Arizona’s Proposition 201: Good Idea, Misguided Execution

avatarthumbnail.jpgProposition 201 starts with the basic themes that home builders need to be accountable for their work and that buyers deserve protections in cases where there are defects with the property.

But the case for this initiative, dramatically (and somewhat inaccurately) titled the “Homeowners’ Bill of Rights”, weakens with each passing paragraph. For each worthwhile provision – a 10-year warranty on the home, for example – there are others that are illogical at best.

If you’re inclined to read the full text of the proposition before heading to the polls, you may do so here on the Arizona Secretary of State’s website. But here are the items that I find more than a little troublesome:

  • D. NO SELLER MAY REQUIRE A DEPOSIT FOR A CONTRACT TO SELL A DWELLING UNLESS THE CONTRACT PROVIDES THAT THE PURCHASER MAY CANCEL THE CONTRACT WITHIN 100 DAYS AND RECEIVE A REFUND OF NO LESS THAN 95% OF THE DEPOSIT.

You walk into a model home, decide you want the property and write the contract. Using today’s date just to arbitrary, this clause means you would have until February 9 to decide whether you really want the home or wish to cancel even as the builder is constructing the home based on the execution of the contract. Yeah, that makes sense.

  • NO CONTRACT FOR THE PURCHASE OF A DWELLING MAY REQUIRE THE PURCHASER TO PAY THE ATTORNEY OR EXPERT FEES OF THE SELLER UNDER ANY CIRCUMSTANCES.

A buyer decides to sue the builder because a bulb burns out too quickly in the bathroom. I think anyone would find this to be frivolous. Yet even if the buyer initiates this lawsuit and is laughed out of the courtroom, they’re not responsible for the sellers’ attorneys fees.

Assignment of attorneys fees is one of the few deterrents to ridiculous lawsuits. Writers of this proposition, however, aren’t particularly concerned with the merit of the lawsuits, not when there are lawyers who might earn a couple bucks.

  • ANY PARTICULAR DEFECT THAT IS REASONABLY ENCOMPASSED IN THE HOMEOWNER’S DESCRIPTION OR THAT IS OR SHOULD HAVE BEEN FOUND BY A SELLER DURING AN INSPECTION OF THE ALLEGED DEFECTS USING DUE DILIGENCE SHALL BE DEEMED INCLUDED WITHIN THE PURCHASER’S NOTICE TO THE SELLER.

Sorry, but the onus for due diligence in any type of purchase falls onto the buyer. Buyers have the option of hiring their own independent home inspectors to inspect the property and smoke out any defects. (Most do not … I’m sure the fact it costs a couple of hundred dollars to hire an inspector is a factor, if a false one.) This isn’t to say builders should be protected if knowingly providing an inferior product, but transferring responsibility for due diligence from seller to buyer is troublesome.

  • ALL FIXTURES OR EQUIPMENT SHOWN IN A SELLER’S MODEL HOMES MUST BE INCLUDED IN THE BASE PURCHASE PRICE ADVERTISED. ANY SUBSTITUTE OR ADDITIONAL FIXTURES OR EQUIPMENT MUST BE SEPARATELY PRICED AND THE PRICES CLEARLY, COMPLETELY AND ACCURATELY DISCLOSED TO BUYERS

This paragraph would be better if it were more specific. Is flooring included? Builders use a wide variety of flooring in their models, as much as anything to show the upgrades that are available. And nearly all builders provide a spec sheet that shows what’s standard and what is optional.

Many models have signs that tell a buyer what’s standard and what’s not. Buyers receive a punch sheet listing what’s standard and what’s not.

There can be minor discrepancies … one of my clients discovered the external plumbing on a pedestal sink was different than what was in the model … and with tighter language, those could be addressed. Instead, it’s a blanket statement whose intent seems to be to protect buyers from themselves.

  • ANY WAIVER BY A PURCHASER BY ANY OR ALL OF THE PROVISIONS OF THIS ARTICLE SHALL BE DEEMED CONTRARY TO PUBLIC POLICY AND SHALL BE VOID AND UNENFORCEABLE.

Again, where is the responsibility on the buyers? There is little worse than legislation whose sole intent is to protect people from their own decisions. If a buyer is inclined to waive anything in the contract, that’s their call. Items are waived in the Arizona resale contract every day – every time a house is sold in “as-is” condition, for instance.

Of course, maybe it’s not surprising that such a proposition is coming in the days where personal responsibility doesn’t exist.

Cynical? Perhaps … but here’s the preamble explaining the proposition:

Arizona homeowners are also entitled to be protected from sharp home sales practices. There are too many instances of homeowners being pushed into houses and mortgages that they cannot afford, with disastrous consequences that are now well known. They have also been victimized by bait-and-switch tactics, deceptive model homes, hidden charges and finance and insurance schemes riddled with conflicts of interest.

Some of this is true. Some is patently false. Not everyone facing foreclosure these days is in that position because they were “pushed.” Many knew full well what their financial circumstances where and also knew those circumstances might not match what was on their loan application.

With a bit of tweaking and a reduction of scope, this proposition might have some possibilities. But as written now, it’s a legal nightmare waiting to happen.

[tags]Phoenix real estate[/tags]

About Jonathan

Jonathan Dalton is a 30-plus-year resident of the Valley and has been helping folks buy and sell homes since 2004. He can be reached at 602-502-9693 or info at allphoenixrealestate.com.