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.