The Tahoe Purchase Agreement | Buyer
As your Tahoe Buyer’s Agent I will be using the California Association of REALTORS® (CAR) Residential Purchase Agreement (RPA) to help you purchase your Tahoe real estate. This document has over 33,000 words, over 30 different sections, and is at least ten (10) pages long, not including our local contract addendum.
In additional to the CAR-RPA there will be additional supporting documents, and disclosures. A typical offer package with disclosures has more than forty (40) pages to it.
In the United States, oral contracts are not enforceable – real estate contracts must be in writing. Even if you give me, your agent, permission to bargain on your behalf, I must have a CAR-RPA Purchase Agreement signed by all buyers before I can present your offer.
Any changes, terms, or provisions to the document must be in writing and agreed to by both parties. Verbal agreements are not enforceable, it’s all about what is in writing that will govern your Tahoe purchase transaction.
When you read the CAR-RPA Purchase Agreement, try to imagine yourself as an independent party who has no knowledge of the transaction other than what’s included in the contract. Is the meaning of each clause clear?
You’re going to have questions and I’m here to help you through the entire process.
Elements in the CAR-RPA Purchase Agreement
Sales Price Self-explanatory, but still the most important term.
Initial Deposit / Increase Deposit ( Also known as Earnest Money)
Along with your Purchase Agreement, you will need to identify your initial deposit and increased deposit amounts to demonstrate how serious you are about the Tahoe home. In some parts of the country the initial deposit/increased deposits is also known as “Earnest Money”. In the Tahoe area we typically expect an offer to include an initial deposit between 1% to 3% of the purchase price, and an additional increased deposit to get the total deposit up to a total of at least 3% of the purchase price.
If your offer is accepted, the initial deposit becomes part of your down payment, or closing costs.
If the offer is rejected, your money is returned to you.
If you back out of a deal against the terms of the contract, depending on when you cancel, none, some, or all of your initial deposit/increase deposit may be at risk for forfeiture.
“Title” refers to the legal ownership. The seller should provide title, free and clear of claims by others not acceptable to you, the buyer. Title insurance will assure that the home is free of “unacceptable liens” or “encumbrances.”
It’s negotiable who will pay for the title insurance policy and the type of policy you purchase.
You also have a choice on which title company to use. Your local Tahoe agent should be able to give you suggestions on what local title companies are available in the area.
A clause which specifies that the obtaining of a mortgage loan on the property on terms and conditions acceptable to you is a condition of the sale, and provides for the refund of your deposit if you fail to get the mortgage loan.
This clause provides for a pest control inspection and report by a licensed pest control operator. Sometimes sellers will provide this report prior to the purchase agreement. If not, it provides for a method of allocating whether seller, buyer or both will pay for the repairs disclosed by the report. Your lender may require a certificate from a qualified inspector stating that the property is free from termites, pests and dry rot.
I strongly recommend an inspection and written report by a home inspector who is a licensed professional to determine the condition of plumbing, heating, cooling and electrical systems, the structure of the home, the grading, roof, siding, windows and doors.
In the Tahoe area it is the responsibility of the buyer to pay for any and all property inspections including the home inspection. You can expect to pay between $300 – $500 for properties up to 2,500 square feet in size. Homes larger than that, or homes that have detached structures will run higher in price for the home inspection.
When you hire your own inspectors, it’s clear that the inspector is working for you, the buyer, not the seller. I also strongly recommend that you request any such additional inspections as may be recommended by your home inspector, such as a separate roof inspection, foundation, or soils inspection, pool inspection, etc. These additional inspections may reveal conditions, or defects beyond the ability of a general home inspector to ascertain the extent of the potential problems.
Other Disclosure and Inspection Terms
See the section on “What you need to know” for a detailed discussion of these disclosure and inspection items.
You can specify, in your Purchase Agreement, that certain conditions must be met before the sale goes through. Contingencies are crucial, so be sure to speak up and tell me what’s important to you, so that all of your concerns are reflected in the offer. They may include:
- Your ability to obtain specific financing from a lending institution. This contingency will ensure that if you can’t find the loan, you will not be bound by the contract.
- That the home inspector you hire provides a satisfactory report within 17 days (standard contract default period) after the seller accepts your offer. With the proper contingency, if the report does not satisfy you, the contract becomes void.
- The sale of your existing home.
Obviously, in a slower home sale market, sellers are more willing to accept contingencies, or longer contingency periods than they are during more active circumstances.
Too many contingencies in a strong real estate market may prevent your offer from being accepted. Make sure your contingencies are clear and are in line with current market conditions.
Your Tahoe Real Estate Agent will be able to provide you guidance on what time period are customary for the area and current market conditions.
Initial Deposit/Increase Deposit (Earnest Money)
This is a deposit that you give when making an offer on a house. A seller is understandably suspicious of a written offer that is not accompanied by a deposit that is line with current market conditions to show “good faith.” Your Tahoe real estate agent will help you determine what initial deposit amount and if necessary an increase deposit amount will show you as a strong buyer.
In the Tahoe area, the initial and increased deposit(s) are held by your escrow holder (title company). Agents rarely take a deposit check these days with the offer, as the default contract terms call for the initial deposit to be made with in 3 business days after acceptance. That means you don’t send a check with your offer unless that is a condition that the seller requests. It also means that your personal banking information isn’t just floating around if your offer is not accepted. If your offer is accepted your initial deposit will become part of your down payment.
In most instances, the buyer will select the escrow company, which is also the title company, providing the title insurance policy after close of escrow. In some counties where the custom is for the seller to pay for the title insurance policy, the seller will select the escrow and title company.
You can negotiate which closing costs you will pay and which will be paid by the seller. However, be aware that longstanding custom regarding the handling of the allocation of these costs makes many of them hard to negotiate on terms different from local custom. If a seller was obligated to pay a certain closing cost when he or she bought the property, they will expect you, the buyer, to pay the same cost on your purchase. See the section on “Who Pays What?” which details these cost allocations in the area we serve.
Withdrawing an offer
In most cases the buyer may withdraw an offer right up until the moment the offer is accepted. Consult your Tahoe Real Estate agent as to the best and safest way to withdraw your offer.
The seller’s response to the offer
You will have a binding contract if the seller, upon receiving the written offer, signs an acceptance just as it stands, unconditionally. The offer becomes a firm contract as soon as the signed offer is delivered to you or me, your Tahoe agent.
If the offer is rejected, then the offer is no longer valid.
If the seller likes everything except the sale price, or the proposed closing date, or the terms of your offer, you may receive a written counteroffer, with the changes the seller prefers. You are then free to accept, reject the counter offer, or make your own counter offer to their proposal.
Each time either party makes any change in the terms, the other side is free to accept, reject it, or counter again.
The document becomes a binding contract only when one party finally signs an unconditional acceptance of the other side’s proposal and that final, unchanged document is delivered to the other party or their agent.
How the seller may counteroffer
The buyer and seller can negotiate and agree about any of the terms, conditions, costs and who pays for them. Some terms and conditions that are negotiable include:
- Termite inspection fee and costs to repair any damage
- Closing costs
- Points to the buyer’s lender
- Repairs required by the lender
- Repairs of conditions or defects disclosed by the seller, uncovered by inspectors, or required by governmental agencies
- Date for the close of escrow
- Date and time for possession by buyer
- A holding over, or rent back, by seller after close of escrow
- Home Warranty
- Inspection Periods
- Seller Contingencies ( seller may need to find a replacement property or complete a 1031 Tax Exchange)
- Contingent upon the sale of another property
- Who pays for HOA transfers
- Who pays for what property inspections
- Title and Escrow Fees
There is so much more to the Buying process than just looking at properties, so it is important to work with an agent that has top skills in all parts of the home/condo buying process.
Need more help in trying to figure out your Lake Tahoe – Truckee home/condo buying options?
Do you want more information on the different neighborhoods, locations, developments, or communities with home owner amenities, and which ones will best meet your individual needs? Call me at 530.414.1260 and I can help you find the right place to buy!
All information is deemed reliable, but is subject to change, and/or correction without notice.
Buyers and Sellers should investigate and verify all information to their own satisfaction.
The Tahoe Purchase Agreement | Buyer