BROKER RISK MANAGEMENT
WEEKLY PRACTICE TIP
(Note: New and Revised Rental Forms are in a Separate Tip)
RPA – RESIDENTIAL PURCHASE AGREEMENT (Revised)
- Paragraph 3E(1) and (2) Added for buyer loan points to be a part of buyer’s loan contingency.
- Paragraph 3G(3): New optional paragraph for buyer to use to ask for seller to pay for buyer’s commission obligation owed to their buyer agent pursuant to a Buyer Representation agreement. If buyer has entered into a buyer representation agreement (See new Buyer Representation and Broker Compensation Agreement below – form BRBC) which obligates the buyer to pay compensation to their agent, then buyer can use this paragraph to ask the seller to pay that amount. Seller can accept or reject the request. If seller accepts, the new seller payment for buyer’s broker (form SPBB below) would be added to the Purchase Agreement. (This request by a buyer that a seller pay for buyer’s obligation pursuant to a buyer representation agreement is not a violation of the NAR Code of Ethics. It is a Code of Ethics violation for an agent to negotiate their commission in the purchase agreement.)
- Paragraph 3M(3): Refers to units occupied by persons other than seller. Last column contains an advisory to seller to add the TOPA form in a counteroffer, if there is a tenant or other occupant and buyer did not check the box to add the form.
- Paragraph 4A: New Mixed Use Purchase Addendum can be added to the Agreement.
- Paragraph 5A(3)(ii): If a buyer fails to deliver the deposit, new language is added to remind buyers and sellers to consult with their qualified California real estate attorney regarding possible liability and remedies.
- Paragraph 7A: New language provides that the unit Buyer intends to occupy and be vacant at the time of possession. Buyer is to identify which unit, if more than one.
- Paragraph 9B(2): Clarifies that window coverings include associated hardware and rods.
- Paragraph 11M: New paragraph requires seller to give buyer known information about any solar system. New form SOLAR may be used to deliver this information to buyer. See SOLAR below.
- Paragraph 12B(3) has been removed: This paragraph, making the review of seller documents part of buyer’s investigation, has been removed. The review of seller documents is its own contingency in Paragraph 8D.
- Paragraph 14A: Note the expanded list of documents that seller is required to deliver to buyer within the time specified in 3N(1). Seller’s agents should start gathering these documents when taking a listing. Buyer’s agents should ensure that they obtain all of the specified documents.
- Paragraph 18A: If seller agrees to pay buyer’s broker’s compensation pursuant to a buyer representation agreement, seller is entitled to see a copy of that agreement.
- Paragraph 23: Added language requiring parties to notify escrow of an assignment. Added language that a nominee will be treated the same as an assignee.
- Paragraph 25I: Adds s definition of legal holidays for purposes of counting days.
- Agent signature lines in real estate broker section: Includes address, email, and phone for each brokerage. Allows each broker to identify as a designated electronic delivery address the email or phone identified above or an alternate by checking the appropriate box
NEW FORMS
ABCD Anticipated Broker Compensation Disclosure
This is an optional form. Advises the buyer that seller’s payment of compensation, direct to a buyer’s broker or indirectly through the seller’s broker, may impact the price the seller will accept; that the buyer’s broker will disclose on a property-by-property basis the compensation promised broker through the MLS or elsewhere; and is where buyer’s broker discloses the final compensation received.
SPBB Seller Payment for Buyer’s Broker
If 3G(3) in the RPA is checked and seller agrees to pay buyer’s broker some or all of the obligation that buyer owes to that broker pursuant to a buyer representation agreement, this form should be used by seller in a counter offer as an Amendment to the purchase agreement to identify the amount of compensation the seller will to pay the buyer’s broker. Note: the buyer’s broker may not receive double payment.
BRBC Buyer Representation and Broker Compensation Agreement
This form replaces the existing three buyer representation agreements: BRE, BRNE and BRNN.
Paragraph 1: Unlike the listing agreement, which ends on a date certain, the buyer representation period lasts for the number of days specified.
Paragraph 4B(1): The form defaults to non-exclusive representation, so that the broker is only entitled to be paid, if the buyer purchases a property for which there was “Broker Involvement,” as defined.
Paragraph 4B(2): This optional paragraph creates an exclusive representation, so that the broker is entitled to be paid if the buyer purchases a property during the representation period, with or without the broker’s help.
Paragraph 4C: This paragraph allows either buyer or broker to cancel the agreement as specified.
Paragraph 4D(1): This paragraph retains the language from the previous buyer representation contracts that credits against the buyer’s compensation obligation any payment that the buyer’s broker receives from the seller’s broker or seller.
Forms Related to the BRBC Form:
- BTA Buyer Transactional Advisory – Gives a buyer more information about an agent’s responsibilities, and those items a buyer needs to address. NOTE: Comes bundled on zipForms with the new BRBC, but can be used separately.
- COBR Cancellation of Buyer Representation – Paragraph 2 is where the buyer or broker gives notice of cancellation to the other of cancellation of the buyer representation agreement, or where the parties agree to a mutual cancellation. Paragraph 3 of the form identifies the compensation that would be due to the buyer’s broker.
- NBIP Notice of Broker Involved Properties – This form would be used at the termination of the buyer representation period, if a protection period was provided. Must be provided to the buyer by buyer’s agent within 5 days after either buyer or broker cancels the BRBC.
NCOA Non-Contingent Offer Advisory
Like the existing Market Conditions Advisory, this new form notifies a buyer of the risks associated with making a non-contingent offer, and describes the importance of including a loan contingency, an appraisal contingency, and an investigation contingency.
SOLAR Advisory and Questionnaire
The first page is an advisory that describes the most common types of solar panel and system ownerships and leases, how payments generally work, what gets transferred with the sale of real estate, and the importance of reviewing all documents and inspecting the system. The second page consists of questions that a seller should answer to the extent seller is aware of the issues. Note that this form does not require seller to identify any defects, repairs, or other issues with the solar panels, which must be disclosed to a buyer. This can be disclosed by seller on the SPQ or TDS form.
REVISED FORMS
SCO Seller Counter Offer, SMCO Seller Multiple Counter Offer and BCO Buyer Counter Offer
Applies to all three CO forms: Language was added to 1B that seller credits in the offer remain unchanged even if purchase price changes. New paragraph 1C clarifies that the difference between the offered price and the appraisal contingency amount will remain the same even if the purchase price changes.
CC Cancellation of Contract
Language was added to paragraph 1B, Proposed Mutual Cancellation, setting a time for the recipient party to respond. If there is no timely response, the proposal expires.
ETA Extension of Time
This form was changed from an addendum to amendment by adding paragraph 5, which establishes a time for the recipient party to respond. If there is no timely response, the proposed ETA expires.
MH-PA Manufactured or Mobile Home Purchase Addendum
Language was added incorporating the terms of existing form MHA and making contractual requirements for the condition of the mobile/manufactured home, if it is to be occupied.
RLAS Residential Lease After Sale
Paragraph 5A: Language was added, consistent with the revised Residential Lease or Month to Month Rental, advising of the maximum-security deposit that can be charged. NOTE: This paragraph is especially important if the seller is staying in possession without any charge. Language was added to the condition of property paragraph for the seller/tenant to acknowledge the condition is “as is” and as disclosed in the purchase agreement (paragraph 10A). The smoking paragraph (14A) was modified, so the seller/tenant is not responsible for smoking damage that already existed at the time lease commenced.
This Weekly Practice Tip is an attorney-client privileged document 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.