Real estate purchase contracts are confusing. For buyers and sellers, that is expected; however, if your real estate representative is also in the dark, you could be the loser. Ask your agent how the new contract changes might affect you. If you get a blank stare, start worrying.

Background

In the State of California, the sale of real property must be in writing to be enforceable. Over the years, residential real estate contracts have become longer and more complicated. 

A majority of Realtors use the California Association of Realtors (CAR) form. Until recently, the entire state used one version, periodically updated. As some practices are different in the northern and southern parts of the state, CAR not long ago developed a local, “Area Edition,” for northern California. 

We now have two purchase contracts with important differences, used interchangeably. Unfortunately, some licensees are not aware of this. Changes to our area edition have not been widely publicized and have gone mainly unnoticed. These modifications, and how they differ from the state version, need to be appreciated in order for the public to be fully protected. 

Differences

Without boring you with all the details, some of the differences are found in the clauses covering “loan,” “closing and occupancy,” “condition of property,” “removal of contingencies,” and “potentially competing buyers and sellers.”

Any one of these, if misunderstood and/or misapplied, can lead to expensive problems. For example, the state version allows the buyer to “…   reasonably request that the seller make repairs;” the local agreement does not include this wording. An East Bay real estate attorney has indicated that using the area edition may make it more difficult for buyers to negotiate condition and/or withdraw from the contract.

Additional complications

Another worry is that, in an attempt to clarify contracts, some agents will create their own clauses, possibly leading to more confusion. To make matters worse, a large real estate firm uses its own, proprietary contract, often modified by changes to the CAR agreement. 

If you are a buyer, you need to ensure that your Realtor knows why he is using a particular purchase agreement and how it will impact your offer. As a seller, your agent may be reviewing as many as four different types of purchase contracts. You want to make sure he is fastidious about recognizing the inconsistencies.
 

Final thoughts

Remember that you will be bound by the contract you sign, even if you did not fully comprehend its implications. Of course, you have the option of hiring an attorney to review it, but few people do.

In the end, the representation of your interests rests in the hands of the real estate person you selected. If you take it for granted that your agent knows contracts, you could be paying the price later.

Related Articles: Understand Before you Sign; Another New Contract,Part 1 and Part 2; and Contract Revised Again