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Basics of a sale, part 1

First, some disclaimers: I am a REALTOR® and happy to give you the benefit of my experience, but I am not a lawyer nor should you dispense with expert advice on any Real Estate decision you are about to make. Also, no two sales are ever the same because the ingredients are always different. The property, buyers and sellers and the time of purchase are consistently unique. However, even though there is no typical sale there are some things common to all. 

1)      First, in Arizona the spoken word has no power. Everything of consequence, no matter how small, must be in writing. Without words on the page and signatures acknowledging receipt and agreement of both parties, there is no binding contract. It is surprising how easy this is to forget, but don’t! Usually people are fine at the beginning of a deal, but every stage or alteration of the sale requires additional writing and signatures. For example, if the Buyer needs additional time to complete inspections the Buyer must ask for this in writing and receive agreement in writing from the Seller. Even if the Seller agrees verbally to give a little more time, it means nothing unless it is on paper with both signatures.

2)      Second, there are just two parties to a sales contract, the Seller and the Buyer (although either one can consist of several people or a legal entity such as a corporation.)  So, even though both parties may be represented by agents, neither the agents of the Seller nor those of the Buyer are a part of the sale.   This is very important.  Without a legal document that makes another person your legal equivalent, no one can sign for you (including your agent), and no one but the Seller and the Buyer are bound to the terms of the contract.

3)      Third, every request or agreement must have an expressed expiration date.   This means that everything must have a due date. The contract itself is simply a collection of agreements held together with an end date being the Close of Escrow.   Even before the Seller and Buyer have a contract, at the time the offer is first made by the Buyer, that offer must have an expiration date. What the Buyer is saying with that end point is something like this: “I will give you until tomorrow to decide if you want to sell your house to me for the following price and terms, or if you want to give me a counter offer which might be more acceptable to you. Otherwise the deal is off and I will go elsewhere.”  Without an expiration date the Seller would be free to consider the offer indefinitely.  Any date can be changed, but once there is an agreement, only through writing and with the consent of both parties.

4)      Last, the purpose of a contract is to find a “meeting of the minds” . . . an agreement.  Many potential sales are never realized because this important point has been lost. Certainly everyone wants a good deal but it always takes two to do this dance. To stretch the metaphor: stepping on the other person’s toes is the best way to stop the music for both people. The process of bargaining should be a conversation, not a fight. It is possible that there will be no common ground between a Seller and a Buyer, but I believe the best way to find that terra incognita is to communicate, not spar.

If you understand these principals and are willing to be bound by your own word (in writing), then you are ready to take the journey to a contract. The next article will cover the standard Residential Sales Contract in Arizona. That excellent Document was created by the Arizona Association of Realtors and is a model for many other states.  TheResidential Purchase Contract can be confusing when you first see it, but it is well balanced, and it provides safeguards for sellers and buyers.