March 6th, 2017 at 5:06 pm
Question: I have buyers who are currently in escrow. They have removed all contingencies, except their loan contingency. At the last minute, their lender said that they do not qualify for the loan unless they sell their current home. Their current home so happens to be listed for sale, but they have received no offers yet. If the sellers decide to cancel due to my buyers’ delay in obtaining a loan, is the buyers’ deposit at risk?
Answer: Yes, unfortunately. The buyers cannot back out under their loan contingency if their loan is declined because they cannot sell their current home. Paragraph 4 of C.A.R.’s Residential Purchase Agreement explicitly states that if, as in your situation, the purchase is not contingent on the sale of the buyers’ existing property, the buyers’ ability to obtain financing is also not contingent upon the sale of the buyers’ property. This provision is certainly tricky given that it’s embedded in paragraph 4 for the Sale of Buyer’s Property, instead of paragraph 3J concerning the Loan Contingency. If, however, the lender would simply decline the loan based on your buyers’ lack of income, rather than require them to sell their existing home, then your buyers can cancel under their loan contingency and be entitled to the return of their deposit.
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February 27th, 2017 at 5:03 pm
Question: I am the buyers’ agent for a property in Altadena. We wrote an offer stating in paragraph 7B(2)(i) that the seller shall pay for “any other minimum mandatory government inspections and reports if required as a condition of closing escrow under any Law.” The seller’s counter offer stated: “Paragraph 7B(2)(i) does not apply, and if any laws changed in 2017 for new requirements, Seller shall not do the work.” If my buyers accept this counter offer, what exactly will they be agreeing to?
Hint: For those unfamiliar with Altadena, it is an unincorporated community north of Pasadena in Los Angeles County. Altadena has no mandatory government inspections or reports required as a condition of closing escrow.
Answer: By accepting the seller’s counter offer, your buyers will take on no new responsibility, but they should also read between the lines as further explained below. Paragraph 7B(2)(i) refers to who pays for government inspections and reports that are point-of-sale requirements, such as Pasadena’s Occupancy Inspection Program and Los Angeles’s 9A Report. Many other cities and communities, such as Altadena, do not have such requirements.
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February 20th, 2017 at 4:49 pm
Question: I am helping buyers from China who are not fluent in English. Their daughter is a graduate student at USC and, to be near her, they want to pay all-cash for a home in Los Angeles. Can the daughter act as their interpreter? Does the contract have to be in their native language?
Answer: As to your first question, the answer is “yes.” Their daughter can be their interpreter. You can have the daughter complete the C.A.R. standard-form Interpreter/Translator Agreement (Form ITA) to help protect us against potential liability.
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February 13th, 2017 at 4:43 pm
Question: In honor of Valentine’s Day, I’ve always been curious about couples holding title to property. Occasionally, I see a married couple on title as “husband and wife as joint tenants.” Is there a good reason to hold title like that, rather than as “husband and wife as community property with right of survivorship?”
Answer: No. First of all, holding title as community property gives married couples a tax advantage over holding title as joint tenants. With community property, if one spouse dies, the entire property receives a stepped-up tax basis for capital gain purposes. So let’s say a married couple bought a house 40 years ago for $200,000, but the house is now worth $2 million. If one spouse dies, the tax basis for the entire property is stepped up to $2 million. If the surviving spouse now sells the property for $2 million, he or she will realize no capital gains and owe no capital gains tax.
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February 6th, 2017 at 4:38 pm
Question: Last week, you addressed a seller’s right to cancel after serving a Notice to Buyer to Perform (NBP). I am the buyer’s agent in that situation. The seller has served an NBP to remove the buyer’s loan contingency, but my buyer needs more time to get his loan approved. What should I do?
Answer: Go over your buyer’s options with your buyer, and let him decide how to proceed. Some buyers may love the house so much that they are willing to take certain risks to get it, whereas other buyers may not. Your buyer’s options are generally as follows:
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