April 2014 - Phoenix Real Estate Newsletter

To our valued clients:

I hope you enjoy this monthly newsletter. Remember whether you are buying a new or resale home it is important to have a realtor to represent your interests. If you know of anyone who is thinking about buying or selling please let me know.  You can search the MLS from my website at www.greathouseaz.com.

Do you want instant updates on the Phoenix Real Estate market? Follow me on Twitter

Do you have a rental property and need a property manager?  Is your Homeowner's Association is looking for a new management company?  Please call or email Karen Van Vugt at 602-316-7028 or ftr9558@cox.net. Karen manages many rental units and several Homeowner's Associations in the greater Phoenix area.

Pat Hune
1st Southwest Realty
Search the real MLS from my website!
Cell 480-703-1976
Fax 480-304-9099

Tempe, AZ

Equal Housing Opportunity

Market Review - R.L. Brown reported March single family housing permits in Greater Phoenix were down a whopping 20.8% from a year ago. Year to date, permits are down 18.9%. This poor showing is confounding most observers of the housing market. The analysis that accompanied the permit data was quite good. It discussed the gap between the median new home price and the median resale home price-now $100,000. According to R.L. Brown, this is pushing home buyers to resale and it is having a chilling effect on new home market share. The spread is so large that the dampening effect is not likely to go away quickly.

Scottsdale-based Meritage Homes Corp. responded to the cooling off of the new-home market in the Phoenix-area by becoming more aggressive in its efforts to lure potential buyers. Meritage saw orders in Arizona plunge 28% year-over-year - the biggest decline of any state the home builder operates in, according to Meritage's first-quarter earnings release this week. 

Sales of Arizona resale homes stayed flat from February to March, and have dropped 7% from this time last year, real estate data company RealtyTrac reported. Despite that drop, the median sale price has gone up 9% in the last 12 months. "There's not enough supply to meet that demand," said Daren Blomquist, vice president of RealtyTrac. "So that's creating the situation where home prices are going up, but the number of sales are going down." 


1)  STAT Newsletter, PPI and Rent Check Link 

2)  Proposed Apartments Near Mesa’s Falcon Field is Under Siege by Neighbors
3)  Top 14 Mistakes Landlords Make

4)  Real Estate Briefs

5)  Tales from the Real Estate Trenches


1) STAT Newsletter Link - STAT is produced monthly  by the Arizona Regional Multiple Listing Service - the database realtors use to list homes for sale and that have sold.

April STAT

STAT Newsletter Highlights

Commentary by Tom Ruff, Information Market

Sales activity in March came in pretty much as expected. In February we had projected 1,400 fewer sales year-over-year and an uptick in the median home price. Year-over-year sales volume in March was down 17.7% with 1,441 fewer sales than the previous year. The decline in sales volume exists almost entirely in homes purchased for less than $200,000, clearly demonstrating the decline in investor activity in our market and the challenges faced by entry-level buyers. The median priced home in March was 3.9% higher than February rising from $180,000 to $187,000. Last month we anticipated a 2.3% increase in the median sales price with the caveat this increase in value should not be viewed as an indication of price appreciation, but is most likely attributed to seasonal factors.

Supply - Even though our supply is what can best be described as typical, our demand is 25% below normal. I still anticipate the imbalance we are seeing between supply and demand to exert downward pressure on pricing later this year. The ARMLS Pending Price Index for April projects the median priced home will remain unchanged at $187,000. In terms of sales volume in April, I expect volume in April will be in the 7,350 range, slightly higher than March in accordance with historical norms, but remaining well below 8,754 found last April.

Last month we asked the question, where are the buyers? We like to look at large groups when it comes to market influence and how they are formed. For example, a generational group could be baby boomers, the children of baby boomers or a large group created by economic realities. Over the past few years the rate of homeownership has declined and we’ve seen numerous stories referencing “a nation of renters.” These articles suggest a cultural shift has taken place where owning a home may no longer be the American dream. 

I disagree that the lack of buyers is due solely to generational trends but contend that the decline in homeownership is the result of pure economics. Where are the buyers? My answer, they’re coming, but they still have some major challenges to overcome. In this edition of STAT, we’ll look into a large group that was created by economic factors, a group the press has branded “boomerang buyers.”  Boomerang buyers are defined as potential home buyers who were previously displaced from their homes due to a foreclosure or short sale. At present, the vast majorities of these potential buyers are unable to return to the market due to credit and down payment requirements. From a statistical perspective these potential buyers might best be defined as “pent up demand,” or to steal from a previously popular phrase “shadow demand.” In a recently published article in The Arizona Republic entitled "Time frame for buyers on rebound" Catherine Reagor did a very nice job simplifying the time and down payment requirements these potential buyers face.

FHA: Homebuyers can take out loans for up to $271,060 in Maricopa County. People who went through foreclosures must wait three years and have a 3.5 percent down payment. Some borrowers who completed short sales with special circumstances, such as a deed-in-lieu situation or problems with a loan modification, are eligible for a loan within a year. 

Fannie Mae: Borrowers can obtain loans for up to $417,000 in the Valley. People who lost a house to foreclosure must wait seven years to qualify and put 10 percent down, unless there was a special circumstance. Former homeowners who completed short sales have to wait two years and have a 20 percent down payment or four years and a 10 percent down payment. Freddie Mac: Borrowers can take out loans for up to $417,000 in the Valley. Borrowers with a foreclosure on their record must wait seven years unless there's a special circumstance, and then the wait is three years. People who went through a short sale must wait four years.

Veterans Administration: These mortgages have the biggest limit, $1 million. Borrowers with a foreclosure only have to wait two years and don't need a down payment if the mortgage is less than $417,000. Eligible veterans who have done a short sale may not even have to wait to take out a VA backed loan.

In order to put these requirements in perspective, let’s take a look at new home financing from 2012 forward. In 2012, when cash buyers/investors played a more significant role in our market, only 55% of home purchases were financed, while in 2013 this number rose to 65%. Thus far in 2014, 67% of the homes purchased have been financed. The percentage of loans based on the types mentioned in the Republic article have stayed fairly consistent, with Freddie Mac and Fannie Mae accounting for 56% of home purchases financed, 28% obtained FHA financing and VA loans accounted for 6%. All other forms of purchase financing accounted for 10%, and each of these other types individually were less than the 6% VA figure. Examples of other types of financing would be seller carrybacks, private loans, loans from a related party, jumbo loans, or loans from companies specializing in “hard money.”

Reviewing the requirements listed above, the VA is the most boomerang buyer friendly but as we can see from the loans being made, they account for the smallest volume of new home purchases. FHA is the second most friendly but they finance slightly more than 1 out of every 4 homes purchased with financing. The largest majority of buyers financing a home purchase obtain either a Fannie Mae or Freddie Mac loan. Unfortunately, we are unable to differentiate between the two and therefore lump them together. The requirements for new financing clearly favor a short sale to foreclosure and special circumstances over both. Having been through the loan process myself lately on a very straight forward loan application and the numerous hoops we were required to jump through I can only imagine how difficult it must be to prove the added dimension of special circumstances.

For the purposes of this discussion we’re going to ignore special circumstances and focus on when the largest majority of boomerang buyers will be able to return, seven years after a foreclosure and four years after a short sale. Under normal circumstances after 4 to 7 years a home owner would be able to use their existing equity towards the down payment of their next purchase, boomerang buyers have no such luxury and most likely the biggest obstacle they will face will be accumulating the 10% down payment.  The large number of foreclosures and short sales that took place in our market has evolved into pent up demand. From the beginning of 2008 through the end of 2012 over 200,000 homes were foreclosed on in Maricopa County. For the years of 2009 through 2013 over 77,000 homes were sold as short sales. These are astoundingly high numbers of former homeowners who left the market as a result of economic factors. While these are extreme numbers and by no means represent how many buyers will return, based on sheer numbers alone, this pent up demand will have a significant impact on our market in the future. As the charts above represented, we are on the front end of this potential wave of buyers. Looking ahead, it will be interesting to see just what impact boomerang buyers have on our market.  The agents who listed and sold short sales should revisit their contacts from 2009 and 2010.


Rent Check - Rent Check is an ARMLS's  publication tracking single family home rentals.  Rental statistics are changing so little from month to month no commentary is needed.  Click on the link for the statistics.

The Arizona Republic asked "How much must an Arizona family make to make rent?”  The answer is sobering.  To afford a basic two-bedroom apartment in Arizona, a renter needs to earn about $17.52 an hour. A renter in metro Phoenix must make $18.40 an hour. The state's minimum wage is $7.90. A new report shows about 53% of Arizona renters don't earn enough to afford a two-bedroom unit. 

Rent Stats

Commercial Real Estate Trends

Current Phoenix market trends data indicates an increase of +0.7% in the median asking price per unit for Multifamily properties compared to the prior 3 months, with an increase of +9.2% compared to last year's prices. County-wide, asking prices for Multifamily properties are 2.6% higher at $48,070 per unit compared to the current median price of $47,757 per unit for Multifamily properties in Phoenix, AZ.

To see more trends in commercial real estate click on the link below:

Loopnet Commercial Trends

(The areas and property types  included in the MLS  statistics are:  The figures shown are for the entire Arizona Regional area as defined by ARMLS. All residential resale transactions recorded by ARMLS are  included. Geographically, this includes Maricopa county, the majority  of Pinal county and a small part of Yavapai county. In addition, "out  of area" listings recorded in ARMLS are included, although these constitute a very small percentage (typically less than 1%) of total  sales and have very little effect on the statistics.  All dwelling types are included. For-sale-by-owner, trustee auctions  and other non-MLS transactions are not included. Land, commercial units, and multiple dwelling units are also excluded.  In addition very few new new home builders list their new homes in the MLS so these numbers are tracked separately in the RL Brown Reports. )



2)  Proposed Apartments Near Mesa’s Falcon Field is Under Siege by Neighbors

Gary Nelson, The Republic, April 2014

A proposal to build apartments near Falcon Field, which already is under siege from neighbors complaining about airplane noise, ran into heavy flak last week from City Council members.  The request comes in the form of a proposed major General Plan amendment filed by Daedalus Real Estate Advisors LLC, which owns Longbow Business Park and Golf Club.  Daedalus wants to change the designation of about 305 acres from business uses to mixed use/residential. The acreage includes the golf course, but the company said in its application the course will remain intact.  The golf course opened in 1997. It is named for the Longbow Apache helicopters made by its next-door neighbor, Boeing Co.  The land is north and east of the McDowell/Higley road intersection, kitty-corner from Falcon Field immediately to the southwest.

"Our vision is to develop a neighborhood-friendly, horizontal mixed-use development integrating residential uses into the (business) park," Daedalus' application says.  John Wesley, Mesa's planning director, said the proposed designation would allow high-density homes on up to 30 percent of the land, resulting in as many as 1,300 dwelling units. He said the company has told him, however, it plans on no more than 500.  A major General Plan amendment takes most of a year to work through city approval; the City Council would not vote on it until October at the earliest.  But Wesley gave both the Planning and Zoning Board and the City Council an early heads-up last week. Nobody cheered.  Beth Coons, vice chairwoman of the planning board, took the first shot.  "I, of all people, understand or agree with property rights," she said. "My problem here is I feel such a need to protect the airport."  Neighbors have complained vociferously for months about increased noise, largely due to operations of a flight-training school. Coons said it makes no sense to put even more homes in the flight paths.  

When Wesley took the issue to the council on April 17, objections flew even before he finished his presentation.  "I have some very major reservations over the change," Councilman Dennis Kavanaugh said. He said Mesa's economic development advisory board and staff, as well as Falcon Field itself, probably would agree with him. David Luna, whose District 5 includes the airport and surrounding neighborhoods, was more blunt.  "I just am not in support of putting residential housing there," he said. "I just don't think that's an appropriate use."

When Dave Richins and Mayor Alex Finter echoed those statements, that made a council majority signaling the plan would not fly in its present form.  Finter studied Falcon Field issues during the run-up to his becoming mayor last week and said he's about to roll out a task force to take a "holistic" look at the area.  "We need to look at these land-use issues, infrastructure, aviation concerns ... and where we are going in the future," Finter said.  Even if council reaction had been favorable, Wesley said changing the General Plan to accommodate Daedalus' proposal could create other complications.  Both the new General Plan heading for voters in November, and the existing Falcon Field sub-area plan, still designate the property exclusively for business uses, Wesley said.  Some council members also fretted over Daedalus' job projections. At build-out the property is projected to provide 5,000 jobs, and the company said that many would still be there even if it included homes.  If the proposal goes no further, this wouldn't be the first time early council opposition short-circuited a major General Plan amendment. In early 2011, a group wanted to build 1,300 homes just north of what is now the Apple Co. factory at Signal Butte and Elliot roads. That idea never resurfaced after an initial negative council review.


3)  Top 14 Mistakes Landlords Make

Various Real Estate Sources, March 2014

When the real estate market crashed both experienced and inexperienced investors purchased rental properties as investments.  Many did not have the knowledge needed to analyze a property to determine if it would be a good buy.  Most did not realize how difficult it is to manage rentals even if they are living in the same city.  Below is a collection of common mistakes landlords make when buying a rental property.

1) Buying the wrong property - This is by far the most expensive and common mistake especially for out of state or first time investors. It is very important to find a realtor who understands the rental market and can provide an analysis to help the determine if the property makes sense.   If your realtor does not manage properties find a professional property manager familiar with the area.  Key factors are location, size, number of bedrooms and bathrooms, rental rates, vacancy rates, HOA dues, age, amenities, condition of the property, deferred maintenance, ongoing maintenance such as landscaping and price.  Most buyers ignore vacancy rates.  One bedroom apartments are hard to rent.  Four bedroom houses are typically easier to rent especially to Section 8 tenants. (Section 8 is a government rental assistance program to help low income tenants get into housing appropriate for their needs.  The properties must pass inspection.  The rents are paid directly from the government to the landlord.)  Cheaper properties are not necessarily better.  If a property is hard to rent then the price should be lower.  It might be worth paying more if the vacancy rates are low.  Buyers should always have a home inspection performed by a licensed inspector to identify future maintenance issues.

2) No Home Warranty -  One of the most expensive items to replace is the HVAC unit.  In the summer, when Phoenix is two inches from the sun, broken air conditioners are common.   Most professional property managers recommend landlords purchase a home warranty and have the HVAC unit serviced at least one a year.  If the HVAC units are not serviced regularly the home warranty will not cover the claim. A new HVAC unit may cost $5,500 or more.  Tree roots can cause sewer line backups.  Be sure the home warranty covers this repairs.  Home warranties also cover other repairs like the refrigerator, dishwasher, hot water heater, washer, dryer and plumbing stoppages.  One major repair will more than cover the cost of the home warranty which ranges from $500 for single family up to $1,500 for a fourplex. Some home warranties are better for single family homes while others are better for multifamily.  Check with your management company for the best home warranty provider  for your property.

3) Hiring the wrong management company - An incompetent management company  can cost you thousands. Many owners shop for the lowest management fees.  Months later these owners complain their management company does not respond to calls or emails, they have not received rents for months, money was sent for repairs but the work has not been completed or the property manager is charging more for repairs than other companies. The bottom-line is a property manager has to clear 8% of collected rents to make money.  Companies charging lower fees make up the difference by adding a percentage on the repairs, charging the tenants administrative fees upfront or a percentage in addition to the monthly rent. This makes your property less attractive than those with lower fees.  Make sure your property manager is a licensed realtor as you will have limited recourse if they are not licensed.

4) Not registering rental properties with the City and County - Most cities require landlords to pay sales tax on rents. Maricopa County assesses higher property taxes on rental properties than single family homes.  The fines are steep if you do not pay the sales tax and/or have not registered the property with the county.  Make sure your management company is collecting and paying the sales taxes and registered the property as a rental with the county. If the landlord has not registered the property the tenant can give a ten day notice and leave.  Out of state owners must have a local statutory agent. The purpose of an Arizona statutory agent  is to be the person or entity that can be served with a summons and complaints filed in a lawsuit or receive notices of violations like overgrown yards or abandoned vehicles.  In Arizona the statutory agent must be an adult individual who resides in the state and must have an Arizona street address not a post office box.  If the landlord has not registered the property the tenant can give a ten day notice and leave. (Yes repeated this to make sure landlords understand how expensive it can be if a property is not registered.)   If you change statutory agents and do not inform the city within 10 days you could be fined.

5) Failure to read the Landlord Tenant Act - Make sure you are familiar with the landlord tenant act so you know your rights and the tenant’s rights.  If you are using a professional property manager they should already be familiar with the terms.  If you are self managing then it will be up to you to follow these rules as the penalties are severe. Be sure to find a good eviction attorney to help you legally evict the tenant.

6) Not protecting personal assets by putting rentals into separate LLC’s - What happens if a tenant falls due to inadequate lighting or an uneven curb, fire destroys the structure and the tenant is injured or killed?  In our litigious society a lawsuit could result in the landlord losing their entire estate including the house they live in!

Example-Faulty electrical wiring results in a fire where one of the tenants is killed.  The family sues, the jury finds for the family and awards several million dollars-an amount far above the property insurance limit.  The family seizes the landlord’s 5 rental properties (worth $1,500,000), personal residence ($900,000) plus the bank accounts ($500,000).  If the landlord had formed a Limited Liability Company or LLC for each rental property the only asset at risk would be the building where the tenant lived.  Each property should have its own LLC. The cost per LLC varies from $700-1400.  You should consult with a real estate and an estate attorney to discuss the benefits and risks of placing your personal assets into an LLC,  revocable or other living trust.

7) Setting the rental price too high - Vacancies will kill the cash flow on a property.  Landlords who ask unrealistic rents are costing themselves thousands of dollars.  It is far better to rent a property quickly than to wait two or three months for another $100.  Remember a month’s lost rent is gone forever.

8) Not maintaining the property - It is important to keep a tenant in place as turnover is costly in both repairs and lost rent. The key is making sure repairs are taken care of in a timely manner.  This will help keep the tenant happy and eliminate potential costly repairs.  What is a small leak today could be a flood tomorrow.  Vacancies are costly and poorly maintained properties will result in lower rents, take longer to find a tenant and can result in costly fines from the city.  

9) Carrying the wrong Property Insurance - If you lived in the house as your personal residence and later change to a rental property be sure to contact your insurance carrier to change the property to reflect it as a rental property.  Typically the rates will go down as you are insuring the building and not the contents.  Due to the number of vacant properties being vandalized a lot of insurance companies will not cover if the property is vacant.  So the moment the tenant moves out you essentially have no coverage.  Ask your insurance company if they cover vacant properties 

10) Installing the wrong flooring - Carpet is a terrible choice for flooring and it is expensive to replace.  Tenants can destroy carpet in a matter of weeks especially if they have pets.  Installing a commercial grade vinyl, porcelain tile, a concrete finish or staining the concrete will significantly reduce the unit turnover costs.  It may be more money initially but will save a lot of money over the life of the rental.  

11) No written lease, rental application or credit and background check - Crazy as it sounds a lot of landlords don’t have written leases. A written lease clearly outlines the tenant obligations and deposits.  If there is no written lease then the landlord cannot charge late fees and it makes it more difficult to go through the eviction process and collect for damages or unpaid rent. All tenants should fill out a rental application including employment history, social security numbers and prior landlords.  The landlord should do a credit and criminal background check, contact prior landlords and verify employment.    

12) Accepting partial payments or prepaid rent - Many landlords accept partial payments without a written agreement from the tenant. The tenant has to sign a non-waiver stating the tenant understands failure to pay will result in an eviction. If the landlord already has a Writ and accepts a partial payment without a signed waiver then the landlord will have to start all over with the eviction process and incur all the service, court and attorney fees again.  And the tenant is living there rent free during the process.  Tenants may offer to  prepay rent if they are having problems getting their applications accepted to due past evictions or poor credit.  Though the landlord can accept the prepaid rent it has to be held in trust for the tenant.  The tenant has a legal right to prepaid rent as it is not due yet.  If the tenant asks for the prepaid rent to be returned the landlord has to comply.  In general do not accept prepaid rent.

13) No pool fence or other barrier - Renting a property without a pool barrier is asking for trouble. It is important for the safety of the tenants especially if there are children.  A  landlord cannot refuse to rent to someone with small children because there is no pool fence as it is violation of Fair Housing and can result in a hefty fine.  If you buy or own a property with an unfenced pool be prepared to install a pool fence or other barrier.

14) No periodic inspections - When the lease is signed the tenant should be made aware the property may be inspected on a monthly basis.  A professional property management company will have the repair companies report any issues like unauthorized occupants or pets, excessive wear and tear, maintenance issues or other damages.  They should also check the smoke and CO detectors and the HVAC filters while at the property.  Some tenants think if they don’t bother the landlord with repairs the rent will not increase. This can result in costly repairs down the line.

Avoiding these mistakes should help keep your vacancies and expenses low, rents high and protect your personal and investment assets.


4)  Real Estate Briefs

a)  490 Acres in Buckeye Purchased at $23K+ per Acre

Hadden Schifman, Vizzda.com, April 28, 2014

The Kemper Marley Foundation in partnership with Mr. Jeff Garrett of Garrett Development have closed on a 490 acre  Development known as Westwind in Buckeye, AZ. Located on the southwest corner of Lower Buckeye & Turner Rds (less than a mile South of the I-10), the properties purchase price was $11,275,490 or $23,010.80 per acre. Mr. Giora Ben Horin, founder of the Benross Corporation sold the property- after acquiring the land on 12/24/2009 at $6,500 per acre with no recorded debt.

b)  Wood Partners Looking to Develop 301-unit Apartment Project in Chandler

The Brew by Rose Law Group, April  2014

Wood Partners in Marietta, Ga. (Leonard Wood, principal) plans to develop a 301-unit apartment project in downtown Chandler. The company has filed for zoning approval to develop the multi-family complex on a site located just east of Arizona Avenue at the southeast corner of Washington Street and Frye Road. Wood Partners is under contract to acquire the 6.4-acre parcel in a deal that is contingent on zoning. Nick Wood of the Phoenix lawfirm Snell & Wilmer is assisting with zoning. Representatives of Wood Partners declined to comment on the proposed project. The property is owned by SMI-Owen Steel Co. Inc. and was once used for steel fabrication. The former steel yard, with an address of 353 S. Washington Street, is now zoned C-3 (regional commercial district). Wood Partners is proposing a mix of two-, three- and four-bedroom units ranging from 640 sq. ft. to 1,726 sq. ft. Sources say Wood Partners is close to finalizing a deal with an equity partner. Construction is expected to start in 2015. Wood Partners has been active in both planning new apartment projects and selling multi-family properties in the Phoenix area. In the past few months, BREW has reported the privately held company closing land purchases on sites in Scottsdale and Tempe to build 514 apartments and selling 500 multi-family units in projects in Peoria and Phoenix. Those two transactions totaled a combined $74.5 million.

c)  Elevation Chandler Skeleton to Become 390,000SF, 335-Unit, $150M Mixed Use Showcase

Eric Jay Toll, AZ Builder’s Exchange, April  2014

When the ten story skeleton of concrete and steel is hauled away, the Great Recession icon at Loops 101 and 202 and Chandler will be gone. Its demolition and scrapped remains could be the symbol that the economic downtown is over in the Valley of the Sun. That project was once called Elevation Chandler, not to be confused with Elevation, the luxury apartments going up east of Loop 101, announced about a year ago.

Rising in its stead is the multiple use development called Chandler Viridian. Hines Interests Limited Partnership, Houston, Texas, plans a luxury residential, 240KSF office and 150KSF hotel on the property across Frye Road from Chandler Fashion Center at Loop 101. Hines has locked up nearly 11 acres of the 26 acre site and is in the process of locking down the remainder. Between the land and development costs, Hines is expecting to invest $150M into the project.

Off the boards of Todd & Associates, Inc., Hines is proposing a seven building, 4-story, 335 unit luxury apartment complex. From the studio of RSP Architects, comes the Class A office space in two 4-story structures and a 10-story, 180 room hotel. A couple of pads for retail or restaurants are shown on the application pending at Chandler.  No contractor has been selected. Hines is winnowing its way through a short list of brokers to lease the residential and office components. The developer plans to sell off the hotel entitlement.  The company plans to go vertical in about a year. There is a lot of scraping and site development to take place before construction on Viridian can begin. A Chandler official said the city is very excited about the new project and the final resolution of the abandoned condo project.  Business Real Estate Weekly of Arizona says that Hines is buying the skeleton and its 10.6 acres for $8.3M ($18/SF) in a deal first announced nearly a year ago. The commercial real estate investor is supposed to be paying around $12M ($18/SF) for the remainder of the property. 


5)  Tales from the Real Estate Trenches

Pat Hune, Broker at 1st Southwest Realty, February 2013  (Editor’s note:  One of my clients suggested I include my real estate experiences in my newsletter.  Sometimes they will be humorous and sometimes educational.  Either way I hope you enjoy them.)  

This month I learned more about septic tanks than I ever wanted to know.   In Arizona if a house sells and has a septic tank it has to be inspected at the seller’s expense at least 3 days prior to close of escrow (COE).  The septic inspection is good for six months in case the buyer cancels.  During the inspection the septic tank is pumped out, filters cleaned, risers and access lines inspected and repaired as required.  A copy of the report is filed with the county.  The inspection cost is averages around $550 plus the filing fee of $45.  On a newer house there are few issues.  When I listed a house in Queen Creek that was built in 2004 I did not except any issues.  Unfortunately this was not the case.  The septic tank would not drain.  Mesa Septic had to bring out a backhoe to find the problem.  The estimated cost was $3,000 assuming no problems with the leach field.  Understandably the sellers were very upset about this unexpected expense and were questioning why it had happened as they had never had an issue.  The problem was tree roots which had disconnected the line from the tank so it would not drain.  Then the sellers remembered they had planted a tree by the septic tank but had removed a few years later.   At a cost of $3,000 for the repair that was one expensive tree!  So the moral of the story is  1) Don’t plant trees close to your septic tank and 2) always schedule your septic tank inspection early so you know the cost of all the repairs needed.