The California Residential Purchase Agreement and Joint Escrow Instructions (RPA) is the standard CAR (California Association of Realtors) form used in the vast majority of California residential real estate transactions. It serves as both the purchase contract and the escrow instructions — when signed by all parties, it opens escrow and governs the entire transaction through closing.
The RPA is a comprehensive document of 10+ pages covering every aspect of the transaction. Understanding its key elements is essential for the California exam.
---
The initial deposit is held in the escrow company's trust account — it is neither the seller's money (not yet) nor fully the buyer's (it's at risk based on contingency removals).
Possession date: When the buyer takes physical possession (receives the keys). Possession typically occurs AT or shortly after close of escrow. If the seller needs time to move out, a seller rent-back agreement may be attached — the seller pays the buyer rent for the days they remain in the property after close.
---
The earnest money (good faith deposit) is the buyer's financial commitment to the transaction. Key rules:
A second deposit is common in CA — a larger additional deposit delivered after contingency removal, demonstrating additional commitment.
---
The liquidated damages clause in the CA RPA is one of the most heavily tested concepts on the exam:
Example: $1,000,000 purchase. Deposit: $50,000. Liquidated damages clause initialed. Buyer defaults after removing all contingencies. Seller can keep 3% × $1,000,000 = $30,000. Seller must return $20,000 to the buyer.
---
The CA RPA contains a mediation clause requiring both parties to attempt mediation before filing a lawsuit for disputes arising from the transaction. Mediation is the first required step in dispute resolution. If mediation is attempted but fails, the parties may proceed to litigation or arbitration.
If a party refuses to mediate and then brings a legal action, the court may deny attorney's fees to that party even if they prevail — a significant incentive to mediate first.
---
Offer: The buyer's completed and signed RPA is presented to the seller.
Counteroffer: If the seller wants different terms, they issue a counter offer (on a CAR Counter Offer form), which terminates the original offer and creates a new offer. A counteroffer can change any term: price, closing date, deposit amount, contingency periods, inclusions/exclusions.
Multiple Counteroffers: A seller can issue identical counter offers to multiple buyers simultaneously. However, the seller may only accept ONE.
Acceptance: When the seller signs the buyer's offer (or the buyer signs the seller's counteroffer) without modification, mutual acceptance is created — this is the moment the binding contract is formed. The acceptance must be communicated to the offeror.
Revocation: An offer can be revoked by the offeror at any time before acceptance is communicated, even if the offeror promised to keep the offer open (unless the promise is supported by consideration — an option contract).
---
Inclusions: Items that are part of the sale by default (fixtures — permanently attached items that go with the property unless excluded). Examples: built-in appliances, light fixtures, ceiling fans, window coverings, garage door openers.
Exclusions: Items the seller wants to keep that might otherwise be considered fixtures. Must be specifically listed in the contract. Example: the seller's antique chandelier — if not excluded in writing, it likely transfers with the property.
The distinction between real property (fixtures) and personal property is frequently tested. The legal test for a fixture: method of attachment, adaptability, and intention of the parties.
---
A seller may want to sell the property in its current condition without making repairs. An AS-IS addendum (or AS-IS clause in the RPA) clarifies that:
AS-IS does NOT eliminate the seller's disclosure obligations — sellers still must disclose all known material defects.
---
---
Quiz Questions:
Q1. Under the standard California RPA, when must the buyer deposit the initial earnest money into escrow?
A) At the time the offer is submitted B) Within 3 business days of acceptance C) Within 7 days of acceptance D) At close of escrow
Answer: B — The standard California RPA requires the buyer to deposit the initial earnest money into escrow within 3 business days of acceptance (mutual agreement). This is a default provision that the parties can modify in the contract. The deposit is held in the escrow company's neutral trust account.
---
Q2. A buyer offers $850,000 on a California home with a $25,000 deposit. The liquidated damages clause is properly initialed. The buyer removes all contingencies and then backs out due to cold feet. How much of the deposit can the seller keep?
A) $25,000 — the full deposit B) $17,000 (2% of $850,000) C) $25,500 (3% of $850,000) — but the deposit is only $25,000 so the seller keeps all $25,000 D) Nothing — the buyer can always back out after contingency removal
Answer: C — 3% of $850,000 = $25,500. The liquidated damages cap is $25,500, but the deposit is only $25,000. Since the deposit is less than the 3% cap, the seller may retain the entire $25,000 deposit. The buyer cannot back out without risk after removing contingencies.
---
Q3. A seller receives an offer at their listing price from a buyer. The seller wants to change the closing date from 30 to 45 days. The seller issues a counteroffer with only that change. What is the legal effect?
A) The buyer's offer is still open because only one term was changed B) The seller's counteroffer terminates the buyer's original offer and creates a new offer with the 45-day closing C) The seller can only accept or reject — sellers cannot issue counteroffers under CA law D) The original offer is put on hold while the buyer decides whether to accept the 45-day closing
Answer: B — A counteroffer, even changing just one term, terminates the original offer and creates a new offer. The buyer is no longer bound by their original offer — they may accept the counteroffer, reject it, or issue their own counter. The buyer's original offer has been extinguished.
---
Q4. A seller marks a home for sale "AS-IS." What does this mean regarding the seller's disclosure obligations?
A) The seller has no obligation to disclose any defects; the buyer buys the property entirely at their own risk B) The seller must still disclose known material defects (TDS, SPQ, NHD); AS-IS only means the seller won't make repairs C) AS-IS eliminates the TDS requirement because the buyer accepts all conditions D) AS-IS means the buyer waives the right to conduct property inspections
Answer: B — AS-IS means the seller will not make repairs, but it does not eliminate disclosure obligations. The seller must still complete the TDS, SPQ, NHD, and all other required disclosures, and disclose all known material defects. The buyer retains the right to inspect and, during the contingency period, cancel if they find unacceptable conditions.
---
Q5. Which of the following items would most likely be considered a FIXTURE that transfers with the California property unless explicitly excluded?
A) The seller's refrigerator (freestanding, plugs into wall) B) A chandelier custom-installed and wired into the dining room ceiling C) The seller's patio furniture D) The seller's large potted garden plants
Answer: B — A chandelier wired into the ceiling is permanently attached and adapted to the property — the classic definition of a fixture. It transfers with the property unless specifically excluded in the contract. A freestanding refrigerator, patio furniture, and potted plants are personal property that the seller can take. The method of attachment and intent determine fixture status.