Identifying and Resolving 10 Common Contract Issues
The Metro Phoenix real estate market of late 2025 is characterized by stabilization, necessitating a more analytical approach from home sellers. Success is no longer solely dependent on initial offer price but on the ability to navigate a contract from acceptance to closing by proactively identifying and resolving potential issues. This document outlines the most prevalent challenges in the transaction process—from pre-listing decisions to post-closing liability—and provides specific, actionable solutions.
Issue 1: Navigating Buyer Broker Commission Concessions
Changes in industry rules have shifted how buyer agent commissions are paid, directly impacting a seller’s net proceeds and offer evaluation process.
- Problem Identification: Sellers are no longer required to offer compensation to a buyer’s broker through the MLS. As a result, buyers may now include a request for the seller to pay their agent’s commission (typically 2-3%) as a seller concession within the purchase offer. This complicates the comparison between multiple offers, as the highest purchase price may not yield the highest net profit.
- Resolution Strategy:
- Establish a Strategy Pre-Listing: Before listing your home, decide on a clear strategy. You can choose to offer a specific commission upfront in the MLS to attract more buyers, or you can choose not to offer one and negotiate it on a case-by-case basis.
- Calculate the “Net Offer”: When evaluating offers, look past the gross purchase price. Instruct your agent to calculate the true net offer for each proposal: Purchase Price – Seller-Paid Closing Costs – Seller-Paid Commission Concessions – Any Other Credits to Buyer. This is the only way to accurately compare offers and understand your final proceeds.
Issue 2: Evaluating Offers from LLCs and Potential Wholesalers
Offers from corporate entities, particularly LLCs, require additional scrutiny to differentiate between legitimate investors and wholesalers who may not intend to close.
- Problem Identification: A real estate wholesaler’s business model is to get a property under contract with the sole intention of assigning (selling) the contract “paper” to another buyer, typically an end investor, for a fee. The primary risk is that if the wholesaler cannot find a buyer to assign the contract to, they will cancel the deal during their inspection period, wasting weeks of the seller’s time. Red flags include an offer from a newly formed LLC, an unusually long inspection period, low earnest money, and the phrase “and/or assigns” next to the buyer’s name.
- Resolution Strategy:
- Investigate the Entity: Use the Arizona Corporation Commission (ACC) website to research the LLC. Assess its age and standing. A company formed just days before making an offer is a significant warning sign.
- Require Substantial, Verifiable Funds: Demand proof of funds that are in the LLC’s name and are sufficient to close. Be wary of letters from “private lenders” without verifiable backing.
- Shorten Contingencies & Increase Earnest Money: In a counteroffer, significantly shorten the inspection period (e.g., 3-5 days). A serious buyer has done their research; a wholesaler needs time to market the contract. Simultaneously, require a substantial earnest money deposit (3-5% or more) that becomes non-refundable upon expiration of the inspection period.
- Control Assignability: In a counteroffer, either strike the “and/or assigns” language or add a clause stipulating that any assignment requires the seller’s written consent and that the original LLC remains fully liable for performance under the contract.
Issue 3: Deficient Offer Terms and Buyer Qualification
A high offer price can be undermined by weak supporting terms, posing a significant risk of contract failure.
- Problem Identification:
- Loan Type Complications: FHA and VA loans, while viable, come with stricter appraisal standards that scrutinize property condition, potentially causing delays.
- Insufficient Earnest Money Deposit (EMD): A low EMD (less than 1% of the purchase price) indicates a lower level of buyer commitment.
- Vetting the Lender: Out-of-state or large national call-center lenders are frequently a source of delays.
- Resolution Strategy:
- Analyze Lender Credentials: Prior to acceptance, your agent should contact the buyer’s loan officer to verify that the buyer’s file has been reviewed by an underwriter and to confirm the lender’s ability to meet the contract’s closing date.
- Negotiate Stronger Terms: In a counteroffer, stipulate an increase in the EMD to a minimum of 1-3% of the purchase price.
- Request Proof of Funds: For any cash portion of the purchase, require documented proof of funds.
Issue 4: The Home Inspection and Repair Requests
The 10-day inspection period is a critical friction point where deals most often face challenges.
- Problem Identification:
- Scope of Requests: Buyers may submit a lengthy list of repairs. Common Phoenix-specific requests include HVAC servicing, correction of cracked roof tiles, pool equipment repairs, and evidence of pest issues (e.g., scorpions, termites).
- Buyer’s Inspection Notice and Seller’s Response (BINSR): An unreasonable BINSR can derail negotiations.
- Resolution Strategy:
- Categorize Requests: Categorize requests into three groups: Critical (safety/structural), Negotiable (nearing end-of-life), and Unreasonable (cosmetic).
- Offer a Credit in Lieu of Repairs: Offering a seller credit is often the most efficient solution. This transfers the responsibility to the buyer, removes your liability for the work, and prevents closing delays.
Issue 5: The Appraisal Gap
In a stable market, there is an elevated risk of the property’s appraised value coming in below the negotiated purchase price.
- Problem Identification: An appraisal gap creates a financing shortfall because the lender will only issue a loan based on the lower appraised value. If the buyer is unable or unwilling to cover the difference in cash, the contract is at risk.
- Resolution Strategy:
- Proactive Information Packet: Before the appraiser’s visit, provide them with a packet containing a list of all recent home improvements and supporting comparable sales.
- Challenge the Appraisal: If the appraisal is low, analyze the report for errors. If discrepancies are found, the buyer’s lender can submit a formal “Reconsideration of Value”.
- Negotiate the Gap: If the value is unchanged, the resolution requires negotiation where the buyer brings more cash, you reduce the price, or you meet somewhere in the middle.
Issue 6: Title and HOA Complications
Issues with the property’s title or Homeowners Association (HOA) can cause significant delays.
- Problem Identification:
- Title Defects (“Clouds”): A preliminary title report may uncover old liens or unrecorded permits that must be resolved before ownership can be legally transferred.
- HOA Delays: In Phoenix’s many planned communities, obtaining the HOA resale disclosure packet can be slow, and the HOA may have violations on the property that need to be rectified.
- Resolution Strategy:
- Order a Preliminary Title Report: As soon as you list the property, have the title company run a preliminary report to allow time to resolve any discovered issues.
- Engage the HOA Early: Contact the HOA or management company before listing to inquire about their process for transferring ownership and to ensure your property is in good standing.
Issue 7: Homeowner’s Insurance Underwriting
A buyer’s ability to secure homeowner’s insurance is a condition of their loan, and past claims can render a property uninsurable or cost-prohibitive.
- Problem Identification: A buyer’s application for insurance can be denied late in the transaction due to the property’s claims history, which is tracked in the CLUE (Comprehensive Loss Underwriting Exchange) report. A history of water damage or roof claims is a common flag.
- Resolution Strategy:
- Order Your CLUE Report: Before listing, order your property’s CLUE report to know its exact claims history.
- Prepare Documentation: If claims exist, gather all documentation proving that licensed contractors performed the repairs and the underlying issue was fully resolved.
- Secure a Pre-emptive Quote: Obtain a current, transferable insurance quote for your property to provide to buyers, demonstrating its insurability.
Issue 8: Solar Panel Lease Transfers
Leased solar systems, extremely common in Phoenix, require the buyer to separately qualify to assume the lease, adding another layer of risk.
- Problem Identification: The buyer must be approved by the solar lease company in a process separate from their mortgage qualification. A buyer’s credit or unwillingness to accept the lease terms can result in a denial, terminating the entire home sale.
- Resolution Strategy:
- Initiate Contact with Solar Company: Before listing, contact the solar provider to understand their specific lease transfer process and timeline.
- Consolidate Documents: Assemble a complete package with the solar lease agreement and transfer application forms to provide to potential buyers upfront.
- Prominently Disclose Lease Terms: Ensure the existence of the lease is clearly stated in all marketing materials to pre-qualify interested parties.
Issue 9: Septic and Well System Compliance
In many popular areas surrounding the core of Phoenix (e.g., Cave Creek, Rio Verde), properties utilize septic systems and private wells, which have strict transfer requirements.
- Problem Identification:
- Septic Certification: Maricopa County requires a septic system to be inspected and certified for transfer. A failed inspection can require repairs costing thousands.
- Well Adequacy: Wells must be tested for water quality and flow rate. A low flow rate or contaminated water can make a property non-financeable.
- Resolution Strategy:
- Conduct Pre-Listing Inspections: Before marketing the home, pay for a full septic inspection and certification, as well as a well inspection and water quality test.
- Provide Reports as Disclosure: Include the passing certifications in the seller’s disclosure documents to build buyer confidence and remove uncertainty.
Issue 10: Post-Closing Liability for Undisclosed Defects
A seller’s legal responsibility does not necessarily end at closing. A failure to properly disclose known defects can lead to future legal action.
- Problem Identification: Months or even years after the sale, a buyer may discover a significant (“material”) defect they believe the seller was aware of but did not disclose on the Seller’s Property Disclosure Statement (SPDS). This can result in a demand letter or lawsuit from the buyer seeking damages for the cost of repair.
- Resolution Strategy:
- Practice Absolute Transparency: The legal principle is “disclose, disclose, disclose.” When completing the SPDS, be meticulous and honest. It is far better to disclose a past issue that has been repaired than to omit it.
- Document Everything: If you disclose a past issue, such as a roof leak that was fixed, provide all supporting invoices and warranty information for the repair. This documentation demonstrates good faith and proves the problem was addressed.
- When in Doubt, Disclose: If you are unsure whether an issue is significant enough to disclose, the safest course of action is always to disclose it.
