TidBit Tuesday

I see a lot of contracts that I review where agents write in, "This property to be sold As-Is." Did you know the contract already has an "As-Is" clause? It's true! On page 5 item 11 of the RPA reads:

CONDITION OF PROPERTY: Unless otherwise agreed in writing: (i) the Property is sold (a) "AS-IS" in its PRESENT physical condition as of the date of Acceptance and (b) subject to Buyer's Investigation rights; (ii) the Property, including pool, spa, landscaping, and grounds, is to be maintained in substantially the same condition as on the date of Acceptance; and (iii) all debris and personal property not included in the sale shall be removed by Close Of Escrow.

What does this mean?

First, you don't have to add in the "AS-IS" clause to your contracts as it already exists. If what you are trying to convey, is that the seller will not make any repairs, then it is best to state: "The property is sold AS-IS and the seller will not make any repairs." This lets the buyer know up front that the seller will not make any repairs, however, the buyer still has the right to conduct any inspections they want (at their cost), and some still ask for repairs. The seller then has a right to refer back to the contract and say they will not make any repairs or just select the appropriate response box on the Request for Repair that says, "Seller does NOT agree to any of buyer's requests."

Second, the seller must maintain the property in the same condition as of the date of acceptance. For example, if the grass is lush and green at the time of the acceptance, the seller cannot turn off the water and let the grass die. It is always best to let your sellers know this at the time the offer is accepted and that they must leave the utilities on for inspections (it's in the contract too).

I know you all know that the standard inspection period for disclosures is 17 days, or whatever time frame is agreed to by the buyer and seller in the fully executed contract. But did you know that the disclosure period can be extended, or the buyer can cancel by a new disclosure, late disclosure, or amended disclosure being introduced to the buyers after the inspection period? Even after they have removed their contingencies. It's true!

Section: 10A (7) states:

If any disclosure or notice specified in paragraph 10A(1), or subsequent or amended disclosure or notice is Delivered to Buyer after the offer is Signed, Buyer shall have the right to cancel this Agreement within 3 Days After Delivery in person, or 5 Days After Delivery by a deposit in the mail, or by an electronic record satisfying the Uniform Electronic Transactions Act (UETA), by giving written notice of cancellation to Seller or Seller's agent.

This means that if you deliver a disclosure such as the NHD or an AVID after contingencies have been removed or at the walk-thru but before the transaction is supposed to close, then the buyer can take an additional 3 or 5 days (depending on how the new disclosure was delivered), to either investigate the new disclosure or flat out cancel. So, please be careful that you are providing all the disclosures within the 17-day inspection period. I know you have no control over a new matter that pops up, but you do have control when you deliver the required disclosures.

Did you know that unless specific steps are taken, one party cannot unilaterally cancel escrow? It's true!

Depending on where you are in the contract, dictates the procedure you must take in order to cancel the escrow. If you are in the middle of the contract or any time frame during the contract, and an issue arises where the other party has not performed, then you must send a Notice to Perform (NSP or NBP) to the other party before you can cancel.

Page 6 Section E states:

NOTICE TO BUYER OR SELLER TO PERFORM: The NBP or NSP shall: (i) be in writing, (ii) be signed by the applicable Buyer or Seller, and (iii) give the other party at least 2 (or___) Days After Delivery (or until the time specified in the applicable paragraph, whichever occurs last) to take the applicable action. An NBP or NSP may not be Delivers any earlier than 2 Days Prior to the expiration of the applicate time for the other Party to remove a contingency or cancel this Agreement or meet an obligation specified in paragraph 14.

So, for example, if the buyer has not delivered their deposit funds to escrow by the 3rd day, then the seller's agent will want to send the buyer's agent an NBP (Notice to Buyer to Perform) signed by the seller asking for the buyer to deposit their funds into escrow within 48 hours. If the buyer does not perform, then the seller can issue the Cancellation of the Contract requesting to cancel the escrow. If you want to be diligent on your time frames, remember the above states you can send the Notice to Perform 2 days before the actual date of performance happens. This applies to any contingency. In addition, you cannot shorten the days on a Notice to Perform unless a different amount of days were agreed upon in the contract. The default amount of days to perform are 2 days. You cannot unilaterally change that because you want to cancel sooner. It must be the number of days agreed upon in the contract.

Now, let's say your Close of Escrow Day has come and gone and now your client is fed-up with waiting to close and wants to cancel. Just because the Close of Escrow Day has passed, does not mean you can just cancel the escrow. Or the day to closed has come and your client has done everything they need to do to close escrow, but the other client has not. In both cases, you will want to deliver to the other party a Demand to Close Escrow form (DCE).

Page 6 Section G states:

CLOSE OF ESCROW: Before Buyer or Seller may cancel this Agreement for the failure of the other Party to close escrow pursuant to this Agreement, Buyer or Seller must first Deliver to the other Party a demand to close escrow (C.A.R. Form DCE). The DCE shall: (i) be signed by the applicable Buyer or Seller; and (ii) give the other Party at least 3 (or____) Days After Delivery to close escrow. A DCE may not be Delivered any earlier than 3 Days Prior to the scheduled close of escrow.

You must deliver the Demand to Close Escrow Form either 3 days prior to the close of escrow or after the close of escrow date has come and gone, but not before then. Then you must give the other party 3 days to perform or whatever time frames you agreed to in the contract. The default amount of time is 3 days. Once the 3 days have passed, and the other party has not performed, then you can issue a Cancellation of Contract, but not before. In addition, before you submit a Demand to Close Escrow, your client must have fulfilled their contractual obligations, including but not limited to returning the escrow package, signing the grant deed, and making necessary repairs. For example, if you give a buyer a demand to close escrow in 3 days, yet the seller has not even returned their escrow package or signed the grant deed, then technically the buyer can't close. So again, your client must have everything done to close before issuing the DCE.

Commission Instructions: In order to save paper and make things run smoother, you can use Digisign in the Skyslope system to send Joe, Liz, or myself your commission instructions to be signed. For Lakeside office please verify that they have our PO box included with the address, to assure we receive the closing packet. If you have questions on how to use Digisign to do this, Liz, the TC's, or Amy can walk you through. Visitor Peads: If you have a listing and you receive a PEAD from a showing agent, you can put those PEADs you receive under the COVID tab or VISITOR PEAD tab under the listing portion of the Skyslope file. This is a good place to keep them, so you don't have to print them and keep them in a separate file. Escrow Completed Page 10 of Contract: When you get the page 10 of the contract back from escrow after they have completed it, you can file that form under the Escrow receipt along with the EMD receipt. Please don't put it under the RPA tab as it causes those who audit the files to go back and see if there was something missing in the main contract. Contacts: As a reminder, please make sure to put ALL parties of the contracts (buyers, sellers, title, escrow) into the Skyslope contacts section. For example, if there are 2 sellers, please put both. In addition, make sure to put your client's email address into the system as well. We use this information to send out client surveys.