Law updated September 2022

ISSUE:

The seller and buyer #1 signed a contract for the sale of ten acres of land. Escrow was opened. Buyer #1 then signed a contract to sell the same ten acres of land to buyer #2. Escrow was opened with the same closing date as the first transaction (“double escrow”). Buyer #2 was unaware of the first transaction. Did buyer #1 and any brokers involved in the transaction have the obligation to disclose to buyer #2 the first escrow?

ANSWER:

Yes.  A.R.S.§ 44-5101 requires that buyer #1 disclose to the seller in writing before entering into a binding agreement that buyer #1 is a wholesale buyer.  Additionally, buyer #1 must also disclose in writing to buyer #2 before entering into a binding agreement that buyer #1 is a “wholesale seller that holds an equitable interest in the real property and that the wholesale seller may not be able to convey title to the property.”

Furthermore, under Lombardo v. Albu, 199 Ariz. 97, 14 P.3d 288 (2000), a principal’s broker has the same obligation of disclosing any fact relating to a party’s inability to close a transaction. Finally, under the Commissioner’s Rules any broker involved in a transaction has the obligation of disclosure. A.A.C. R4-28-1101(A) and (B)(1).