California Residential Purchase Agreement Explained: What You Should Know

By Craig Donofrio

Posted on September 2nd, 2022

real estate purchase contract

Deciphering all the legalese of a residential purchase agreement — AKA a home purchase contract — can be a little daunting without some guidance, so use this post to learn about the 11 most important things to focus on when reviewing a California home offer.

Normally, you'd go over a purchase agreement with your realtor, who would advise you on whether or not you should accept the deal or counter. But we understand that sellers don't want to pay the hefty 3% fee that seller agents charge.

That's why Home Bay has partnered with Clever Real Estate. Clever partners with experience California agents who can help sell your house for just a 1% listing fee for home sales over $350,000 (in California, that's almost every home!).

Clever is free to use. If they can't connect you to an agent you love, there's no obligation to continue.

🏡 Connect with a Clever agent and find out how much you can save!

Purchase Price

No explanation required here — the higher the amount, the better. In the real estate offer form most widely used by the California Association of Realtors (CAR), you will find the Purchase Price in section 1.

Close of Escrow Date

This is the date your sale is finalized and is also typically the day you will receive payment for your home. If you are looking at the CAR offer form, the Close of Escrow Date is in section 1.

Thirty to 60 days is the most common timeframe for closing escrow.

» MORE: How to Navigate the Escrow Timeline

Real Estate Agent Commissions

If the buyer is asking you to pay commissions, there will typically be information for a buyer’s agent and their brokerage written into section 2 of the CAR offer form.

Earnest Money aka Initial Deposit to Escrow

In California, the standard amount of earnest money is 1 to 3% of the Purchase Price. In the CAR offer form, you will find the Earnest Money Amount referenced in section 3A. If the buyer is offering less than 1 to 3%, beware of their ability to successfully close.

Loan Amount

This is found in section 3D of the CAR offer form. The lower the Loan Amount relative to the Purchase Price, the higher the probability that the buyer can successfully obtain a loan to close.

Purchase Contingent on the Sale of Another Property

In the CAR offer form, see if the buyer checked the box contained in Section 4B. If so, be very leery of the offer because the buyer is saying he or she must first sell their home in order to be able to buy yours. If the box is checked, their offer is commonly referred to as a contingent offer.

Included Items

Is the buyer asking you to provide things like furniture and electronics? See section 8B of the CAR offer form to find out.

Tenant Possession

If you have a tenant, see section 9D of the CAR offer form. It will tell you whether the buyer wants you to keep the tenant or boot them at Close of Escrow.

Contingency Removal Periods

Thecontingency removaldate is the date defined in the offer that buyer will remove contingencies and indicate a firm intent to close escrow. Did the buyer change the defaults for removal of contingencies? The check boxes in section 14 of the CAR offer will tell you.

Liquidated Damages, Mediation and Arbitration

Typically the buyer and seller will both want to agree to liquidated damages, mediation and arbitration. If the buyer has initialed all the boxes contained in sections 21 and 22 of the CAR offer form, the buyer is agreeing to them.

Remember, reviewing legal agreements is not for novices. If you need help, we recommend going with an agent who has at least three years of experience. But we don't recommend overspending on commission, which is why Home Bay has partnered with Clever Real Estate.

Clever can match you with pre-vetted California agents with several years of selling experience. The nationwide brokerage pre-negotiates low listing fees and passes those savings on to you — with Clever, you'll pay only a 1% listing fee for home sales over $350,000.

On an $800,000 house — roughly the median home sale price in California — you would pay just $8,000 with Clever. With a 3% listing agent, you'd be forking over $24,000! That's a savings of $16,000.

👋 Need a great agent?

If you're weighing your options for buying or selling a house, Clever can help! With our friends at Clever: 

✅ You'll only pay $3,000 or 1% to list your home 

✅ In eligible states, you'll get 0.5% cash back when you buy a home 

✅ You'll work with a full-service realtor from a top broker, like RE/MAX or Keller Williams 

Saving on realtor fees doesn't have to mean sacrificing service. Find a top local agent today!

Related Reading

Interested in buying or selling?

We've improved the traditional real estate model with modern technology to cut costs, not quality.

Get started today

Posted in Real Estate Negotiations, Selling a House