The Real Estate market in Arizona is hot right now and there are several issues a buyer and seller must be aware in a market where deals are routinely being closed within 24 hours of a home being listed! For instance, buying and selling real estate usually occurs with lawyers, brokers, real estate agents and the buyer and seller. Many different forms of documentation must be filled out by each party, including the Real Estate Purchase Contract, the Seller Disclosure Statement (“SPDS”) and the furnishing of HOA information. All the parties need to review each to make sure the documents fit each party’s needs and are valid and free of legal issues. That means it is crucial in hiring a competent broker and lawyer to assist with these sometimes difficult transactions.
Arizona’s HOT Real Estate Market 2022
In competitive markets, time is of the essence and real estate agents are creating new and original ways to help buyers and sellers identify ways to make their offer/property stand out above the crowd. Conduct such as waiving appraisals, taking the property “as is”, early closings, waiving of inspections and non-refundable deposits have become more common than in past markets. Unfortunately, such actions bring more and more risk to buyers, and increased protection for sellers.
For the buyer’s real estate agent, it is vital to communicate all of the legal disadvantages to the buyer when faced with such tactics. Otherwise, each party could be opening themselves up to liability should any issues arise. Thus, it may be prudent to prepare a written disclosure for the buyer to sign when a buyer’s agent discusses the positives and negatives of these creative offers.
Investors Invading the Valley and Creating Legal/Marketing Issues
According to Redfin, more than 30 percent of the homes sold in Phoenix market in the third quarter of 2021 were bought by investors. As such, the average rent has risen by roughly 30 percent over the past year. Investors are buying thousands of Phoenix-area homes as rent prices spike (azfamily.com) Here, the frequency of “sight unseen” purchases by investment companies buying single family homes is on the rise. If you’ve visited a home in the past 3 months, you know them when you see them: these are the agents recording the home tour on their cell phones, sometimes chatting with their client representative at the same time. These investors have not only driven investment in the Valley to record numbers, but have brought with them a host of legal issues. For instance, the amount of “as is” purchases, early closings and waiving of inspections/appraisals have risen, meaning sloppiness in disclosure and greater potential for later lawsuits.
Arizona Short Term Rentals (“STR”)
One item on most buyers minds (not just investors) is the option of renting the residence as a short term rental (“STR”) after the purchase. But buyer beware, there are several local communities, including more and more Homeowners Associations, which have inserted rental reporting requirements and/or rewritten their governing documents prohibiting STR’s. T
Arizona Disclosures and SPDS
Arizona law requires a seller to fill out and provide a Seller Disclosure Statement, or “SPDS”, when selling a residential property. Here, the seller is required to furnish all material information a reasonable purchaser would expect to have when deciding whether or not to purchase a property. One important issue is that of a latent defect, which is one that would require a special inspection or investigation to discover (something that is not obvious). In many of the lawsuits RSN handles, sellers are not disclosing known latent defects and the buyers (or new owners) bring suit when the defects are discovered after the purchase. The issue is important to understand when deciding to sell/purchase a residence, especially in a hot market. The good news is that the issue may be handled by asking good questions of the seller which may lead to more information being revealed which otherwise may not have been known during the preparation of the SPDS. Again, good communication between the buyer and seller is vital to the purchase process.
Non-Refundable Deposits
An important issue for potential buyers to know is when their deposit goes “live”, or is non-refundable. In a quick moving market, where buyers are making quick offers and looking at many properties, the smart seller will require the earnest money deposit to be non-refundable as quickly as possible to tie the buyer down. Likewise, a smart buyer will make the deposit refundable upon the failure of many conditions in the contract and allow themselves many “outs”. Like most purchase/sale agreements, the terms of the agreement govern the transaction and mature buyers/sellers know how to best minimize their risk concerning refundable deposits.
Experienced Arizona Real Estate Attorneys
RSN Law helps our clients pursue home transactions and or litigation over them in the simplest and most effective path possible. If you have become the victim of an unscrupulous seller, or your contract has fallen out of escrow without cause, please contact RSN Law today and our construction and real estate Best Lawyers® 2022 lawyer Robert Rutila at 480-712-0035 or make an appointment with our contact us page.
RSN Law intends this article to be for informational purposes, not to be relied on a specific legal matter, and does not create an attorney-client relationship.