Understanding the Arizona Real Estate Contract
The Arizona real estate contract can be a bit confusing. Therefore, if you are thinking of buying a home in Arizona, there are a few things you will need to know. Your agent from The Kolb Team can help walk you through it. In brief, the Arizona purchase contract contains a pre-printed portion of language drafted by the Arizona Association of Realtors. The contract is divided into 9 sections.
In the event you find yourself signing this contract your Buyer’s agent will supply you with the Buyer Advisory beforehand. The Buyer Advisory will help you understand the purchase contract and will provide useful resources to you. For example, this helpful resource will be of great value during your due diligence process once your offer has been accepted.
Section one of the Arizona real estate contract relates to the property you are intending to purchase. With this intention, the buyer and seller names will be inserted as well as the legal description of the property. In this case, page one is where the offer price and earnest money will go. This is where you will be disclosing whether the offer is cash, whether you will financing or a combination of both. Also, in this section you will be selecting a close of escrow date as well as the date you will take possession of the property. By the way, any addenda that may accompany the offer such as homeowner addendum or buyer contingency will go here as well.
In the case of an all cash sale you will need to provide proof of funds. Such as a Letter of Credit or source of funds from a financial institution documenting the availability of those funds.
You Are Entering Into a Legally Binding Agreement
The second section relates to financing. For instance, if you are obtaining a loan to purchase the property you will be needing a Pre-Qualification AAR form. This should be attached to your offer and will help to strengthen your position. With this in mind, many Arizona lenders can pre-qualify you over the phone. Next, in this section you will disclose the type of financing. Coupled with asking for any seller concessions and disclosing who is paying the appraisal fee. Obviously, in a cash sale this section does not apply.
Next, section three deals with the Title and Escrow process. Unlike many states, Arizona closings are handled through escrow. Here, the title company will be disclosed. In this case, it is important you read the entire section. It deals with title commitment and who pays for any liens on the property if discovered.
Read the Contract Before You Sign
Disclosure is covered in section four. Notably, the seller should provide a completed SPDS (Seller Property Disclosure Statement). This form should be provided to you, the buyer within 3 days of contract acceptance. Typically, the seller will provide a 5 year insurance claims history (CLUE). This report would reveal any insurance claims filed on the property. Likewise, this section also deals with foreign sellers and IRS tax reporting. Lastly, if the home you wish to purchase was built before 1978 you will receive the Lead Based paint disclosure.
Section five is about warranties. In this case, dealing with warranties for what the seller warrants and those things that survive closing.
Due Diligence in section six is your friend, which you should be read carefully. The buyer’s inspection period is normally 10 days from contract acceptance. Hence, the home inspections process is very important. For this reason, you will note in the purchase contract that you have the right to conduct many different types of inspections. Normally, a home and termite inspections are the minimum. But, if a home has a pool you will want that inspected as well. By all means, once the inspection is done you and your buyer’s agent will discuss what items, if any, to ask the seller to repair. The seller will have 5 days to respond to your request. Likewise, if they do not agree to fix everything you requested you will have 5 days to cancel the contract or move ahead. At this time, you will request for title to refund your earnest money refund which can take up to ten days.
By the way, this is where you can ask for a home warranty policy. And, ask the seller to pay the premium. A home warranty can save you thousands of dollars in repairs. Your agent at The Kolb Team will be able to suggest some companies and give you guidance into who should pay the premium.
What to do if There is a Breach of Contract?
Remedies in the case of a breach of contract you will find in section seven. Hopefully, you will never need this. But, if you do your options are in this section. In Arizona, if one party breaches, the other may issue a cure notice that gives the breaching party three days to correct. If the breach is not corrected or cured, the contract can be cancelled with earnest money possibly forfeited and the breaching party may be sued for damages.
Additional Terms and Conditions are discussed in section eight. In other words, this section will deal with risk of loss and compensation. As well as, calculating time periods, subsequent offers and earnest money. This sections will also cover terms of acceptance of your offer. Accordingly, it will disclose the broker on behalf of the buyer. And, this is where you will sign the contract as buyer.
We Have a Deal
Last but not least, section nine is the Seller Acceptance. Once the Arizona real estate contract is complete with any addenda the buyer’s agent will submit those documents. Coupled with, the earnest money, to the sellers agent. Under those circumstances, the seller will accept and sign the document. Or, send a counter offer. The negotiations continue until both parties are in agreement. In the event that a buyer will instruct their agent to submit a low ball offer, the seller may not respond.
If you are thinking of buying a home in Arizona, take time to understand the Arizona real estate contract. Because, for most people buying a home is their single largest investment, it is good to take time to understand the process.
If you would like a copy of our FREE Guide to Buying a Home click here. For more information on Buying or Selling a home call us. 480-440-0849. The Kolb Team. Your Arizona’s active adult communities experts.
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