Understanding the CAR Residential Contracts Series Introduction

By: D. Keith Dunnagan,

BPE Law Group, PC

August 8, 2023

Every year we work with hundreds of individuals including investors, buyers, sellers, and real estate professionals. This work is centered on understanding how the real estate contracts effect everything from a specific performance and non-disclosure lawsuit to the relationship between buyer and seller or client and agent to the impact on an earnest money deposit. Last year, the California Association of Realtors (CAR) released a significantly revised Residential Purchase Agreement (RPA). Over the next several weeks we will walk through the standard transaction with the updated forms.

Each real estate transaction in California is governed by a series of contracts and agreements that determine in rights, obligations, and liabilities of the parties to the contract. In context of the residential buy/sell transaction in California, the most common contracts to be used are those CAR form contracts. These contracts run the gamut of situations, including conventional sales, home equity sales acts transactions, and seller financed transactions to name a few. They deal with situations involving seller leasebacks, buyer in possession, options, and just about any other issue you can think of that may reasonably pop up in a transaction.

The purpose of this series is going to be to give both the parties to a transaction and the agents a look at the main CAR Residential Contracts, including the RPA, the Real Estate Agency Disclosure, Buyer’s Inspection Advisory, the Disclosure Documents (TDS/SPQ/AVID) and Notices (Notice to Perform or Demand to Close Escrow) and how they work together in guiding and documenting a residential transaction. Some of these documents are legally required (such as the TDS) and carry significant liabilities when not completed. Others, such as advisories are good business practice and disclosures for the parties to a transaction. These agreements have been used extensively in California and cover a multitude of scenarios and are designed to capture and cover many different scenarios that may arise during a transaction.

In the next article we will begin to break down the RPA. This is the contract that forms the basis of the relationship of the parties. Not only does it determine price and closing timeframe, it also identifies and sets the contingency period and process. It defines how a contract can be cancelled or how to cure a potential breach. It sets the liability limits of certain breaches and provides the parties with the bulk of the remedies when a party breaches. There is an abundance of case law on the subject of interpreting this contract and we will look at some of the more important cases and their impact on this document.

The one thing to take away from this upcoming series is that whether you are a party to a transaction or an agent guiding a client you need to know and understand just how these contracts work together the real estate transaction.

The information presented in this Article is not to be taken as legal advice. Every person’s 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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