Due Diligence Part 2-2017 AAR PC

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Section 6.f Lines 241-246

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  • Conventional septic system is most commonly a septic system  however, other alternative systems do exist
  • The buyer indicates what their belief is as it relates to the sewer or septic connection
  • The buyer is advised that if the connection to a sewer connection is a material matter to the buyer the buyer must investigate during the inspection period
  • The On-Site Wastewater Treatment Facility Addendum is incorporated into the agreement
  • BUYER INITIALS ARE REQUIRED
Quick Quiz

Fill in the Blank:

Conventional septic is most commonly a septic system  however, other alternative systems do .

 Section 6.g Lines 247-251

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  • Buyer is tasked with investigating all state, county and municipal pool barrier regulations.
  • Buyer acknowledges receipt of Arizona Department of Health Services approved private pool safety notice  (azdhs.gov/phs/oeh/pool_rules.htm).
  • Link for AZ Department of Health Services is provided on the Buyer Advisory.
  • Providing the link on the Buyer Advisory may not meet the burden of duty required of the agent.
Quick Quiz

Fill in the Blank:

Buyer is with investigating all state, county and municipal pool barrier .

Section 6.h Lines 252-259

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  • Buyer acknowledges that Brokers are not qualified or licensed to conduct due diligence with respect to the premises or surrounding area
  • Buyer is advised to consult with qualified licensed professionals to assist in their due diligence efforts
  • The buyer holds the broker harmless from defects or conditions that could have been discovered by inspection or investigation
  • The hold harmless provision MUST be initialed in every transaction
Quick Quiz

Fill in the Blank:

The buyer holds the harmless from defects or conditions that could have been discovered by inspection or .

Section 6.i Lines 260-263

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  • Prior to the conclusion of the inspection period the buyer shall deliver to the seller a signed notice of any/all items disapproved.
  • The BINSR is available for this purpose
  • Prior to delivery buyer shall conducted all desired inspections
  • The buyer has ONE opportunity to deliver notice of disapproved items

Contract Default Timeline Reminders:

Preliminary Title                       5 Days

Inspection Period                    10 Days

SPDS                                       Inspection period or 3 days whichever is later

Claims History                         Inspection period or 5 days whichever is later

Affidavit of Disclosure             Inspection period or 5 days whichever is later

Changes during escrow           5 Days from delivery of notice

Section 6.j Lines 264-289

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Buyer has sole discretion to disapprove

Buyer has three choices:

1. Accept premises in current condition

2. Allow the seller a chance to correct disapproved items

3.Cancel the contract

On the BINSR there is not a place to renegotiate the repairs or price. Money, credit or adjustment of purchase price should never be put on the BINSR.

Verbal extensions of inspection period are not enforceable, they must be in writing.

Buyer’s failure to take any action shall be deemed buyer agreement to proceed without correction of any/all disapproved items

Quick Quiz

Fill in the Blank:

Buyer failure to take any shall be deemed buyer agreement to proceed without correction of any/all disapproved .

What happens if a Buyer, within the inspection period, delivers to Seller a notice electing to cancel the contract as permitted in Section 6j, but fails to identify items disapproved?

Section 6j(1)(b) addresses this scenario and explains that if Buyer’s notice fails to specify items disapproved as permitted in the contract, the cancellation will remain in effect but Buyer has failed to comply with a provision of the contract and Seller may deliver to Buyer a cure notice. If Buyer fails to cure before expiration of the cure period, Buyer shall be in breach and Seller shall be entitled to the earnest money.

Section 6.k Lines 290-297

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  • Buyer to indicate whether or not the buyer is requesting a home warranty.
  • Not all home warranty plans are created equal.
  • Party responsible to order –If you are indicating the seller to order do not write TBD in the issued by section.

Section 6.l Lines 298-301

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  • Seller grants buyer REASONABLE access to conduct walk-through for the purpose of satisfying  the buyer that the agreed to repairs are complete and that warranted items are in working order
  • If buyer fails to do  a walk-through the seller is released from liability for any defects that could have been discovered
  • Always provide a minimum of two options for home warranty and preferably three options.
  • Sellers may at sellers option elect to purchase a seller home warranty
Quick Quiz

Fill in the Blank:

Seller grants buyer REASONABLE to conduct walk-through for the purpose of satisfying  the buyer that the agreed to repairs are complete and that warranted items are in working  .

Scenario #1

At the final walk-through the seller had not made the agreed repairs, and the buyer delivered a three-day Cure Period Notice to the seller. The buyer wants the home, but does not want to close the transaction until the agreed repairs have been made. The seller has now delivered a three-day Cure Period Notice to the buyer because the buyer has failed to close the transaction. Can the seller cancel the transaction if the buyer does not close within three days?

Answer:
Click the red plus sign circle to find the answer.

 

Answer:   Probably not. The buyer submitted a three-day Cure Period Notice to the seller for failing to make the agreed repairs prior to the seller submitting a three-day Cure Period Notice to the buyer for the buyer’s failure to close. Therefore, the seller was in breach of the Contract for failing to make the repairs before the buyer was in breach of the Contract for failing to close. Lines 298-301 of the Contract provide that, in the event of a breach of the Contract, the non-breaching party may cancel the Contract. Inasmuch as both the seller and the buyer are in breach of the Contract, neither the seller nor the buyer can cancel the Contract. Note: The buyer should attempt to get the seller to agree to a hold back of the seller’s proceeds for the amount of the agreed repairs. If the seller will not agree to a hold-back, the buyer should close the transaction under protest and then mediate with the seller the buyer’s claim for agreed repairs.

Section 6.m Lines 302-304

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  • Seller shall make the premises available for all inspections and walk-through upon reasonable notice by the buyer.
  • Seller shall have all utilities on, including propane until COE in order to allow buyer to conduct inspections and walk-through.

Section 6.n Lines 305-309

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The Foreign Investment in Real Property Tax Act (“FIRPTA”) provides that, if a seller is a Foreign Person, a buyer of residential real property must withhold federal income taxes up to 15% of the purchase price, unless an exception applies. If FIRPTA is applicable and Buyer fails to withhold, Buyer may be held liable for the tax. Buyer agrees to perform any acts reasonable or necessary to comply with FIRPTA and IRS reporting requirements and Buyer is responsible for obtaining independent legal and tax advice.

Quick Quiz

Fill in the Blank:
The Foreign Investment in Real Property Tax Act (“FIRPTA”) that, if a seller is a Foreign Person, a of residential real property must withhold federal income taxes up to 15% of the purchase price, unless an exception .

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