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How Long Do I Have to Back Out of a Deal?

How many days do I get to back out of a home purchase in Arizona?


Now that is an often misconstrued matter.  Many people view the due diligence period (inspection period) as a “free look.”  While it is true that a buyer is entitled to a full return of his/her earnest money and freedom from the obligation to continue with the purchase based upon the results of inspection(s) or other material matter (discovery of neighborhood crack house right next door, improper square footage in listing, scary structural or insurance history as reported in the Seller Property Disclosure Statement or insurance loss history report, etc) during the first 10 days of the escrow period, it should not be abused.  It’s not really a “free” look anyway if you are shelling out money for inspections.  I’ll address the question by examining the buyer protections that are in place regarding the initial inspection period in the standard AAR (Arizona Association of Realtors) purchase contract.

As a protection, the time frame for the inspection period is often  slightly misunderstood.  The buyer has 10 days from the full execution of the purchase contract (the day it the contract by both parties is executed is considered Day Zero) to provide the seller with notice of his/her intentions.  Any time up to 11:59 PM on Day 10, the buyer can elect to (A) move forward with the purchase, (B) decline to move forward based upon a specific objection(s) or (C) agree to move forward provided that the seller make certain repairs.  If the buyer chooses option A, he/she is committed to the purchase and the inspection period is over.  If option B is selected, the buyer withdraws from the purchase and earnest money is fully refundable (provided the seller doesn’t contest the validity of the buyer’s objection).  If option C is selected, the seller has 5 days to respond to the repair demands.  If the seller responds in any manner other than full acceptance of buyer demands, the buyer has another 5 days to review upon receipt of seller’s response.  The options for the buyer at that point are to either walk away or accept and move forward.

So, like so many things in Real Estate, the answer is that “it depends.”   Depending on the choices made by each party, the buyer can actually have up to 20 days to cancel the contract based upon inspection issues. There are other potential walk-aways in the standard purchase contract, such as the financing and appraisal contingencies, that extend beyond the initial inspection period, but those are dependent upon your good faith effort to obtain timely loan approval failing or the property not approving for at least the sales price (in financed transactions), respectively. They aren’t reliable escape clauses to be leveraged if you simply change your mind weeks into the escrow period.

There is also the final walk-through, which provides the buyer with the opportunity to ensure that the property is both in substantially the same condition as it was when they agreed to purchase terms, and that all agreed upon repairs have been competently performed. Again, however, this is not a reliable walk-away at the zero hour. There would have to be some serious material reason for exiting the transaction at this point. A reason that would have to stand up to scrutiny as you can bet your bippy the seller will contest it.

Long story short, there are ways out of a purchase agreement in Arizona if certain contingencies are not met, or the other party breaches the agreement, but you shouldn’t rely on them as safeguards against a change of heart. Your “free look,” if you insist on considering that, effectively ends at midnight of Day 10.

* A note of importance If the buyer supplies the seller with notice of repair demands prior to Day 10, he/she effectively waives the remaining time left in the initial 10 day inspection period.  For example, if the buyer sends repair demands to the seller on Day 5, he/she cannot come back with additional demands on Day 9.  And if the seller signs off on the agreement to make all repairs, the buyer is now bound to proceed. *

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Ray and Paul Slaybaugh are not attorneys, just humble Real Estate agents.  Please do not be silly enough to rely on any opinions given here for legal advice.  Consult with a qualified attorney should you have any legal matter pertaining to a Real Estate transaction that needs to be addressed.

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So You Don’t Want to Make Any Repairs, Eh?

One of the age old adages of Real Estate is that everything is negotiable.  By and large, it is true.  However, another adage to bear in mind is that there is a time and a place for everything.  Let’s examine the sticky issue of seller repairs during the course of a typical transaction, for example.

Buyer’s aren’t the only ones who can experience a healthy degree of remorse after consummating an agreement to purchase a home.  The phenomenon also extends to sellers who are convinced that they have undersold their property.  Hard to fathom that anyone who watches the news these days and has an idea of what is going on in the current market would think it is possible to undersell right now, but it happens.  While a remorseful buyer may look to the home inspection as an escape hatch to get out of a purchase they no longer wish to make, a remorseful seller may decide to stonewall all buyer inspection requests because “they are already stealing the house.”

There is also the case of a seller who has received a subsequently higher offer.  Legally bound to the terms of the contract with the first buyer, the higher offer can only be placed in backup status.  As such, some sellers with a better backup offer in hand will be inclined to stonewall the inspection demands of buyer number one in hopes of chasing him/her away.  This would enable the more favorable terms of the second contract to be moved to the forefront.

Well, in each case, there is a problem with the strategy.  A seller cannot retroactively change a purchase agreement to an “as is” transaction.  The time to address such terms is during the initial contract negotiation.  Unless overridden with constructive language, the boiler plate of the AAR (Arizona Association of Realtors) purchase contract warrants that certain systems of the home are in working order upon the close of escrow (receipted proof of any/all corrective work is required to be furnished to the buyer 3 days prior to closing).

Section 5a of the AAR Purchase Contract:

Seller Warranties: Seller warrants and shall maintain and repair the Premises so that, at the earlier of possession or COE: (i) all heating, cooling, mechanical, plumbing and electrical systems (including swimming pool and/or spa, motors, filter systems, cleaning systems, and heaters, if any), freestanding range/oven, and built-in appliances will be in working condition; …

In other words, the seller is contractually obligated to make any repairs necessary to ensure that the systems referenced in the passage above are in fully functional condition at closing (or possession, whichever comes first).  I am not an attorney, but according to the suits in our downtown corporate office, “functional” is to mean “as intended upon original installation.”  In other words, your A/C may work, but if it has a temperature split outside of the ideal range, you are most likely technically obligated to repair the component that is preventing it from functioning in accordance with original specifications.  Faulty wiring (double taps in the breaker box, reversed polarity, etc), non-functioning fixed appliances, leaky shower valves … you are on the hook for those repairs.

Let me reiterate, I am not an attorney, so please do not refer to anything stated in this post for legal guidance.  I am but a simple Realtor with a simple message:

Unless you struck the seller warranty language out of your original purchase agreement (good luck with that in this market unless you happen to be an asset manager for a bank and willing to discount the price of the home dramatically), there are certain repairs you are stuck with, lest you be in breach of the purchase contract.

That’s where fun new topics such as specific performance lawsuits come into play.

Read the contract to which you are agreeing, and don’t let your agent dismiss the fine print as “just boilerplate.”  That boilerplate contains specific rights and responsibilities of which you need to be aware prior to ratification.  The Devil is always in the details.

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