NorCal FSBO

The CAR contract is the standard form everybody uses. It is signed by the buyer and seller for California home sales.

Click here for an example of a CAR contract. And for good measure, here’s the accompanying estimate of closing costs.

The document is 16-pages long, and it works seamlessly with all the other documents needed for a typical home purchase/sale, such as the disclosures and escrow documents. 

CAR stands for California Association of Realtors, but the CAR contract is also the standard form used for FSBOs (because it is so user-friendly, and it is what 3^rd parties like lenders and escrow companies like to see). 

Pretty much everyone likes the CAR contract, myself included, because the terms are standard, straightforward, and balanced fairly between buyer and seller. The form is so easy to use that most of the checkboxes and fields don’t even need any input, because the standard terms are set by default.

Electronic versions of the CAR contract (and related CAR forms) are currently only available to licensed real estate agents and lawyers.  

The CAR contract is updated regularly to match current laws and practices, so it’s good to use the newest version (currently that would be December 2022). 

These are the key provisions in the CAR contract:

• Seller name
• Buyer name
• Address of home being purchased
• Purchase price
• Initial Deposit (typical is 1% in a buyer’s market; or 3% in a seller’s market)
• Loan amount (if any)
• Buyer contingencies to cancel (standard is 17-days for any investigation, appraisal and loan approval)
• Close of escrow (typical is 30-days)
• Escrow company
• Personal property (typical is appliances included)
• Closing cost allocation (this is city and county specific)
• As-Is Sale

Looking for more details on these terms? You can read my blog post here: https://norcalfsbo.com/2015/01/08/the-purchase-contract-part-2/

Or call me anytime for a free consultation: 209-785-8998. I enjoy answering questions.

—

Greg Glaser, Attorney at Law
I help home buyers & sellers throughout California
209-785-8998 — greg@gregglaser.com
Flat Fee Packages Available (no commission) for Buyers and Sellers Without a Real Estate Agent
http://www.GregGlaser.com

As a FSBO lawyer, I love helping families save money when transferring real estate from one family member to another.  It’s an easy process, and filled with gratitude as family members help one another meet their goals! The most common situation is parents selling or gifting a home to their son or daughter, or helping the child qualify for a mortgage (gift letter or equity gift). 

Contact me anytime for a free consultation, I enjoy answering questions 🙂 greg@gregglaser.com

Here is what most people do on these transactions, but anything can be customized to meet your goals:

Normal paperwork. We use the normal paperwork and forms to process the transaction. This helps ensure the transaction is documented properly/legally, and it allows for an easy close of escrow.  For example, we’ll use the standard CAR form purchase/sale agreement, and the required TDS disclosure form. It is customary (though not required) to utilize an escrow company to process funds and record the deed. 

Cost and Tax Savings. There are several ways to save money on family transfers: 

• No agents, no commissions. This can save tens of thousands of dollars. Obviously there is no need for real estate agents on family transfers. A flat fee lawyer like myself can prepare all the needed paperwork and handle the transaction with zero commission. 

• No title reports. This can save a couple thousand dollars. Many families already know the title history, so they can save money by foregoing the purchase of a title policy. This is not an option though if the buyer is using a loan to purchase the property (because the buyer’s lender will require a title policy).

• No escrow.  This can save a couple thousand dollars.  Some transactions are so simple (i.e., no commercial lenders) that an escrow is not even needed. We just handle the paperwork and any financial transfers directly between the interested parties, and then we record the deed with the County.

• Tax Basis. This can save thousands of dollars annually. On transfers from parent to child, there is a form that can be submitted to the County so that the child can continue paying the low annual property taxes of the parent. There is also a tax benefit for grandparent to grandchild transfers (if the parent has already passed away). For family transfers that do not qualify for the tax benefit (i.e., brother to brother), one option to keep the tax basis low is you can choose the minimum possible purchase price that could reasonably be considered market value – the neighbors might not be pleased, but if the County agrees that your purchase price reflects the market value, then you’ve reduced your annual tax bill as much as possible.

• Seniors (and almost seniors). People over age 55 who are moving their primary residence get a special tax break in California.  

Gifting.  Often a family member will give a home, or a portion of the equity, to another family member. It’s a good idea to document any gift so that you are safely navigating tax laws. These are the key tax laws to navigate:

• Uniform Estate and Gift tax (aka death tax). As an American citizen in 2022, you have a lifetime estate and gift tax limit that allows you to give away up to $12 Million with zero tax consequences — there are IRS reporting rules, but no tax is due. That $12 Million number changes over time depending on how much the US Congress decides to tax people. Most Americans don’t have multimillion dollar estates, so they don’t need to worry about triggering the $12 Million dollar limit. But for those $12M+ very high value estates, there are tools to maximum your tax benefits (such as portability, staggered giving through seller-financing, family businesses, and annual gift tax exclusion).

• Annual gift tax exclusion. In 2022, there is an annual gift tax exclusion of $16,000 (example: dad can give his son $16,000 tax free, and does not need to report it to the IRS).  And this annual gift tax exclusion can be combined cumulatively (example: dad and mom can combine their $16,000 limits for $32,000 total, and can double that again (to $64,000) if giving to both son and his wife.

• Advance on inheritance. It’s a pretty common situation that a parent wants to help one child, but ensure that their siblings are treated equally. The solution is called ‘advance on inheritance’. Basically, it means that if the borrowing child pays back the parent, then that child later receives his full inheritance upon the parent’s death. But if the borrowing child is unable to pay back the parent, then that child’s inheritance is reduced by whatever amount that child failed to pay back. This ensures all the siblings are treated equally upon the parent’s death. 

• Gift Letters. If a lender is involved on the transaction, the lender will want to see a formal gift letter that confirms any gift of equity or funds between family members. 

Seller Financing. This option is relatively common. For tax savings or income consistency, many families like to do low-interest or zero-interest loans to allocate payments over time. There are many ways to customize seller financing (aka owner carryback) to maximize tax advantages.

—

Greg Glaser, Attorney at Law
I help home buyers & sellers throughout California
209-785-8998 — greg@gregglaser.com
Flat Fee Packages Available (no commission) for Buyers and Sellers Without a Realtor
http://www.GregGlaser.com

Overall

Most home sellers provide the buyer with a full set of disclosures and these two inspection reports before or after the buyer tours the home: (1) general home inspection report, and (2) pest inspection report.  

For real estate agent-assisted sales, normally the seller provides these two reports upfront (at the time of the home tour). FSBOs are the same, except many FSBO sellers often find/know the buyer first, so the buyer simply hires his own home inspection contractors of choice, and therefore the buyer pays for the reports directly. 

When

Inspections can be completed anytime before close of escrow, but the two main inspections (home inspection and pest inspection) are usually completed before the purchase contract is signed. And then any additional inspections are completed during the inspection contingency period (typical is up to 17-days after the purchase contract is signed).

Cost

On a $600,000 home, a home inspection report costs about $400, and a pest inspection $250. The more expensive the home, the more expensive the reports, but a home inspection tends to cap off around $900 and pest inspection around $500, except for large multimillion dollar homes.

Find Inspectors on Yelp

Whether you’re a buyer or seller, you can easily find good inspectors using Yelp.com, because Yelp shows customer reviews (and keeps contractors accountable for good service). For a home inspection report, type “home inspection” and add your city/area. And for a pest inspection report, type “pest inspection” and add your city/area. Notably, a pest inspection is often called, Wood Destroying Pests and Organisms Report. 

Local Inspections

Here’s another article that I wrote on inspections, which also goes into some additional required inspections by certain local governments (such as San Francisco requires a water and energy inspection; and some cities require a sewer lateral inspection):

https://norcalfsbo.com/2017/08/01/presale-inspections-for-california-home-buyers/

Other Inspection Options

The standard CAR form “Buyer’s Investigation Elections” (BIE) identifies 39 separate inspection reports that a buyer is invited to consider before closing escrow! Most buyers ignore this list for good reason, because it’s ridiculously long — you can read the list at the end of this post if you like. As stated above, most buyers only do two inspections: home inspection and pest inspection. However, here is my short list of additional situations where it’s wise to consider paying for additional inspections:

• Water well: if the property has its own water well, it’s a good idea to test the productivity (i.e., gallons per minute) and also the water quality (i.e., bacteria). This report costs about $500. You can hire any local well contractor to provide the report.
  
• Survey: if the property has a disputed boundary line (i.e., if you suspect the fences don’t match the property line) it’s a good idea to hire a local surveyor to measure the property boundaries, and verify those measurements against the title records. This report costs about $400.
  
• Square footage: if the home has a disputed square footage (i.e., if you suspect the MLS square footage doesn’t match reality because of an unpermitted addition), consider hiring a professional appraiser (or measurement company) to take measurements. This report costs about $400.
  
• Roof: replacing a roof is a costly item (upwards of $50,000), and many general home inspection contractors don’t go up on the roof to inspect it in detail to look for evidence of leaks. So if you want a thorough roof report, you need to hire a roof contractor to give you those details. This report costs about $400.
  
• Pool/spa: fixing a pool or spa is an inconvenient item. Some buyers like to have the peace of mind that the pool and spa are in good condition. Because pools are built by specialty contractors, you might want to hire one of those pros to give you details on your pool’s condition. This report costs about $300.
  
• Environmental: If you have a specific reason to suspect something is wrong with the air quality in the home, or the soil quality in the yard, you can hire an environmental inspection. The cost of these reports vary even into the thousands of dollars, depending on what you’re looking for. 

Here is the full ridiculously long list of 39 available inspections:

1. GENERAL HOME INSPECTION

2. WOOD DESTROYING PESTS

3. CHIMNEY

4. ELECTRICAL

5. HEATING/AIR CONDITIONING

6. LEAD PAINT

7. PLUMBING

8. SQUARE FOOTAGE

9. STRUCTURAL

10. EASEMENTS/ENCROACHMENTS

11. FOUNDATION/SLAB

12. LOT SIZE

13. BOUNDARIES

14. POOL/SPA

15. ROOF

16. SEWER

17. SEPTIC SYSTEM

18. SOIL STABILITY

19. SURVEY

20. TREE/ARBORIST

21. WELL

22. WATER SYSTEMS AND COMPONENTS

23. RADON GAS

24. FORMALDEHYDE

25. ASBESTOS

26. METHANE GAS

27. MOLD

28. PERMITS

29. PUBLIC RECORDS

30. ZONING

31. GOVERNMENT REQUIREMENTS

32. VACANT LAND/CONSTRUCTION FINANCING

33. CONSTRUCTION COSTS

34. AVAILABILITY OF UTILITIES

35. ENVIRONMENTAL SURVEY

36. NATURAL HAZARDS REPORTS

37. SUBDIVISION OF PROPERTY

38. USAGE (INCLUDING ADUs)

39. INSURABILITY

—

Greg Glaser, Attorney at Law
I help home buyers & sellers throughout California
209-785-8998 — greg@gregglaser.com
Flat Fee Packages Available (no commission) for Buyers and Sellers Without a Realtor
http://www.GregGlaser.com

For your FSBO, here is a typical contract timeline based on the standard CAR form purchase agreement:

• Start of the process – Purchase agreement is signed. All days in the contract are counted from this date (such that the signing date is Day 0).  For example, if you sign the contract on June 17, then Day 1 means June 18.

• Day 1 – Buyer provides the signed purchase agreement to Buyer’s lender for next steps in the loan application process. It is the Buyer’s responsibility to work with their lender throughout the loan approval process, to provide the lender any information and documents requested, such as proof of income.  
  
• By Day 3– Buyer opens escrow, and Buyer gives the initial deposit (earnest money) to the escrow company.  The initial deposit counts toward the purchase price. 
  
• By Day 4– Buyer and Seller coordinate a convenient date/time for any inspection(s) by Buyer’s contractor(s), such as a pest inspection and home inspection.  Under the standard contract, Buyer pays for inspections, but neither party is required to do any repairs. 
  
• By Day 5 – Escrow sends Seller the initial escrow packet/info-request.  This is a simple form requesting some profile information to confirm the Seller’s identity.
  
• By Day 6 – Escrow sends the preliminary title report to the Buyer.  This is the document that explains the title history.
  
• By Day 7 – Seller provides disclosures to Buyer.  There are many required disclosures in California.
  
• Within 10-days – Buyer’s lender contacts Seller to coordinate a convenient date/time for the lender to complete the appraisal (if any)
  
• By Day 16 – Seller provides escrow with answers to any questions in the initial escrow packet.
  
• By Day 15 – Buyer’s contractor(s) completes any desired inspections.
  
• By Day 16 – The lender’s appraisal is complete.
  
• By Day 17 – Buyer releases the following contingencies: inspection, investigation, and appraisal.
  
• By Day 19 – Buyer has provided to Buyer’s lender all documents requested by the lender.
  
• By Day 20 – Buyer confirms with Buyer’s lender that the lender approves Buyer releasing the loan approval contingency (in other words, the lender has provided final approval for the loan).
  
• By Day 21 – Buyer releases the loan approval contingency.
  
• By Day 22 – Each party requests from escrow an advance copy of their ‘closing documents’ so they can review. 

• Approximately Day 25 – Escrow contacts the parties to schedule signing appointments for closing documents.  

• By Day 26. This is a good time for Seller and Buyer to discuss final items (i.e., final walk through (optional), transfer of keys, utilities, any appliance warranties).
  
• Approximately Day 28 – Loan documents are provided to escrow. Buyer makes the final deposit with escrow. The parties sign and notarize their respective closing documents (this can be done separately, no need for everyone to sign at the same time or place). 
  
• Day 30 – Close of escrow, all funds are paid, deed is recorded with the County. It’s official.  

The summary above is a general guide, but your specific contract terms will determine the actual dates. Additionally, there may be other items to consider or include, depending on your specific contract such as:

• HOA. If the property has a Homeowner’s Association, then you need to order HOA documents as soon as possible

• Repairs. Most sales are as-is, so no repairs are required. But if your contract requires you to complete repairs, then that needs to be included in your contract timeline.

• Local Requirements.  Some cities have special requirements (such as sewer lateral inspection), so it is smart to check this.

Need some help with forms, disclosures, anything? Call me or email anytime!

—

Greg Glaser, Attorney at Law
I help home buyers & sellers throughout California
209-785-8998 — greg@gregglaser.com
Flat Fee Packages Available (no commission) for Buyers and Sellers Without a Realtor
http://www.GregGlaser.com

As a FSBO real estate lawyer, I’ve learned how to help clients avoid situations that hinder success of their FSBO.  Here is some of my general advice for things to avoid:

1. Listing the Home At Too High A Price (Common Pitfall)

The #1 thing that drives potential buyers away from even scheduling a home tour is when the home is priced higher than the estimates of Zillow/Redfin/Trulia/etc. Quite simply, potential buyers don’t want to spend time looking at homes they think are potentially overpriced (and which their friends and family will think are overpriced).

It is a much better strategy for sellers to list the home at whatever reasonable market value is estimated by Zillow etc, and then show the home to more potential buyers. More potential buyers means more potential offers, which means the seller can then utilize the multiple counteroffer process to explore the true market value of the home. On an $800,000 home, a seller can use the counteroffer process to increase the home price by around $30,000 (I’m speaking generally of course, based on my experience of averages). Indeed, from the Buyer’s perspective, an additional $30,000 is just a small increase in the monthly mortgage payment.

The key here is that a happy seller is usually one who has multiple offers in hand and can therefore do counteroffers. An unhappy seller is usually one who lists the home price too high, and therefore receives less interest in the home.  On an $800,000 home, the best way to make $830,000 is to list for $800,000.   And the best way to make $770,000 is to list for $830,000.  Go figure!

If the home is located in a city or suburban neighborhood (with lots of comparable sales around), then you can get a pretty accurate estimate of market value from Zillow, Redfin, etc. If searching yourself for comparable sales, keep in mind that the most important factors are square footage, the number of bedrooms and bathrooms, and the age of the house.

2. Writing a Property Description That Is Unusual And Discusses Logistics (Common pitfall)

The #2 thing that drives potential buyers and buyer agents away from even calling to tour a home is when the property description is written differently than most listings. For example, a good property description is 1-2 paragraphs and it reads like this, “Come see this beautiful and recently remodeled Victorian townhome. 3 bedroom, 2 bath. 2,100 square feet. Ideal location close to Oakview park.… Friendly and safe neighborhood.”

Compare this absolutely terrible property description, “For Sale By Owner. 1% commission offered to buyer’s agent. All showings must be scheduled by calling 555-875-0983. House is in GREAT condition. 3 bedroom, 2 bath…. All showings subject to Owner availability.”

Do you see the difference? The first listing (the good one) looks like every other listing on the MLS. It is attractively worded and inviting; it does not discuss any logistics of sale or listing, but rather focuses exclusively on the property qualities. Moreover, the listing is entirely upbeat and does not anticipate problems or issues whatsoever.

Compare the bad listing — it broadcasts FSBO, it discusses logistics of showings, it discusses the commission, it uses ALL CAPS like a teenager’s text message, and it finishes with a disclaimer. It is literally terrible.

The best and most successful FSBO listings do not look like FSBO listings. Rather, they look exactly like agent-assisted listings.

3. Offering A Reduced or Zero Commission to a Buyer’s Agent (common pitfall)

One of the best ways to scare away buyer’s agents is to offer them no commission, or anything less than 2.5%.
From my experience, FSBO sellers should always offer buyer’s agents 2.5%. When listing the home, do not put the commission in the property description. Rather, when listing on the MLS (through a flat fee MLS company), you simply specify the percentage offered to a buyer’s agent in the section/box designated for that item, and nowhere else. And if you are only listing on Zillow, then you do not specify the commission anywhere; rather, it will be assumed that you are offering 2.5%, which buyer’s agents will confirm in writing when they make offers (for example, there is CAR form called Single Party Compensation Agreement).

In an MLS listing, the seller should always offer a 2.5% commission to a buyer’s agent. Do not offer more, and do not offer less. Anything lower than 2.5% looks weird/bad.

4. Not Hiring a Real Estate Photographer (common pitfall)

Real estate photography pays for itself because it generates more interest in the home. More interest means more showings. After a potential buyer sees your home online, they usually email their friends & family to discuss and receive validation or criticism. The only thing those friends & family will ever see are your photos online, list price, and property description. Again, real estate photography pays for itself.

5. Negotiating During the Property Tour (relatively common pitfall)

While a potential buyer is touring your home, don’t try to negotiate with them on the sales price. Rather, your goal is simply to ensure they have a good experience viewing the home. It’s all about the experience, their enjoyment, their visualization.

With that said, you can definitely answer a potential buyer’s questions if they ask you about the home. But your goal should simply be to give them space to visualize themselves in the home and enjoy the experience of touring the home. At the conclusion of the tour, you can encourage them to make any offer they like in writing, which can be submitted any time after the property tour.

6. Fake Buyers (Rare pitfall)

In my 15-years of real estate law practice focusing on FSBOs, I have only had one seller client who reported to me that they had a fake buyer (thief) tour their home. My client was a kind man who allowed an older woman (who turned out to be a thief) to tour the home. This is what the seller reported to me afterwards: the potential buyer carried a large bag with her (red flag); she said she was an all cash buyer and openly discussed a high offer she wanted to make (red flag), and she asked if she could be alone while touring the property so she could get a better sense of the property (red flag). The seller recognized all of these red flags, but when the thief was able to be alone, she stole some of the seller’s personal property. The police were able to track her down right away because the seller recorded her car license plate number, and she returned the property.

The lesson here is that sellers should be vigilant for red flags and trust their instincts. Sellers should avoid showing their home to any suspicious persons. Indeed, if the potential buyer does not have an agent, it is prudent to accompany that person at all times during a showing. And for additional precaution, sellers can record the license plate number of any potential buyers without an agent.

Here are some additional tips for showing a FSBO home:
https://norcalfsbo.com/2012/06/22/showing-a-fsbo-home/

7. Not Checking for Errors on the MLS (rare pitfall)

It is important for FSBO Sellers to double check the work of their flat fee MLS listing company. Here are some errors that can occur with data entry:

(1) the property gets listed on the wrong MLS (i.e., the wrong county)
(2) the designated telephone number for property inquiries doesn’t work
(3) the property details are incorrect (i.e., 3 bedrooms rather than 4 bedrooms)

A good FSBO seller will promptly double check everything about their listing immediately after it goes live.  A simple way to do this is to test everything just like a potential buyer would (i.e., read the listing, call the phone number, leave a message for the seller).

Conclusion

The best FSBOs are the ones where the seller has a positive energy for the experience, because the seller will attract that same energy in potential buyers. FSBO is not hard, it’s fun.  It’s especially fun receiving multiple offers!  The FSBO process really just takes a positive attitude and a little know how.  (And my clients have told me that hiring me as their FSBO real estate lawyer also helps 🙂

—
Greg Glaser, Attorney at Law
I help home buyers & sellers throughout California
(925) 642-6651 — greg@gregglaser.com
Flat Fee Packages Available (no commission) for Buyers and Sellers Without a Realtor
http://www.GregGlaser.com

Reality: A recent academic study showed 0% difference in the sales price of FSBO homes and realtor-assisted homes. The study looked at a very large number (15,606) of single family homes sold in Madison, Wisconsin over multiple years.  The key to the study’s success was that the economists properly adjusted for differences in the location, square footage and other factors between various homes — this is the exact same thing that professional appraisers do daily.

And yet, the National Association of Realtors (NAR) maintains that FSBOs sell for less?!  As economist John Wake recently observed, the NAR is doing a numbers trick to scare people away from FSBOs.  Basically, the NAR’s data set used only a fraction of the number of homes compared to the above-referenced Wisconsin study, and the NAR also failed to properly account for key differences in home sales (such as location and square footage).  If appraisers failed to account for these differences, they would be fired.  But when the NAR does it and posts their results on Twitter, they are applauded by their base. Go figure.

It is obvious that lots of FSBO sales are simply in a different league than realtor-assisted sales.  For example, family-to-family sales (i.e., father selling a home to his daughter) are more likely to use a lawyer (no commission) than an agent.  Indeed, as a FSBO lawyer in California, every year approximately 10%-15% of my FSBO transactions are these family-to-family sales, and the sales price is almost always a huge discount (i.e., 20%-40%). Another significant percentage of FSBOs (again, approximately 10%-15%) are landlord-tenant sales. For these transactions, the sale price is usually discounted somewhere in the range of 7% (because the buyer has already been paying rent (so there is good will), and the seller doesn’t need to do any listing, showing, or repairs (also, the seller views the sale as lower risk because the buyer already knows the home intimately).

Economist John Wake also observed, the NAR failed to properly account for “mobile homes, manufactured homes, condos and single-family homes in rural areas”.  Take it all together and it is plain that a large percentage of FSBOs are in a different league than realtor-assisted sales.

In my law practice, I see FSBOs matching comparable sales routinely – it is standard practice for FSBOs to match comparable sales (often higher in a strong market).  That means that if you do the FSBO right, you can expect a full-price offer on your home or higher in a strong market.

—
Greg Glaser, Attorney at Law
I help home buyers & sellers throughout California
(925) 642-6651 — greg@gregglaser.com
Flat Fee Packages Available (no commission) for Buyers and Sellers Without a Realtor
http://www.GregGlaser.com

A contingency is a contractual right allowing a party to cancel a contract (without penalty) either before or after any event (i.e., 21-days after signing a contract).

Standard Buyer Contingencies
For example, the standard California Association of Realtors (CAR) home purchase contract contingencies are as follows:

• Inspections. 17-days for the buyer to complete any inspections and investigation (i.e., home inspections, reviewing the title report). Only the buyer can cancel if the buyer is not fully satisfied with the result of the buyer’s inspections and investigations.
• Appraisal. 17-days for the buyer’s lender to complete an appraisal. Only the buyer can cancel if the appraisal amount is lower than the purchase price.
• Loan Approval. 21-days for buyer’s lender to ‘approve’ the loan. Only the buyer can cancel if the lender does not approve the loan (i.e., the lender does not provide a loan commitment letter or other confirmation of final loan approval).

Less Common Contingencies
And here are some contingencies that are less common:

• Sale of buyer’s current home. This contingency is usually processed with the CAR form “Contingency for Sale of Buyer’s Property”, which offers several timing options. Sometimes the Seller only has 17-days to find a new home or cancel; but sometimes the seller checks the box that the contingency continues until seller actually closes escrow on the replacement home.
• Seller finds a replacement home. This contingency is usually processed with the CAR form “Seller’s Purchase of Replacement Property”, which offers several timing options. Sometimes the Seller only has 17-days to find a new home or cancel; but sometimes the seller checks the box that the contingency continues until seller actually closes escrow on the replacement home.

Counting Calendar Days for Contingencies
On the standard CAR contract, contingency days are counted as “day after”, so here is how to count them properly:

• The contract start date is the day of the last signature on the contract (example: Buyer signs the contract on 6/1/18 and Seller signs the contract on 6/2/18, so the contract start date is 6/2/18)
• Count “days ‘after” the contract start date (example: contract start date is 6/2/18, so day one is 6/3/18, day two is 6/4/18… day 17 is 6/19/18).
• Weekends and holidays are included in the counting. However, if the last day to perform an action (i.e., release a contingency) lands on a weekend or holiday, then the CAR contract automatically moves the date forward to the next business day (i.e., the 21-day loan contingency lands on Saturday 6/23/18, so the buyer’s last day to release the loan contingency is actually Monday 6/25/18).
• Regarding time of day, an action can be performed at any time of day, up until 11:59pm (i.e., the buyer’s last day to release the inspection contingency is 6/19/18, so buyer has until 11:59pm on 6/19/18 to email the seller the signed contingency release form).

Release of Contingencies Procedure
Contingencies are typically released in writing with the CAR form “Contingency Removal”. It’s simple — the buyer checks the appropriate boxes for the contingencies being released, and then emails the form to the seller.

Buyer Delay in Releasing Contingencies
It is not uncommon for a buyer to delay in releasing contingencies. On the standard CAR home purchase contract, there is a surprising result though – nothing happens automatically. If the seller wants something to happen, the seller must be proactive according to the following CAR contract rules/steps: First, the seller needs to give the buyer an official “Notice to Perform” document. This begins a 2-day clock in which the buyer either (1) releases the contingency, or (2) the buyer does nothing. In the event the buyer does nothing, then the seller is free to cancel the agreement; but if the seller cancels the agreement then the buyer receives a refund of the buyer’s initial deposit.

Cancellation Pursuant to Contingency
Here is the typical procedure for cancellation pursuant to a contingency (assume the buyer is the one cancelling):
First, the buyer usually calls or emails the seller to advise of the reason they are cancelling (i.e., concerns about the home inspection report findings; second thoughts about the neighborhood). Second (or concurrently with the first step), the buyer emails the seller the official cancellation document – usually this is the CAR form “Cancellation of Contract” (CC). Both parties need to sign the CC form section relating to release of Buyer’s initial deposit before the escrow will actually release the initial deposit back to buyer. If both parties do not sign their agreement to release the deposit, then escrow will simply hold the funds in escrow until the parties resolve the issue by mediation or arbitration/trial.

Legal Note re Liquidated Damages
The only time the buyer pays liquidated damages to the seller is if the Buyer breaches the contract.  Cancelling pursuant to a contingency is not a “breach” of contract. Rather, it is the exercise of a contractual right. Therefore, the Buyer is entitled to a refund of the full deposit upon exercise of a contingency. The only exception to this rule is if the purchase contract explicitly states that an initial deposit is nonrefundable regardless of contingencies.

—
Greg Glaser, Attorney at Law
I help home buyers & sellers throughout California
(925) 642-6651 — greg@gregglaser.com
Flat Fee Packages Available (no commission) for Buyers and Sellers Without a Realtor
http://www.GregGlaser.com

Condition of Property and Required Disclosures

In California, real estate transactions are required to have certain disclosures.  See e.g., California Civil Code section 1102 (“disclose any fact materially affecting the value and desirability of the property, including, but not limited to, the physical conditions of the property”). The best rule of thumb is that the seller should put themselves in the shoes of the buyer, and therefore disclose any facts that they would want to know themselves if they were purchasing the property.

Some disclosures are included in the purchase contract, but most disclosures are not included in the contract or even attached to the contract.  Rather, most disclosures are simply provided sufficiently in advance of close of escrow (the standard contract gives the seller 7-days after the contract is signed to provide the disclosures; but most sellers like to provide disclosures at the time of signing the contract).

Generally, the most important disclosures needed from the Seller are the ones relating to the physical condition of the property.  In California, this is the 3-page Real Estate Transfer Disclosure Statement (TDS) and the 4-page Seller Property Questionnaire (SPQ).

Risk & Responsibility

It is important for every buyer to understand that they take on both risk and responsibility when purchasing property.  Generally there are no guarantees in property sales, which is why it is standard practice for buyers to conduct thorough property inspections with the help of certified home inspectors, termite inspectors, and sometimes more (i.e., roof inspectors).  Yelp.com is a good source for finding inspectors.  Inspection reports become an official part of the disclosures made by the parties in order to finalize the purchase/sale.

With that said, sellers must remember that they have an affirmative duty to disclose certain material facts about the property condition within the seller’s knowledge, such as any hidden dangers of which the seller has been made aware (i.e., cracks in the property foundation, mold in the attic, a leaky dishwasher, a drug dealing neighbor, a potential dispute about the fence line).  A seller who has information about such a problem (either through personal discovery, the disclosure of a previous owner, or by the report of a professional) must disclose the material facts.  Making disclosure of information learned from a property inspection is as simple as providing the buyer a copy of the inspector’s report.

A seller who is unaware of an issue or problem has no duty to disclose the problem.  The exception to this rule is that the seller will still be held to a ‘reasonable person’ standard; so if a reasonable person in the seller’s circumstances would have been aware of the issue (i.e., faulty wiring causes the lights to flicker on and off every 45-minutes or so), then a seller who lived in the house for even one week would have a difficult time trying to claim they did not know about the problem.

If the seller fails to disclose a problem, the buyer has many legal remedies. This area of the law is called ‘real estate nondisclosure litigation’.

As-Is Sale

Every Property in California is sold “as is” unless the parties specify otherwise in the contract itself.   Therefore, if the parties want the Seller to make any changes or repairs to the Property before the sale closes, then they will need to specify exactly what should be done in the contract (either in the original contract or by addendum). There are only a handful of minor exceptions to this rule, such as the Seller’s obligation to strap the water heater, and the Seller’s obligation to provide carbon monoxide detectors.

Key point: Just because the sale is “as is”, this does not trump the law that requires a seller to disclose material facts about the property condition and history.  In other words, sellers must always disclose material facts about the property, even when the sale is as-is.

For more information on disclosures, here is my post California Home Sale – Required & Standard Disclosures.

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Greg Glaser, Attorney at Law
San Francisco Bay Area – Northern California
(925) 642-6651 — greg@gregglaser.com
Flat Fee Packages Available for Buyers and Sellers Without a Realtor
http://www.GregGlaser.com

It is customary for a home buyer to spend approximately $600 for inspections prior to purchasing a home (this happens during the escrow period, usually in the first 17-days after signing a home purchase contract). Even when the Seller provides a copy of a recent inspection report, most buyers like to hire their own independent inspection companies.

The two most common inspections (that most buyers perform) are not required by law. Here they are:

(A) General Home Inspection – This is often just called a Home Inspection. The average cost is between $350 and $600. A contractor visits the home for approximately 2-5 hours, inspects everything (except the roof and crawl spaces unless the buyer specifically requests), and takes lots of photos. Within approximately 48 hours, the contractor will email an approximately 30-page inspection report to the buyer.

1. Tip 1: The best home inspectors are often retired general contractors who no longer build homes (often because of knee or back pain). These guys know the building codes very well, and their practical experience makes them well suited to explaining things to buyers (even giving casual estimates verbally for what it would cost to fix certain issues).  Most inspection contractors will return your phone call within 24-hours and be able to schedule an appointment to inspect the home within 72-hours.
2. Tip 2: To find a reliable home inspection company near you, I recommend using Yelp.com (in the search section of Yelp, type ‘home inspection’ and the name of your town, county, or area). Generally, the companies that offer a combined report (Home Inspection + Termite Inspection) are not the best choice because their inspectors are not always thorough.  The best companies are usually sole proprietor businesses operated by just one man, the experienced contractor who will be performing the inspection.

(B) Wood Destroying Organisms and Pest Report – This is often called a Termite Inspection, even though the inspector looks for anything that destroys wood (i.e., termites, mold, dry rot). The average cost is $175. To find a reliable pest inspection company near you, I recommend using Yelp.com (in the search section of Yelp, type ‘termite inspection’ and the name of your town, county or area).

1. Tip 1: Choose a contractor that regularly performs termite inspections for home sales.  It should be the primary business of the contractor – performing termite inspections.
2. Tip 2: The Inspection Report will categorize issues (i.e., termite damage) into two categories: Section 1 and Section 2. Section 1 means the inspector recommends the issue should be repaired promptly (within a month or year or so) because it is a safety hazard or otherwise will cause continuing damage to the home if not repaired promptly. Section 2 refers to issues that are not urgent (they are recommended for repair basically anytime in the future). Most home sales are “as-is”, so the Buyer is responsible for any repairs if they choose to purchase the home (or the buyer can cancel based on an inspection contingency). Sometimes the parties will negotiate to perform repairs prior to close of escrow, or more commonly negotiate for the Seller to give Buyer a $ credit to perform some/all of the repair work after close of escrow.
3. Tip 3: For FHA loans and VA loans, the lender requires that Section 1 work be completed before close of escrow (and sometimes (though rarely) section 2 work also). If the buyer cannot afford to pay for the lender’s requested repairs, then often the buyer will ask the seller to pay for the repairs. If the seller declines (which the seller is free to do, because all sales are as-is unless agreed otherwise in writing), then the Buyer usually cancels the contract for a full refund during the buyer’s inspection contingency period (i.e. 17-days after signing the contract).

Inspections/Reports Required by Law

The only inspections/reports required by law are when the home is in a City or County that requires a special presale inspection/report.  These are usually minor things, and easy to accomplish.  Most cities and counties in California do not require presale inspections or reports. But here are some examples of cities that do:

• San Francisco:
  • 3R report – this is a report ordered online (seller pays $150) that shows the property’s building permit history
  • Water & Energy Inspection – this is an inspection where a special licensed inspector visits the property and checks for things like low-flow toilets. If the property is not in full compliance, the inspector will not certify the sale (but will offer to complete the repairs/upgrades immediately), so typically the seller will pay to bring the property into compliance. In my experience, most homes & condos pass the inspection, and any required repairs are usually under $500 and handled very quickly during the escrow period.  At the conclusion of this inspection, the inspector files a RECO compliance report with the City of San Francisco.
• Oakland: Lots of homes in Oakland are within a water district called EBMUD, where the seller is required to hire a special contractor to inspect the sewer lateral. If the sewer lateral is damaged, it needs to be fixed prior to the close of escrow, and typically the seller pays for it.  In the old days, these inspections and repairs were more expensive, but today with remote cameras and trenchless sewer lateral repairs, costs are pretty reasonable.  Notably, homes with a recent certification of compliance are exempt from this ordinance.
• Berkeley: In addition to sewer lateral inspections, Berkeley has a RECO program for energy conservation inspections.
• San Jose:
  • Within the Natural Hazard Zone Disclosure Report, the Seller must complete a form for trees in the front yard. This is technically a disclosure rather than an inspection or report, but I wanted to highlight it as an example because it shows that each city is unique and nuanced, and so it helps to work with a professional (like myself) if you are considering FSBO.
• Mill Valley: This city has a presale inspection that requires sign-off by the public works department
• Northern & Southern California – several other cities in both Northern and Southern California require presale inspections. Call me with questions for a free consultation: 925-642-6651.

—
Greg Glaser, Attorney at Law
San Francisco Bay Area – Northern California
(925) 642-6651 — greg@gregglaser.com
Flat Fee Packages Available for Buyers and Sellers Without a Realtor
http://www.GregGlaser.com

With an attorney to assist you (rather than a real estate agent), buying or selling your home is actually quite simple and straightforward.  Here is a typical breakdown of the logistics & responsibilities, showing that most of the tasks are handled by the attorney, escrow, and lender:

Attorney	Seller	Buyer	Escrow	Lender
· Prepares the purchase agreement · Answers all questions and guides the transaction · Provides all necessary disclosure forms · Reviews all documents · Coordinates with all parties	· Lists the home for sale (here’s how, it’s easy) · Shows the home to potential buyers (here’s how, it’s easy) · Provides info about the property on disclosure forms and closing documents (it’s easy; your attorney helps you)	· Tours the home · Hires any inspection contractors (it’s easy, most people use Yelp) · Provides requested information to the lender (it’s easy) · Reviews disclosure forms and closing documents (it’s easy; your attorney helps you)	· Provides title report · Handles all funds · Answers questions · Provides closing documents · Files and records all necessary documents	· Provides loan documents · Answers questions

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Greg Glaser, Attorney at Law
San Francisco Bay Area – Northern California
(925) 642-6651 — greg@gregglaser.com
Flat Fee Packages Available for Buyers and Sellers Without a Realtor
http://www.GregGlaser.com