This form is used by a buyer broker when preparing an offer for their buyer-client to purchase an interest in one-to-four unit residential property.
Negotiating broker fees — the past finally bows out
A purchase agreement form is the primary document a buyer broker uses to prepare a buyer’s offer to submit and negotiate a real estate sales transaction between a buyer and seller.
Different types of properties, financing and broker fee arrangements require a diverse variety of purchase agreements, options, and exchange agreements. Here, we review a straightforward one-to-four residential unit acquisition under a purchase agreement with conventional financing terms.
Variations in purchase agreement forms accommodate government insured financing and other types of real estate. Purchase agreements make no distinction and are unconcerned as to whether the participants are individuals or entities.
In contrast, brokers and their agents for sales of income producing real estate will use a different form entitled: Purchase Agreement — For Other than One-to-Four Residential Units — with Buyer Broker Fee Provision. [See RPI Form 151]
When to prepare the buyer broker representation agreement
Before preparing a purchase agreement offer for review with their buyer-client, the buyer broker by necessity negotiates their fee and enters into a buyer representation agreement authorizing them to represent their buyer-client. [See RPI Form 103.1 and 103.2]
Negotiations for entering into a buyer representation agreement take place before the agent begins any effort to meet the buyer’s objective to buy property. Efforts of a buyer broker include any aspect of locating property, advice concerning a property, analysis of the buyer’s price point capacity, and any activities which lead to buying a property.
Before any work on behalf of the buyer is undertaken, the agent needs to first clear with their broker or office manager the propriety of the broker’s office representing the client. Conflicts of interest known to the broker immediately come to mind. Dual agency aspects might also arise as property listed with the office may have caused the buyer to contact the broker’s agent.
Also, the demeanor of the buyer might be such that the broker does not want their agents spending time assisting the individual. Simple prior planning needs to be undertaken when any fiduciary (read: buyer broker) considers representing an individual.
On confirming the representation of the buyer is proper, the agent prepares a buyer representation agreement. The buyer broker enters the fee deemed to be necessary as their fee on the representation agreement. Each broker properly establishes the fee amount they will charge for their services. They do not set the fee in collaboration with another broker.
The agent then reviews the prepared buyer representation agreement with the prospective buyer-client for their approval and signature. Only after receiving a signed representation agreement is the buyer broker and their agent authorized to proceed to diligently locate, advise and assist the buyer to purchase property.
Without first negotiating a signed representation agreement with the buyer-client, a broker may not prepare and review a purchase agreement offer for their buyer-client to sign. The purchase agreement fee provision calls for entry of the buyer broker fee as previously set in the representation agreement. [See RPI Form 150 §10.1]
While the purchase agreement sets out the buyer broker fee, it will never set out the seller broker fee amount — that practice is gone with yesterday’s antitrust violations. Again, the conduct is about complying with the Buyer-Broker Representation code and licensing law. [CC §§1670.50(a), 1670.50(e)]
Conversely, the fee due the buyer broker is not of concern to the seller or the seller broker. However, the seller broker protects their fee by negotiating and entering into a separate representation agreement (formerly called a listing) signed by their seller-client. [See RPI Form 102]
Of course, as before, the purchase price the buyer funds is the source for payment of all broker fees. The seller broker, when disclosing material facts, prepares and reviews a net sheet with their seller-client. The disbursement of broker fees from the purchase price is listed. No change there. [See RPI Form 310 §4.31]
The fee-math involved in a sale
Let’s look at some scenarios.
We’ll demonstrate the math of the new negotiating power buyer brokers are given to protect their fee, both in the representation agreement and in the purchase agreement offer the buyer-client signs.
Editor’s note — The type of person — individual or entity — only affects the duration of the period of representation, not the type of purchase agreement form to be used. In contrast, the use of different forms of buyer representation agreements avoid error in the expiration of representation when the broker’s buyer is an individual or an entity. [See RPI Form 103.1 and 103.2]
Consider a buyer who meets a real estate agent. The buyer decides to hire the agent and their broker to locate, advise and negotiate the acquisition of property they want to own, whatever type it might be.
The buyer and broker enter into a buyer representation agreement negotiated by the agent. A provision in the agreement authorizes the broker and their agent to represent them to find properties, discuss the advantages and disadvantages of ownership with the buyer, and write up and submit an offer when a suitable property is located. [See RPI Forms 103.1 and 103.2]
A suitable property is located with a market value of $1 million. The buyer is able and willing to make a $200,000 cash down payment on the purchase price. Mortgage financing funds the remaining $800,000 of the purchase price.
As called for in the representation agreement, the broker is entitled to the fee calculated as a percentage of the purchase price, say, the standard fixed fee of 3%.
The fee will be included in the purchase price offered the seller.
Here, escrow disburses the buyer broker fee from the buyer’s funds deposited and transferred to the seller to pay the purchase price — $1 million.
With these representation and purchase agreement conditions, the buyer broker’s business risk for letting others control their fee no longer exists. The buyer and the buyer broker set the fee without outside influence, eliminating the risk of misconduct from other brokers, trade unions, MLSs or AORs. [People v. National Association of Realtors (1981) 120 CA3d 465]
The buyer broker manages the purchase agreement transaction
The buyer and agent agree to offer $1 million as the purchase price paid to acquire the property. The buyer agent prepares a Buyer’s Cost Sheet itemizing the total costs to be funded to close escrow on the purchase agreement and take title to the property. No broker fees are paid by the buyer as transactional costs. [See RPI Form 311]
On the seller’s side of the transaction, the seller broker advises their seller by itemizing the charges they will incur on the $1 million price tag and the amount of net sales proceeds on closing. For a review with the seller of the costs disbursed from the purchase price on acceptance of the buyer’s offer, the seller broker prepares an estimate using a Seller’s Net Sales Proceeds form. Broker fees are listed as one itemized transactional cost. [See RPI Form 310 §4.31]
On closing, the seller’s net proceeds will reflect disbursement of all broker fees — the buyer broker fee and the seller broker fee in an amount of, say, 6% of the purchase price. The result of separate negotiations by clients produces the same expected broker fees to be paid on the transaction.
Under past escrow accounting procedure and now going forward, all the broker fees are disbursed from payment of the purchase price agreed to in the purchase agreement and the seller representation agreement. Thus, critically, the seller today ends up with the same net sales proceeds on the same purchase price as in the past. No change from the past in accounting for the brokers fees in cost sheets and escrow settlement statements.
Analyzing preparation of the purchase agreement
A buyer agent uses the Purchase Agreement — for One-to-Four Residential Units — with Buyer Broker Fee Provision published by Realty Publications, Inc. (RPI) when preparing an offer for their buyer to purchase one-to-four unit residential property with a fee provision for disbursing the buyer broker fee from the purchase price. [See RPI Form 150]
The Purchase Agreement provisions include:
- Facts: the buyer’s name, the amount of the good-faith deposit, the property’s address and the type of ownership sought (fee simple, leasehold, etc.) [See RPI Form 150 §1];
- Terms: the down payment and mortgage amounts, the terms of the mortgage, the principal balance and monthly amount of the mortgage, any second trust deed notes, improvement bond liens and solar bond liens [See RPI Form 150 §§3 through 7];
- Purchase price: the purchase price the buyer is to fund, with a provision for payment of the buyer broker fee out of the purchase price funds. Also, the Agency Law Disclosure is attached. [See RPI Form 305; See RPI Form 150 §8];
- Acceptance and performance: the amount of time in which the offer may be accepted, the sale of the buyer’s current residence when applicable, termination provisions, a mediation provision and any amount the seller is due on a buyer’s breach [See RPI Form 150 §9];
- Property conditions: indicates whether the seller agrees to provide:
- a structural pest control inspection report;
- a home inspection report;
- a home warranty policy;
- a certificate of occupancy;
- a certification by a licensed contractor stating the sewage disposal system is operational;
- a certification by a licensed water testing lab stating the well supplying the property meets potable standards;
- how many gallons a well on the property produces per minute, when applicable;
- an energy audit report; and
- the Transfer Disclosure Statement. [See RPI Form 150 §10]
- Due diligence contingencies: Contingencies for the buyer’s due diligence investigations into income and expense records, rental income statements, hazard disclosures, property condition disclosures and other relevant information to be delivered by the seller are listed in an addendum for consideration and checking those applicable to the agreement. [See RPI Form 279; See RPI Form 151 §11]
- Closing conditions: the escrow company to be used, the date escrow is due to close, any covenants, conditions and restrictions (CC&Rs) or easements on record, and the title company to be used [See RPI Form 150 §12];
- Notices: Regarding sales data, registered sex offenders, appraisal objectivity, gas and hazardous liquid pipelines and supplemental property tax bill. [See RPI Form 151 §13]
- Blank: Miscellaneous provisions not included elsewhere in the body of the form are listed here. [See RPI Form 151 §14]
- Signatures of the buyer, their broker and agent, and a space for the seller, their broker and agent to enter their signatures, forming a contract. [See RPI Form 150]
The following instructions are for the preparation and use of the Purchase Agreement — One-to-Four Residential Units, RPI Form 150. Form 150 is designed as a checklist of practical provisions so a broker or their agent can prepare an offer for a prospective buyer who seeks to purchase conventionally financed, one-to-four unit residential property located in California.
Each instruction corresponds to the provision in the form bearing the same number.
Editor’s note — Check and enter items throughout the agreement with boxes and blanks, unless the provision is not intended to be included as part of the final agreement, in which case it is left unchecked or blank.
Document identification
Enter the date and name of the city where the offer is prepared. This date is used when referring to this purchase agreement.
Facts:
- Buyer, deposit and property: Enter the name of each buyer who will sign the offer. Do not enter the word nominee or assignee.
1.1 Enter the dollar amount of any good-faith, earnest money deposit. Check the appropriate box to indicate the form of the good-faith deposit. Enter the name of the payee (escrow, title company or broker).
1.2 Confirms the deposit is to be applied towards the buyer’s obligation to purchase the property.
1.3 Enter the name of the city and county in which the property is located.
1.4 Enter the legal description or common address of the property, or the assessor’s parcel number (APN).
1.5 Check the box to indicate personal property will be included in the sale. The seller’s trade fixtures to be purchased by the buyer need to be listed as inventory if they are to be acquired by the buyer. [See RPI Form 256]
1.6 Check the box to indicate the buyer’s interest will be a leasehold or other type of interest.
2. Entire agreement: Enter the number of pages comprising all of the addenda, disclosures, etc., which are attached to the purchase agreement.
Terms for payment of the purchase price
- Cash down payment: Enter the dollar amount of the buyer’s cash down payment toward the purchase price.
3.1 Additional down payment: Enter the description of any other consideration to be paid as part of the price, such as trust deed notes, personal property or real estate equities (an exchange). Enter the dollar amount of its net value.
4. New trust deed mortgage: Check the appropriate box to indicate whether any new financing will be a first or second trust deed mortgage. Enter the amount of the mortgage, the monthly principal and interest (PI) payment, the term of the mortgage and the rate of interest. Check the box to indicate whether the interest will be adjustable (ARM), and if so, enter the index name. Enter any limitations on mortgage points.
5. First trust deed note: Check the appropriate box to indicate whether the transfer of title is to be “subject to” an existing mortgage or by an “assumption” of the mortgage if the buyer is to take over an existing first trust deed mortgage. Enter the remaining balance. Check and attach the mortgage terms documentation. [See RPI Form 154-4]
6. Solar bond or assessment assumed: Enter the amount of the principal balance remaining unpaid on solar bonds and liens which will remain unpaid and become the responsibility of the buyer on closing.
Editor’s note — improvement bonds are obligations of the seller which may be assumed by the buyer in lieu of their payoff by the seller. If assumed, the bonded indebtedness becomes part of the consideration paid for the property. Some purchase agreements erroneously place these bonds under “property tax” as though they were ad valorem taxes, and then fail to prorate and charge the unpaid amount to the seller.
- Seller carryback note: Enter the amount of the carryback note to be executed by the buyer as partial payment of the price. Check and attach the terms for seller carryback financing. [See RPI Form 154-2]
- Purchase price: Enter the total purchase price the buyer is to fund.
8.1 Buyer broker fee: Enter the amount of the buyer broker fee to be paid out of the purchase price funds. States the party wrongfully preventing the intended conveyance is to pay the fee.
8.2 Agency Law Disclosure: Attach the Agency Law Disclosure for the buyer. [See RPI Form 305]
Acceptance and performance contingencies
- Acceptance and Performance:
9.1 Delivery of acceptance: Enter the number of days in which the seller may accept this offer and form a binding contract.
Editor’s note — Acceptance occurs on the return delivery to the person making the offer (or counteroffer) or to their broker of a copy of the unaltered purchase agreement offer containing the signed acceptance.
9.2 Extension of performance dates: Authorizes the brokers to extend the performance dates up to one month to meet the objectives of the agreement — time being of a reasonable duration and not the essence of this agreement as a matter of policy. This extension authority does not extend to the acceptance period.
9.3 Cancellation procedures: Provides the method of cancellation required to terminate the agreement when the right to cancel is triggered by other provisions in the agreement, such as contingency or performance provisions. [See RPI Form 183]
9.4 Mortgage contingency: Authorizes the buyer to cancel the transaction at the time scheduled for closing if the financing for payment of the price is not obtainable or assumable.
9.5 Sale of other property: If the closing of this transaction is to be contingent on the buyer’s receipt of net proceeds from a sale of other property, enter the address of the property to be sold by the buyer.
9.6 Exchange cooperation: Requires the parties to cooperate in an IRS §1031 transaction on further written notice by either party. Provides for the parties to assign their interests in this agreement. [See RPI Forms 171 and 172-2]
9.7 Mediation provision: Provides for the participants to enter into non-binding mediations to resolve a dispute remaining unsolved after 30 days of informal settlement negotiations.
9.8 Liability limitations: Provides for a dollar limit on the buyer’s liability for the buyer’s breach of the agreement. Check the first box and enter the maximum dollar amount of money losses the seller may recover from the buyer or check the second box to indicate the buyer’s monetary liability is limited to the good-faith deposit tendered with the offer to buy.
Editor’s note — Liability limitation provisions avoid the misleading and unenforceable forfeiture called for under liquidated damage clauses included in most purchase agreement forms provided by other publishers of forms.
Condition reports and certificates
- Property Conditions:
10.1 Seller to furnish: Check the appropriate box(es) within the following subsections to indicate the items the seller is to furnish prior to closing.
a. Pest control: Check the box to indicate the seller is to furnish a structural pest control report and clearance.
b. Home inspection report: Check the box to indicate the seller is to employ a home inspection company and furnish the buyer with the company’s home inspection report.
c. Home warranty: Check the box to indicate the seller is to furnish an insurance policy for home repairs. Enter the name of the insurer and the type of coverage, such as for the air conditioning unit, etc.
d. Local ordinance compliance: Check the box to indicate the seller is to furnish a certificate of occupancy or other clearance required by local ordinance.
e. Sewer or septic certificate: Check the box to indicate the seller is to furnish a certificate of the condition of the sewage disposal system stating it is functioning properly.
f. Potable well water: Check the box to indicate the seller is to furnish a certificate stating the well supply meets water standards.
g. Well water capacities: Check the box to indicate the seller is to furnish a certificate stating the amount of water the well supplies. Enter the number of gallons per minute the well is expected to produce.
h. Energy Audit Report: Check the box and enter the rating of the property’s improvements.
i-k. Other terms: Check the box(es) and enter any other report, certification or clearance the seller is to furnish.
Property condition disclosure
10.2 Property condition(s): Check the appropriate box within the following subsections to indicate the status of the seller’s Condition of Property Disclosure — Transfer Disclosure Statement (TDS). [See RPI Form 304]
a. Attached TDS: Check the box to indicate the seller’s TDS has been prepared and handed to the buyer, and if so, attach it to this agreement. Thus, the property’s condition “as disclosed” is accepted by the buyer upon entering into the purchase agreement offer as mandated.
Editor’s note — Use of the TDS form is mandated on one-to-four unit residential property.
b. Later delivered TDS: Check the box to indicate the TDS is to be delivered later to the buyer to confirm the condition of the property “as disclosed” prior to entry into the purchase agreement. On receipt of the TDS, the buyer may either cancel the transaction for failure of the seller or the seller’s agent to disclose known property defects prior to acceptance of the purchase agreement (or counteroffer), or give notice to the seller of the defects known and not disclosed prior to acceptance and make a demand on the seller to correct them prior to closing.
c. Repair of defects: Authorizes the buyer to either cancel the transaction or adjust the price if the seller fails to correct the defects noticed under sections 10.2b or 10.3a. [See RPI Form 183]
The buyer’s property inspection
10.3 Buyer’s inspection: Authorizes the buyer to inspect the property twice during the escrow period to verify its condition is as disclosed by the seller prior to the time of acceptance.
a. Initial property inspection: Requires the buyer to inspect the property immediately after acceptance to put the seller on notice of material defects to be corrected by the seller prior to closing. [See RPI Form 269]
b. Final walk-through inspection: Requires the buyer to inspect the property again within five days before closing to confirm repairs and maintenance of the property have occurred. [See RPI Form 270]
10.4 Property maintenance: Requires the seller to maintain the present condition of the property until the close of escrow.
10.5 Safety compliance: Requires smoke detectors and water heater bracing to exist or be installed by the seller.
10.6 Fixtures and fittings: Confirms this agreement includes real estate fixtures and fittings as part of the property purchased.
Editor’s note — Trade fixtures are personal property to be listed as items on the Personal Property Inventory at Section 1. [See RPI Form 256]
10.7 Possession delivered. Check whether possession of the property, including keys and access codes, are delivered on the close of escrow or as stated in an Occupancy Agreement. Attach the Occupancy Agreement, when applicable. [See RPI Forms 271 and 272]
10.8 Hazard disclosure booklets: Check the appropriate box(es) to indicate which hazard booklets have been received by the buyer, together with the seller’s prepared and signed disclosures accompanying each booklet:
a. Environmental Hazards: A Guide for Homeowners, Buyers, Landlords and Tenants (on all one-to-four units). [See RPI Form 316-1]
b. Protect Your Family from Lead in Your Home (on all pre-1978 one-to-four units). [See RPI Form 313]
c. The Homeowner’s Guide to Earthquake Safety (on all pre-1960 one-to-four units). [See RPI Form 315]
Due diligence contingencies
- Due diligence contingencies: Check the appropriate box(es) on the attached addendum Due Diligence Contingencies Addendum to indicate disclosures and documents the seller is to provide the buyer as soon as reasonably practicable after entry into the agreement. Attach the addendum to the purchase agreement. Enter the number of days the buyer may terminate the agreement based on the buyer’s reasonable disapproval of the checked items in the addenda. [See RPI Form 183]
11.1 Check the box to indicate the Due Diligence Contingencies Addendum is attached. [See RPI Form 279]
11.2 Check the box to indicate a Homeowners’ Association (HOA) Addendum is attached. [See RPI Form 309]
Escrow and closing
- Closing conditions:
12.1 Escrow closing agent: Enter the name of the escrow company holding the closing.
a. Escrow instructions: Check the box to indicate the purchase agreement is to also serve as the mutual instructions to escrow from the participants. The escrow company will typically prepare supplemental instructions they will need to handle and close the transaction. [See RPI Form 401]
b. Escrow instructions: Check the box to indicate escrow instructions have been prepared and are attached to this purchase agreement. Prepare and attach the prepared escrow instructions to the purchase agreement and obtain the signatures of the participants. [See RPI Form 401]
12.2 Closing date: Enter the specific date for closing or the number of days anticipated as necessary for the parties to perform and close escrow. Also, prior to seven days before closing, the participants are to deliver all documents needed by third parties to perform their services by the date scheduled for closing.
a. Escrow charges: Requires each participant to pay their customary escrow closing charges, amounts any competent escrow officer can provide on inquiry. [See RPI Form 310 and 311]
12.3 CC&Rs and easements: Provides for the buyer’s title to be subject to covenants, conditions and restrictions (CC&Rs), reservations and easements of record.
12.4 Title insurance: Provides for title to be vested in the name of the buyer or their assignee. Enter the name of the title insurance company which is to provide a preliminary title report in anticipation of issuing title insurance. Check the appropriate box to indicate the type of title insurance policy to be issued on closing.
a. Policy endorsements: Enter any endorsements to be issued with the policy.
b. Payment of premium: Check the appropriate box to indicate whether the buyer or seller is to pay the title insurance premium.
12.5 Fire insurance: Requires the buyer to provide a new policy of hazard insurance.
12.6 Prorates and adjustments: Authorizes prorations and adjustments on the close of escrow for taxes, insurance premiums, rents, interest, mortgage balances, service contracts and other property operating expenses, prepaid or accrued.
12.7 Personal property: Requires the seller to execute a bill of sale for any personal property being transferred in this transaction as called for in Section 1.
12.8 Property destruction: Provides for the seller to bear the risk of loss for any casualty losses suffered by the property prior to the close of escrow. Thus, the buyer may terminate the agreement when the seller is unable to provide a marketable title or should the property improvements suffer major damage. [See RIP Form 183]
12.9 Transfer fees: Provides for the seller to pay any transfer fees incurred in the transaction.
Notices
- Notices
13.1 Sales data: Notifies the buyer the broker is authorized to report the sale, its price and terms in brokerage trade associations and multiple listing services.
13.2 Sex offenders: Notifies the buyer where to find a list of registered sex offenders.
13.3 Appraisal objectivity: Notifies the buyer any appraisal of the property is required to be unbiased, objective and not influenced by illegal considerations, including race, color, religion, etc., and states where the buyer may report an appraisal they believe is influenced by those factors.
13.4 Gas and hazardous liquid pipelines: Notifies the buyer of the public availability of information regarding general location of gas and hazardous liquid transmission pipelines via the National Pipeline Mapping System (NPMS) website.
13.5 Supplemental property tax bill: Notifies the buyer they will receive one or two supplemental property tax bills they are to pay when the county assessor revalues the property after a change of ownership.
Blank provisions
- Blank: Enter any miscellaneous terms and provisions to apply to the purchase offer.
Agency confirmation
Buyer broker identification: Enter the name of the buyer broker and their Department of Real Estate (DRE) license number. Enter the name of any buyer agent and their DRE license number. Obtain the signature of the buyer broker or the buyer agent acting on behalf of the buyer broker. Check the appropriate box to indicate the agency which was created by the broker’s (and their agent’s) conduct with the participants. Enter the buyer broker’s address, telephone and cell numbers, and email address.
Seller broker identification: Enter the name of the seller broker and their DRE license number. Enter the name of any seller agent and their DRE license. Obtain the signature of the seller broker or their seller agent acting on behalf of the seller broker. Check the appropriate box to indicate the agency which was created by the broker’s (and their agent’s) conduct with the participants. Enter the seller broker’s address, telephone and cell numbers, and email address.
Signatures
Buyer’s signature: If additional buyers are involved, check the box, prepare a Signature Page Addendum form referencing this purchase agreement, and enter their names and obtain their signatures until all buyers are individually named and have signed. Enter the date the buyer signs the purchase agreement and the buyer’s name. Obtain the buyer’s signature. [See RPI Form 251]
Seller’s signature: If additional sellers are involved, check the box, prepare a Signature Page Addendum form referencing this purchase agreement, and enter their names and obtain their signatures until all sellers are individually named and have signed. Enter the date the seller signs the purchase agreement and the seller’s name. Obtain the seller’s signature. [See RPI Form 251]
Rejection of offer
When the offer contained in the purchase agreement is rejected instead of accepted and the rejection won’t result in a counteroffer, enter the date of the rejection and the names of the participant rejecting the offer. Obtain the signatures of the party rejecting the offer.
Form navigation page published 06-2015. Updated 02-2025.
Form last revised 2025.
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