Faced with unprecedented circumstances related to the coronavirus pandemic, the California Association of Realtors (CAR) released a new coronavirus addendum, addressing some of the situations and questions that buyers and sellers are facing in our state.
The new form, which you can sell below, is not mandatory at this time for use in real estate transactions. It’s an optional form that can be incorporated into either a new or existing transaction should both the buyer and seller wish to use it.
The form lays out the reason for its existence and then goes on to include four terms.
Paragraph 1 on the form states that the buyer and seller agree to extend escrow by up to 30 days (another date can be filled in, if desired by the parties) if either buyer or seller are unable to perform to close escrow due to “unforeseen circumstances” related to COVID-19. The addendum defines “unforeseen circumstances” and provides examples of such situations. This could involve either the buyer’s inability to obtain a mortgage in a timely manner or the seller’s difficulty getting a lien released, along with issues involving other third parties that are unable to do what needs to be done to close the transaction on time.
Paragraph 2 on the form is optional and is only a part of the agreement if checked. It states that the buyer could cancel the escrow and get the good faith deposit back if they are unable to fund their loan due to COVID-19 related circumstances, even after releasing their loan contingency.
Paragraph 3 could be checked if both parties have reached an agreement to cancel the transaction and release the deposit to the buyer.
Paragraph 4 is blank and could include terms desired by buyer and seller.
Both parties must sign this document in order for it to be incorporated into the Residential Purchase Agreement. The terms as written seem to provide more protection for the buyers’ good faith deposit than would otherwise be the case. As such, sellers who are already in escrow may not be enthusiastic about incorporating these new terms. However, in a market where there buyers are facing uncertain challenges, buyers may be reluctant to move forward without additional protections, meaning sellers may want to be more flexible.
We are not attorneys and are not authorized to provide legal advice on the form. We suggest that you consult with an attorney if you do have any legal questions.
If we can answer any questions regarding the current real estate market and whether you should buy, sell, or wait, please let us know.