Reviewed May 2016

The Arizona Association of REALTORS®, by way of a workgroup chaired by Martha Appel,[1] drafted a Buyer Pre-Closing Walkthrough form, effective February 2013. The form is intended to encourage buyers to conduct a pre-closing walkthrough of the premises to be purchased and document their findings in a manner easily conveyed to the seller. Should the buyer conduct a pre-closing walkthrough, the new form enables them to inform the seller that the premises is in acceptable condition, or give evidence that the agreed upon corrections or repairs to the premises have not been completed or the premises is not in substantially the same condition.  Should a buyer mark box two, delivery of the form serves as the issuance of a cure period notice providing the seller with three days after delivery to cure their non-compliance.

Below is a list of frequently asked questions (FAQs) regarding implementation of the Buyer Pre-Closing Walkthrough form.

Q1: Is the buyer required to conduct a pre-closing walkthrough and what are the consequences of a buyer’s decision to forego a pre-closing walkthrough?

A1: Section 6m of the AAR Residential Resale Real Estate Purchase Contract grants the buyer and buyer’s inspector(s) reasonable access to conduct pre-closing walkthrough(s) should the buyer so choose. Although the buyer is not contractually obligated to conduct a pre-closing walkthrough, they should be encouraged to do so. Section 6m further states that “If Buyer does not conduct such walkthrough(s), Buyer releases Seller and Broker(s) from liability for any defects that could have been discovered.”

Q2: When is the best time for the buyer to conduct a pre-closing walkthrough?

A2: A prudent buyer should conduct their pre-closing walkthrough at least three days prior to the scheduled date for close of escrow. Doing so will enable the buyer to mark box number two, thereby issuing a three day cure notice in enough time to allow the seller to make the necessary correction(s) or repair(s) by the close of escrow date.

Q3: What are the seller’s obligations in regard to the buyer’s pre-closing walkthrough?

A3: The seller is obligated to make the premises available for all walkthroughs upon reasonable notice. The seller is also obligated to have all utilities on, including propane.

Q4: What action should a buyer take after completing a Buyer Pre-Closing Walkthrough form on which the buyer marked box number two?

A4: The buyer, through their agent, should schedule a follow-up walkthrough to occur three days after delivery of the Buyer Pre-Closing Walkthrough form. If at the time of the second walkthrough all required corrections or repairs have been made, the buyer should then execute a second Buyer Pre-Closing Walkthrough form on which box number one is marked.

 Q4: What action can a buyer take if they conduct their pre-closing walkthrough on the day of close of escrow and learn at that time that the agreed upon correction(s) or repair(s) has not been made by the seller?

A4: The buyer should complete the Buyer Pre-Closing Walkthrough form and mark box number two.  The buyer may then delay closing for up to three days to allow the seller an opportunity to complete all required corrections or repairs. Alternatively, the buyer may close escrow and if the seller fails to complete all required corrections or repairs within three days, pursue the seller for the breach and recover the cost of the correction(s)/repair(s).

Q5:  What happens if the seller fails to make the required correction(s) or repair(s) within three days after delivery of the Buyer Pre-Closing Walkthrough form on which the buyer has marked box number two?

A5: If the seller fails to timely make the required correction(s) or repair(s), the seller is in breach of contract at which point the buyer may pursue all legal remedies, subject to the Alternative Dispute Resolution obligations set forth in the contract.  AAR’s Buyer-Seller Dispute Resolution Information Packet can be found at https://www.aaronline.com/disputes/Dispute-Resolution-System_packet.pdf. Alternatively, the buyer may elect to cancel the contract as permitted by Section 7b of the Residential Resale Real Estate Purchase Contract.

 Q6: Does the Pre-Closing Walkthrough form act as a second “Inspection Period” as that term is used on line 185 of the Residential Resale Real Estate Purchase Contract?

A6: Absolutely not. The pre-closing walkthrough is for the limited purpose of ensuring that: (1) the agreed upon corrections or repairs, if any, have been completed; and (2) the premises is in substantially the same condition as of the date of contract acceptance.

Q7: What should an agent do if asked by their buyer to conduct a pre-closing walkthrough on the buyer’s behalf?

A7: The agent should discuss the buyer’s request with their broker and determine whether the broker has a policy in place prohibiting such activity. Even if no such prohibition exists, it is recommended that the agent avoid conducting the pre-closing walkthrough on the buyer’s behalf, as doing so subjects the agent to risk and liability. While the agent should always encourage the buyer to personally conduct the walkthrough, if the buyer cannot do so, the agent can recommend in writing that the buyer have a friend, family member or home inspector act on their behalf.

Q8: What should the buyer’s agent do if the buyer chooses to allow a third-party to conduct a pre-closing walkthrough on the buyer’s behalf?

A8: Prior to allowing a third-party to conduct a pre-closing walkthrough, the buyer’s agent should have signed and dated written permission from the buyer authorizing the third-party.  Even under these circumstances, the buyer, not the third-party, is required to execute the Buyer Pre-Closing Walkthrough form.

Q9: Under what circumstances should the buyer’s agent sign the Buyer Pre-Closing Walkthrough form?

A9: The buyer, not the buyer’s agent, should in all instances execute the form.

Q10: Can the buyer change their election after having completed the Buyer Pre-Closing Walkthrough form?

A10: If the buyer completes the Buyer Pre-Closing Walkthrough form by marking either box one or three, the buyer is likely bound by their election.  For this reason, an agent should make every effort to ensure that the buyer has taken the time allotted to conduct a pre-closing walkthrough and has thoroughly considered their options before making an election.  If the buyer completes the Buyer Pre-Closing Walkthrough form by marking box two, the buyer can nonetheless subsequently elect to waive the previously agreed-upon correction(s) or repair(s).

Q11: Is it appropriate for the Buyer Pre-Closing Walkthrough form to be submitted to the title company?

A11: Once executed by the buyer, the form is intended to be conveyed by the buyer’s agent to the listing agent.  Unless using a separate cure period notice, the form must be conveyed to the listing agent in the event the buyer marks box number two.  It is similarly appropriate for an executed Buyer Pre-Closing Walkthrough form to be submitted to the applicable title company to keep it apprised as to the status of close of escrow and on those occasions in which the form may impact the disposition of the earnest money deposit.