California Real Estate Purchase Agreement

Real Estate Purchase Agreements are
Legally Binding Contracts

California Real Estate Purchase Agreement

Real estate purchase agreements are legally binding contracts that set forth the terms and conditions of the purchase and sale of real estate between the buyer and seller. Verbal promises should never be relied on; all details of your verbal agreement should be written into your real estate purchase agreement as soon as possible. The following terms and conditions should be carefully considered.

When you buy a home in California, you must sign a purchase contract. Normally, your real estate agent will complete preprinted purchase contract. You may make changes or additions to contract, but the seller must agree to every change you make. You should also agree with the seller on the possession date and what appliances and personal property will be included with the home.

Sales Price.
For most home purchasers, the sales price is the most important term. Recognize that other non-monetary terms of the agreement are also important.
Escrow Period:

The average escrow time runs 30 to 45 days and is negotiated by buyer and seller Initial Deposit: Most sellers look at the deposit to see how serious the buyers are.

Financing terms:

Spells out the down payment, the loan amount, term of the loan, and the interest rate.

Loan Application:

Buyers normally have 7 days after seller's acceptance of the contract to make their loan application.

Financing Contingency.

The purchase contract should provide that your deposit will be refunded if the sale has to be canceled because you are unable to get a real estate loan. For example, your purchase contract could allow the purchase to be canceled if you cannot obtain a real estate loan at an interest rate at or below a rate you specify in the agreement.

Appraisal Contingency:

Most offers are written with the sale dependent on the property appraising for the purchase price

Closing an Possession:

This is the date for the sale to close and provides for the time the seller will give possession to the buyer.

Pest/Termite Report:

Your lender will normally require a certificate from a licensed California pest control inspector stating that the home is free from termites and other pests and pest damage. You may want to reserve the right to cancel the agreement or seek immediate treatment and repairs by the seller if pest damage is found.

Other Inspections and Reports:

Septic tanks, wells, natural hazard zone reports, roof reports and certifications, smoke detector and water heater certifications

Home Inspection:

It is a good idea to have the home inspected. An inspection should determine the condition of the plumbing, heating, cooling and electrical systems. The structure should also be examined to assure it is sound and to determine the condition of the roof, siding, windows and doors. The lot should be graded away from the house so that water does not drain toward the house and into the basement. Most buyers prefer to pay for these inspections so that the inspector is working for them, not the seller.

You may wish to include in your purchase contract the right to cancel:

If you are not satisfied with the inspection results. In that case, you may want to re-negotiate for a lower sale price or require the seller to make repairs. Lead-Based Paint. If you buy a home built before 1979, you have certain rights concerning lead-based paint and lead poisoning hazards. The seller or sales agent must give you the EPA pamphlet "Protect Your Family From Lead in Your Home" or other EPA-approved lead hazard information. The seller or sales agent must tell you what the seller actually knows about the home’s lead-based paint or lead-based paint hazards and give you any relevant records or reports. You have at least ten (10) days to do an inspection or risk assessment for lead-based paint or lead-based paint hazards. However, to have the right to cancel the sale based on the results of an inspection or risk assessment, you will need to negotiate this condition with the seller.

Finally, the seller must attach a transfer disclosure statement to the purchase contract:

which will include a Lead Warning Statement. You, the seller, and the sales agent will sign an acknowledgment that these notification requirements have been satisfied. Other Environmental Concerns. California has laws requiring sellers to provide buyers an environmental hazards report. This report may contain; items such as leaking underground oil tanks, the presence of radon or asbestos, lead water pipes, earthquake hazards, and other such hazards, and to take the steps to clean-up any such hazards. You may negotiate who will pay for the costs of any required testing and/or clean-up.

Sharing of Expenses:

You need to agree with the seller about how expenses related to the property such as taxes, water and sewer charges, condominium fees, and utility bills, are to be divided on the date of settlement. Unless you agree otherwise, you should only be responsible for the portion of these expenses owed after the date of sale. Settlement Agent/Escrow Agent or Company. Depending on local practices, you may have an option to select the escrow agent or company. In southern California, an escrow agent or company will usually handle the settlement, the buyer, seller and lender will provide instructions. Closing Costs. You can negotiate which closing costs you will pay and which will be paid by the seller.

Typical Buyer's Closing Costs

Typical Seller's Closing Costs

Title refers to the legal ownership of your new home. The seller should provide title, free and clear of all claims by others against your new home. Claims by others against your new home are sometimes known as "liens" or "encumbrances." You may negotiate who will pay for the title search which will tell you whether the title is "clear."

Conditions affecting the property

Buyer's investigation of the property and property reports:

Buyers should conduct and investigation of the property and or acquire the services of professional inspectors

Repairs to the property:

Sale of buyer's property

Time periods for inspections, repairs and removal of contingencies, buyers and sellers rights to cancel

Liquidated Damages:

If the buyer cancels the transaction this clause provides for how the deposit is handled.


Provides for an arbitrator instead of the courts to settle disputes between buyer and seller.

Tax Pro-rations:

Provides that taxes be paid current and be pro-rated as the date of recording.

Withholding taxes:

Provides that Buyer and Seller will comply with state and federal tax laws.

Multiple Listing:

Brokers are authorized to submit sale information to MLS.

Equal Housing:

Property is sold in compliance with the equal housing laws.

Attorney Fees:

Provides than in any legal action the prevailing party shall be entitled to reasonable attorney fees.

Expiration of Offer:

Contract may not be amended, extended without the written consent of all parties.

Buyer's and Seller's' signatures:

All parties to the contract must sign the contract.

Buyer's and Seller's inspection advisories:

Buyer should use reasonable care in inspecting the property and the seller is required to disclose all material facts known to them. Carefully read the Entire Contract

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