A Comprehensive Overview of the Arizona Purchase Agreement

What is the Arizona Purchase Agreement?

The Arizona purchase agreement is the most important and foundational document in a real estate transaction in Arizona. This is especially so in commercial transactions where there is usually consideration spend to prepare legal, architectural, and engineering plans and studies before the purchase agreement has even been signed. The purchase agreement is the main document that is signed before the time when the purchaser might discover the defects in the condition of the property, so the purchase agreement is even more critical to a commercial seller in that earlier stage.
Arizona law requires that the sale of real property be in writing . This is called the Statute of Frauds. However, the parties can still enter into an oral contract in Arizona, and uphold it in court, if the party seeking performance by the other party has partially performed the oral contract.
The purchase agreement is the document that becomes the binding legal contract between the parties. The Statute of Frauds does not require a particular type of document—only a writing regarding the subject matter of the contract. The agreement is almost always the framework that will set the stage for future obligations that must be carried out by the parties pursuant to the terms of the agreement.

The Parts of the Arizona Purchase Agreement

A standard Arizona Purchase Agreement contains several key components. For the purposes of this guide, it will assume a residential purchase agreement; however, commercial and vacant land agreements follow a similar form. Buyer & Seller Information. The Purchase Agreement will always have the names of the Buyer and Seller. This is self explanatory, but it’s important to review for correct spelling and additional parties that may be the buyer or seller. For example, is it John Smith and wife Mary Smith (buying) or John Smith and girlfriend Mary Hawkenson (buying) and how are they going to take title if they are buying together? Is the Seller a limited liability company (LLC) or a corporation? Legal Description. The description of the property that is for sale is found on a Purchase Agreement. The legal description refers to the official record of the property and may include a Book & page or other recording number. The legal description may also refer to a subdivision plat map or a condominium declaration as well as a lot and block number. A street address is not an official legal description. It is important to double check the correct legal description as the property being bought and sold may be similar to a different property and listed incorrectly in the MLS. Purchase Price. This is the actual agreed upon purchase price. A Purchase Agreement will typically also have details such as earnest deposit amount, financing details, closing date, home warranty requirements, personal property included in the transaction such as refrigerator, washer and dryer, and more. There are many pages to an Arizona Purchase Agreement that may reference these main areas identified above. It’s critical to read the agreement thoroughly and understand that it is a contract and has binding legal consequences.

Legal Rights and Protections for Buyers and Sellers

Both parties to the Arizona Purchase Agreement have legal obligations that must be fulfilled in accordance with Arizona law. In addition, the Purchase Agreement contains disclosure and disclaimer provisions that are designed to protect both buyers and sellers.
Both buyers and sellers are required to fully behave in good faith and with due diligence in all transactions under the Arizona Purchase Agreement. Purchasers of property in Arizona are protected by the Residential Property Disclosure Act. Sellers are protected by the seller’s disclosure obligation as well as the buyer’s responsibility to procure home insurance for the property and its contents and to inspect the property. Under the Residential Property Disclosure Act, sellers of one- to four-family residences, including condominiums, are required to disclose facts materially affecting the property’s value. The Residential Property Disclosure Act requires sellers to disclose any material, substantial, and available facts relating to the physical condition of the property being sold that could affect a buyer’s decision to buy or the amount he or she is willing to pay. Disclosable facts include information about the presence of lead-based paint, lead contamination, mold contamination, flooding, structural problems, pest control and more.
Sellers are not required to reveal information about the property’s zoning, utilities, or environmental issues if these facts are readily available through the municipal records or the State Land Department. Purchasers also have specific rights under the Arizona Purchase Agreement, including the right to have a survey map prepared for the property should it affect the purchase. Buyers have the option of rejecting any changes made to the property after the Purchase Agreement has been finalized before purchasing. This means that if the seller makes major renovations that change the intended purpose of the property (such as turning a bedroom into a kitchen or a garage into a family room) after signing the Purchase Agreement but before closing, the buyer may reject the changes. Homebuyers are also protected under the Federal Fair Housing Act, which prohibits housing discrimination on the basis of race, color, religion, sex, national origin, familial status, or handicap.

Contingencies Commonly Used in the Arizona Purchase Agreement

Contingencies for Inspection, Financing, and Appraisals
As part of any offer in Arizona, buyers and sellers typically include conditions that must be met in order for the sale to go through. These contingencies essentially safeguard the buyer in case something goes wrong in the process. In many cases, these contingencies often place the burden back on the seller if certain conditions aren’t met. For example, most agreements make it the responsibility of the seller to repair issues that come up during an inspection rather than the buyer. The details of these contingencies vary depending on the transaction, but some of the most common ones seen in Arizona Purchase Agreements include the following:
The home inspection contingency is one of the most commonly used processes in an Arizona Purchase Agreement. As stated above, this contracts the seller to paying for any issues found in the results of the inspection. Beyond that the results of the inspection can lead to other contingencies such as:
Home inspections can also reveal issues that may not seem like a major problem at the time but could become one later on. A good inspection should highlight potential future issues since it’s likely that your inspector has more experience and background knowledge of what to look out for than you do. This type of foresight can save you from possible headaches later on.
Another common contingency is the financing contingency, which contracts the sale to the buyer’s ability to secure financing. To make this work, the buyer would need to find a bank or moneylender willing to provide a loan to finance the purchase. If they can’t find a lender, then they have the option to back out of the deal without losing their earnest money transfer. In addition, lenders often request a second appraisal to ensure that the value of the home is correct. This occurs after the home buyer has the first appraisal done for the lender so that they can move forward with securing financing. Your appraisal contingency should specify who will be responsible for paying for this additional appraisal and if the sale will be cancelled if this value is ultimately lower than the seller’s asking price.
Another contingency you might hear is the appraisal contingency, which is similar to the financing contingency and designed to protect the buyer. This refers to the lender’s request for a second appraisal after the home buyer has had a first appraisal done for the lender. Similar to the financing contingency, this contingency should detail who will be responsible for paying for the second appraisal and whether the sale will be cancelled if this value ends up being lower than the seller’s asking price.

Amendments and Addendums to the Arizona Purchase Agreement

The Arizona purchase agreement is a basic contract, which means that the terms of the contract can be changed over the course of negotiations. These changes are essential, as it allows both parties to really hone in on the details of a sale or purchase. There are a few certain things that cannot be changed unless the appropriate steps have been taken, but generally speaking, amendments and addendums can be made at any time. You need to know what these modifications are and why it is important to get them in writing.
Amendments
Any changes to the terms of a contract should be explicitly stated in writing. This will help to avoid any confusion over issues that have been modified or added. It is also necessary to have all modified terms written and signed if you ever find yourself in court-the law requires that all changes be in writing. If both parties agree to modify the terms , an Amendment can be drawn up to show the change in the legal agreement. If the Amendment covers the sole issue of date or time, then no formalities need to be observed-just keep a record for both parties.
Addendums
Amendments are technically addendums. However, you will most likely hear the term addendum used to refer to any additional terms that have been added to the contract, such as the disclosures. If either party wants to add in any terms not included in the original contract, then an addendum will need to be made. In Arizona, one of the most common addendums is the Buyer Sale Contingency Addendum. This is used when the property being purchased has to be sold before purchase, such as in investment situations or in short sales.
One last thing to remember about making changes to the contract-do not forget to get those signatures and have the addendum notarized. This will protect you in the event that there are future disputes over any changes that were made.

Contract Disputes and Terminations

Within the purchase agreement, there are sections that cover dispute resolution and the process by which the contract may be terminated. These sections outline the steps that must be taken in the event of a disagreement over the terms of the contract, such as how the dispute should be communicated and filed. It also states how each party may end the contract if a breach has occurred or if there are any issues with the property itself. There are a total of six ways to terminate an Arizona Purchase Agreement.
If either party decides not to go through with the sale, specific contingencies need to be met, including but not limited to:
The agreement will become void if:
Purchase agreements do not typically include contingencies for the buyer’s lender to get 100% clear on a loan. If this is the case and the buyer’s lender cannot fulfill the deal, the agreement will terminate with no penalties under the Default paragraph.
If you need to terminate the agreement, you should do so in writing with a formal letter of cancellation. This includes signing the cancellation on the original contract and agreeing to return all earnest money.

Legal Guidance and Professional Help

Before you make any commitments , you should seek legal advice or professional assistance. If an attorney reviews the Purchase Agreement before you make a final decision it could be helpful in negotiating better terms for your contract. A real estate agent is most likely to be able to answer your questions.