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Arizona Real Estate Law
Documents Commonly Used in the Sale of
Arizona FSBO Homes
by Jeana Morrissey, Arizona real estate attorney
The following is a list of the documents that are used in a typical sale of
Arizona residential real estate, including Arizona for sale by owner
transactions. A particular sale may not use every one of the following
documents, but most of the documents are used in almost all Arizona residential
sales. The first list below is the most commonly used residential real
estate sale documents.
The second list below consists of documents that are also commonly found in
Arizona residential real estate transactions and prepared by or obtained from
Common Arizona Residential Purchase / Sale Documents:
Agreement. Arizona law provides that a contract to sell Arizona
land is not enforceable unless it is in writing. This is the document that
contains the terms and conditions applicable to the sale. It is the most
important legal document in any sale transaction because it states the rights
and obligations of each party.
Instructions. Although not required, most Arizona sales of real
property involve an escrow company that acts as the escrow agent. Escrow
instructions may be included in the Purchase Agreement or may be a separate
standard preprinted escrow company provided document. Escrow instructions
may be modified, including an escrow company's standard preprinted instructions.
For more information about escrows, see
What Happens In
This is the document that when signed, acknowledged before a notary public
and given to the buyer will transfer title to the property to the buyer.
Commonly used types of deeds in Arizona are: (i) Warranty Deed, (ii) Special
Warranty Deed, and (iii) Quit Claim Deed. If you are the buyer of
Arizona land, you should negotiate for a Warranty Deed if possible, but
accept a Special Warranty Deed and never accept a Quit Claim Deed.
of Legal Value. Arizona Revised Statutes
Section 11-1133 requires that all deeds to be recorded in Arizona must
be accompanied by an Affidavit of Legal Value unless an applicable exemption
ARS § 11-1134) applies to the transaction. This document states
the purchase price paid for the property and is used by County Assessors to
value the property for real property tax purposes. The escrow agent
usually prepares this document for the closing.
Disclosure Statement. Arizona law requires the seller of real
property to disclose all known material facts concerning the property to the buyer.
No specific form is required, but Arizona realtors use the SPDS prepared by the Arizona Association
of Realtors. It is a fill-in-the-blanks type of form that the seller
should complete and then deliver to the buyer. The seller should: (i)
obtain the buyer's signature on the SPDS with the date of delivery of the
SPDS, and (ii) keep a copy of the signed document for in seller's records.
Based Paint Disclosure. A federal law known as the
“Residential Lead-Based Paint Hazard Reduction Act of 1992” requires that
before ratification of a purchase agreement for the sale of a residence
built before 1978, the seller must: (i) give the Buyer an EPA-approved
information pamphlet on identifying and controlling lead-based paint hazards
called “Protect Your Family From Lead In Your Home,” (ii) disclose any known
information concerning lead-based paint or lead-based paint hazards, (iii)
disclose information such as the location of the lead-based paint and/or
lead-based paint hazards, and the condition of the painted surfaces, (iv)
provide any records and reports on lead-based paint and/or lead-based paint
hazards that are available to the seller, (v) include an attachment to the
purchase agreement that includes a Lead Warning Statement and confirms that
the Seller has complied with all notification requirements (the Seller, Buyer
and all real estate agents must sign and date the attachment), (vi) Seller
must give buyer a ten day period to conduct a paint inspection or risk
assessment for lead-based paint or lead-based paint hazards. Parties
may mutually agree, in writing, to lengthen or shorten the time period for
inspection. Homebuyers may waive this inspection opportunity.
Pool Safety Notice. If the property has a swimming pool or
spa, the Seller should give Buyer a copy of the Residential Pool Safety
Notice and have the Buyer acknowledge receiving the document.
Your Protection: Get a Home Inspection. This is a brochure
prepared by the U.S. Department of Housing & Urban Development. A
Seller should give the Buyer a copy of this document, HUD-92564.CN, and have
the Buyer acknowledge in writing that the Buyer received the document.
If a sale transaction will involve FHA mortgage insurance on the property,
the Seller and Buyer sign the Form HUD-92564-CN “For Your Protection: Get a
Home Inspection” on or before the date the parties sign the sales contract
or the buyer cannot get FHA mortgage insurance unless the parties re-sign
the sales contract after the date they sign the HUD-92564-CN.
Association Disclosure Statement. If the property is
subject to a homeowners' association ("HOA") the Seller has a duty to
disclose to the Buyer all known material information about the HOA and how it
affects the property. If the HOA has over 50 units, the HOA must send
a copy of the applicable Conditions, Covenants & Restrictions to prospective
Buyer within ten business days of the HOA receiving notice of the sale.
of Inspection and Notice of Transfer of Ownership. If the
property contains a septic tank or what the Arizona Department of
Environmental Quality ("ADEQ") refers to as an "on-site wastewater treatment
facility" that was approved for use on or after January 1, 2001, by ADEQ or a
delegated county agency, the system must be inspected at the time title
passes to the Buyer. Because septic tank systems may fail after many years of service or after a change in
water usage, often following occupancy by new owners, ADEQ adopted rules to provide for the statewide
inspection of septic tank and alternative systems to help selling and buying
property owners understand the physical and operational condition of the
septic system serving the home or business. The buyer or transferee of Arizona real property with a reportable septic
tank must file the
Report of Inspection and Notice of Transfer of Ownership with the appropriate
county agency within fifteen days after the date of an ownership change.
The form must be submitted to the applicable county health or environ-mental
agency delegated by ADEQ to administer the department’s on-site wastewater
treatment facility program. The
ADEQ has a checklist that it recommends for use by inspectors to assist in
completing the official transfer inspection form.
Investment in Real Property Act Affidavit. The Foreign
Investment in Real Property Tax Act of 1980 ("FIRPTA") established Internal
Revenue Code Section 897. Section 897 applies to foreign persons that
dispose of U.S. real property interests. IRC Section 1445 imposes an
obligation on the Buyer to withhold a portion of the sales proceeds due a
foreign Seller and pay the withheld amount to the Internal Revenue Service
on behalf of the Seller. IRC Section 1461 makes the Buyer liable
for the tax that must be deducted and withheld under IRC Section 1445.
A Buyer can avoid withholding and the associated tax liability if the Seller
certifies that the Seller is not a foreign person and if the Buyer has no
reason to believe the Seller is a foreign person. Buyers should always
include a provision in the sales contract that obligates the Seller to
deliver a FIRPTA Affidavit and that authorizes the Buyer to withhold the
proper amount at closing and pay it to the IRS if the Seller does not sign
and deliver a FIRPTA Affidavit in which the Seller states that the Seller is
not a foreign person as defined in Section 897.
an Owner's Policy of
Title Insurance. This is a report on the state of the title of
the property to be sold prepared by a title insurance
company after opening escrow. It states the current owner(s) of the
property, the legal description of the property, the dollar amount of title
insurance coverage, the requirements that must be satisfied before the title
insurance company will issue the title insurance policy described in the
commitment, and the liens, encumbrances and other title matters that will be
excluded (not covered) by the title insurance policy. The exceptions to
title insurance coverage are especially important because they are title matters
that will affect the property after the sale. For more information about
title commitments and title searches see
What's in a Title
On closing of the sale of the property and payment of the premium, the title
insurance company will issue a policy of title insurance to the buyer that
conforms to the commitment for title insurance of all the conditions thereto
have been satisfied. For more information about title insurance see
Title Insurance Articles.
If the seller loans the
buyer all or part of the purchase price (commonly referred to as a "seller
carryback" or carryback loan), the following additional documents should be
Promissory Note. This very important document is the document that evidences the buyer's debt for
the unpaid portion of the purchase price. It states the amount owed, the
interest rate, if any, the payment amounts and dates, maturity date and other
terms and conditions applicable to the loan.
Deed of Trust.
If the Promissory Note is secured by a lien on the property being sold or other
real property in Arizona, the Deed of Trust (rather than a mortgage) is used
most often to create the lien. This document must be signed by the buyer,
acknowledged before a notary public then recorded in the county where the
encumbered real property is located.
Insurance. If we represent a Seller who makes a carryback loan
secured by a lien on the home, we will also arrange for the Seller to
obtain a policy of lender's title insurance. If the Seller will obtain a Deed of Trust or a lien
on the property being sold to secure payment of a debt owed to the Seller,
the Seller (the lender) should acquire lender's title insurance (as opposed to
owner's title insurance, which is what the Buyer should acquire) in the
amount of the carryback loan to insure that the Deed of Trust is a validly
recorded lien on the property subject only to liens and encumbrances
acceptable to the Seller. Normally, the Buyer pays the cost of the
lender's title insurance. I recommend without exception that a Seller
who takes a carryback lien on the property sold always get lender's title
insurance on the carryback lien.
Other Documents Frequently Used in Arizona Residential
Real Estate Transactions in Arizona
ALTA Survey. A survey of the property prepared by a
licensed surveyor that complies with the minimum standard details
promulgated by the
American Land Title Association. This type of survey is required
to obtain a policy of extended coverage title insurance, which provides
greater coverage and protection than the standard owners and lenders title
Loan Status Report. This is a document prepared by
the Buyer's lender that states that the lender has conditionally approved a loan to the
Buyer subject to the satisfaction of certain conditions.
of Disclosure. Arizona Revised Statutes
provides that a seller of five or fewer parcels of land (improved and
unimproved), other than subdivided land, in an unincorporated area of a
county and any subsequent seller of any of the parcels shall furnish a
written Affidavit of Disclosure to the buyer at least seven days before the
transfer of the property, and the buyer shall acknowledge receipt of the
affidavit. The buyer has the right to rescind the sales transaction
for a period of five days after the Affidavit of Disclosure is furnished to
the buyer. The seller must record the signed Affidavit of Disclosure
when the deed is recorded.
You can see from the list of documents above that buying and selling an
Arizona home is a very complicated undertaking. It is not something an
inexperienced person should do unless he or she is willing to assume the risk
that one or more required documents may be missing or defective and result in
liability and economic loss. For example:
If you are a buyer, how will you comply with
the FIRPTA requirements or the septic tank inspection requirements?
|If you are a seller, how will you give the swimming pool notice, the HUD
home inspection notice, the lead based paint notice, the HOA notice and the
other notices you must give to satisfy Arizona law?|
If you are involved in a for sale by owner transaction, it is especially
important that you be represented by an Arizona real estate attorney.
Sales of residential property in Arizona are extremely complex transactions.
It does not make any sense to get involved in a home purchase or sale that
involves hundreds of thousands of dollars and not hire a real estate attorney to
protect your investment.
How to Hire Arizona Attorney Jeana Morrissey to Prepare Your Home Purchase or Sale Contract
For a list of the documents prepared and services performed by Arizona real estate attorney
Jeana Morrissey when she is
hired for a fixed fee (not by the hour) to prepare a FSBO contract and related
documents for the purchase or sale of an Arizona residential property, see the
article entitled "Arizona For Sale by Owner Contract Preparation Service."
To hire Jeana Morrissey, Arizona real estate attorney, to
prepare a FSBO contract and related documents for the purchase or sale,
Complete and sign the
Arizona Residential Purchase & Sale Contract
Questionnaire and get it to us. The Questionnaire asks for the information
we need to prepare your documents. You may not know the answers to
some of questions, but answer the Questionnaire as best you can. Fax
the completed Questionnaire to 602-297-6890 or email it to
How to Contact Arizona Real Estate Attorney Jeana Morrissey
For a free telephone consultation about preparing
your AZ FSBO documents, call Arizona real estate attorney
Jeana Morrissey at 602-906-4953, ext. 4 or send an email message to her at
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|For a free telephone consultation about preparing
your AZ FSBO documents, call Arizona real estate attorney
Jeana Morrissey at 602-906-4953, ext. 4.
To hire Arizona real estate attorney
Jeana Morrissey to prepare a contract to buy
or sell an Arizona home, complete our online
Arizona Residential Purchase & Sale Contract Preparation