Please describe, and give the number of days for all the contingencies in the Re
ID: 379243 • Letter: P
Question
Please describe, and give the number of days for all the contingencies in the Residential Purchase Agreement (herein referred to as the RPA). Additionally, please describe and give an example of how the Mediation, Arbitration, Liquidated Damages and Attorneys Fees clause works.
Please describe how the agency relationship between the buyer, seller and all the agents works. Also please describe the responsibilities and level of responsibility that each agent owes to their principle and the counter party.
Explanation / Answer
A contingency is a statement that is added to your contract that will allow you the right to back out of the deal without penalty under specific circumstances. A financing contingency may say that Buyer shall have 20 days from the date of binding agreement (“Financing Contingency Period”) to determine if buyer has the ability to obtain a loan. An appraisal contingency may say that if you can’t get an appraisal on the property that is at least as high as the purchase price, you can back out of the deal. Inspection contingency may say that the Buyer has a set amount of time (often ranging from 3-14 days), where he can do whatever he needs to do to ensure that he wants to buy the property.
When the buyer and seller agree, as part of the contract, to a liquidated damages provision, they are agreeing in advance that should the buyer breach the purchase agreement, the seller is entitled to the pre-agreed upon amount of damages. A buyer who breaches the purchase agreement after signing the liquidated damages provision risks losing the entire amount of the deposit. There is one significant exception to that rule: for residential purchases of one to four units, California law sets the maximum amount of liquidated damages at 3% of the purchase price. Arbitration is an alternative to a court trial. Instead of the plaintiff filing a lawsuit against the other party arbitrations are designed to be faster and, consequently, less expensive. The process is faster – usually 3-5 months – and takes place before a single arbitrator. The losing side may end up paying not only their own attorney’s fees and costs but the other side’s as well.
A seller’s agent is hired by and represents the seller. All fiduciary duties are owed to the seller. A buyer’s agent is hired by prospective buyers to represent them in a real estate transaction. Dual agency is a relationship in which the brokerage firm represents both the buyer and the seller in the same real estate transaction. The buyer’s rep works in the buyer’s best interest throughout the transaction and owes fiduciary duties to the buyer. The subagent works with the buyer as a customer but owes fiduciary duties to the listing broker and the seller.