How do you buy a second home in Scottsdale, Arizona?

Buying a second home in Scottsdale, Arizona means applying for a loan as a second home, checking the HOA's rules and the property tax class, and planning for the months the house sits empty before you make an offer. A lender treats a second home differently from the house you live in and from a rental, an HOA can limit whether you rent it out, and the county taxes it as a non-primary residence. Each of those is easier to handle before you write the offer than after you close.

I'm Jen Keene, a REALTOR® with eXp Luxury in Scottsdale, AZ, helping people buy a second or part-time home. I hold the Resort and Second-Home Property Specialist (RSPS) certification, and I walk every buyer through pre-approval and the buyer broker agreement before they see a single house.

Lenders sort every mortgage by how you will use the home: a primary residence, a second home or an investment property. Fannie Mae's Selling Guide defines a principal residence as a property the borrower occupies as their primary residence, and an investment property as one the borrower owns but does not occupy. Freddie Mac's published loan-to-value limits list second homes and one-unit investment properties as their own categories, with a different maximum from a primary residence.

A second home has requirements of its own. According to Fannie Mae's Selling Guide, you must occupy it for some portion of the year, it has to be a one-unit dwelling suitable for year-round occupancy, and you must have exclusive control over it. It can't be a rental property or a timeshare, and it can't be subject to an agreement that gives a management firm control over who occupies it. Rental income is allowed, but the guide says the loan is eligible as a second home only if that income isn't used to qualify.

Second homes and investment properties also carry extra pricing. Fannie Mae's guide says a loan-level price adjustment applies to certain loans on second homes and to every loan on an investment property. Down payment and rate figures change, so I don't quote them here. Tell your lender how you plan to use the home before you apply, and ask for today's numbers in writing. Here's how financing works when you buy a home.

The Maricopa County Assessor sorts residential property into legal classes. Class 3 is a primary residence, and Class 4 is a residential rental (4.2) or a non-primary residence (4.1), which is where a second home lands. The Assessor defines a primary residence as your one main home, where you or a qualified family member live more than seven months of the year, and says a vacation home can't qualify. Arizona law describes class three the same way, as property used for residential purposes and occupied by the owner as the owner's primary residence (A.R.S. 42-12003), and A.R.S. 42-12004 covers class four, including residential property that is solely rented.

The assessment ratio is the same for both. A.R.S. 42-15003 sets it at ten percent of full cash value or limited valuation for class three, and A.R.S. 42-15004 sets it at ten percent for class four. What changes is the state aid to education credit. A.R.S. 15-972 applies that credit to owner-occupied residential property, so a second home isn't eligible for it. Look up the figures for the specific home you're buying on the Maricopa County Assessor's and Treasurer's websites, or ask me and I'll pull them. Here's how property tax works in Scottsdale.

Don't claim a second home as your primary residence. According to the Maricopa County Assessor, a home doesn't qualify if you claim primary residence or property tax relief for a home in another state, and an owner who doesn't answer the Assessor's verification notices can see the home reclassified as Class 4.1, and the County Treasurer may then apply a civil penalty that can equal the state aid credit. If you later move here full time, the Assessor accepts a Request for Residential Legal Class Change with proof of residency, such as a driver's license or voter registration card showing the property address. Questions about your state income tax or federal taxes belong with a CPA, and I'd ask yours before you buy.

Arizona law requires the HOA's documents to reach you after your offer is accepted. For a planned community, A.R.S. 33-1806 lists the declaration, bylaws and rules, the minutes of the last three open board meetings, the operating budget, the most recent reserve study if one exists, any special assessments and unresolved violations. For a condominium, A.R.S. 33-1260 lists the same kind of package. If the association has fewer than 50 properties, the seller delivers the documents within 10 days after accepting your offer, and with 50 or more, the seller notifies the association and the association has 10 days to deliver them.

Read the declaration's rental rules first. A.R.S. 33-1806.01 says a member may use the property as a rental unless the declaration prohibits it, and must follow the declaration's rental time period restrictions, and A.R.S. 33-1260.01 says the same for a condominium unit owner. A minimum lease length in the declaration can therefore rule out short stays, whatever the city allows. Here's what to know about HOA rules in Arizona.

If the home belongs to more than one association, such as a community association and a sub-association, the statute requires a statement identifying each association's disclosure report and resale fee. Each association's documents say what it maintains, so ask both what they cover while you're away.

You can if the HOA, your lender and the city all allow it. Arizona law says a city may not prohibit vacation rentals or short-term rentals (A.R.S. 9-500.39), and the same statute lets a city require a license, neighbor notification, emergency contact information and liability insurance. The City of Scottsdale's page says all properties offered for rent for less than 30 days require a Scottsdale license. Its page for owners lists a Transaction Privilege Tax license from the Arizona Department of Revenue, notice to neighbors within 30 days of receiving the license, at least $500,000 in liability coverage (from your own policy or through an online lodging marketplace) and a 24-hour emergency contact. It also lists a $250 annual license fee, so check the page for the current amount.

County registration is a separate step. Under A.R.S. 33-1902, an owner of residential rental property keeps information on file with the county assessor, and an owner who lives outside Arizona must name a statutory agent who lives in Arizona to accept legal service. The Maricopa County Assessor's page says the same, and the City of Scottsdale lists registration with the Maricopa County Assessor before the property is occupied. The Assessor's page doesn't say whether a short-term rental counts as residential rental property, so ask the Assessor and a licensed Arizona attorney how it applies to your plan. Here's what to know about rental and investment property in Scottsdale.

Triple-I says many homeowners policies limit or exclude coverage when a property has been unoccupied for typically 30 to 60 consecutive days, and that many standard policies limit theft and vandalism coverage once a home is considered vacant. The National Association of Insurance Commissioners says vacant or unoccupied homes can leave the owner exposed to loss and liability that a homeowners policy may not cover. Triple-I advises you to tell your insurer if the home will be empty for an extended period and to ask about a vacant home policy or endorsement. Triple-I also says a standard policy may not cover losses while the home is rented out, so tell the insurer about any rental plan too. Before you close, I'd ask the insurance agent for the policy's wording on vacant and unoccupied homes in writing.

The City of Scottsdale's water page says to know where your property owner's cut-off valve is and how to use it, and to turn the water off at the main shut-off valve if a pipe bursts, so whoever checks on your house should know where yours is. For a longer absence, the city's suspend service page says a customer who plans to leave for an extended period can suspend water service and billing for a minimum of six consecutive months, and that the request takes effect within 3 to 5 business days after the city gets the form.

The biggest risk when you're not in town is a fake wire instruction. The CFPB says to confirm wiring instructions with your trusted representatives before you send anything, to never follow instructions in an email, and to verify the account name and number using a phone number you agreed on earlier, not one from an email. First American Title's guide says the same and adds that legitimate wiring instructions almost never change in the middle of a transaction, so a change is a red flag. Here's what happens during escrow in Arizona, including where wire fraud shows up.

If you can't be in Arizona on closing day, I'll ask the title company how an out-of-state buyer signs and whether your lender accepts that way of signing, and I'll do it when we write the offer instead of the week of closing. Here's who pays what at closing in Arizona.

• Planning a rental the loan or the HOA rules out. Fannie Mae's second home rules exclude a rental property and a management agreement that controls occupancy, and the declaration can set a minimum lease length.
• Claiming the home as your primary residence. The Assessor says a vacation home can't qualify, and a wrong classification may bring a civil penalty.
• Leaving the house empty without telling the insurer. Coverage can be limited after 30 to 60 consecutive days, according to Triple-I.
• Wiring money from an email. Confirm every instruction by phone, on a number you already had.
• Skipping the HOA documents. Arizona law gives you the package after your offer is accepted, so read the declaration and the reserve study when it arrives.

If you live out of state, buy in a community with an HOA, and plan to rent the home for a few weeks each winter, the steps come in a set order. Tell the lender about the rental plan first, because Fannie Mae's second home rules rule out a rental property and a management firm that controls occupancy. Read the declaration next for the rental time period. If the declaration allows short stays, the City of Scottsdale requires a license for any stay under 30 days, along with the Transaction Privilege Tax license, the neighbor notice, the $500,000 liability coverage and the emergency contact.

Then tell the insurer, because a standard policy may not cover losses while the home is rented out, and ask the Maricopa County Assessor and an Arizona attorney whether the county registration and the in-state agent apply to you. A CPA can answer how the rental income is taxed. I can walk through the sequence with you before you make an offer, and I'll check the current rules for the address you're looking at.

Start with your lender, so you know what a second home loan looks like for you. Here's how buying works in Arizona, and here's more on buying a resort or second home. If you'd like to talk it through, get in touch or call me at (480) 203-6605.