John Karadsheh
As of this past Feb. 1, the Arizona Association of REALTORS® rolled out a revised version of the Residential Real Estate Purchase Contract.
There were hundreds of changes. While some of these changes were small, there are a few major paradigm shifts, which drastically will affect buyers and sellers. It is imperative that if you are buying or selling a home, your agent is familiar with all of these changes.
Major Change 1
All Cash Sale—In the previous version, proof of funds was not required to be delivered to the seller until five days after contract acceptance. Now, proof of funds must be submitted with the offer.
Major Change 2
Fixtures and Personal Property—The new contract does a much better job of identifying what items in the property are considered fixtures and automatically will convey with the sale.
Major Change 3
Seller Concessions—Oftentimes, buyers will ask sellers for closing costs assistance. The new purchase contract narrowed down the scope of what can be included in those concessions. Specifically pre-paids are no longer included in those closing costs.
Major Change 4
Appraisal Fees—The new contract does a great job of removing past ambiguity regarding who will pay for an appraisal and when that payment is due. It also clarifies that the buyer shall be responsible for any costs associated with updating the appraisal.
Major Change 5
Foreign Investment in Real Property Tax Act—The new contract does a great job of alerting both buyers and sellers to the potential consequences regarding federal income tax withholdings.
Major Change 6
Warranties—This is by far the biggest change to the contract. Previously, the seller was obligated to have all heating, cooling, mechanical, plumbing and electrical systems in working condition prior to close of escrow. Now, all properties are being sold in their present physical condition as of the date of contract acceptance. What does this mean? The seller is no longer contractually obligated to repair or replace any system or part of the home. The buyer, however, still does have the opportunity to inspect the premises, and still retains the right to try to negotiate repairs during the due diligence period. If the seller refuses to negotiate the requested repairs, the buyer has two choices—proceed with the sale without the repairs, or cancel and receive a refund of their earnest money.
Major Change 7
Buyer Disapproval—As in the previous contract, during the buyer’s due diligence period, the buyer may cancel the contract for any reason related to the property. The new contract, however, states the buyer must specify items disapproved of, and failure to do so will result in the loss of the earnest money.
In my opinion, the changes to the new purchase contract are excellent. While some of the new ideas will take some getting used to, ultimately, we will see smoother transactions.
John Karadsheh is the Designated Broker for KOR Properties. He has been a Multi-Million Dollar producing agent for more than 15 years and is an Accredited Buyers Representative (ABR) and Certified Residential Specialist (CRS). In 2014, John was voted the No. 1 Real Estate Agent in Arizona by Ranking Arizona. You can reach John at (480) 568-8684, or visit his website at KORproperties.com.
KOR Properties is a boutique real estate brokerage serving the Valley of the Sun and the creator and founding sponsor of Mesa Food Truck Fridays.