This is the first in a series of three blog articles detailing and explaining the Arizona Real Estate Purchase Contract. Sections 1 and 2 of the Contract deal with the Property Details and Financing of the property so let’s take a look at them.

Section 1 – Property Details

Lines 1 and 2 of the Arizona Purchase Contract (section 1a) specify who the Buying and Selling parties. Section 1B specifies the property address and legal description.

Section 1c is one of the most important sections of the Contract as it contains the Purchase Price, amount of earnest deposit (if any), down payment (if any), and terms of financing (if not a cash deal). This is typically thought of as “the meat” of the Contract.

Section 1d details Close of Escrow (“COE”) which is when title is recorded, keys are handed over and formal ownership of the property is given to the new owner. This is typically called “closing”.

Sections 1e through 1g are self-explanatory but I do want to touch on lines 40-45. If the boxes on line 40 are checked, please make sure that the items are detailed on lines 41-42 (e.g. color, model, serial number), otherwise you may be left with a different refrigerator/washer/dryer than the ones that were present when you made your offer. I know it sounds far-fetched but I have seen Sellers swap out appliances right before COE with older ones. And legally, the Buyer doesn’t have recourse against the Seller for that specific action (realistically though they could hold up closing while it is resolved).

Section 2 – Financing

The financing section of the Arizona Purchase Contract is not very long (38 lines) but it contains loads of valuable information and disclosures.

Section 2a specifies that the Contract is contingent upon Buyer obtaining financing for a loan “without conditions” no later than COE. Basically this means that if the Buyer cannot qualify for a loan then they are able to get out of the Contract. This is typically avoided in the first place by requiring that Buyer’s submit a Loan Status Report (LSR) when they first submit a Purchase Contract for the property. The LSR is a stamp of pre-approval from a lender that tells the Seller that the Buyer is “good to go” to buy the home.

Section 2b is along the same lines as Section 2a and says that if Buyer cannot obtain financing “after diligent and good faith effort” bye COE the Contract shall be canceled and Buyer will be entitled to their earnest deposit.

Section 2c applies to property appraisals. If the property does not appraise for the purchase price set forth in Section 1 the Buyer has five (5) days to either waive this contingency (which happened a lot during the real estate boom) and continue with the purchase or cancel the Contract and receive a refund of their earnest deposit.

Sections 2d through 2f are self-explanatory and pertain to time constraints for notices and documentation to be filed or completed.

Section 2g and 2h specify the type of the loan (if any) the Buyer is planning on using to purchase the property. There are also options to have certain costs paid for by Buyer or Seller (when purchasing property almost everything is negotiable).

For VA and FHA loans there are certain costs that the Buyer is not allowed to pay (by law) and that the seller must pay for. Section 2i details what amount these costs cannot exceed.

Sections 2j and 2k are simply timeline and disclosure notices.

Arizona Purchase Contract – Sections 1 & 2 Summary

As you can see the first two sections of an Arizona Purchase Contract are laden with many important details and timelines. Keep in mind that this Purchase Contract is periodically updated by the Arizona Association of Realtors (AAR) and that this article is only as current as when it was written.  Hopefully you come away from this article a better informed consumer!

Stay tuned for parts two and three of the Arizona Real Estate Purchase Contract – Dissected and Explained series:

• Arizona Real Estate Purchase Contract – Title/Escrow, Disclosures, and Warranties
• Arizona Real Estate Purchase Contract – Due Diligence, Remedies, and Seller Acceptance

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Check out these possibly related posts:

1. Arizona Real Estate Purchase Contract – Dissected and Explained
2. Listing Agreement
3. Making an Offer
4. Closing
5. Closing

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Tagged as: AAR, appraisal, Arizona Purchase Contract, close of escrow, down payment, earnest deposit, FHA, financing, LSR, VA