Top Ten Things a Seller Should Look For in the Purchase Contract

The "Top Ten" list of important areas in a contract does not mean that the other areas are unimportant. There are many important provisions in the contract and the seller must carefully read the entire contract and all other documents relating to the sale of their property.  If you are selling a home in Arizona, the standard form used is the 9-page Arizona Association of Realtors® Residential Resale Real Estate Purchase Contract (07/00) ("Contract"). The following information highlights ten areas of the contract that a home seller should review and understand.

1. Agency Confirmation (lines 2-3) A listing agent owes a fiduciary duty to the seller. If a buyer is represented by a buyers's agent from hte same brokerage firm as the sellers agent, the seller and the buyer may consent to a dual representation by that brokerage firm. Any such consent by the seller and the buyer will be in writing.
2. Earnest Money (lines 4-11) iIf a buyer defaults after a contract has been executed in most instances, the only recourse for the seller is to collect the earnest monies. Therefore, althoughthe amount of the earnest money is negotiable, a seller should demand sufficient earnest money to compensate the seller for taking the home off the market. (Note: If the buyers check "bounses" for any reason, the contract is immediately voidable by the seller.)
   
   
3. Fixtures, Personal Property, and Leased Equipment (lines 2-3) The purchase of a house includes the purchase of all fixtures, but does not normally include personal property such as a refrigerator or leased equipment such as a security system or a swimming pool cleaning system. A seller should review carefully the list of fistures and personal property which must remain with the home under the contract. If the seller wants to take a specific item which normally stays with the house, the seller must provide in the contract that the item will be taken by the seller.  (Note: a statement in the listing documentation that an item does not convey will not take control over what is in the contract.)
   
   
4. Financing Options (lines 51-101) The contract allows for financing contingencies. In other words, if the buyer makes a good faith effort to qualify for the loan but us unable to qualify for the loan specified in the contract, the buyer should be allowed to cancel the contract and receive the return of the earnest money. The buyer is required to procure conditional loan approval (CLA) from a lender wither as an attachment to the contract or within a negotiated time after acceptance of the contract. This CLA will require a completed loan application and a sophisticated credit report known as the 'Trimerged Residential Credit Report' (TMRCR). If the buyer doesn't timely furnish a CLA to the seller, the seller can cancel the contract after 5 days written notice.
   
   
5. Seller's Property Disclosure Statement (lines 141-142) THe seller is required within 5 days after acceptance of the contract to deliver a 'ellers Property Disclosure Statement (SPDS)...normally pronounced "spuds" ...to the buyer disclosing all material facts about home known to the seller. The seller will also have to disclose any material facts about the home discovered after delivery of the SPDS.
   
   
6. H.O.A./Condominimum/P.U.D. (lines 148-164) If the home is in a homeowners association (HOA) of less than50 units, the seller will have to furnish a statement to the buyer setting forth such items as the prinicpal contact person for the HOA, the amount of teh assessments, and any pending litigation between the seller and the HOA. If the HOA has 50 or more units, the seller only needs to furnish notice of the pending sale to the HOA and the HOA has the obligation to furnish this statement to the buyer.  The fee charged by the HOA for this statement and other transfer fees can be substantial.
   
   
7. Buyer's Reasonable Disapproval (lines 238-253) In general, if the buyer reasonably disapproves with the applicable time period of such items as the commitment for title insurance, the SPDS, or the home inspection, the buyer has the option to either canceling teh contract and receiving the earnest money, or requesting that the seller remedy the problem. If the seller is unwilling or unable to remedy the problem (except for items warrented by the seller such as air conditioning, which the seller musty repair), the contract may be canceled by the buyer and teh earnest money returned to the buyer.
   
   
8. Final Walkthrough (lines 266-270) Prior to the close of escrow, buyer has the right to conduct a final walkthrough of the home to confirm the following (seller has the obligation to have the utilities on at the time of the final walkthrough):
   1. Any repairs agreed to be made by the seller have been completed
   2. The home is in substantially the same condition as when the contract was executed
   3. The heating, cooling, mechanical, plumbing and electrical systems, and teh free-standing range/oven and the built-in appliances, are in working condition as warranted by the seller on lines 271-273 of the contract
      
      
9. Mediation (lines 311-322) Any dispute between the buyer and the seller arising out of the contract is generally subject to mandatory mediation. In other words, a mediator will be contacted through the local Realtor^® association to meet with the seller and buyer to rty to reach a settlement of the dispute. Only if mediation fails can the buyer or seller file a lawsuit. Tere are limited exception to the requirement to mediation, e.g., mediation is not required for disputes in small claims court, generally less than $2,500.
   
   
10. Subsequent Offers (lines 387-389) After the contract is executed by the seller and the buyer, the listing broker still has the obligation to present all offers from other buyers to the seller, unless the seller waives this obligation. If the seller executes a contract with another buyer that contract must be a "back-up offer," namely, contingent on the cancellation of the original contract.