RHRC Legal Update #183 – Additional Observations On C.A.R.’s June 2026 Forms Release
by David Hamerslough and Victoria B. Naidorf
Our last two articles discussed three forms that were part of C.A.R.’s June 2026 forms release (SPQ, SWPI-Q, and SWPI-C). This month’s article provides some observations that we have to other forms that were part of C.A.R.’s June 2026 forms release.
Residential Listing Agreement- Exclusive (RLA)
Paragraph 2C(2) continues to include additional language to explain when and why the seller and seller’s broker may (if checked) agree that the seller’s broker is entitled to additional compensation than what is provided for in Paragraph 2C (1).
Please remember that this optional consideration only applies when the buyer is representing themselves and not when they are represented by any agent. In other words, if the buyer is represented by the same broker that has the listing (dual agency) or is represented by any other broker (single agency), this option would not apply.
If checked, the same blank spaces that need to be completed in Paragraph 2C (1) need to be filled in to identify the amount of compensation. In addition, if the seller’s broker is going to be representing the buyer (dual agency) the buyer-side compensation will need to be specified in a separate written agreement (such as a BRBC) as required under the NAR settlement and California law.
When this option was first added to the RLA (July 2024) we understood the rationale for offering additional compensation where the buyer is unrepresented was that doing so would require additional time and effort on the part of the seller’s broker.
This rationale is now expressly stated. The June 2026 revision to the RLA now describes the additional compensation “for additional effort needed to facilitate transaction.”
Our issues with this provision for additional compensation remain the same as when it was first introduced. Some of those issues include, but are not limited to, (1) whether the specified amount of compensation is reasonable, (2) how the seller’s broker would know at the time of taking the listing how much additional time and effort, if any, will be required by an unrepresented buyer, and (3) to what degree this raises the potential for an undisclosed dual agency relationship to exist among the seller’s broker, the seller, and the buyer if the seller’s broker is determined to be acting on behalf of the buyer.
It appears that C.A.R. believes that any of these potential issues can be addressed by the buyer signing a Buyer Non-Agency Agreement (BNA). Language has now been added to the RLA in Paragraph 2C(2) stating that if the broker is not representing the buyer, the broker is advised to provide the unrepresented buyer with the BNA. The BNA was created in June of 2019 and modified in June of 2022 to eliminate the reference to agency disclosure. The rationale for doing so was that the Agency Disclosure form was only applicable for an agent representing a party and the BNA purported to establish non-agency.
Whether a dual agency relationships exists will turn on more than just the execution of a form even one that purportedly characterizes the understanding regarding agency as an “Agreement.” From our perspective, whether a dual agency relationship exists is a factual question that will be impacted by the words and actions of the parties, such as the statements and conduct of the seller’s broker and the buyer. If there is a finding by a decision-maker that dual agency existed, notwithstanding the Confirmation section of the purchase agreement, the legal consequences can be significant. The seller may face liability to the buyer. The seller’s broker may (1) lose the right to receive any compensation for the transaction, (2) be liable to the seller and buyer for all legal fees and costs if the transaction is rescinded, and (3) face a claim potentially impacting their license on the basis of any undisclosed dual agency.
These potential risks can only be evaluated on a transaction-by-transaction basis. The real question is whether the risks of creating a potential undisclosed dual agency can be better managed and compensation accounted for by the seller’s broker agreeing to act as a dual agent and having all parties sign the necessary transactional documents, including an appropriate Agency Disclosure, Buyer Representation Agreement, etc.
One other revision was made to Paragraphs 12 A and B of the RLA. This revision clarifies that social media is included in the terms relating to the dissemination of photographs or electronic images of the property on the Internet.
Residential Purchase Agreement and Joint Escrow Instructions (RPA)
Paragraph 2D now advises the parties (i.e., buyer and seller) to discuss with their agent the broker’s policy on dual agency and multiple representation of competing buyers and sellers. Irrespective of the reason for adding this language (e.g. company exclusives?) we are concerned this language appears to place the burden of discussing these issues on the buyer and seller rather than the broker/agent who legal bare the burden of providing that information to their clients. There also may be a question regarding the timeliness of any such discussion if it has not occurred prior to presentation of the offer. Our suggestion is that the broker/agent discuss these issues prior to the execution of any listing agreement or buyer representation agreement.
Paragraph 3E(1) and (2) now provide for the attachment of the C.A.R. form Seller Financing Disclosure and Addendum (SFA) if the box for seller financing is checked. This will hopefully encourage the SFA being fully and completely prepared at the time of contract ratification. Our experience has been that the SFA is often only partial filled in (e.g. the term of the note and its interest rate) as of contract ratification. All terms and conditions in the SFA should be addressed and filled in prior to contract ratification.
Please remember that a seller should evaluate a request for seller financing from the perspective of being a lender. Some of the issues to be considered are the priority of the seller’s note/deed of trust, the potential equity cushion, how the buyer is going to meet all of the financial obligations when all notes/deeds of trust are due, the creditworthiness of the buyer, what documentation is to be provided and evaluated on this subject, what notices/notifications the seller should request regarding defaults and/or delinquencies on any payment etc.
Paragraph 3G(2) has been revised to clarify that it is to be used for credit/payments other than closing costs (to be covered exclusively in Paragraph 3G(1)) and buyer broker compensation (to be covered exclusively in Paragraph 3G(3)). There are now spaces for the dollar amount to be filled in and a description of this credit/payment.
Paragraph 3L(2) and corresponding Paragraph 8B introduce a new term (Appraisal Gap) regarding the appraisal contingency. The RPA previously indicated that the appraisal contingency could be based on the property appraising at the purchase price or, if a box was checked, at a specific dollar amount that was filled in to the blank space adjacent to the checked box. Potential issues arose for a buyer if the parties negotiated an increase in the purchase price but did not increase the specific dollar amount that would determine what the property would need to appraise for in order for the contingency to apply. The buyer unwittingly agreed to a lower appraised value for determining the appraisal contingency but could then have a significant gap to fund if the property appraised at that lower amount.
The Appraisal Gap addresses this situation. It does so by tying the value that is to be used to determine the appraisal contingency to the purchase price less the amount that is filled in to define the Appraisal Gap. This correlates the Appraisal Gap with the purchase price much like deposits, loan amounts, and down payments do so in relation to the purchase price. For the Appraisal Gap to exist a box needs to be checked and a dollar amount filled in to the space adjacent to that box.
The parties need to understand that this only changes the value by which the appraisal contingency is to be assessed; it does not change any of the other contractual provisions (Paragraph 8B) otherwise relating to that contingency. The parties should also understand that the buyer may still need to fund the Appraisal Gap in order to obtain his or her loan assuming that the buyer elects to move forward with the transaction. All parties should evaluate whether the buyer has the ability to fund the gap, what impact doing so may have on the buyers cash reserves and ability to fund any down payment, and what impact any of these actions have on lender approval.
Language has now been added to Paragraph 3P(1) that identifies what items are to be included and excluded from the sale. The language still requires that a box be checked identifying that item, but now adds that the item is existing. This clarifies that checking a box does not create an obligation on the part of the seller to provide the item if the item does not exist. Paragraph 9B(2) now indicates that pool fencing is included in the sale if it is existing.
Paragraph 8A(1) (loan contingency) has been revised to address insurance issues in conjunction with the removal of the loan contingency. The requirements are similar to how the appraisal contingency relates to the loan contingency. If there is no appraisal or insurance contingency or that contingency has been waived or removed, then failure of the property to appraise at the purchase price or a lender conditioning the loan on obtaining insurance does not entitle the buyer to exercise a cancellation right pursuant to the loan contingency if the buyer is otherwise qualified for the specified loan and is able to satisfy the lender’s non-appraisal (or non-insurance) conditions for closing the loan.
Buyers need to investigate the insurability of the property and include a contingency regarding that issue. In today’s insurance market, it can be very challenging to predict the availability of coverage even if the seller had it in place for years. Paragraph 8A(2) advises the buyer on this subject and confirms that failure of the buyer to obtain insurance may justify cancellation based on the insurance contingency but not on the loan contingency. This will be the case even if the reason institutional lender refuses to fund based upon the lack of insurability.
The caption for Paragraph 14C (seller’s right to cancel) and 14D (buyer’s right to cancel) now reiterate the requirement that for a cancellation to be effective it must be done in writing and signed by the seller or buyer.
Paragraph 14G regarding the Demand to Close Escrow (DCE) has also been revised. It reiterates that any cancellation delivered after the DCE period has lapsed must be in writing and signed by the party canceling the agreement. The revision now adds that if the seller cancels under these circumstances but the buyer still has a contingency the seller “shall authorize the return of buyer’s deposit… provided buyer is acting in good faith to satisfy the contingency.”
Refunding the deposit under this circumstance is consistent with C.A.R.’s philosophy on that subject as expressed in Paragraph 14C. However, whether the buyer has acted in good faith will be a fact-driven analysis, and the buyer’s right to a return of his/hers deposit will turn on, among other things, the statements and conduct of the buyer and seller with respect to that contingency. This evaluation will be impacted by, among other things, the communications between the buyer and seller and their respective agents, the communications between the two agents, what steps, if any, the buyer took to investigate the contingency, and what boxes were checked in any notice to perform and/or contingency removal. The analysis and resolution of these issues should not be based on the language of the contract alone.
The DCE form has been revised to reflect these changes. The phrase, “depending on the circumstances” has been added to provide flexibility in any analysis and action that the seller takes in this circumstance. We would also note that the version of the DCE that is on the C.A.R. website appears to be missing the word “may” after the second reference to the seller in the section entitled Note to Buyer. This is the word that gives the seller the options identified in the Note to Buyer. We are sure that C.A.R. will revise the form to add this word but, in the meantime, recognize that the seller has options after issuing a DCE and the seller and the buyer has failed to close.
Counter Offer Forms (BCO, SCO, SMCO) and Liquidated Damages and Arbitration Agreement (LDAA)
The enforceability of a liquidated damage and arbitration clause depends upon, among other things, each clause being separately initialed by all parties. One issue that arose in this regard was where the buyer submitted an offer with these clauses initialed, but the seller made a counteroffer without initialing these clauses in the offer. C.A.R.’s counteroffer forms historically have provided that if these clauses were not initialed by all parties they were excluded from the purchase agreement, unless “specifically referenced for inclusion in Paragraph 1D or in another Counteroffer or Addendum.”
This could lead to disputes about the enforceability of these clauses (1) if the party making the counteroffer did not separately initial either of these paragraphs but only stated in Paragraph 1D or an addendum that they agreed to be bound by these paragraphs or (2) initials of the parties to these clauses were on different documents.
C.A.R. has revised their Counteroffer Forms and the LDAA (which was introduced in June of 2025) to address issues related to the initialing (and enforceability) of these clauses. When it was introduced, the LDAA was titled as an additional signature addendum. It did not indicate whether signatures could be in counterpart.
C.A.R.’s revisions to the counteroffers and the LDAA in June 2026 now state that counterpart signatures are acceptable. The revision eliminates any reference to Paragraph 1D and now refers to the LDAA or a Counteroffer or addendum. It still provides that if signatures by all parties to these clauses is not initialed by all parties in the offer itself or in an addendum, such as the LDAA, then the clause is not enforceable. The LDAA provides a space for initials by all parties. It also provides a space for each party to print their name, which will be helpful in any situation where it is unclear which party has actually initialed the clause.
While the LDAA explains the requirement for initialing by all parties it does not provide any explanation regarding the impact of liquidated damages or binding arbitration. Information on these subjects is contained in, among others, C.A.R.’s Statewide Buyers and Sellers Advisory (SBSA). We would encourage C.A.R. to make a reference in the LDAA to the discussion of these subjects in the SBSA.
Finally, the revised counteroffer forms now include the concept of the Appraisal Gap. This language is consistent with what is provided in the offer on this subject and correlates the Appraisal Gap to any adjustment the are made in the counteroffer, deposit, the loan amount, and down payment.
We hope that these observations will assist buyers, sellers, and real estate licensees in understanding and using these revised C.A.R. forms. If you have any questions we recommend that you consult with your manager and/or broker or, if need be, a qualified California real estate attorney.
About David Hamerslough
In his 35 years of practice, Dave Hamerslough has litigated and arbitrated residential and commercial real estate disputes on behalf of brokers and agents, buyers and sellers, and landlords and tenants. Dave also acts as a mediator and arbitrator of real estate disputes. He also teaches courses and writes articles on these subjects to brokers, agents, attorneys, and consumers.
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