Tuesday, September 23, 2008

When's The Money Due?

Like a lot of metro Phoenix Realtors, lately I've been working with lots of out of town buyers (especially Canadians). These buyers are often used to the way purchase transactions are handled in their hometowns, but somewhat baffled by the way we do things in metro Phoenix.

From the standard AAR contract, line 13, "Close of Escrow ("COE") shall occur when the deed is recorded at the appropriate county recorder's office."

Notice it doesn't say anything about the buyers and sellers being present. Recordation is handled by the folks at the escrow office who record the sale documents online with the Maricopa County Recorder's Office.

Many buyers from the East Coast, the Midwest and even Canada are used to "closing" describing a giant conference table with the Buyer, the Buyer's Realtor, the Buyer's attorney, the Seller, the Seller's Realtor, the Seller's attorney a notary public and a title officer. Oh, and donuts too.

Buyers and Sellers in metro Phoenix don't have to hire lawyers to represent them. They can, but don't have to. Documents can be handled via express mail and email/fax. Money can be wired. No need to come to Arizona for your Arizona closing.

If buyers do plan to come to town for their closing, it could be helpful to arrive about 2 or 3 days before closing and plan to stay for 2 to 3 days afterwards too. That way you can sign the documents in person, pick up the keys in person, and then spend a few fun days moving stuff in and decorating.

Now, down to brass tacks. When's the money due?

Earnest money is due immediately upon contract acceptance. Usually the buyer's Realtor delivers it to the escrow officer in person or through a messenger. The escrow officer issues a receipt for the money received. Personal checks are acceptable unless negotiated otherwise by the parties. Buyers should note that their earnest money is cashed right away, so it must be liquid funds.

Any cash down payment is due on closing day. (Buyers paying all cash should apply this paragraph to their situation.) Arizona is a good funds state, which means that money for closing real estate deals must be "immediately available." Cashier's checks and wire transfers are acceptable. Contrary to logic, cash is not acceptable. Buyers who send a wire transfer should note that the USA Patriot Act slowed down the US wire system significantly. Expect your wire to take an entire day to transit the system. It will probably take less than 8 hours, but if it takes the whole day, at least you've planned ahead and not delayed your own closing. Got insomnia? You can read all 132 pages of the actual Patriot Act here. By the way, if you read the entire Act (and especially if you actually understand it) you should run for Congress immediately.

Buyers getting a home loan should be aware that by signing the standard AAR purchase contract you've agreed to sign all loan documents "no later than three (3) days prior to COE" (line 69). This language has been in place for 3 years, but I still sometimes encounter lenders who aren't aware of the requirement. Buyers should also note that lines 68 of the standard AAR purchase contract binds them to two further responsibilities: (1) making diligent and timely efforts to provide their lender with all the documentation requested, and (2) ensuring that their lender provides status updates to both agents. This means that the seller's Realtor is approved to talk to the buyer's lender about the progress towards getting a loan approval.

That should cover all the angles on getting money to the table in a metro Phoenix residential real estate purchase. Got more questions? See the FAQ files or related posts below.