Question: I represent the Buyer whose offer, written on a CAR Residential Purchase Agreement (“RPA”) form, was accepted over the weekend. That offer included a 17-day Investigation Contingency. My Buyer was unable to put her deposit into escrow within the agreed-upon 3 Business Day period of time. I contacted the Seller’s Agent and he sent me an email that it was “not a problem” so we went ahead and scheduled the Buyer’s general house inspection and a pest control inspection.
When the Buyer and her inspectors showed up at the Property Friday morning, the Seller refused to allow anyone into his home. The Seller said that since the Buyer’s Deposit was not in escrow, there was no contract and the Seller did not need to allow the Buyer to inspect the Property. The Seller also claims that there was never any agreement to conduct a pest control inspection and that failing to specify that type of investigation in the contract was fraud on the part of the Buyer. The Buyer’s deposit was wired into escrow later that day even though the Seller never issued a Notice to Buyer to Perform.
The Seller’s Agent is no longer responding to my calls, texts or emails. I suspect that the Seller has another Buyer and just wants my client to go away. The Buyer is upset that she cannot conduct her inspections but she is adamant that she wants to buy this house. Did the Buyer have a right to conduct inspections even before her deposit was put into escrow? Did the Buyer have to secure the Seller’s specific agreement to allow her to have a pest control inspection? What should I advise the Buyer?
Bottom line: The Buyer needs to be advised, in writing, such as in an email, to immediately consult with a qualified California real estate attorney to protect her interests.
Answer: The claim by the Seller that the Buyer could not commence inspections prior to putting her initial deposit into escrow is not true when using any of the three (3) standard real estate Purchase Agreements created for use by California REALTORS® The Seller is obligated to allow access to the Buyer whether or not the deposit has been made.
See Weekly Practice Tip: Seller Will Not Allow Access (11/13/20)
I. Must the Contract Specify the Actual Inspections to be Obtained by Buyer?
A Buyer does not need to secure the Seller’s approval as to what types of inspections the Buyer will actually conduct including, but not limited to, a pest control inspection of the Property. The standard Purchase Agreement forms allow the Buyer to conduct any inspections during the investigation contingency that the Buyer chooses to conduct which is also the recommendation in most standard advisories.
Paragraph 12A of the CAR RPA explains the types of inspections that a Buyer may conduct during the Buyer’s Investigation of Property Contingency. That paragraph states that during the time period designated in paragraph 14B(1), the Buyer has the right to conduct inspections “including, but not limited to, (i) a general physical inspection, (ii) an inspection specifically for wood- destroying pest and organisms …”.
Paragraph 16 of the PRDS® Real Estate Purchase Contract and Paragraph 12 of the San Francisco Purchase Agreement also allows a Buyer to choose whatever inspections the Buyer deems necessary including, but not limited to, inspections for wood-destroying pests and organisms.
II. What Should the Buyer’s Agent Do If the Seller Will Not Allow Access?
To enforce the terms of the Purchase Agreement, all three of the standard purchase agreement forms used by California REALTORS® require use of Notices to Perform. The Buyer’s Agent should prepare a Notice to Seller to Perform, specifically noting the Seller’s obligation to allow access to the Property. The CAR, PRDS and SFAR Notice forms all have “other” or optional checkboxes under the heading Contractual Actions (or Obligations). The Buyer’s Agent should specify that the Seller must provide access to the Property pursuant to the access paragraph in the Purchase Agreement form that was used.
Note: The Seller’s obligation to allow reasonable access to the Buyer is in ¶¶12B and 14B(5) of the CAR RPA; ¶16E of the PRDS® Purchase Contract; and ¶12 of the SFAR Purchase Contract.
III. What Should the Buyer’s Agent Do If There is No Compliance with the Notice to Perform?
If the Notice to Perform does not change the Seller’s position regarding allowing access, then the Buyer needs to be advised, in writing, such as in an email, to immediately consult with a qualified California real estate attorney to protect the Buyer’s interests because there is nothing more that the Buyer’s Agent can do to enforce the terms of the Purchase Agreement.
A well-written letter from the Buyer’s attorney to the Seller pointing out the consequences of not allowing Buyer to proceed may cause the Seller to change his mind. But, if that does not work, the Buyer may need to file a lawsuit against the Seller to stop any effort to sell the Property to anyone else. Whether or not the Buyer should file a Specific Performance action against the Seller is a decision that the Buyer should only make with her own qualified California real estate attorney.
PRACTICE TIPS:
- The Buyer’s Agent should advise the Buyer of the Buyer’s right to issue a Notice to Seller to Perform the Seller’s contractual obligation to allow access.
- Regardless of whether the Buyer agrees to issue a Notice to Seller to Perform, the Buyer’s Agent should advise the Buyer to retain the services of a qualified California real estate attorney. If the Buyer ignores that recommendation, then document that the Buyer is not following the Agent’s advice.
See Weekly Practice Tip: How to Handle Clients Who Will Not Follow Advice? (11-16-18)
WEEKLY PRACTICE TIP: DO NOT FORWARD TO CLIENTS. This Weekly Practice Tip is for the exclusive use of clients of Broker Risk Management and their Agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.
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