California Residential Purchase Agreement Explained: A Guide for Russian River Home Buyers

If you're thinking about buying a home in the Russian River area, understanding the California Residential Purchase Agreement is an important part of preparing to make an offer.

The Residential Purchase Agreement, commonly called the RPA, is the contract California real estate agents typically use when preparing an offer for a residential property. It covers far more than simply how much you're willing to pay for the home.

Purchase price, financing, deposits, inspections, insurance, closing costs, possession and contingencies can all become part of your offer.

For buyers looking at homes in Guerneville, Forestville, Monte Rio, Cazadero, Rio Nido, Duncans Mills, Jenner and the surrounding Russian River communities, there can also be additional property-specific issues to investigate.

I've helped buyers and sellers throughout the Russian River area for years, and my goal with this guide is to give you a practical overview of what you're likely to encounter when it's time to write an offer.

What Is the California Residential Purchase Agreement?

The California Residential Purchase Agreement is a detailed contract that establishes the terms under which a buyer is offering to purchase a property.

Your real estate agent will prepare the offer based on the terms you choose.

Those terms can include:

• Purchase price
• Initial deposit
• Financing
• Close of escrow
• Inspection periods
• Appraisal and loan contingencies
• Insurance contingency
• Seller credits
• Buyer broker compensation
• Allocation of escrow and title expenses
• Personal property included in the sale
• Possession
• Other terms specific to the transaction

Many of these terms are negotiable.

That's important because sellers don't necessarily evaluate an offer based solely on price. The overall combination of price, contingencies, financing, timing and other terms can influence how attractive an offer is.

Purchase Price and Close of Escrow

The purchase price is obviously one of the first major decisions when preparing an offer.

You'll also specify when you want the transaction to close.

For example, an offer could call for a 30-day escrow or establish a specific closing date.

The appropriate timeframe can depend on financing, inspections, the seller's needs and the circumstances of the transaction.

How Long Does the Seller Have to Respond?

The purchase agreement also establishes when your offer expires.

In some situations, a buyer may want to give the seller several days to respond. In a competitive situation, a buyer may choose a shorter timeframe.

There isn't one strategy that's appropriate for every property.

This is where understanding the current Russian River real estate market becomes valuable. Your agent should help you evaluate the property, competition and seller's situation before deciding how to structure the offer.

Initial Deposit and Liquidated Damages

The initial deposit is another important part of the offer.

A deposit of 3% of the purchase price is commonly used in our market, although the terms of an offer are negotiable.

Buyers should also understand the agreement's liquidated damages provision.

Under the provision discussed in my video, for a qualifying residential property of no more than four units that the buyer intends to occupy, the amount retained as liquidated damages is generally limited to no more than 3% of the purchase price.

That doesn't mean a buyer automatically loses a deposit simply because a transaction doesn't close.

Contingencies, contractual rights and the specific circumstances surrounding a cancellation matter. Deposit disputes can also become legal issues.

If you have questions about your legal rights or obligations under a purchase agreement, you should consult a qualified real estate attorney.

Loan and Appraisal Contingencies

If you're financing your purchase, your offer will include information about your loan.

The purchase agreement also provides for financing-related contingencies.

These contingencies can be extremely important because circumstances can change during escrow.

A lender may discover an issue with the buyer's financing, or an appraisal may not support the purchase price.

Buyers should understand exactly which contingencies are included in their offer, when they expire and the consequences of removing or waiving them.

Property Inspection and Investigation Contingency

This is particularly important when buying Russian River real estate.

During the investigation period, buyers can conduct inspections and investigate matters affecting the property.

Depending on the home, that could include:

• General home inspection
• Pest inspection
• Septic inspection
• Well or water system investigation
• Mold inspection
• Roof inspection
• Drainage investigation
• County permit and property records
• Flood information
• Fire and defensible-space considerations
• Other inspections appropriate for the property

Russian River properties can be very different from one another.

A house in downtown Guerneville can present completely different issues from an acreage property outside Cazadero or a riverfront property in Monte Rio.

That's one reason I encourage buyers not to treat the inspection period as simply another box to check.

Fire Insurance Is an Important Russian River Consideration

Homeowners insurance has become an increasingly important issue when buying property in Sonoma County, particularly in areas with elevated wildfire exposure.

Before removing an insurance contingency, buyers should understand whether coverage is available and what it is likely to cost.

Some properties may require coverage involving the California FAIR Plan in combination with other insurance.

Don't wait until the end of escrow to start investigating insurance.

Your ability to obtain appropriate coverage can affect both your financing and the long-term cost of owning the property.

Septic, Wells, Flood Zones and Rural Property Issues

One of the biggest differences between buying in the Russian River area and buying a typical suburban home is the variety of property systems and conditions you'll encounter.

Depending on where you're buying, you may need to investigate:

Septic systems: Many Russian River properties aren't connected to municipal sewer systems.

Water: A property may have a private well, shared water system or service from a local water district.

Flooding: Properties near the Russian River and its tributaries may be located within designated flood zones.

Fire: Insurance availability, vegetation, defensible space and home-hardening features can be important considerations.

County records and permits: Older homes sometimes have additions, conversions or auxiliary spaces that deserve additional investigation.

These are exactly the kinds of local issues buyers should understand before removing their contingencies.

Seller Credits and Closing Costs

The purchase agreement also allows buyers and sellers to negotiate various costs.

A buyer might request a seller credit toward allowable closing costs, for example.

The agreement also addresses expenses such as escrow, title insurance, transfer taxes and other transaction costs.

Who pays a particular expense can depend on local custom, the contract and what the parties negotiate.

What Is Included With the Property?

Don't assume that every appliance or item you see while touring a home automatically stays with the property.

The purchase agreement identifies items that are included or excluded from the sale.

If something matters to you—such as a refrigerator or other specified property—make sure your agent addresses it properly in the offer.

Removing Contingencies Is a Major Decision

Contingencies provide buyers with important contractual protections.

As the transaction progresses, a buyer may be asked to remove contingencies after completing investigations, obtaining financing approval, reviewing an appraisal or securing insurance.

Don't remove a contingency simply because a deadline has arrived.

Understand what you're removing and make sure you're comfortable proceeding with the transaction.

Removing contingencies can significantly affect your cancellation rights and potentially your deposit.

Understanding the Contract Is Only Half the Equation

The California Residential Purchase Agreement provides the framework for your transaction.

But when you're buying property on the Russian River, local property knowledge is just as important as understanding the contract.

A beautiful house can still have complicated questions involving septic, flood, insurance, water, access, permits or other rural-property issues.

That's why working with a real estate agent who understands the Russian River area can make a significant difference.

Buying a Home in the Russian River Area?

I specialize in Russian River and West Sonoma County real estate, including Guerneville, Forestville, Monte Rio, Cazadero, Rio Nido, Duncans Mills, Jenner and surrounding communities.

If you're thinking about buying a primary residence, vacation home, second home or investment property in the Russian River area, call me. I'm happy to talk about the market, the different communities and what you should consider before making an offer.

David R. Millar
The Millar Group
707-217-1786

This article provides general real estate information and is not legal advice. Real estate contracts and individual transactions can involve significant legal consequences. Consult your real estate agent regarding your transaction and a qualified attorney regarding legal questions.