What Are Some Key Issues To Consider When Reviewing A Contract To Purchase Real Property In California?
The California Association of Realtors (C.A.R.) uses a standardized form that contains a lot of information and a lot of boxes to check when it comes to reviewing a contract for a real estate transaction, and these contracts are commonly used. Buyer and sellers face different issues. A buyer should have an option to take the title to the property in the name that is written down, whether it’s a husband and wife or a company, but it should also preserve the option to assign that contract. For example, it may be advantageous to assign a contract to a different entity, newly created entity, or a family trust. There are all kinds of circumstances where early on in the contract, the buyer wants to preserve the right to assign that contract.
Other issues include contingencies. Oftentimes, a buyer wants to make their offer and obligation to close contingent on things like obtaining financing. To determine what is necessary for a financing contingency, it’s necessary to discuss with the buyer whether they’ve been pre-approved or need a third-party guarantee or co-signer.
There are other contingencies of concern, such as inspections. The buyer wants to have the right to inspect the property and/or hire a professional inspector to look over the property and identify potential defects or problems that need to be fixed. The buyer wants to preserve the greatest possible rights to not only inspect, but also identify things that need to be fixed; if such issues are not fixed within a certain period of time, then the buyer wants to reserve the right to cancel the contract and have the deposit they provided returned.
Depending upon the property transaction, the buyer may want to preserve the right to rent the property for some period of time prior to closing escrow. This would allow the buyer to live in the property and determine whether there are any issues with the property or neighbors before they actually close. These are some of the areas that an attorney would want to discuss with the buyer.
One of the issues that may arise further into the contract is whether the buyer should agree to a mandatory arbitration and mediation provision. When I am representing a seller, I typically want that box checked, because the seller wants to minimize costs if there is a dispute about alleged defects or problems with the transaction.
On the other hand, the buyer may need a greater opportunity or set of options, and in those cases, I may advise the buyer to refuse the arbitration and mediation provisions so that they have greater rights depending upon whether the defects show up a year after the transaction closes. There are more issues that may arise, and in each individual buyer or seller’s circumstances, capable and experienced counsel will want to review these matters in detail before escrow closes.
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