Real estate transactions are process-driven creatures. For many people, however, the process can be a mystery, where steps occur and the deal flows along without any meaningful appreciation for what’s happening. Herewith, a primer:
So you’ve found a home you want to buy in Arizona. Let’s assume you’re working with a real estate agent. You want to pay $450,000, and you’re a cash buyer, i.e., you don’t need financing.
Step one involves a written offer. Your agent can and will help you prepare the offer. Usually, your offer will be on a contract form (provided by the agent), and may be called a Deposit Receipt and Agreement, or a Residential Resale Real Estate Purchase Contract. Read this document, for when you and the seller signs it, it’s your contract.
Also, have an attorney review the offer before your agent gives it to the listing broker. Arizona law allows licensed real estate salespersons and brokers to prepare contracts for the purchase of property. So, why spend the money for an attorney? From my vantage point—admittedly, as a real estate attorney who handles transactions—you’re buying added protection from potential errors. Most attorneys can review a contract and assist with a purchase for $1-2000. I think that’s money worth spending.
There may be some counteroffers, back and forth. Know this: you can make or accept a counteroffer, but if you make a counteroffer, the prior offers are no longer available for acceptance. Thus, if seller counters at $475,000, you counter at $460,000 and seller says “never mind,” you can’t force the seller to sell for $475,000.
After you and the seller have signed the contract, someone delivers the contract, with your earnest money—good faith money, usually at risk after the due diligence period ends—to the escrow agent. In Arizona the escrow agent is usually a title insurance agency, which sells title insurance and acts as the go-between between you and the seller.
The due diligence period—often 10 days, but a term to be focused on in the negotiations—provides you with a chance to investigate the property. More time is better than less. You will want a home inspection, but many home inspectors are not insured and not financially strong enough to pay later if they missed something significant. (If you have an attorney involved, having him or her review the inspection contract can be a very wise move. Many real estate attorneys are also familiar with the home inspection industry.)
You also have an opportunity to review the preliminary title report. It tells everyone what title issues exist, what needs to be resolved before the deal closes, and the state of title when the closing occurs. BIG DEAL! Stay tuned here for more pieces about real estate title and issues; for the moment, however, exceptions to title are matters that remain after you own the property. Property taxes are always an exception, as future taxes must be paid. Easements for utilities remain, but knowing where they are, especially on properties where you may be adding a structure, subdividing acreage, etc., can matter greatly. Unless you are a real estate professional, getting help with the title report makes lots of sense. (Most title reports are pretty clean. You’re in “you don’t know what you don’t know” territory, many real estate agents are not title experts, and the escrow officer is not paid to advise you about these issues.)
If you OK the condition of the property and title, you will move forward to a closing. You’ll get a closing statement. It tells you what money comes in, where it goes, and how much you need to show up with at closing. Again, it’s an important document to review and understand.
I’ve provided what is, of necessity, a mile-high—on review, maybe three or four miles high—view of the home purchase process. Every situation differs. And, again, while Arizona law allows your agent to do much of the work, and many agents are as capable as some attorneys when it comes to understanding these issues, hiring an experienced real estate transactional attorney, with experience in residential contracts, often represents wise expenditure of funds.