16 minute read
Section 1 COMMON DOCUMENTS A BUYER SHOULD REVIEW
from Buyer Book
by FirstAmAZ
The documents listed below may not be relevant in every transaction, nor is the list exhaustive. Unless otherwise stated, the real estate broker has not independently verified the information contained in these documents.
1 Purchase Contract
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Buyers should protect themselves by taking the time to read the Arizona REALTORS® Residential Resale Real Estate Purchase Contract and understand their legal rights and obligations before they submit an offer to buy a property.
http://bit.ly/38XEynJ
(AAR Sample Residential Resale Purchase Contract)
Contingency Waivers
The Purchase Contract contains numerous contingencies, including, but not limited to, the loan contingency, the inspection contingency, and the appraisal contingency. Should a buyer elect to waive any such contingencies in conjunction with their purchase offer, adverse consequences may result that place buyer at risk of losing their Earnest Money or incurring monetary damages if buyer decides not to purchase the property after their offer is accepted. Before offering to waive any contractual contingencies, buyers should weigh the risks and consult with independent legal counsel.
2 MLS Printout
A listing is a contractual agreement between the seller and the listing broker and may authorize the broker to submit information to the Multiple Listing Service (MLS). The MLS printout is similar to an advertisement. Neither the listing agreement nor the printout is a part of the purchase contract between the buyer and seller. The information in the MLS printout was probably secured from the seller, the builder, or a governmental agency, and could be inaccurate, incomplete or an approximation. Therefore, the buyer should verify any important information contained in the MLS.
3 The Subdivision Disclosure Report (Public Report)
A Subdivision Disclosure Report (Public Report) is intended to point out material information about a subdivision. Subdividers (any person who offers for sale or lease six or more lots in a subdivision or who causes land to be divided into a subdivision) are required to give buyers a Public Report. Read the Public Report before signing any contract to purchase a property in a subdivision. Although some of the information may become outdated, subsequent buyers can also benefit from reviewing the Public Report. Public Reports dating from January 1, 1997, are available on the Arizona Department of Real Estate (ADRE) website. https://services.azre.gov/publicdatabase/SearchDevelopments.aspx (ADRE Search Developments) https://azre.gov/consumers/property-buyers-checklist-home-or-land (ADRE Property Buyer’s Checklist)
ADRE does not verify the information in the Public Report. Therefore, the Report could be inaccurate, so it should be verified by the buyer.
4 Seller’s Property Disclosure Statement (SPDS)
Most sellers provide a SPDS. This document poses a variety of questions for the seller to answer about the property and its condition. The real estate broker is not responsible for verifying the accuracy of the items on the SPDS; therefore, a buyer should carefully review the SPDS and verify those statements of concern.
A seller’s disclosure obligation remains even if the buyer and seller agree that no Seller’s Property Disclosure Statement will be provided.
http://bit.ly/2knrN0A (AAR Sample SPDS) http://www.azre.gov/PublicInfo/PropertyBuyerChecklist.aspx (ADRE Property Buyer’s Checklist)
5 Covenants, Conditions and Restrictions (CC&Rs)
The CC&Rs are recorded against the property and generally empower a homeowner’s association to control certain aspects of property use within the development. By purchasing a property in such a development, the buyer agrees to be bound by the CC&Rs. The association, the property owners as a whole, and individual property owner can enforce the CC&Rs. It is essential that the buyer review and agree to these restrictions prior to purchasing a property.
http://www.azre.gov/PublicInfo/PropertyBuyerChecklist.aspx (ADRE Property Buyer’s Checklist)
It is the law of this state that any covenants or restrictions that are based on race, religion, color, handicap status or national origin are invalid and unenforceable A.R.S. 32-2107.01 https://www.aaronline.com/arizona-deed-restrictions/ (Arizona Deed Restrictions webpage)
ADRE ADVISES: “Read the deed restrictions, also called CC&Rs (covenants, conditions and restrictions). You might find some of the CC&Rs are very strict.” Buyers should consult legal counsel if uncertain of the application of particular provisions in the CC&Rs.
6 Homeowners Association (HOA) Governing Documents
In addition to CC&Rs, HOAs may be governed by Articles of Incorporation, Bylaws, Rules and Regulations, and often architectural control standards. Read and understand these documents. Also, be aware that some HOAs impose fees that must be paid when the property is sold, so ask if the purchase of the property will result in any fees. Condominium and planned community HOAs are regulated by Arizona statutes. They are not under the jurisdiction of the Department of Real Estate (ADRE). Nonetheless, the Arizona’s Homeowner's Association Dispute Process is administered by the ADRE.
http://bit.ly/2ebBSLH (A.R.S. 33-1260; and http://bit.ly/2e8jdM3 (A.R.S.§33-1806) http://bit.ly/1rCq9kd (ADRE HOA Information)
7 HOA Disclosures
If purchasing a resale home in a condominium or planned community, the seller (if fewer than 50 units in the community) or the HOA (if there are 50 or more units) must provide the buyer with a disclosure containing a variety of information.
http://bit.ly/2ebBSLH (A.R.S.33-1260); and http://bit.ly/2e8jdM3 (A.R.S. 33-1806)
8 Community Facilities District
Community Facilities Districts (CFDs) are special taxing districts that use bonds for the purpose of financing construction, acquisition, operation and maintenance of public infrastructure that benefits the real property owners comprising the CFD members. Roadways, public sewer, utility infrastructure and public parks are examples of the types of public infrastructure paid for by CFDs. CFDs have a Governing Board that may be the City Council acting as the board or a stand-alone board. Any member of a CFD may request disclosures from this board. Questions to ask include: the amount still owed and how many more payments are left in order to pay off the CFD for the property. It is important that you review the Detailed Property Tax Statement which will show the current amount due to the CFD.
CFDs are most commonly found on the property’s detailed property tax statement from the County Tax Assessor. The local municipality or county can also be a source of CFD information.
9 Title Report or Title Commitment
The title report or commitment contains important information and is provided to the buyer by the title/ escrow company or agent. This report or commitment lists documents that are exceptions to the title insurance (Schedule B Exceptions). Schedule B Exceptions may include encumbrances, easements, and liens against the property, some of which may affect the use of the property, such as a future addition or swimming pool. Make sure you receive and review all of the listed documents. Questions about the title commitment and Schedule B documents may be ans wered by the title or escrow officer, legal counsel, or a surveyor.
https://www.homeclosing101.org/ (American Land Title Association) https://bit.ly/34KkCaQ (CFPB - What is title insurance?)
10 Loan Information and Documents
Unless a buyer is paying cash, the buyer must qualify for a loan in order to complete the purchase. A buyer should complete a loan application with a lender before making an offer on a property if at all possible and, if not, immediately after making an offer. It will be the buyer’s responsibility to deposit any down payment and ensure that the buyer’s lender deposits the remainder of the purchase price into escrow prior to the close of escrow date. Therefore, make sure you get all requested documentation to your lender as soon as possible.
https://www.consumerfinance.gov/owning-a-home/ (Buying a house: Tools & Resources for Homebuyers) https://www.hud.gov/topics/buying_a_home (HUD.gov)
11 Home Warranty Policy
A home warranty [policy] is a service contract that typically covers the repair and/or replacement costs of home appliances and major systems such as heating, cooling, plumbing, and possibly other components of a home that fail due to normal usage and age. Coverage varies depending on the policy. Be aware that pre-existing property conditions are generally not covered. A home warranty may be part of the sale of the home. If so, buyers should thoroughly read the home warranty contract to understand coverage, limitations, exclusions, and costs associated with the policy.
12 Affidavit of Disclosure
If the buyer is purchasing five or fewer parcels of land (whether improved or vacant), other than subdivided land, in an unincorporated area of a county, the seller must furnish the buyer with an Affidavit of Disclosure.
https://bit.ly/2ZLwvdX
(AAR Sample Affidavit of Disclosure)
13 Lead-Based Paint Disclosure Form
If the home was built prior to 1978, the seller must provide the buyer with a lead -based paint disclosure form. Buyer is further advised to use certified contractors to perform renovation, repair or painting projects that disturb leadbased paint in residential properties built before 1978 and to follow specific work practices to prevent lead contamination.
http://bit.ly/2O4pL4A (AAR Sample Form) https://bit.ly/3uzq5Kb (ADRE Lead Based Paint Information)
14 Professional Inspection Report
The importance of having a property inspected by a professional inspector cannot be over-emphasized. An inspection is a visual physical examination, performed for a fee, designed to identify material defects in the property.
The inspector will generally provide the buyer with a report detailing information about the property’s condition. The buyer should carefully review this report with the inspector and ask the inspector about any item of concern. Pay attention to the scope of the inspection and any portions of the property excluded from the inspection.
Home | American Society of Home Inspectors, ASHI (ASHI Home Buyer’s Guide)
15 County Assessors/Tax Records
The county assessor’s records contain a variety of valuable information, including the assessed value of the property for tax purposes and some of the physical aspects of the property, such as the reported square footage. The date-built information in the assessor’s records can be either the actual or effective/weighted age if the residence has been remodeled. All information on the site should be verified for accuracy.
Apache: https://bit.ly/3CVkXTu
Coconino: http://bit.ly/2F9PstM
Graham: http://bit.ly/2JGz2ZO
La Paz: http://bit.ly/2HzhhdR
Mohave: https://bit.ly/2Y8QH9g
Pima: https://www.asr.pima.gov/
Santa Cruz: http://bit.ly/1yRYwXl
Yuma: https://bit.ly/3uO8BbW
Cochise: http://bit.ly/1oUS7ok
Gila: http://bit.ly/Yq3bV9
Greenlee: http://bit.ly/2SCTZu6
Maricopa: https://mcassessor.maricopa.gov/
Navajo: http://bit.ly/1pWxgVA
Pinal: http://www.pinalcountyaz.gov/ Assessor/Pages/home.aspx
Yavapai: Assessor's Office Home (yavapaiaz.gov)
16 Termites and Other Wood Destroying Insects and Organisms
Termites and other wood destroying insects are commonly found in some parts of Arizona. General guidance, inspection report information and the ability to search a property for past termite treatments may be found on the Arizona Department of Agriculture website.
Termites | Arizona Department of Agriculture (az.gov) (AZDA-Termite Information) http://bit.ly/2GiGlIR (AZDA-Wood Destroying Insect Inspection Reports) https://tarf.azda.gov/ (AZDA-Search for Termite Reports)
17 Foreign Investment in Real Property Tax Act (FIRPTA)
Foreign Investment in Real Property Tax Act(FIRPTA) may impact the purchase of property if the legal owner(s)of the property are foreign persons or nonresident aliens pursuant to FIRPTA. If so, consulta tax advisor as mandatory withholding may apply.
https://bit.ly/3w10GsF (I.R.S. FIRPTA Definitions) https://www.irs.gov/Individuals/International-taxpayers/firptawithholding (I.R.S. FIRPTA Information) https://www.irsvideos.gov/Individual/education/FIRPTA (I.R.S. FIRPTA Video)
Section 2 COMMON PHYSICAL CONDITIONS IN THE PROPERTY A BUYER SHOULD INVESTIGATE
Because every buyer and every property are different, the physical property conditions requiring investigation will vary.
1 Repairs, Remodeling and New Construction
The seller may have made repairs or added a room to the property. The buyer should feel comfortable that the work was properly done or have an expert evaluate the work. Request copies of permits, invoices or other documentation regarding the work performed.
Use Of Licensed Contractors
A contractor’s license is required for work performed on a property unless the aggregate contract price, including labor and material, is less than $1,000, the work performed is of a “casual or minor nature,” and no building permit is required.
An unlicensed property owner may also perform work themselves if the property is intended for occupancy solely by the owner. If, however, the property is listed or offered for sale or rent within one year of the completed work, it is considered prima facie evidence that the owner performed the work for purposes of sale or rent.
Owners of property who are acting as developers, who improve structures or appurtenances to structures on their property for the purpose of sale or rent, and who contract with a licensed general contractor must identify the licensed contractors’ names and license numbers in all sales documents.
https://roc.az.gov/before-hire (Before you Hire a Contractor–Tips) https://remodelingdoneright.nari.org/ (National Association of the Remodeling Industry) https://apps-secure.phoenix.gov/PDD/Search/Permits (Phoenix Building Permit Search) https://www.tucsonaz.gov/pdsd/records (Tucson Building permit records)
Other cities- search Planning & Development
2 Square Footage
Square footage on the MLS printout or as listed by the county assessor’s records is often only an estimate and generally should not be relied upon for the exact square footage. An appraiser or architect can measure the property’s size to verify the square footage.
If the square footage is important, you should have it confirmed by one of these experts during the inspection period in a resale transaction and prior to executing a contract on a new home transaction.
https://dfi.az.gov/industry/RealEstateAppraisers (Licensed Real Estate Appraisers)
3 Roof
If the roof is 10 years old or older, a roof inspection by a licensed roofing contractors highly recommended.
www.azroofing.org
(Arizona Roofing Contractors Association) https://roc.az.gov/before-hire
(Before you Hire a Contractor)
4 Swimming Pools and Spas
If the property has a pool or a spa, the home inspector may Exclude the pool or spa form the general inspection so an inspection by a pool or spa company may be necessary.
Pool Barrier Laws & Information | Arizona Association of REALTORS® (aaronline.com) (AAR-Pool Barrier Laws & Information-Updated August 2020)
36-1681 - Pool enclosures; requirements; exceptions; enforcement (azleg.gov) (A.R.S. 36-1681 Swimming Pool Enclosures)
5 Septic and Other On-Site Wastewater Treatment Facilities
If the home is not connected to a public sewer, it is probably served by an on-site wastewater treatment facility (conventional septic or alternative system). A qualified inspector must inspect any such facility within six months prior to transfer of ownership. For information on current inspection and transfer of ownership requirements, contact the specific county environmental/health agency where the property is located or the Arizona Department Environmental Quality (ADEQ).
Notice of Transfer and Inspection | On-site Wastewater | ADEQ Arizona Department of Environmental Quality (azdeq.gov) (ADEQ – AZ Statewide Inspection Program File a Notice of Transfer Online)
6 Sewer
Even if the listing or SPDS indicates that the property is connected to the city sewer, a plumber, home inspector, or other professional should verify it. Some counties and cities can perform this test as well.
7 Water/Well Issues
The property may receive water from a municipal system, a private water company, or a well. You should investigate the availability and quality of the water to the property, as well as the water provider. A list of Arizona’s water companies is available at the Arizona Corporation Commission.
https://www.azcc.gov/utilities/water
(Arizona Corporation Commission - Utilities-Water) https://new.azwater.gov/aaws/statutes-rules
(Assured and Adequate Water Supply)
Adjudications: Arizona is undertaking several Stream Adjudications, which are court proceedings to determine the extent and priority of water rights in an entire river system.
For information regarding water uses and watersheds affected by these adjudications, and the forms upon sale of the property, visit the Department of Water Resources online.
Adjudications Overview | Arizona Department of Water Resources (azwater.gov) (Department of Water Resources – Adjudications) www.cagrd.com
CAGRDs: The Central Arizona Groundwater Replenishment District (CAGRD) functions to replenish groundwater used by its members, individual subdivisions and service areas of member water providers. Homeowners in a CAGRD pay an annual assessment fee which is collected through the county property tax process based the amount of ground water served to member homes.
(Central Arizona Ground Water Replenishment District)
8 Soil Problems
The soil in some areas of Arizona has “clay-like” tendencies, sometimes referred to as “expansive soil.” https://azre.gov/PublicInfo/Fissures
Other areas are subject to fissure, subsidence and other soil conditions. Properties built on such soils may experience significant movement causing a major problem.
If it has been disclosed that the property is subject to any such soil conditions or if the buyer has any concerns about the soil condition or observes evidence of cracking, the buyer should secure an independent assessment of the property and its structural integrity by a licensed, bonded, and insured professional engineer.
(ADRE – Overview of Arizona Soils) https://bit.ly/3rTzD2O (Problem Soils AZGS) http://bit.ly/2MpcKNU
(Shrink/Swell Potential & FAQs) http://bit.ly/2yfzVHR
(Information on Land Subsidence & Earth Fissures) www.btr.state.az.us
(State Certified Engineers & Firms)
9 Previous Fire/Flood
If it is disclosed there has been a fire or flood on the property, a qualified inspector should be hired to advise you regarding any possible future problems as a result of the fire or flood damage and/or any subsequent repairs. For example, if the property was not properly cleaned after a flood, mold issues may result. Your insurance agent may be able to assist you in obtaining information regarding fire, flood, or other past damage to the property.
10 Pests
Cockroaches, rattlesnakes, black widow spiders, scorpions, termites and other pests are common in parts of Arizona. Fortunately, most pests can be controlled with pesticides. Scorpions: Scorpions, on the other hand, may be difficult to eliminate. If buyer has any concerns or if the SPDS indicates the seller has seen scorpions or other pests on the property, seek the advice of a pest control company.
Bed Bugs: Infestations are on the rise in Arizona and nationally.
Roof Rats: Roof Rats have been reported in some areas by Maricopa County Environmental Services.
Termites: Consumer Information is available from the Arizona Department of Agriculture.
Bark Beetles: Bark beetles have been reported in some forested areas.
http://bit.ly/32y89l6 (Information on Scorpions)
Bed Bugs | Arizona Department of Agriculture (az.gov) (Bed Bugs) Bedbugs: Get them Out and Keep them Out) http://www.maricopa.gov/FAQ.aspx?TID=104 (Maricopa County
– Roof Rats) https://agriculture.az.gov/pestspest-control/termites (Termite Information https://agriculture.az.gov/pests-pest-control/agriculture(Bark Beetle Information)
11 Endangered & Threatened Species
Certain areas in the state may have issues related to federally listed endangered or threatened species that may affect land uses. Further information may be obtained on the U.S. Fish and Wildlife website or by contacting the appropriate planning/development service department.
Arizona Ecological Services Field Office | U.S. Fish & Wildlife Service (fws.gov)
(Arizona Ecological Services) (Arizona Endangered Species)
12 Death and Felonies on the Properties
Arizona law states that sellers and real estate licensees have no liability for failure to disclose to a buyer that the property was ever the site of a natural death, suicide, murder or felony.
This information is often difficult to uncover; however, the local law enforcement agency may be able to identify incidents related to a property address.
http://bit.ly/2lo53MZ (A.R.S. § 32-2156)
13 Indoor Environmental Concerns
Attention has been given to the possible health effects of mold in homes, apartments and commercial buildings. Certain types of molds may cause health problems in some people while triggering only common allergic responses in others. Mold is often not detectable by a visual inspection. To determine if the premises you are purchasing, or leasing contains mold or airborne health hazards, you may retain an environmental expert to perform an indoor air quality test. This is particularly important if any of the inspection reports or disclosure documents indicate the existence of past or present moisture, standing water, visible water stains, or water intrusion in the Premises.
The Arizona Department of Health Ser vices, Office of Environmental Health, states:
“If you can see mold, or if there is an earthy or musty odor, you can assume you have a mold problem.” https://www.epa.gov/indoor-air-quality-iaq (EPA-Indoor Air Quality) https://www.epa.gov/mold (EPA-Mold) https://www.cdc.gov/mold/ (CDC-Mold Information) bit.ly2kRk7jm (Drywall Information Center) http://bit.ly/2GclWpM (About Radon) http://bit.ly/2t1CAPq (Carbon Monoxide Infographic) https://www.epa.gov/asbestos (Asbestos Information) http://bit.ly/2qUZcSt (Voluntary GuidelinesMethamphetamine & Fentanyl Laboratory Cleanup)
Imported Drywall: There have been reports of problematic drywall, produced in China, used in Arizona homes. Residents in homes with problem drywall report health issues such as respiratory irritation, and other problems such as copper corrosion and sulfur odors. Visit the Consumer Product Safety Commission website for more information.
Radon Gas and Carbon Monoxide: Radon gas and carbon monoxide poisoning are two of the more common and potentially serious indoor air quality (IAQ) concerns. Both of these concerns can be addressed by the home inspector, usually for an additional fee. For information on radon levels in the state, visit Arizona Radiation Regulatory Agency online.
Drug labs: Residual contamination arising from the illicit manufacture of methamphetamine and other drugs carried out in clandestine drug laboratories presents a serious risk of harm to human and environmental health.
Other: For information on other indoor environmental concerns, the EPA has a host of resource materials and pamphlets online.
Formaldehyde | US EPA (EPA Formaldehyde)
14 Property Boundaries
If the property boundaries are of concern, a survey may be warranted. For example, a survey may be advisable if there is an obvious use of property by others, i.e., a well-worn path across a property and/or parked cars on the property or fences or structures of adjacent property owners that appear to be built on the property. For more information, visit the Arizona Professional Land Surveyors online. A search for surveyors may be found online at the Board of Technical Registration.
https://btr.az.gov/arizona-professional-land-surveyors-apls (AZ BTR Land Surveyors) http://www.azpls.org/ (Professional Land Surveyors)
15 Flood Insurance/Flood Plain Status
Your mortgage lender may require you to purchase flood insurance in connection with your purchase of the property. The National Flood Insurance Program provides for the availability of flood insurance and established flood insurance policy premiums based on the risk of flooding in the area where properties are located. Changes to the federal law (The BiggertWaters Flood Insurance Reform Act of 2012 and the Homeowner Flood Insurance Affordability Act of 2014, in particular) will result in changes to flood insurance premiums that are likely to be higher, and in the future, may be substantially higher, than premiums paid for flood insurance prior to or at the time of sale of the property. As a result, purchasers of property should not rely on the premiums paid for flood insurance on the property previously as an indication of the premiums that will apply after completion of the purchase. In considering purchase of the property, you should consult with one or more carriers of flood insurance for a better understanding of flood insurance coverage, current and anticipated future flood insurance premiums, whether the prior owner’s policy may be assumed by a subsequent purchase of the property, and other matters related to the purchase of flood insurance for the property. If community floodplain information is not available for a specific property, and in order to obtain flood insurance, it may be necessary to have an elevation survey and obtain an elevation certificate. This is necessary to determine a properties insurability and premium rate. You may also wish to contact the Federal Emergency Management Agency (FEMA) for
Section 3
more information about flood insurance as it relates to the property.
National Flood Insurance Program (FEMA) https://www.realtor.com/flood-risk/ (Flood Risk Information) https://www.floodsmart.gov/flood-map-zone/elevationcertificate (Elevation Certificates: Who Needs Them and Why - fact sheet) http://azgs.arizona.edu/center-natural-hazards/floods (Flooding in Arizona) https://www.fcd.maricopa.gov/5308/Flood-Control-District (Maricopa County Flood Control District-Services)
Other Arizona Counties: Consult County Websites.
16 Insurance (Claims History)
Many factors affect the availability and cost of homeowner’s insurance. Property owners may request a five-year claims history from their insurance company, an insurance support organization or consumer reporting agency.
Consumer Resources (naic.org) (Helping You Navigate Insurance and Make Better Informed Decisions)
17 Other Property Conditions
Plumbing: Check functionality.
Cooling/Heating: Make sure the cooling and heating systems are adequate. If it is important to you, hire a qualified heating/cooling inspector.
https://www.epa.gov/ods-phaseout (Phaseout of Ozone-Depleting Substances -ODS)
Electrical Systems: Check for functionality and safety.
