The CAR Contingency for Sale of Buyer’s Property (COP) form has been substantially changed and restructured. Many of the paragraphs are contingent upon whether other paragraphs make them operable based on how the form is completed. It is essential that agents: (1) understand this form; (2) discuss each paragraph with buyer and/or seller-clients; and (3) make sure that the final version of the form reflects the client’s wishes.
This COP User Guide is intended to be a step-by-step guide to completing this form.
A. Paragraph 1 (Buyer’s Property Contingency). The first choice a Buyer’s Agent and Buyer must make is whether the Buyer’s obligation to purchase the Seller’s Property is going to be contingent on (COP Paragraph):
1A (the default) Buyer ENTERING INTO AND CLOSING ESCROW ON Buyer’s Property;
If 1A is chosen, then both paragraphs 2, 3, 4 and 5 apply.
If 1B applies, Buyer ONLY ENTERING INTO A CONTRACT for the sale of Buyer’s Property;
If 1B box is checked, then paragraph 2 and 3 apply.
If 1C applies, ONLY CLOSING ESCROW on Buyer’s Property.
If 1C box is checked, then only paragraphs 4 and 5 apply.
(NOTE: Buyers may prefer 1C, and Sellers may prefer 1B, so this may have to be negotiated.)
B. Paragraph 2 (Buyer Entering into a Contract for Sale of Buyer’s Property). Sets the time within which Buyer must provide to Seller the Escrow Evidence (defined as a copy of the contract for sale of Buyer’s Property AND Escrow Company’s contact information and escrow number).
C. Paragraph 3 (Listing and MLS Status of Buyer’s Property. Buyer affirms that Buyer’s Property is already listed or will be listed in the specified number of Days; and obligates Buyer to deliver to Seller evidence that Property is listed and MLS information.
D. Paragraph 4 (Close of Escrow of Buyer’s Property). Buyer has until the specified time to close on the sale of Buyer’s Property. Adds that the contingency for the sale of Buyer’s Property cannot be used to cancel the Agreement once Buyer’s Property closes.
E. Paragraph 5 (Status of Buyer’s Property). Requires Buyer to keep Seller informed of status of the sale of Buyer’s Property, which documents must be provided, and when.
F. Paragraph 6 (Cancellation of Sale of Buyer’s Property). Remains largely unchanged. Buyer must deliver to Seller within 2 (or ___) Days the notice of cancellation on the sale of Buyer’s Property given by either party to that contract to the other.
G. Paragraph 7 (Back-Up Offers and Seller Right to Require Buyer to Remove Contingencies or Cancel). This paragraph has been completely restructured and must be carefully reviewed before using.
7A Seller’s right to accept back-up offers is affirmed in 7A which goes on to state that Brokers shall not violate MLS rules regarding property status.
7B (Removal of Buyer Contingencies and Proof of Funds). Applies only if 7C(1) or 7C(2) apply.
If Seller accepts a back-up offer and provides a copy to Buyer, Seller has the immediate (7B(1)) or delayed (7B(2)) right to provide Buyer with the Notice to Buyer to Remove Buyer Contingencies and Provide Proof of Funds (the “Notice to Buyer”) at the bottom of Page 2.
If Buyer receives the Notice to Buyer, Buyer must within 2 (or ___) Days (i) remove this contingency for the sale of Buyer’s Property; (ii) remove the loan contingency; and (iii) provide verification of sufficient funds to close escrow with the sale of Buyer’s Property. If Buyer does not fully comply with the Notice to Buyer within the 2 (or ___) Days, Seller may then immediately cancel the Agreement in writing without giving Buyer a NBP per paragraph 8A.
7C (Time to Give Notice to Buyer).
If 7C(i) □ (the default) applies, Seller may immediately give the Notice to Buyer.
If 7C(ii) □ applies, Seller has a delayed right after 17 (or___) Days to give the Notice to Buyer.
If 7C(iii) □ applies, Seller has NO RIGHT to give the Notice to Buyer during the entire term of the Agreement.
(SELLER’S AGENTS NOTE: If 7C(iii) is checked, then if Seller accepts a back-up offer, Seller has NO RIGHT at any time during the term of the Agreement to give Buyer the Notice to Buyer to Remove Contingencies and Provide Proof of Funds, and cancel the Agreement if Buyer does not comply.)
H. Paragraph 8 (Removal of Contingencies.) Removal of the Contingency for the sale of Buyer’s Property must be in writing and, even if removed, Seller still can cancel if Buyer has not fully performed as required by the Notice to Buyer.
I. Paragraph 9 (Seller Right to Cancel). In the prior version of the COP, Seller’s rights to cancel the Agreement were in various places in the form. Now. all seven of Seller rights to cancel are in one place. Note that a NBP form is required in four of those rights to cancel (9B, C, D and F) before Seller can cancel the Agreement.
J. Paragraph 10 (Buyer Right to Cancel). Buyer has the right to Cancel the Agreement if, PRIOR TO the removal of Buyer’s Property Contingency specified in paragraph 1A, B, or C, is applicable:
If 1A or 1B applies, and Buyer is unable to enter into a contract on Buyer’s Property within the time specified in 2A, (NOTE typo: form says 3A(1) which doesn’t exist and is the wrong paragraph), or
If 1A or1C applies:
If either party for Buyer’s Property sale gives notice to the other to cancel the contract for the purchase of Buyer’s Property per Paragraph 6; or
If Buyer is unable to close escrow on Buyer’s Property within the time specified in paragraph 4.
K. Paragraph 11 (Time for Performance of Contract Obligations and Delivery of Buyer Deposit).
11A All contract times except Buyer’s Deposit start as provided in the Agreement unless the box is checked in 11A (regarding all Contract Obligations other than Deposit) in which case the time periods start the Day after Buyer delivers to Seller any of the following:
(i) Escrow Evidence of Buyer’s Property; or,
(ii) Buyer’s election in writing to begin the time periods; or
(iii) Buyer’s removal of this contingency for the sale of Buyer’s Property.
11B Buyer’s Initial Deposit must be delivered within the time specified in the Agreement. However, if the box is checked in 11B (regarding Buyer’s Initial Deposit), then Buyer’s Deposit must be paid within 3 business days after Buyer delivers to Seller any of the following:
(i) Escrow Evidence for Buyer’s Property; or
(ii) Buyer’s election in writing to begin the time periods; or
(iii) Buyer’s removal of this contingency for the sale of Buyer’s Property.
PRACTICE TIPS:
- Please carefully read this revised version of the COP form, and this User Guide prior to using this form.
- Review the form with Buyer or Seller-client and the options available to them prior to completing this form.
- Review the completed form with your Broker or Manager prior to adding it to an offer or counter-offer.
- Track the timeframes to stay on top of the obligations of your clients and when notices can be given to the other party.
- Seller’s Agent should only use the Notice at the bottom of page 2 when giving the Buyer the Notice allowed for in 7B, if applicable.
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.
© Copyright Broker Risk Management 2020 12/28/20