Standard? Forms!

Well boys and girls the new RPA (residential purchase agreement for those who don't acronym)is soon to be released. Old version lasted for a while, few liked it, fewer understood it, particularly those Buyers and Sellers who executed it. CAR is of course conducting courses in RPA--the full version course is 4 hours long taught by an attorney who has never used the RPA in conducting a transaction with real Buyers and Sellers.

Lets consider the time elements involved. There's an 8 page contract and CAR figures it takes an attorney, teaching licensed real estate agents who have some background in real estate contracts, 4 hours to run through the content in this new RPA. So what are the implication for a member of the public who doesn't have a background in real estate contracts? How long will it take a real estate agent, who doesn't have experience teaching seminars in contract law, to educate the buyers or sellers about the document they are executing? One could argue the real estate agent needs to know more about the contract than the public, but I'd hate to try to make that argument in a deposition or in court. The public is signing a contract with significant financial implications. They probably should understand it pretty thoroughly.

Realistically, would a member of the public sit there for 4 hours or even 2 hours to review the contract prior to signing? Realistically, would most real estate agents be able to retain enough from a 4 hour course to discuss the contents of the contract for even 2 hours with a member of the public? Keep in mind that the percentage of agents who actually attend the full RPA course or the shorter version is probably well under 50%.

Now we're getting to the point--you knew we were working up to something. Whom does the new RPA benefit? The public? They generally didn't understand the last RPA very well, which was around for several years, and this new RPA is at least as complex, ie they generally won't understand it either. Does it benefit the real estate agents? They need to learn a new RPA and that's work. They need to explain the new RPA to everyone, even experienced investors, because the RPA is new and that's also work. The brokers may benefit to a certain extent because each iteration of the RPA transfers more and more liability away from brokers. BTW, that transfer may be a fragile legal myth (more on that in a later post).

If there's no clearly compelling benefit, why do we have a new RPA? Because the Standard Forms Committee and CAR legal staff have organizational responsibilities to create new forms and revise old ones. It's what they do. They receive comments, some good, some not so good. When the volume of comments/suggestions crosses a threshold, they launch a revision. This process has accelerated in the past decade--with the release of new forms twice a year. The revisions often follow the lead of large metro brokers who have attorneys on retainer to continually seek to minimize legal exposure using in house addenda that often end up becoming the standard of practice for the state after Standard Forms/CAR legal staff folds them into form revisions. This "one size fits all" approach introduces non-metro areas to contractual solutions focused at solving problems they never knew they had.

In the end, CAR successfully achieves still greater control over residential real estate, but at undetermined downstream and collateral costs to the public who are further removed from the comfort of understanding the process of buying and selling real estate.

I do have a copy of the final draft of the RPA and will offer sage comments on the changes in a later post.