We are all familiar with the intimidating mountains of paperwork that accompany a real estate purchase, but understanding precisely what they mean is critical given the potential implications of closing such a major transaction.
Though there are a multitude of potential issues, it is important to be aware of the two most common. First of which is a lack of follow-through on either the buyer or seller’s part for any number of reasons. Second are issues of disclosure, wherein relevant information has been unreasonably withheld. For example: the plumbing is leaking, the foundation is cracked, the electrical is not to code.
If you find yourself in one of these situations or any other, it’s vital to know your options. The California Association of Realtors Residential Purchase Agreement (CARRPA) is the standard for almost all real estate transactions: about 90% utilize this form. If you do not have a very good reason or very good legal representation you should not even consider entering into an agreement without its protection. Unorthodox deals are inherently unpredictable and equally hazardous.
CARRPA offers you three primary varieties of protection:
- The Liquidated Damages Clause
- The Mediation Clause
- The Arbitration Clause
When a buyer breaches the established contract it may be feasible to site a liquidated damage clause. However, the liquidated damage clause has a contingency period after which the transaction cannot be easily terminated. If the buyer does bow out they generally forfeit 3% of the purchase price.
In the far less common event that the seller feels the need to back out, generally in light of second thoughts or family pressures, the situation is different. Though historically, when a seller retracts their offer the buyer is likely to simply move on. As the market tightens, the instances of disputes on these grounds will undoubtedly increase.
In the event that these, or any other disputes arise, the mediation clause virtually requires that a mediation process be undertaken before any further proceedings. The party initiating the dispute is responsible for submitting a formal request for mediation after which both parties must meet with a neutral third party and attempt to resolve the issue. The arbitration clause offers a further venue for disputes to be settled outside of court and ideally prevent amassing even greater legal fees.