Part 3 of an abridged 2017 Risk Management Exchange transcription featuring Scott Drucker, Esq. and from the 2017 Risk Management Committee: Evan Fuchs (chair), Holly Eslinger, JT Tsighis and John Mijac.

Residential Purchase Contract

Scott Drucker: Let’s up jump to the Residential Purchase Contract. How many of you have gotten the new contract with an As-Is Addendum attached to it?

JT Tsighis: The amended February 2017 Contract sales, states in section 5A, buyer and seller agree the premises are being sold in its present physical condition as of the date of the contract acceptance. (More here.)

Evan Fuchs: The As-Is Addendum is currently still available in zipForm®, but it will be going away.
Scott Drucker: ZipForm® has been instructed to remove it April 1st.

Evan Fuchs: Here’s something that may surprise you. Through zipForm®, we’re able to track how often forms are used incorrectly — outdated versions of existing forms that are still in the system. How many times would you estimate that an outdated purchase contract was used?

JT Tsighis: Since April 2015, there have been more than 10,000 uses of outdated versions of the Residential Purchase Contract, 10-thousand.

Scott Drucker: That’s only one form and that’s only through zipForm®; that doesn’t include everyone that’s got those printed ones in their trunk — we can’t track those.

Elimination of Prepaids

Scott Drucker: Let me raise a quick issue that we’ve been seeing — the elimination of prepaids; seller concessions. The reason that we eliminated prepaids is because they were being abused. We were seeing ridiculous interpretations. The issue that we’re now experiencing is there are some mandatory prepaids; homeowners insurance, would be an example.

We get the question, “Well, you eliminated prepaids, can homeowners insurance be included in seller concessions?” The answer to that question is yes. Because if it’s mandatory, it’s a loan cost. If it’s a required condition of the loan funding, it’s a loan cost. (More here.)

That’s just an example of an issue arising from the new contract and we’ve started doing some education — working with lenders, underwriters and title officers.

Service vs Comfort Animals

Emmy Simpson: I’m also a member of the Risk Management Committee. This is my first year and I’m just soaking it all in. How are we addressing the service animal versus comfort animal issue?

Holly Eslinger: I have rental properties and I’m dealing with it right now. Tenants want to bring their comfort cats or comfort horses…and I’ll tell you, we haven’t gotten anywhere. The biggest problem is the statutes are so vague, that it doesn’t really speak to what is a service animal?

Member: I do a lot of property management and this has become a huge issue. If a tenant is willing to have their doctor write a note saying they have to have this animal…at some point there’s going to be a test case.

Scott Drucker: You can request a letter from a medical professional. In fact, HUD published a sample letter.

Holly Eslinger: There is a huge difference between the training of a service animal and the training of a comfort animal. For $99, you can get a certificate and a little thing they can wear that says that they are a “comfort” animal. NAR knows it’s a huge issue, but it has to be addressed through legislation.

Vacation Rentals by Owner (VRBO)

Member: Are there going to be any forms or anything on VRBOs? Do we go through the whole lease form and just call it, two days? What I’ve been asked is, “Do I really have to sign 30 pages to spend the night there?”

John Mijac: In the Broker Breakout Session yesterday, Arizona Department of Real Estate (ADRE) Commissioner Judy Lowe said, if it’s less than 30 days, you didn’t need a license.

Even if it’s only two days, if you are acting as an agent and doing things the public expects from REALTORS®, then it is a kind of property management. Maybe it’s appropriate to stick with those forms, if you were going to incorporate Airbnb or whatever short-term rental lead generation into your business model.

Scott Drucker: One of the issues that we’ve run into in the past with short-term leases is uncertainty regarding the application of Arizona’s Residential Landlord and Tenant Act.

Next: Pre/Post Possession | Coming Soon | Final Thoughts

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