Arizona Real Estate Law

by Christopher A. Combs

The following is for informational purposes only and is not intended as definitive legal or tax advice. You should not act upon this information without seeking independent legal counsel. If you desire legal, tax or other professional advice, please contact your attorney, tax advisor or other professional consultant.

Cancellation Only Available During Inspection Period on "As Is" Sale

Question: We helped our son purchase a "fixer upper" in Tempe. Our plan was to pay for repairs and improvements, and when our son finished college we would sell the home. Although the seller sold the home "as-is," we did a home inspection which showed only minor problems with the home. A week before escrow closed, our son went to the home with a contractor to get a bid for the remodeling of the kitchen. At that time the contractor discovered mold behind a leaking reverse osmosis system. We are scared of a mold problem and we want to cancel the contract. Do we have the right to cancel the contract because of the mold problem?...

Answer: Probably not. A buyer has the right to cancel the contract if the buyer discovers mold during the inspection period, but generally does not have this right after the inspection period. If a buyer can show, however, that the seller knew of the mold problem but failed to disclose the mold problem, the buyer should have the right to cancel the contract because of the fraudulent non-disclosure by the seller. Finally, if the mold is a major problem, a buyer should have the right to cancel the contract either before or after close of escrow because of a mutual mistake of fact by the buyer and the seller. For example, if it costs $75,000 to remediate a mold problem in a $100,000 house, a buyer should be entitled to cancel the purchase contract.

Phoenix attorney Christopher A. Combs is a partner with the firm of Combs Law Group, P.C. Reprinted with permission. Copyright 2006, all rights reserved.

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More columns from Arizona real estate attorney Christopher Combs

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• Deed of Trust Recommended for Loan Secured by Real Property (05/27/06)
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• Consent By Joint Tenant Not Needed to Convey Property (05/06/06)
• 1031 Tax Deferred Exchange Not Suggested for Sale of Out-Of-State Property. (04/29/06)
• Purpose of Property Contingent on Financing, Not Down Payment (04/22/06)
• Enforcement of Easement Rights Available with Court Intervention (04/15/06)
• No reason to cancel contract because of divorce (April 2006)
• Homebuilders’ New Home Lotteries Not Considered Illegal Gambling (04/01/06)
• Cancellation Only Available During Inspection Period on "As Is" Sale (03/25/06)
• The Pros and Cons of Binding Arbitration (03/18/06)
• Partial Residency Required for Capital Gains Tax Exemption (03/11/06)
• Options To Transfer Property Upon Death (03/04/06)
• Disturbing Heat Pump Could Be Considered a Nuisance (02/25/06)
• Appraisal must be satisfactory to the lender (Jan 2006)
• Two Months’ Rent Unrecoverable After Settlement With Landlord (02/11/06)
• CC&Rs Restrict "Use" of Toy Basketball Hoop (02/04/06)
• Recourse Available For Defective Construction of New Home (01/28/06)
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• Federal Law Protects Adult Care Facilities (01/07/06)
• Title Company Can Assist With Transfer of Title (12/31/05)
• Security Deposit Should Be Returned if No Breach of Lease (12/24/05)
• Explanation of Capital Gains Taxes and Mutual Consent Required to Cancel Listing Agreement (12/03/05)
• Seller Cannot "Back Out" or Cancel Purchase Contract (12/10/05)
• Buyer Can Cancel after Inspection (Nov 2005)
• Eminent Domain Allows Municipality Use of Privately Owned Property (11/26/05)
• Claims for Non-Disclosure Potentially Waived by Failing to Inspect Property Prior to Closing (11/19/05)
• Deed Instruments Used to Transfer Real Property in Arizona (11/12/05)
• Remedy and Recourse for Tree Disputes Between Neighbors (11/05/05)
• "Poor Man's Lis Pendens" Must be Removed Prior to Sale of Property to New Buyer (10/29/05)
• Problems with Jointly Owned Property
• Beneficiary Deed Suggested to Avoid Probate of Property
• Both Signatures Required to Sell Community Property with Right of Survivorship Property
• Seller Can't Refuse to Perform
• Homeowners Can Amend CC&Rs to Prohibit Residency to Registered Sex Offenders
• Only Environmental Hazards Must be Disclosed in Home that Manufactures and Possesses Drugs
• Disclosure of Sales Price Required by Law
• Adverse possession after ten years by “tacking” of prior owners
• Homebuilder Not Required to Reserve Lot or Enter Into a Conditional Purchase Contract Before Issuance of Public Report
• Inheritance of Land Recommended Over Inheritance of Money
• Title Company Can Assist With the Transfer of Title Out of Joint Tenancy, After Death of Spouse
• Methamphetamine drug bust during escrow must be disclosed
• Buyer has right to assign contract unless specifically prohibited in the contract
• CC&Rs restricting ownership by registered sex offenders probably enforceable
• Mortgage Loan Prepayment Penalties Legal and Enforceable
• No Tax Liability for Monetary Gift to Son
• Mediation Required for Earnest Money Dispute
• Quit Claim Deed is Sufficient to Transfer Property into Trust
• Husband and wife must sign personal guarantee
• Mutual Agreement to Sell Property is Required for Tenants-in-Common
• Due on Sale Clause Not Applicable with Transfers of Real Property to Children
• Handwritten language controls over boilerplate language
• Mediation Required for Earnest Money Dispute
• Consent from Mortgage Lender is Required for Removal of Name from Mortgage Loan
• Arizona Property Can be Transferred Into Out-of-State Revocable Living Trust
• Listing Daughter to Title of Real Property Not Recommended
• No Recourse Available for Raised HOA Dues
• Golfers not Liable for Personal or Property Damage Caused to Golf Course Residents
• Monthly Private Mortgage Insurance Payment is Not Tax-Deductible
• Failure to deliver conditional loan approval is not a material breach
• Warranty Deed Suggested for the Transfer of Real Property into Marital Community
• Anti-speculation clauses can be recorded
• Builder Warranties and Home Inspection Prior to Warranty Expiration
• Amendment to the contract must be signed by all parties to the contract
• Private Mortgage Insurance Removal Requirements
• After disclosure the buyer required to investigate
• “Beautiful View” Unprotected if Home Construction in Compliance with Local Community Regulations
• Buyer did not qualify for financing because of condition of the home
• LLC Formation for Rental Properties Recommended
• Buyer has right to request replacement of air conditioning unit
• Disclaimer Deed Needed from Spouse
• Buyer has until close of escrow to satisfy financing contingency
• No Permission or Reimbursement Required for Maintenance of Encroaching Neighbor’s Orange Tree
• Removal of seller from home after closing
• Estate Planning Options for Sibling Relatives
• Buyer can assign equitable interest in contract unless expressly prohibited
• Criminal Abatement Must be Disclosed if Property Value Affected
• No right to inspect after expiration
• Golfer Liability for Danger
• Seller’s response can be proposed amendment to the contract
• CC&R Prohibition on Large Dogs
• Seller and buyer can amend to eliminate warranted items
• Difficult Neighbor Should be Disclosed
• Rentals on weekly basis are subject to Landlord-Tenant Act
• Neighbor is Responsible for Watering Damage
• Buyer waives any repairs by only requesting a reduction in price in lieu of repairs
• Forged Signature on Deed
• Contract does not require a specific closing date
• Considering "FSBO"
• Girlfriend’s Rights in Home
• Additional time to cancel after buyer receives HOA rules and regulations
• Holding Title with Right of Survivorship
• Homebuilder Can Prohibit Independent Home Inspector
• Seller hospitalized at the time of closing
• Seller and subcontractors liable for faulty work
• Home builder can prohibit investor buyers
• Seller not required to purchase garage door openers
• Listing of home built by unlicensed contractor
• No right to cancel after inspection period because of crime
• Death of seller does not excuse breach of contract
• Address is a material fact requiring disclosure
• No requirement to inspect before purchase of home
• Seller not required to make FHA repairs
• Reasonable disapproval based on size of home
• Buyer entitled to the earnest money if fails to qualify for financing
• Alcohol rehabilitation group home is protected from disclosure
• Contingency of financing until closing
• CC&Rs can prohibit all "for sale" signs
• Listing broker must present verbal offers
• Seller must repair warranted item even if seller refused in buyer’s request for repairs
• Buyer and seller cannot agree to fraudulent sales price
• Acceptance by two buyers of multiple counteroffers by Seller
• Buyer has responsibility for swimming pool barrier
• Failure to deliver possession at time of closing
• Disclosure not required for possession of drugs in the home
• No cancellation by Seller after promise to extend
• Home can be sold even though addition to home built without permit