Spuds are what REALTORS call a Seller’s Property Disclosure Statement (SPDS). It is a multi-page document that sellers often provide with information about the house and all of its major systems (eg, air conditioning, plumbing, roof, etc.).
In Arizona, sellers are required to disclose any material facts of which they are aware regarding the property. The SPDS is a form created by the Arizona Association of REALTORS (AAR) to standardize the way sellers disclose material facts about property.
The standard AAR residential purchase contract has a provision that requires sellers to provide SPDS to buyers within 5 days of contract acceptance. Buyers have until the end of the inspection period or 5 days from receipt of the SPDS (whichever is later) to report any disapproved items disclosed on the SPDS.
Contrary to what many people think, the SPDS is not required by law. It is just a provision in the standard AAR Residential Purchase Agreement. Sellers are required by law to disclose material information. Sellers can do this in any other document they choose.
The other common myth about the SPDS is that once the seller provides it, they are no longer required to disclose new material facts. That couldn’t be further from the truth. The seller’s obligation to disclose remains throughout the escrow period. If the seller learns of a material fact that was not originally disclosed, the seller is required to disclose it and give the buyer 5 days to review and notify the disapproved items. This is normally done by issuing a revised SPDS.
Many sellers will not accept contracts that require them to provide an SPDS and will ask buyers to remove the provision from the contract. Banks that sell foreclosures will typically ask buyers to waive SPDS based on the claim that the bank has limited knowledge about the property. One important thing to remember is that even when SPDS is waived, the seller still has an obligation to disclose all material facts.
Your REALTOR should review the SPDS, its importance, and the implications when sellers ask buyers to waive the SPDS. Buyers should understand all the ramifications and make an informed decision on whether or not they are willing to forego SPDS.
And before closing this article I would like to leave you with a thought. If you are a seller, I strongly recommend that you prepare an SPDS when you put the property on the market. You can even make the document available to potential buyers. It will show them that you are aware of their obligations and that if they decide to submit an offer, it will not cause any delay in the process. Very few sellers do that and it usually has such a positive impact on potential buyers. If you do this when you list the property, once you accept an offer, all you have to do is re-read the document and make sure it’s still valid and up-to-date. Ask your REALTOR to help you fill out the SPDS as soon as possible.