This is the second in a series of three blog articles detailing and explaining the Arizona Real Estate Purchase Contract.

I would recommend reading the first blog article first if you haven’t already: Arizona Real Estate Purchase Contract – Property and Financing Section

Sections 3, 4 and 5 of the Purchase Contract deal with Title & Escrow, Disclosures and Warranties, respectively.

Section 3 – Title & Escrow

Lines 89 through 114 specify the Escrow and Title company that the Buyer has elected to use during the Purchase process. Sometimes Escrow and Title are separate companies, in which case there would be two company names and two phone numbers, and other times one company handles both duties.

Section 3f discusses how the earnest money can be released in the event of a dispute between Buyer and Seller. Essentially it indemnifies the escrow company of any liability in case of such event and directs all actions to be dictated by the Purchase Contract.

Sections 3g and 3h explain who will pay for any outstanding assessments or liens against the property and 3i discusses necessary action in case of the Buyer being a foreign resident or non-resident alien.

Section 4 – Disclosures

Section 4a discussed the Seller Property and Disclosure Statement (SPDS) which is commonly referred to as the “SPUDS” by agents. The SPDS is the document where the Seller lists any and all defects/details they are aware of regarding the property. This document must be provided to the Buyer within five (5) days of Contract Acceptance which gives them time to review the document during their inspection period.

Also within five days of Contract Acceptance the Seller must provide a 5-year Insurance Claims History report to the Buyer. Section 4b is has a few purposes. First, to let the Buyer know if there were any claims to the property (fire, vandalism, plumbing issues, etc.). And second, to alert to the Buyer to the possiblity that the home may not be insurable.  If the home is not insurable the Buyer will probably not qualify for most traditional lending programs.

Section 4c deals with Lead-Based Paint Disclosures and what the Seller’s obligations are to the Buyer. The Buyer also has an option to back out of the deal at this point and retain their earnest deposit.

Sections 4d and 4e deal with an Affidavit of Disclosure and the Seller’s responsibility to inform Buyer if there are any changes to the Premises or disclosures during the escrow proces.

Section 5 – Warranties

The warranties section is a particularly important section of the Contract and many deals fall apart at this stage. The Arizona Real Estate Purchase Contract is extremely Buyer-friendly and protects them to the fullest.

Section 5a states which systems, appliances and other equipment is required to be in working condition by COE.  It also specifies that Property must in the “substantially same condition” as on the date of Contract acceptance. Many Sellers think that they are not obligated to have everything in working condition to sell their home, but if this is the case, they should have the Buyer submit an As-Is Addendum that specifically waives their rights to have these warranted items in working order.

Section 5b states that Seller has disclosed all known latent defects to Buyer and that all labor/services/materials/machinery/fixtures/tools utilized in the 150 days prior to COE have been completely paid for. This section is to protect the Buyer against having to pay for items that Seller had not paid for before COE.

Section 5C is where the Buyer asserts that Buyer has disclosed to Seller anything that may affect the Buyer’s ability to close escrow. There is also a write-in section where Buyer can spell-out what verbal representations they are relying on (if any); typically this section is filled out with “NONE“.

Arizona Purchase Contract – Sections 3, 4 & 5 Summary

As you can see these sections of theArizona 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 part three of the Arizona Real Estate Purchase Contract – Dissected and Explained series:

• Arizona Real Estate Purchase Contract – Dissected and Explained
• 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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