BROKER RISK MANAGEMENT
WEEKLY PRACTICE TIP
QUESTIONS AND ANSWERS FROM A CLOSE LOOK AT THE RESIDENTIAL PURCHASE AGREEMENT, PART III
The following are questions and answers from Broker Risk Management’s webinar regarding a look at the Residential Purchase Agreement, Part III, held on March 2, 2026.
QUESTION NO. 1: It is my understanding that when a Notice to Perform is delivered to a buyer at 9:00 a.m., the buyer has until 9:00 a.m. two days later to respond. Is that accurate?
ANSWER: No. The buyer would have until 11:59 p.m. two days after delivery of the Notice to Perform. “Days” are defined in ¶¶25I & J of the RPA as 24-hour blocks of time commencing at 12:00 AM (midnight) and ending at 11:59 PM. Thus, when a notice is delivered, or any contract action occurs, at any time of the day, that is Day 0 for counting Days.
QUESTION NO. 2: When is an agent required to submit transaction documents to the broker for review?
ANSWER: As soon as possible or practicable. The California Department of Real Estate (“DRE”) requires that a broker supervise agents in the handling of their transaction. A broker cannot supervise agents unless the transaction documents are timely provided to the broker for review. The DRE requires that the documents be submitted as soon as possible. The documents include all material documents affecting a transaction including but not limited to contract documents, disclosure documents, emails and texts.
QUESTION NO. 3: I am representing a buyer in a transaction. The seller has not included a requirement that we provide the buyer representation agreement to the seller. However, the escrow holder is requesting a copy. Am I required to provide it?
ANSWER: There is no law or requirement that an escrow company enforce the provisions of the NAR settlement. Paragraph 19D(1) states in relevant part: “If a copy of a separate compensation agreement(s), including if applicable Paragraph 3G(3) of this agreement, is deposited with escrow holder by agent, escrow holder shall accept such agreement(s) and pay out buyer’s or seller’s funds, or both, as applicable, the broker’s compensation provided for such agreement(s).” The first paragraph of this provision starts with “If a copy of a separate agreement is deposited” with escrow holder, meaning the deposit of such agreements (e.g., the BRBC) are optional. The provision makes a reference to 3G(3), and any contractual amendments thereto, as instructions that the escrow company shall pay the brokers as instructed. While BRM and CAR are investigating this further, unless an escrow company can provide a plausible argument that would entitle it to demand a copy of the buyer representation agreement, it does not appear that escrow companies have a right to demand it and brokers may push back on escrow companies requesting copies of the buyer representation agreement.
QUESTION NO. 4: Will errors and omissions insurance cover an agent’s supervision of contractors or vendors as part of staging and preparing the property for market? If a property manager supervises repair work, is that considered part of an agent’s duties and is that covered by errors and omissions insurance?
ANSWER: Errors and omissions insurance will cover actions performed by an agent within the scope of an agent’s normal and expected duties. Acting as a contractor or supervising contractors as part of the preparation of the property for market or staging is not within the scope of an agent’s normal duties. An agent can recommend improvements and refer clients to contractors to perform the work. However, agents cannot supervise a contractor’s work as agents do not have a contractor’s license; and even if that agent does have a contractor’s license, that supervision is pursuant to that license not as a part of agent’s duties. Further, BRM recommends that agents refrain from signing contracts with contractors or paying contractors. Instead, the sellers should make the final decision on selecting the contractor, signing the contracts and paying the invoices. A property manager, assuming the property management agreement allows a property manager to retain contractors to undertake or perform repairs, may hire a contractor to perform a repair and inspect the repair after to confirm that it meets with the property manager’s satisfaction. However, a property manager should not be supervising a licensed contractor as a property manager does not have a contractor’s license. Errors and omissions insurance will cover actions by a property manager that are considered within the course and scope of a property manager’s duties, including those set forth in a property manager’s contract with its client. However, an insurance company could argue that there is no coverage for a property manager supervising a contractor’s work.
QUESTION NO. 5: When agents are giving a credit to their client, shouldn’t the credit be an addendum to the listing agreement or buyer representation agreement, not the Residential Purchase Agreement?
ANSWER: If a credit is being given to a client, it should be part of the agreement between the agent and the client. However, that credit must be included on the closing statements and paid through escrow.
QUESTION NO. 6: Can we recommend handymen?
ANSWER: Yes. However, handymen cannot legally undertake work at a property without a contractor’s license if the project is valued at more than $1,000. If an agent is going to recommend a handyman, the agent should disclose that the handyman is not a licensed contractor.
QUESTION NO. 7: When listing the number of bedrooms or bathrooms in a property, if the number set forth in the public/tax records is different than the actual number of rooms in the house, how do we list or market it?
ANSWER: The most conservative approach is to list the number of bedrooms identified on the tax records. It is suggested that if there is a discrepancy in number of bedrooms between the actual bedrooms and the tax records, you should discuss the issue with the seller to determine why there is a discrepancy. It may be that a bedroom was added without permits. It may also be that one of the bedrooms does not meet the Building Code. It is also recommended that you check the Multiple Listing Service history to determine how the house was previously marketed. The seller should investigate the discrepancy; the agent should not, as the investigation will likely include checking public records including permitting records. If an agent chooses to use the actual bedroom count, the agent needs to ensure that the discrepancy is clearly disclosed and the result of any investigation undertaken by a seller is also disclosed.
QUESTION NO. 8: Would a new buyer representation agreement be required with a new assigned buyer (i.e., buyer number two)?
ANSWER: Yes. A buyer representation agreement is required for each buyer.
QUESTION NO. 9: In counting days, if a deadline falls on a weekend or legal holiday, does it get postponed to the next day?
ANSWER: Yes. If a deadline falls on a weekend (Saturday or Sunday) or legal holiday (e.g., President’s Day), the deadline will expire on the following business day.
ATTORNEY-CLIENT PRIVILEGED COMMUNICATION: 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.