This is my friend Mo's college term paper. Mo is one of the premiere title officers in Arizona, a good friend and client. Reprinted with permission.





Tips for Buying and Selling Real Estate in Arizona[1]
Maureen M. Stadelman
COM/150
June 5, 2010

Tips for Buying and Selling Real Estate in Arizona

According to the 2008 United States census, "67.8% of the respondents were homeowners." (U.S. Census Bureau, 2009). Meaning that almost three quarters of the population had been through the process of buying a home as of 2009 census. The process that they underwent is described in the following paragraphs. Buying and selling real estate are two of the most substantial undertakings that a person can experience in his or her lifetime. For many, it is the largest monetary transaction they will ever make in their lives. Most people do not realize the emotional impact that can be a part of a real estate transaction. According to Perkins (2006), "As you approach the prospects of buying your next home or investment property or selling either, for that matter, keep in mind that you're about to go through a Grand Canyon of emotional ups and downs."

These emotional ups and downs attached to ownership, or the desire for ownership of property can sometimes bring undesirable results during the purchasing or selling process. Knowing that real estate transactions can be an expensive and emotional experience; education on the process can make the transaction go smoothly, because knowing what to expect can prevent problems.

The biggest fears that a buyer has is the ability to pay for the property, maintain the property and if the property will fit the buyer's needs. Emotionally, the buyer desires security and an environment in which they can create their own memories. Meanwhile, the seller's fear is if the sale of the property will be a good return on the money invested in the property. For many the emotional impact of selling the home is the disruption of daily routines, the thought of strangers judging the home, and the feeling of loss of memories created.

When starting the buying process, it is important to find knowledgeable professionals who will assist you in navigating your transaction. For buyers, the first step is to visit a lender or mortgage broker and obtain a pre-qualification determination. The pre-qualification determination will tell the buyer; 1) if they can obtain financing and 2) how much they can borrow. The next step for the buyer is to find and narrow down the neighborhoods that they want to live in. Then find a REALTOR® familiar with areas of interest to the buyer. The buyer should interview several REALTORS® in order to determine which one the buyer will feel the most comfortable working with.

For sellers the process is much the same. Sellers should start by finding a REALTOR® who is knowledgeable about the area in which the seller's home is located. The REALTOR® will provide the seller with data about sales of comparative homes in the area. Called a CMA in Arizona this stands for Comparative Market Analysis. CMAs are tools used by Realtors to determine the value of homes and is the same method used by Appraisers in most cases. A CMA contains information about properties recently sold and properties still on the market. The list of properties on the CMA will include the following information about each; age of the property, livable square footage of home, number of bedrooms and bathrooms, square footage of land, length of time on the market, original listing price, and final sales price.

Good REALTORS® are familiar with the features of the homes in the areas they specialize in and should be able to provide the seller with the details of homes the seller's home will be competing against. In other words, comparing apples with apples. At this point that the seller and REALTOR® can come up with a realistic listing price for the property.

The next step the majority of buyers and sellers fail to do is study the documents they will be required to sign. Both buyer and seller should read the standard real estate purchase contract and standard listing agreement forms and become familiar with the terms. In addition, anything contained in these documents the buyer or seller does not understand should be brought to the attention of the Realtor. The Realtor can explain the terms and provide examples to help the buyer and seller understand the meaning and implications. This step should be taken before the buyer starts looking at homes to buy and before the seller agrees to list their home for sale with a REALTOR®.

Buyers should now be ready to narrow down the features that they are looking for in a home. Features most commonly included are; number of bedrooms and bathrooms, size of the home, and size of land. Additional features can further narrow search results such as architecture style, amount of parking, types of utilities installed, yard features, type of view, etc.

The REALTOR® will search the MLS (Multiple Listing Service) data base for properties meeting the required features and provide the buyer with a list of homes matching the search criteria. The buyer then chooses which homes to view in person. The REALTOR® makes appointments for
"showings" of the homes contained in the list compiled from the MLS data base. The Buyer, accompanied by the REALTOR® then visits each home on the list to determine if the Buyer is interested in purchasing the home.

This can be a complicated process and is usually where the emotional aspect of buying a home begins to take form. "How can you ignore those feelings of elation when you walk into a home that you love, the rush of adrenaline and the excitement you feel…and the fact that you can imagine yourself living there?" (Hegedus-Garcia, 2009)

When the buyer has made a decision to purchase a home it is time to write an offer. The offer is typically written by a REALTOR® on the standard purchase contract forms. The purchase contract contains the terms and conditions of the offer the buyer hopes the seller will accept. This form addresses sales price; down payment being made; amount of financing that the buyer will be obtaining; addresses who will be responsible for various fees; and sets the timelines for inspections and close of escrow date. While the buyer waits with bated breath the offer is presented to the seller for review.

The seller can do one of three things with the offer; accept it, reject it or change it. More often than not, the seller will change it. When the seller initiates a change of terms it is called a counter offer. The buyer and seller are now involved in the ritual of negotiation with counter offers going back and forth across between them. For some buyers and sellers this can be a stressful and emotional exercise. The buyer is about to make a large financial and emotional investment. The seller may have expectations that have to be met. With compromise and sensible advice from the REALTORS®, the buyer and seller will reach a mutual agreement beginning the final process of the transaction.

The final process of the transaction begins when the REALTOR® "opens escrow" at the title company. Meaning that the signed purchase contract, all addendums and the earnest money are taken to an escrow officer. The escrow officer acts as a "disinterested third party," meaning that the escrow officer is a neutral party to the transaction. The role of the escrow officer is to interpret the terms and conditions of the purchase contract, prepare the legal documents for the transfer of the property, and hold all money involved in the transaction in an escrow account. The money in the escrow account can only be disbursed by the escrow officer when all terms and conditions have been met and the buyer and seller are ready to close escrow. This sounds pretty easy, doesn't it?

Unfortunately, the time period between opening the escrow and closing the escrow can be most stressful for both the buyer and seller. Time lines have to be met for inspections and repairs. It is possible to have unexpected delays. The buyers and sellers need to make moving arrangements and at the same time work full-time jobs and care for children. In addition some of the language used in a real estate transaction is not familiar to the average layperson, making the process more confusing.

This stress can lead to feelings of regret for both the buyer and seller. If the seller performs any action to stop the property from closing escrow the action is usually termed "seller's remorse." Buyers initiating an action to stop the close of escrow is usually called "backing out." Either way these actions are usually considered a breach of contract. Simply put, a breach of contract is: when an individual does not perform the actions that the individual previously had agreed to perform. If one of the parties breaches the contract the result could be that the other party has a right to sue for non-performance of the written contract. Typically, mediation is encouraged first to allow the parties a chance to work out the problems and come to a mutual agreement on how to proceed. Should that fail, litigation may be the next step.

Some escrow officers have been known to describe their jobs as helping individuals achieve the American dream; the dream of owning a home. This description makes the job seem glamorous. In reality by the time escrow is ready to close many buyers and sellers have been exposed to so many positive and negative emotional experiences that they are completely frustrated. Typically, the buyers and sellers who became frustrated had no concept of the magnitude of what they were about to undertake. My conclusion is that anyone wanting to achieve the American dream should be prepared for the journey. Educating oneself in the processes involved in buying and selling property could result in a less frustrating experience. Do your research, acknowledge what your financial and emotional limitations are, and ask many questions of the professionals who will be guiding you along the way. One of the greatest clichés ever is: "There is no such thing as a stupid question."




References

Hegedus-Garcia, I. (2009, October 28). Emotions in real estate. Retrieved from http://www.miamism.com/real-estate-emotions/
Perkins, B. (2006, March 3). Hold emotions at bay during real estate transaction. Retrieved from http://realtytimes.com/rtpages/20060303_emotions.htm
U.S. Census Bureau. (2009, December 17). Homeownership rates by state. Retrieved from http://www.census.gov/compendia/statab/2010/tables/10s0958.pdf
[1] The use of the word "Arizona" in the title is for clarification purposes only. The information contained in this essay is based on the writer's working knowledge of Arizona real estate law and procedure. Real estate laws and procedures differ from state to state.