The Blog

Everyday in the wacky world of real estate is an adventure. There are so many different forms generated by the California Association of Realtors® and there are so many little details on each form that it is easy to get caught in the crosshairs and make little mistakes along the way.

Here’s a little something that you need to be aware of:

Item 14 of the Residential Purchase Agreement (RPA) details what needs to happen with delivery of disclosures and reports and what happens when delivery by Seller does NOT occur in a timely manner. (Note that this is in the same place on both the existing RPA and the new one coming on November 24, 2014.)

First off, delivery by Seller of any reports and disclosures should occur within 7 days of acceptance (unless another time frame has been negotiated in the Agreement). If delivery does not occur according to the negotiated timeframe, the buyer must deliver to the seller a Notice to Seller to Perform, and the buyer may cancel the Agreement if the seller does not perform in the specified time period.

The buyer will also have an additional 5 days to remove contingencies related to the item delivered late; the buyer may also cancel the Agreement within that same 5 day period if the Buyer does not like when he or she sees during on that item. The buyer should NOT remove contingencies for any reports or disclosures that he or she has not received from the seller.

Here’s an example of how this could go awry:

If you have requested septic certification and you have not seen the septic report and inspection, but you (the buyer) remove the contingency, the seller can still cancel the agreement. See below from the SWPI:

1D. If, in order to obtain the certification, additional costs are needed to repair the septic system or otherwise bring it into compliance with applicable law, further written agreement is required. If agreement is not reached within the time period for removing contingencies, then either party may cancel the Agreement.

So, if the buyer removes the septic contingency and no agreement has been made as to whom is going to pay additional repairs to fix a busted tank, then the RPA could still be cancelled after the contingency period.

It’s a tricky little loophole. To avoid getting yourself mixed up in such drama, never ever allow your buyers to remove contingencies for items for which they have not seen the reports. Also, always complete a Notice to Seller to Perform for documents not returned within the designed timeframes.

Better to air on the side of caution complete a few extra documents then have a transaction fall through at the eleventh hour.