CONTRACT Section 1-Property Part 2 -2017 AAR PC

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Section 1.e Lines 32-35

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Discussion:  The contract defaults to a possession date equal to the close of escrow.  Most company policy is to avoid pre and post possession agreements whenever possible.  Why?

If you must have either pre or post possession get the terms in writing.  Always use the Company approved pre or post possession agreement—DO NOT DRAFT YOUR OWN.

Parties are recommended to seek appropriate counsel about potential risks from these professionals:

  • Insurance
  • Legal
  • Tax
  • accounting

Section 1.f Lines 36-38

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Regardless of whose responsibility it is to complete and/or supply the addenda specified in section 1.f—as the Buyer’s agent you must indicate all of the Addenda as appropriate to the transaction.  If you don’t you cannot issue cure for these items and you lose rights and protections for your client.

Your buyer is relocating from Tennessee where his house is currently on the market with Keller Williams.  You are making an offer for a property in Gold Canyon.  The home was built in 1975 and sits on 1.25 acres.  The house was originally built with a septic but when Fulton homes built down the road and brought in utilities the seller had the property hooked to the sewer.  The heirs of the property own the property free and clear and are willing to owner finance $100,000.00.  What are the required addenda?

Answer:

  1. Buyer Contingency Addendum
  2. Lead Based Paint Disclosure
  3. Assumption/Carryback Addendum
  4. Onsite Wastewater Addendum
Quick Quiz

Fill in the Blank:
If you don’t you issue cure for these items and you lose rights and protections for your .

Section 1.g Lines 30-53

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What is—and—what is not a fixture is perhaps one of the easiest areas of the contract to have a misunderstanding between the Buyer and the Seller.

The contract requires that all existing property included in the sale will be conveyed in substantially the same condition as on the date of contract acceptance.

As was previously the case, Section 1g titled Fixtures and Personal Property addresses outdoor landscaping. However, a change has been made to the specific language. What does the change entail?

Answer: Outdoor landscaping, as set forth on lines 46-47, has been clarified to specifically reference the fact that shrubbery and trees constitute fixtures that convey with the property.

The language also explains that “unpotted plants” are included in the sale, meaning they cannot be removed by the Seller. However, potted plants, even if connected to the irrigation/drip system do not convey and can be removed by the Seller unless otherwise agreed to in writing.

Lines 49 and 50 under Fixtures and Personal Property make reference to “garage door openers and remote controls.” If Seller has lost the garage door openers, is Seller required to obtain new ones and convey them to Buyer at close of escrow?

Answer: No. Section 1g pertains to “existing” “means to operate fixtures and property.” Therefore, if the item is not in Seller’s possession, there is no obligation that it be conveyed to Buyer.

Line 65 requires Seller to deliver to Buyer a notice of all leased items within three days after contract acceptance. How does Seller comply with this requirement?

Answer: To satisfy this obligation, Seller can convey to Buyer a notice as defined in Section 8m. However, the preferred method is for Seller to identify all leased items in the Seller’s Property Disclosure Statement (“SPDS”).
Quick Quiz

Fill in the Blank:
To this obligation, Seller can convey to Buyer a notice as in Section 8m.

Arizona uses a three-part test for determining when personal property has become a fixture?

Answer:

  1. Annexation to the realty
  2. Adaptability or application as affixed to the use of real estate
  3. Intention of the party to make the object a permanent part of property

What is required for personal property or fixtures to be conveyed in a transaction?

Answer:

  1. Items must be clear of encumbrances
  2. Must be conveyed with no monetary value
  3. Must be conveyed in substantially the same condition as on the date of contract acceptance

In the event of an all cash sale, what’s changed in the Purchase Contract?

Answer: Now, in the event of an all cash sale, Buyer is obligated to attach to their offer either a Letter of Credit or a source of funds from a financial institution documenting the availability of funds to close escrow. See lines 19-20. As a result of this change, lines 26-29 of the Additional Clause Addendum are no longer necessary and have been deleted.
Quick Quiz

Fill in the Blank:
is obligated to attach to their offer either a Letter of or a source of funds from a financial institution documenting the availability of funds to close .

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