When buying a Los Angeles home it helps if you understand the Residential Purchase Agreement (RPA) which is what will be filled out when making an offer. The majority of the contract is standard and pretty much self-explanatory, but there are areas that need to be filled out that can cause some confusion.
Below is an explanation of selected items in the Purchase Agreement you will be filling out once you have decided on a property. It will help you understand some of the terms of the contract.
1. This is pretty self-explanatory. Details of the property are provided together with the amount of the offer. Item D. will determine the length of the escrow period.
3. Item A. is the amount of the good faith deposit, usually 3% of the purchase price, which will need to be delivered to escrow within 3 days of acceptance of the contract by both sides. Item C. is checked if it is an all cash offer. Item D. is the amount of the loan. Item F. is the balance of the loan which will be part of the closing costs. Items I and J. If you are getting a loan then these are the contingencies which will allow you to cancel the contract should you a) after a good faith effort be unable to get a loan or b) cancel or re-negotiate the contract should the home not appraise. Cash buyers usually waive these two contingencies.
7. Here an explanation of who pays for what is determined. Item C.(1). In Southern California escrow fees are split between buyer and seller, each one paying their share. Item C.(2). In Southern California the Seller generally pays for the owner’s Title Insurance (Buyer pays for Lender’s Title Insurance). Items D (1), (2) and (3). In Southern California it is customary for the Seller to pay for the County and City transfer fees, and if the property is a condominium or PUD, for the HOA documents. Item D.(9). This is the cost for a one-year home warranty for appliances, air-conditioning, etc. (something in this competitive sellers’ market it may be advisable to waive).
8. Item B.2. The stove and refrigerator boxes would be checked if the buyer would like to keep them. Item B.3. Here is where a buyer would request additional items they would like. Item C. If a buyer particularly does not want items left then they would be entered here.
14. Item B. The standard time period per the contract for the buyer to conduct his or her inspections is 17 days. To make the offer stronger it is advisable to lower the time period to 7 to 10 days,
21. Item B. Liquidated damages. This limits the amount of damages a buyer will have to pay in case of default, which is a maximum of 3% of the purchase price.
22. Mediation/Arbitration. It is highly advisable to sign this section as it avoids expensive lawsuits in case of default by either party.
31. Here you can determine how much time you give the Seller to respond to your offer. The standard is 3 days but you can shorten it or extend it. Should the time period expire, the contract can always be extended.
Take time to read through the contract and if you have any questions, please don’t hesitate to contact me.
More Frequently Asked Questions
What Can I Afford?
What are the Closing Costs?
How to Read an MLS Listing
What are the Different Listing Statuses?
Understanding the Purchase Agreement
What is Title Insurance?
How to Take Title
Should I Buy a House or a Condo?
What is Escrow?
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