Residential Purchase Contract and Joint Escrow Instructions:
The purchase contract is very complex. To ensure you understand the agreement, we will go through the contract page by page, and section by section. If you still have any questions at the end, please feel free to email firstname.lastname@example.org .
- Offer: This is the offer’s introduction which states the buyer, property address, offer price, and the escrow period.
- Agency: Brokerages representing the buyer and seller are shown here. It is also important to note that it should be clear if the same brokerage is representing both parties.
- Finance Terms: The purchase price is broken down into the initial deposit, the loan amount, and the rest of the down payment. The initial deposit should be 3% of the offer price. If this is an all cash offer, there will be no loan amount and the remainder of the funds shall be listed as the balance of the purchase price or down payment.
Financing terms are continued on the first half of page 2. To strengthen our offer, I recommend presenting your offer with your “proof of funds”. What this is, is proof that you have the necessary funds available for your down payment. It can be a bank statement, stock summary, etc. Also to be turned in with your offer is your pre-approval letter. You are not required to use the lender you turn in with your offer, however if you cannot receive alternate financing, you would be required to go with them. This is also the area where you will list any financing or appraisal contingencies your offer might have. I highly recommend you consult your lender for advice on how long you will need to receive full approval. The CAR contract has a 17days contingency built in, but that time my be shortened to make the offer more attractive to the seller.
- Allocation of Costs: In the allocation of costs, it is indicated whether it is a buyer of seller expense. In Santa Clara County, the buyer will pay recording fees, but the seller shall pay for the title insurance policy, escrow fees, country transfer tax, and usually the city transfer tax. The city transfer tax is sometimes split between the buyer and seller. In San Mateo County, the buyer is responsible for recording fees, title insurance policy, escrow fees and sometimes half of the city transfer tax. Sellers are responsible for the county transfer tax and half of the city transfer tax.
- Closing and Possession: The first section asks whether or not you intend to occupy this home as a primary residence. It is important to answer this honestly to avoid any issues. For a seller occupied property, they are to be vacated by 5pm on close of escrow unless there is a rent-back option. For tenant occupied properties, the property shall be vacant 5 days prior to close of escrow. At this time we will arrange for a final walk through inspection.
- Statutory Disclosures (including Lead-Based Paint Hazard Disclosures) and Cancellation Rights: One disclosure that sellers are required to provide is the Lead- Based Paint and Hazard Disclosure. Please refer to that disclosure page for more information. Natural and Environmental Hazards are typically found in the JCP report. Some of the major things to notice in this report is: the earthquake and environmental hazards booklet, whether or not the property is located within a flood zone or seismic hazard zone, and if it is in a very high fire hazard zone. Megan’s Law has provided buyers with a public list of registered sex offenders in the area. It is the buyer’s duty to take a look on meganslaw.ca.gov for more information on sex offenders in the neighborhood.
- Condominium/ Planned Development Disclosures: Although typically known prior to making an offer, the seller has 7 days after acceptance to disclose whether or not the property is in a planned development or some other common interest subdivision. The seller shall have 3 days after acceptance to request HOA docs from the management company. There is a contingency later in the contract which specifies how many days the buyer shall have to review and accept the HOA docs.
- Items Included In and Excluded From Purchase Price: All fixtures and appliances are assumed to be included in the sale unless otherwise specified. Any items the buyer would like to be excluded from the sale may be listed in section C.
- Condition of Property: In the CAR contract each property is sold in its present as-is condition. Buyers are strongly advised to have their own property inspection done on their purchase to better understand its current condition.
10. Buyer’s Investigation Of Property And Matters Affecting Property: All offers are made subject to inspection or property condition. Later in the contract the buyer shall specify how many days they will need to conduct their investigations. Sellers are required to make the property available within the specified time period for any buyer investigations. Buyers are responsible for any damage done as a result of these investigations. The seller shall be required to keep water, gas, and electricity on through close of escrow.
11. Seller Disclosures; Addenda; Advisories; Other Terms: The seller is required to provide certain disclosures, addenda, and advisories are checked here.
12. Title and Vesting: The seller shall provide the buyer with a preliminary title report. The prelim is an offer by the title insurer to issue a policy of title insurance. Title shall be taken in current condition and subject to any encumbrances, easements, covenants and conditions, restrictions, and rights to other matters. Buyer shall consult a tax professional for advice on how to take title on the property.
13. Sale of Byer’s Property: This area states whether or not the offer is contingent upon the sale of any buyer’s property.
14. Time Periods: Removal of Contingencies; Cancellation Rights: The time frames outlined in section 14 may only be altered by mutual agreement between both parties. Any removal of contingencies or cancellation under this paragraph by either buyer or seller is made in good faith and in writing. Buyer’s duties to remove contingencies, and seller’s right to cancel are clearly outlined in this section. If contingencies are not removed, or documents are not provided within the specified time periods, a notice to perform or quit may be issued by either party.
15. Repairs: Any repairs agreed upon in this contract or supplementary addenda shall be completed prior to the buyer’s final walk through inspection or final verification of condition.
16. Final Verification of Condition: Prior to close of escrow a final walk through inspection will be scheduled. The purpose of the final walk through inspection is to ensure the property has been maintained in the same condition as when the offer was made.
17. Prorations of Property Taxes and Other Items: Unless otherwise agreed upon in writing, the seller is to ensure that all property taxes and assessments, HOA dues, and special and emergency assessments imposed prior to close of escrow. Any tax bills issued after close of escrow shall be handled directly between the buyer and seller.
18. Selection of Service Providers: Brokers do not ensure the quality or performance of any vendors. It is the buyer and seller’s right to select any providers of their choosing.
19. Multiple Listing Service (MLS): Brokers are authorized