Broker Newsletter
January 15, 2008
In This Issue
· Dual Agency
· Waiving the SPDS
· Continuing Education
· Broker Blog
· FHA Loan Changes
· Maximum Allowable Contributions
· EA vs. ER
· Getting Short Sales Approved
Revelation Links
Training Calendar
Current RE Issues
Homebuilders In Trouble
Several Valley New Home Subdivisions are Stalled – see list with status
Updated Buyer Advisory
Renters’ have a right to SPDS. Also, Buyer Advisory now available in mobile format for use on your phone.
Broker Blog
Read Our Online Broker Blog
Continuing Education Requirements
Enter your CE hours as you take them on the ADRE website
Contact Us
480.722.9800 Office
480.802.1599 Broker Hotline
http://www.mywestusa.com
brokerreview@westusa.com
Dual Agency: When to use and when to avoid
Dual agency is defined as a transaction in which one broker represents both clients. Dual representation can be even more complex when both parties are represented by one licensee. It can even be advantageous in some ways but it is not without its inherent risk of conflicts.
The ADRE Commissioner’s Rules state that “A licensee shall not … represent both parties to a transaction without prior written consent of both parties.” ADRE can sanction a licensee that has “acted for more than one party in a transaction without the knowledge or consent of all parties to the transaction.”
· If you have a listing, either for sale or for lease, and you find a buyer or tenant that is not working with an agent, you do not need to offer representation to that customer. You can write the contracts and collect the full commissions. The discussion you need to have with the customer before you show them your clients’ home is as follows: Pull out the Agency Election form, explain it to them, and let them know that you work for the sellers, checking boxes 43 and 44 and have them acknowledge that they are the buyers on line 47 before they sign.
· Remember that the time to discuss agency with a buyer is before you show the buyer any homes. Likewise, discuss agency situations with your sellers before you bring any buyers through the home.
· When working with short sales, it is important to know that when the contract goes through the bank approval process, it is very possible that they will not pay more than 4% total commission when one agent represents both parties.
Waiving the SPDS?
In section 4a of the purchase contract, lines 131 through 133, verbiage clearly states that the seller shall deliver a completed Seller Property Disclosure Statement (SPDS) to the buyer within 5 days of contract acceptance.
In today’s market with vacant properties and bank owned REO properties, we have become comfortable with accepting no SPDS in a transaction.
If your seller initially refuses to complete the SPDS on the basis that they have never occupied the property, or maybe they’ve never even seen the property, be persistent. All owners should be able to answer the questions in the “Ownership and Property” sections which refer to address, legal owner, retirement community, vacancy, whether it is rented, etc. Even the questions in the rest of the SPDS are generally worded as “are you aware?” which the seller can answer.
If you are working with a buyer and the seller will not provide a SPDS, provide your buyer with a blank copy of the SPDS before you have them waive the SPDS. Also have them sign and initial the bland SPDS for your records.
Continuing Education Requirements
Although license renewals are now valid for four years, don’t forget that Continuing Education Periods are still 2 years. Therefore, all agents are required to take 24 continuing education hours every 24 months. Remember to enter your hours online at the ADRE website as you earn them.
Visit Our Broker Blog for Answers
Don’t forget our online Broker Bulletin for West USA Revelation agents. We will post information on specific real estate and contract topics to assist you with your transactions. If you look today, you will find information on topics ranging from Using Lease Option Contracts to Mortgage Fraud as well as Short Sales. Additionally, I post the monthly Broker Newsletters there for you to refer back to.
FHA Loan Updates
Guidelines for FHA mortgages changed at the beginning of the year. The maximum loan amount is now $271,000, and the minimum down payment was raised to 3.5% of purchase price.
Remember to get your FHA buyers to sign the “For Your Protection Get a Home Inspection” form (A140 in A-Forms).
Don’t forget that FHA mortgages allow your lender to build a credit file for your clients with little to no credit history. We just saw a buyer get approved based on his rent, cell phone, and Tivo bill!
Maximum Allowable Contributions
When you are involved in a transaction where the seller is contributing to the buyer’s closing costs, make sure you know what the maximum allowable contribution is for the loan program that they buyer and lender intend to use. Compensation in lieu of repairs will also be counted towards the maximum allowable contribution and may become a deal killer. Look for alternatives like getting the seller to actually pay for the repairs directly through escrow at close of escrow.
Exclusive Agency vs. Exclusive Right to Sell
Lately we’ve had a few agents using the Exclusive Agency Listing Contract instead of the Exclusive Right to Sell contract. For clarification, the Exclusive Agency offers you only the right to be the “exclusive agent” as it states. Meaning that no other realtor will be enlisted to advertise the property and find a buyer. However, it offers you no compensation or rights if the sellers find their own. Always use the Exclusive Right contract; it provides you with the exclusive right to sell the property with no exceptions. If you and the seller agree upon a particular situation in which your compensation would be reduced or excluded, write it on page 3 of the listing contract.
Additionally, as our in-house short-sale negotiator has pointed out, for lender approval, it is critical that you use the ER paperwork in order to get the transaction approved and get paid.
Getting Short Sales Approved
Whether you are representing the buyer or the seller, there are a few key points to getting your short sales transactions approved:
n Make sure the seller’s personal package including their financial statements and hardship letter is prepared and ready to be submitted.
n Make sure the house is priced appropriately. Realize that before approving short sales, the lenders attain Broker Price Opinions (BPO’s) and use comparable sales to justify their losses. Do not price your short sale listings significantly below the comparables in a desperate attempt to attain a contract that will never get accepted anyway. Don’t let your buyers fall victim to ridiculously priced listings which tie your buyers up and impact their reality of market prices. Discuss the comps!
Monday, February 9, 2009
December Broker Newsletter
Broker Newsletter
December 18, 2008
In This Issue
· Contract 101 Q & A
· Representing Buyers in REO’s
· Announcing Broker Blog
· Quadrennial Code of Ethics Requirement
· Subsequent Offers on Short Sale Listings
Revelation Links
Training Calendar
Current RE Issues
Homebuilders In Trouble
Several Valley New Home Subdivisions are Stalled – see list with status
Updated Buyer Advisory
Renters’ have a right to SPDS
Broker Blog
Read Our Online Broker Blog
Code of Ethics Course
Take the course online before December 31, 2008
Contact Us
480.722.9800
http://www.mywestusa.com
brokerreview@westusa.com
Contract 101 Q & A
By AAR General Counsel Michelle Lind
Q – If a buyer elects to cancel a purchase contract during the inspection period, does the buyer need to state the reason for the cancelation?
A – Yes. The buyer is permitted to cancel the contract during the inspection period at their sole discretion; however, per section 6j of the purchase contract, the buyer is required to “deliver signed notice of items disapproved.” If the buyer fails to provide a reason for the cancelation, the seller can cure the buyer to provide a reason, and if the buyer fails to do so prior to the expiration of the cure notice, the buyer will be in breach of contract.
Tips for Representing Your Buyer in the Purchase of REO Property
REO property sales accounted for 20% of the total residential transactions in the valley in October. It is impossible to effectively work with buyers and avoid the REO properties.
In an effort to prepare you and your buyers for this specific type of transaction, our own top-producing agent Ann Schude has provided some tips from her own experience to help you navigate the process smoothly.
· Prepare your buyers for the timeline specific to REO property transactions. Some banks may take up to 4 weeks to get the seller signed addendums back from the bank.
· Make sure your buyer is using a lender that will not require the seller signed contract to begin working on the loan. It is imperative that your buyer uses the time in which you are waiting for signed contract and addendums to secure financing.
· Let your buyer know in advance that it is not unusual for the transaction to close a few days, even weeks, late.
· In most cases, the bank will require that the earnest money to become non-refundable after the inspection period. Ensure that your buyer’s financing is solid before entering into the contract.
· Each bank defines the beginning of the inspection period differently – some start upon verbal acceptance while others start on the official contract date. Carefully mind the contract specific timelines for the protection of your buyer.
· If your buyer is paying cash, have them investigate title insurance policies with the title company. They may wish to purchase an owner’s policy for protection against title issues.
· As with all of your buyer transactions, make sure your buyer finds acceptable homeowners’ insurance specific to the property during the inspection period. Excessive previous insurance claims on the property will affect the cost of insurance and may give your buyer insight to past repair issues.
· For your own protection, make sure that your buyer signs off on waiving their rights to Sellers Property Disclosure Statements and Clue Reports on bank owned properties. You can include this verbiage on page 7 of the purchase contract or in an addendum. Also acquire a signed BINSR and Final Walkthrough.
· Prepare your buyer for higher than normal escrow fees. Ann’s experience is that escrow fees may be as much as double normal fees -- $650 per side in one particular transaction. I checked with our partner Fidelity Title, and they charge the standard escrow fees on REO transactions, and the fees are calculated from the purchase price of the property.
Your buyers may benefit from the aggressive prices of REO properties, and with these tips, you can provide excellent service by preparing your buyers for the process and protecting their interests.
Visit Our Broker Blog for Answers
We have started an online Broker Bulletin for West USA Revelation agents. We will post information on specific real estate and contract topics to assist you with your transactions. If you look today, you will find information on topics ranging from Using Lease Option Contracts to Mortgage Fraud as well as Short Sales.
Review the Bulletin periodically for assistance with topical real estate issues.
Quadrennial Code of Ethics Requirement
Arizona Association of Realtors requires that every REALTOR® complete 2½ hours of Code of Ethics training in between January 1, 2005 and December 31, 2008. If you were new to the business during that period of time, you should have already taken the class as a new member requirement; however, in not, you only have a couple of weeks to squeeze it in.
Use the link provided to the left to take the course online at no charge to you now. The penalty for not taking the class before the deadline is a suspension of your real estate board membership.
Exclusive Agency vs. Exclusive Right to Sell
How should you handle subsequent offers on short sale listings when you represent the seller?
We have all heard that submitting multiple offers to lenders for approval on short sale transactions can stall the approval process; however, we have to keep the sellers’ best interests at heart through the process and follow the contract provisions as well. Once a seller has accepted a contract with Buyer A with a short sale addendum, and that contract has been submitted to the lender for approval, it is not in your seller’s best interest to submit additional offers to the bank until they respond to the initial offer.
What if Buyer B submits an offer $10,000 higher than the initial contract with Buyer A?
n If the seller accepts the offer with the short sale addendum, you are required per lines 17-18 of the addendum to submit the contract to the lender for approval within 5 days of contract acceptance.
n If the seller does not accept the offer, or accepts it only as a back up contract with verbiage such as “this contract is contingent upon cancellation of the contract in first position between parties…”, then you are not obligated to provide the contract to the lender for approval until it becomes a contract.
You must present all offers to your seller unless they specifically give you written permission not to present offers. At the initial listing appointment, you should prepare your seller for the procedure in which you will handle subsequent purchase offers to minimize the approval process delays and maximize your sellers’ chances of a successful short sale.
December 18, 2008
In This Issue
· Contract 101 Q & A
· Representing Buyers in REO’s
· Announcing Broker Blog
· Quadrennial Code of Ethics Requirement
· Subsequent Offers on Short Sale Listings
Revelation Links
Training Calendar
Current RE Issues
Homebuilders In Trouble
Several Valley New Home Subdivisions are Stalled – see list with status
Updated Buyer Advisory
Renters’ have a right to SPDS
Broker Blog
Read Our Online Broker Blog
Code of Ethics Course
Take the course online before December 31, 2008
Contact Us
480.722.9800
http://www.mywestusa.com
brokerreview@westusa.com
Contract 101 Q & A
By AAR General Counsel Michelle Lind
Q – If a buyer elects to cancel a purchase contract during the inspection period, does the buyer need to state the reason for the cancelation?
A – Yes. The buyer is permitted to cancel the contract during the inspection period at their sole discretion; however, per section 6j of the purchase contract, the buyer is required to “deliver signed notice of items disapproved.” If the buyer fails to provide a reason for the cancelation, the seller can cure the buyer to provide a reason, and if the buyer fails to do so prior to the expiration of the cure notice, the buyer will be in breach of contract.
Tips for Representing Your Buyer in the Purchase of REO Property
REO property sales accounted for 20% of the total residential transactions in the valley in October. It is impossible to effectively work with buyers and avoid the REO properties.
In an effort to prepare you and your buyers for this specific type of transaction, our own top-producing agent Ann Schude has provided some tips from her own experience to help you navigate the process smoothly.
· Prepare your buyers for the timeline specific to REO property transactions. Some banks may take up to 4 weeks to get the seller signed addendums back from the bank.
· Make sure your buyer is using a lender that will not require the seller signed contract to begin working on the loan. It is imperative that your buyer uses the time in which you are waiting for signed contract and addendums to secure financing.
· Let your buyer know in advance that it is not unusual for the transaction to close a few days, even weeks, late.
· In most cases, the bank will require that the earnest money to become non-refundable after the inspection period. Ensure that your buyer’s financing is solid before entering into the contract.
· Each bank defines the beginning of the inspection period differently – some start upon verbal acceptance while others start on the official contract date. Carefully mind the contract specific timelines for the protection of your buyer.
· If your buyer is paying cash, have them investigate title insurance policies with the title company. They may wish to purchase an owner’s policy for protection against title issues.
· As with all of your buyer transactions, make sure your buyer finds acceptable homeowners’ insurance specific to the property during the inspection period. Excessive previous insurance claims on the property will affect the cost of insurance and may give your buyer insight to past repair issues.
· For your own protection, make sure that your buyer signs off on waiving their rights to Sellers Property Disclosure Statements and Clue Reports on bank owned properties. You can include this verbiage on page 7 of the purchase contract or in an addendum. Also acquire a signed BINSR and Final Walkthrough.
· Prepare your buyer for higher than normal escrow fees. Ann’s experience is that escrow fees may be as much as double normal fees -- $650 per side in one particular transaction. I checked with our partner Fidelity Title, and they charge the standard escrow fees on REO transactions, and the fees are calculated from the purchase price of the property.
Your buyers may benefit from the aggressive prices of REO properties, and with these tips, you can provide excellent service by preparing your buyers for the process and protecting their interests.
Visit Our Broker Blog for Answers
We have started an online Broker Bulletin for West USA Revelation agents. We will post information on specific real estate and contract topics to assist you with your transactions. If you look today, you will find information on topics ranging from Using Lease Option Contracts to Mortgage Fraud as well as Short Sales.
Review the Bulletin periodically for assistance with topical real estate issues.
Quadrennial Code of Ethics Requirement
Arizona Association of Realtors requires that every REALTOR® complete 2½ hours of Code of Ethics training in between January 1, 2005 and December 31, 2008. If you were new to the business during that period of time, you should have already taken the class as a new member requirement; however, in not, you only have a couple of weeks to squeeze it in.
Use the link provided to the left to take the course online at no charge to you now. The penalty for not taking the class before the deadline is a suspension of your real estate board membership.
Exclusive Agency vs. Exclusive Right to Sell
How should you handle subsequent offers on short sale listings when you represent the seller?
We have all heard that submitting multiple offers to lenders for approval on short sale transactions can stall the approval process; however, we have to keep the sellers’ best interests at heart through the process and follow the contract provisions as well. Once a seller has accepted a contract with Buyer A with a short sale addendum, and that contract has been submitted to the lender for approval, it is not in your seller’s best interest to submit additional offers to the bank until they respond to the initial offer.
What if Buyer B submits an offer $10,000 higher than the initial contract with Buyer A?
n If the seller accepts the offer with the short sale addendum, you are required per lines 17-18 of the addendum to submit the contract to the lender for approval within 5 days of contract acceptance.
n If the seller does not accept the offer, or accepts it only as a back up contract with verbiage such as “this contract is contingent upon cancellation of the contract in first position between parties…”, then you are not obligated to provide the contract to the lender for approval until it becomes a contract.
You must present all offers to your seller unless they specifically give you written permission not to present offers. At the initial listing appointment, you should prepare your seller for the procedure in which you will handle subsequent purchase offers to minimize the approval process delays and maximize your sellers’ chances of a successful short sale.
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