Archive for January, 2011

Hold Seller to “As Is” Condition with Arizona Real Estate Contracts

January 4, 2011

Recently, a contract was signed to purchase a real estate-owned (“REO”) by the bank Scottsdale home. Also signed with the standard contract was a standard “as is” addendum. Although the air conditioning unit in the home was old, the air conditioning unit was in working condition at the time that the contract was signed the contract and when the home inspection was done. However, at the final walkthrough two days before closing, the air conditioning unit was not working. The bank’s listing broker said that the air conditioning unit had been repaired just before the contract was signed, however the air conditioning repairman had said that the air conditioning unit would break down again in a few days. The listing broker furnished that information to the bank, but the bank refused to authorize the money to make the proper repairs. According to Arizona real estate law, is the bank required to repair the air conditioning unit before closing?

Although the bank sold the home “as is,” the standard “as is” addendum requires that the air conditioning unit be in substantially the same condition at the time of closing as the air conditioning unit was in at the time of contract. If the air conditioning unit was not in working condition at the time of the signing of the contract, however, the “as is” addendum would protect the bank from fixing the air conditioning unit at closing. Inasmuch as the air conditioning unit was in working condition at the time of the signing of the contract, the air conditioning unit must be in substantially the same condition, i.e., working condition, at the time of closing.

Furthermore, an “as is” addendum in a contract does not protect the seller from fraudulent non-disclosure. For example, if the car dealer Tex Earnhardt sells a car “as is,” but Tex knows that the car has a defective carburetor, Tex has the duty to disclose that the carburetor is defective. Otherwise the buyer of the car would have a claim against Tex for damages for fraudulent non-disclosure if the carburetor fails. Therefore, after the listing broker told the bank that proper repairs needed to be done, the bank (and the listing broker) had the obligation to disclose to you that the repairs to the air conditioning unit were not effective.

Note: Many REO bank sellers have their own form of addendum used in their REO sales which may have terms different from the standard sales documents and should be reviewed carefully.


Who Has Homeowner’s Liability After Arizona Foreclosure Sale

January 4, 2011

Some Gilbert, Arizona residents are planning on doing a “strategic mortgage default” on their home. Meaning, although they are financially able to pay the mortgage payments they do not want to pay “good money after bad” by making the mortgage payments when the home’s value is less than one half of the mortgage loan. They are also planning on not paying the real property taxes, the homeowner’s insurance, and the HOA monthly dues. After the foreclosure sale occurs, will they have any liability for not making these payments?

First, if there is a foreclosure of a home the former homeowners should have no liability for any deficiency balance on the mortgage loan after the foreclosure sale. Second, if there has been any unreasonable damage to the home at the time of the foreclosure sale, the former homeowners will have personal liability for this damage. The homeowners should confirm that either someone is paying the homeowner’s insurance. Third, if there is an HOA on the property, the homeowners will have liability for the HOA monthly dues until the date of the foreclosure sale. Finally, there would be no personal liability for the real property taxes.

Arizona Landlord Tenant Law Says Home Showings at Reasonable Times

January 3, 2011

Recently a man signed a one-year lease for a nice home in Tempe to rent while attending Arizona State University. However, he has now learned that the landlord is behind on the mortgage payments, and that a foreclosure sale will eventually be scheduled. The landlord desperately wants to do a short sale of the home and wants to hold open houses in the home every Saturday and Sunday between the hours of 1 p.m. to 4 p.m. The tenant is upset because he does not want real estate agents and prospective buyers walking through his home every weekend afternoon. Does the Arizona Landlord Tenant Law allow a landlord to require these types of open houses?

Under A.R.S. § 33-1343 the landlord is entitled upon two days’ notice to enter the home at reasonable times to “exhibit the dwelling unit to prospective or actual purchasers….” The holding of open houses totaling six hours every weekend is probably more than simply exhibiting the home to prospective purchasers.

IF HOA Refuses to Pay to Rid Rats, Homeowners May Need Special Meeting

January 3, 2011

A condominium owner’s unit in Scottsdale has been invaded by roof rats. The management company for our HOA has refused to take the advice of a rodent company to seal all of the holes and possible entry points in the attics of our condominium building. The management company says that, because of the number of foreclosures and mortgage defaults in the building, there is not enough money to pay for a total sealing. The rodent company, however, will not guarantee that the rats have been removed unless there is a total sealing of our condominium building. Is there anything that can be done?

One of the effects of the current real estate market is that many residences, especially condominiums, are distressed properties and HOA dues are not being paid. The result is that many HOA’s are without funds to properly maintain their community. If the unit owner and other condominium owners want to pay for a total sealing of the condominium building, they should request a homeowner’s meeting to consider a special assessment of all of the homeowners to pay for this cost.