CAR Unveils 2021 Revision to the RPA

CAR Unveils 2021 Revision to the RPA

By: D. Keith Dunnagan, Esq. and Trey Van Dyke, 2L

June 22, 2021

The housing market continues to heat up across California this Summer. In some markets, homes are being nearly auctioned-off as double-digit numbers of offers has become the standard. Although the situation is not the same in every market, there is one aspect of nearly every residential real estate transaction that is common across the State: the use of the Residential Purchase Agreement (RPA).

The California Association of Realtors® (CAR) released their current version of this common form in 2018 but they have been working on a newer version. The RPA is the contract that incorporates most aspects of the sale of single-family dwellings in the State under 5 units; it ties in the buyer, seller, and their respective agents and brokers into one form. Understandably, it is very important for consumers and the real estate industry, but it is also critical to peripheral industries conducting inspections, construction repairs, and even the legal industry.

CAR attorneys have been hard at work in rewriting the RPA as it was set to release in 2020. For obvious reasons, 2020 was not an ideal year to release a very different version of the most commonly used contract in residential real estate transactions, so the release of the newest version has been delayed until December 2021 (for now). The draft of the new RPA shows that much of the substantive terms remain, but where they are placed within the document has drastically changed. The grid format that CAR has adopted is similar in appearance to the changes to loan applications that were made years ago under TILA-RESPA Integrated Disclosures (TRID) and other loan industry modifications.

The first thing experienced consumers, Realtors® and attorneys will notice is that the majority of changeable or selectable terms in the RPA have all been moved up-front to the beginning of the contract. The first page contains similar details of the property and lists the brokerage representing the respective parties, but by paragraph three everything starts to change. This paragraph is a three-page table of changeable terms. Purchase terms such as price, the amount of deposit, what type of loan and what rate, as well as all cash purchase notation and verification options for monies, are now found in the beginning of the lengthy paragraph three of the form.

The next section includes terms like Seller credit (something many Californians have thought to be extinct) and additional finance terms that can be modified. The various Buyer timelines for the transaction are next, such as; inspection, appraisal, and loan contingencies, and when the Buyer my verify the property condition; as well as Seller timelines including preliminary title report and other Seller disclosures. Following this section, the parties may agree to a different time of possession if, for example, the Seller wishes to rent the house from the Buyer for a period after closing in order to find their next home.

Items included and excluded (an often-litigated subject) is listed next in the table of terms. Realtors® should take caution here as these items must be manually checked, whereas many items in this section were previously listed in a large paragraph of standard items to be included. One wouldn’t want to miss checking the box on the microwave, for example, or perhaps even worse: missing the wine refrigerator box.

The last section of the paragraph three table consists of how the parties will allocate costs of closing. This includes, who will pay for the homeowners association documents, the city and county (if applicable) transfer taxes levied on the sale of property, escrow and title fees, and who shall pay if the Buyer gets a home warranty to protect major appliances.

The remainder of the contract is where all of the legalese (so called “boilerplate”) language exists. Legally, much of the RPA remains similar to the previous version, however, changing the order of everything is a major change in itself. Within the sections beyond paragraph three, the legal rights and restraints on the parties is explained in further detail, and the timelines, amounts (or even language), adopted in paragraph three are referenced for the terms specified in detail here. For example, paragraph 12 is titled, “BUYER INVESTIGATION OF PROPERTY AND MATTERS AFFECTING PROPERTY.” Subsection “A” underneath says, “Buyer shall, within the time specified in paragraph 3L(3), have the right, at Buyer’s expense unless Otherwise Agreed, to conduct inspections, investigations, tests, surveys and other studies (emphasis added).” This language is the same as the previous RPA but now references the table on page two under “Investigation of Property.” The standard “17 (or ___ ) Days after Acceptance” is in the second column of the table, where the consumer or their agent can modify this time period. Previously, the standard “17 (or ___ ) Days after Acceptance” was contained within the language of the contract.

Overall, the 2021 RPA is a great change for consumers, who may get a more comfortable grasp of the terms of the transaction by simply looking at the first three pages. However, it should be cautioned that the rights and responsibilities of the parties are actually contained in the rest of the document; therefore, Realtors® and attorneys need to be very familiar with the entire contract. This warning is not missed by CAR as the consumer must initial that they have read all 16 pages of the contract (up from the previous 10). We will dive a little more deeply into the new RPA in subsequent BPE Law Group blog posts so that we can help the real estate and legal industries prepare for the upcoming changes to this critical tool.

The information presented in this article is not to be taken as legal advice. Every situation is different. If you are facing a legal issue of any kind, get competent legal advice in your state immediately so that you can determine your best options.

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