First-Time Homebuyer Consultation Is Essential

It can be daunting to look at the eight-page purchase contract when purchasing your first home. Even if you have purchased in the past, you may not recognize the newer
contract and addenda.

First-time buyers should be comforted by the fact that all real estate agents in California use the same DRE (Department of Real Estate) contracts. Realtors are
not allowed to practice law but are allowed to fill in the blanks.

The good news is that the DRE contract is written for the protection of the consumer and favors buyers. If you buy from a private builder then all bets are off and you should read the contract very carefully or have your attorney review it for you.

An important word in the purchase contract is contingency. The contract is contingent upon several things, including a physical inspection, an appraisal, a termite report, a review of the HOA documents, and a loan approval.

Basically the buyer can back out of a contract for any reason during the due diligence period. The DRE purchase contract defaults to 17 days for this due diligence period but can be changed. Most everything can be easily accomplished during this
period except maybe the full loan approval. You will need to have a discussion with the lender and be sure you are going to get the loan before removing all your contingencies.

In California the contingency deadline does not automatically disappear at midnight on the 17th day like Cinderella’s ride. You must actually sign a form. If you delay signing this form the seller of the property may give you a notice to perform which usually allows the buyer to remove contingencies or back out with return of earnest money.

By the way, when purchasing a bank-owned property (REO), please be aware that the bank is likely to have a very lengthy (20-page) addendum which you must sign in order
to go into escrow—and this addendum will override the contract.

Again, read this addendum very carefully because it is likely to change some of the protections we are accustomed to having. Many times in my career buyers have told me that I was the first Realtor that actually reviewed the contract with them before asking them to sign. 

Most of the blanks appear in the first two pages of the DRE contract. The first page confirms agency and spells out the price, closing time and financing terms. The
second page spells out more of the details of title, escrow, inspections and home warranty. Everything in real estate is negotiable but most geographical areas have standard practices that make things easier. When you deviate from these standards you raise a potential red flag to the seller. Home ownership is a wonderful privilege we enjoy in our country.