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In California real estate, buyers and sellers will be parties to 2 agreements (contracts). The first will be the ‘hiring’ contract they enter with their agent (Buyer Rep or Listing Agreement). The second will be the agreement between the Sellers and Buyers (‘offer’ turned ‘contract’).

Both contain terms and conditions of a product or service being traded between the parties. Promises made by each party become duties for ‘fair and ethical dealings’ and ‘good-faith efforts’. These are meaningful limits for humans. We err. But we should never be unfair or have bad faith toward anyone. After all, the risk of exposure can long survive any real estate transaction.

The California Association of REALTORs (CAR) has a particular monopoly on what constitutes a valid ‘pre-printed’ agreement in California. The National Association of REALTORs (NAR) owns the ‘REALTOR’ brand. NAR also owns the Business Code of Ethics as it applies to REALTORs. So minding CAR and NAR (and SAR) rules is a required pillar for REALTORs. (A licensed agent is not necessarily a REALTOR.)

Because CAR owns the documents, they are driven to update them based on court decisions or conventions. Some changes are proposed then removed before being implemented. Some changes are made regardless of the benefits to consumers. When judges make decisions based on poor jurisprudence, that decision can render a document change that helps nobody but that judge’s ego.

Sellers and buyers are parties to the valid and enforceable purchase agreement. On the first day of acceptance, the purchase contract becomes executable. The buyer made promises about the time it will take and how much rigor their lender will impose on the purchase (appraisal and loan, if any). The seller made promises about giving that buyer exclusivity, any extras and a price. That ‘purchase agreement’ becomes the executable “Dance” between the buyer and seller.

A critical component in advising a seller is the evaluation of a buyer, their lender, and their statements of worthiness. This analysis is more critical if multiple offers are compared. The seller relies on the buyer’s promises. The seller’s agent must do their homework.

But the upcoming changes to the 12/2021 California Residential Purchase Agreement (RPA) constitute (in my opinion) a monumental shift in how a buyer is held to their promises in the agreement.  Not only does the new RPA provide SIX additional pages, it really puts a veil over a buyer’s true intent. And seller’s can’t argue.  The rationale I’m told is “what does it matter if the buyer closes in the same time at the same price?”.

Ah! But that moves ALL leverage to the buyer and puts sellers at their whim. For example, if the seller got multiple offers and accepted the ‘all-cash, 15-day’ offer, relaying the news to the other offerees, AND THEN the winning buyer, intended or not, can change to a 100% loan. Yes, they must close in 15 days at the agreed price. But, as agents know, it’s easier to get sellers to agree to an extension than a cancellation.

After a lengthy discussion with a lawyer at CAR, I was told that this change would not be removed. That means it can only be countered out until a dispute causes another judge to make another decision.

The sale of residential real estate is a protected market in California. Lawyers get paid by Brokers who own multiple listing services. The supply-chain of lawyers is protected. But almost anyone can pass the real estate exam.

Code of Ethics issue: It appears that the 12/21 RPA will erode our ability to keep the public from being damaged. That is, if a buyer can lie about their initial funding “promises” by subsequently changing their promises WITH NO agreement, then my and my clients’ reliance on that promise does damage to all involved.

Do not hire an agent who doesn’t understand how to protect you.

The letter of the new contract (12/2021) means Sellers must know buyers can say anything to win and then may perform something else.

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