The Most Significant Change to the Arizona Real Estate Contract

Once upon a time, there were certain items that a seller warranted were in working condition when a home went under contract using the Arizona Association of Realtors’ Residential Purchase Contract, items that weren’t subject to the usual repair negotiations that take place during most escrows. If these weren’t working, the seller had to disclose that information and the buyer would have to say they were fine with the knowledge.

The short version of the list was all of the major systems of the house except for the roof. For those who like detail, here was the actual rundown from the old section 5a:

5a. Seller Warranties: Seller warrants and shall maintain and repair the Premises so that at the earlier of possession or COE: (i) all heating, cooling, mechanical, plumbing, and electrical systems (including swimming pool and/or spa, motors, filter systems, cleaning systems, and heaters, if any), free-standing range/oven, and built-in appliances will be in working condition; (ii) all other agreed upon repairs and corrections will be completed pursuant to Section 6j; (iii) the Premises, including all additional existing personal property included in the sale, will be in substantially the same condition as on the date of Contract acceptance; and (iv) all personal property not included in the sale and all debris will be removed from the Premises.

There’s a bit there, but the relevant part for today’s discussion is section (i). This section was a boon for buyers whose agents had a clue and a nuisance for sellers who either weren’t prepped ahead of time by their agents or simply didn’t care what the contract said regarding what had to work.

That no longer is the case. Here’s the new section 5a from the latest version of the AAR Residential Purchase Contract:

5a. Condition of Premises:BUYER AND SELLER AGREE THE PREMISES ARE BEING SOLD IN ITS PRESENT PHYSICAL CONDITION AS OF THE DATE OF CONTRACT ACCEPTANCE. Seller makes no warranty to Buyer, either express or implied, as to the condition, zoning, or fitness for any particular use or purpose of the Premises. However, Seller shall maintain and repair the Premises so that at the earlier of possession or COE: (i) the Premises, including all personal property included in the sale, will be in
substantially the same condition as on the date of Contract acceptance; and (ii) all personal property not included in the sale and debris will be removed from the Premises. Buyer is advised to conduct independent inspections and investigations regarding the Premises within the Inspection Period as specified in Section 6a. Buyer and Seller acknowledge and understand they may, but are not obligated to, engage in negotiations for repairs/improvements to the Premises. Any/all agreed upon repairs/improvements will be addressed pursuant to Section 6j. (Bold emphasis added)

Again, there’s a lot there but the headline is in the first sentence. Essentially, all sales using the Residential Purchase Contract now are as-is sales. If there are problems with the plumbing, electrical, air conditioning, et al, those now are subject to the regular course of repair negotiations. The seller can fix or not as they choose; of course, the buyer can continue with the purchase or not as they choose, but that’s another story.

Which makes it extremely important that buyers get a home inspection performed so they know what they are purchasing. Yes, the seller is required to disclose whether there is an issue with any of the systems but not all stopped drains are blocked alike.

One quick side note – all of the above only matters if you’re using the AAR Residential Purchase Contract. If you’re using a home-brew, online, general purchase contract because you don’t want to use a real estate agent, you’re losing more than a few protections whether you’re the buyer or seller. Inspection periods, for instance, aren’t to be found in the Arizona Revised Statutes. That’s a feature of the AAR contract.

There are a few other tweaks to the contract. We’ll get to those in the near future.

Jonathan Dalton

Jonathan Dalton is a 40-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.

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