October Newsletter

	Broker Newsletter
October 15, 2009
In This Issue · Protect Yourself When Listing Short Sales · Earnest Money Rules · Time Running Out for Buyer Tax Credit · Appraisal Contingency Notification · SureClose Reminder Revelation Links Training Calendar Current RE Issues IRS Tax Credit Information Information on the in’s and out’s of the tax credit for first-time homebuyers. HUD Homes A list of HUD homes available for purchase by city. Updated ARMLS Rules A table of Old vs. New ARMLS Rules Broker Blog Read Our Online Broker Blog Contact Us 480.722.9800 Office 480.802.1599 Broker Hotline http://www.mywestusa.com brokerreview@westusa.com	Protect Yourself: Short Sale Listing Risks With Short Sale transactions representing a large portion of our market, be aware of the following potential risks to you as the agent. Remember that the short sale transaction is a regular real estate transaction with a buyer and a seller. It just has a specific contingency that is the short sale negotiation between the seller and the seller's lender. Do not represent yourself as an “expert” on short sales, and whenever your client asks “should I?” followed by anything to do with short sale, loan payments, or foreclosures, refer them to their attorney! 1. Misrepresenting Tax Consequences -- Although a law was passed in 2007 directing the IRS not to count forgiven mortgage debt as income, the provision in limited. It applies only to purchase money; it does not apply to second homes or investments; and it doesn't apply to a cash-out refinance. There is also a dollar limitation. Do not say that there is no tax consequence. Advise clients to speak with their accountants about whether or not they may experience a tax consequence. 2. Acting on Inappropriate Lender Requests for Seller Contributions --Lenders may go after money that sellers have in the bank or retirement accounts as a settlement to approve the short sale. The lender may communicate the demand to the realtor to get the seller to sign a note as a condition of the sale. If the loan qualifies under the state anti-deficiency statutes, the lender has no claim to this money, and agents that suggest otherwise may be at risk for negligence claims. If a lender demands money or a note, allow them to communicate it to the client directly. 3. Providing Poor Oversight of a Short Sale Negotiator -- If you take a hands off approach to your short sale negotiators business, you could be charged with negligence if a deal falls apart. Make sure that you and your negotiator have a process for communication. Keep a communication log to ensure that your seller's transaction is being worked on. 4. Facilitating Transactions not Listed on the HUD-1 -- An investor may try to sweeten the deal for a seller by offering an incentive for the seller to accept and present their contract to the bank for approval. The seller's lender will frown upon the seller walk away from the home with money when they are taking a loss on it. Inflated values for personal property could draw ties to loan fraud if they are considered deceptive. Do not broker deals for personal property. ** excerpt from Sevrar News Magazine article by Robert Freedman Time Running Out for Tax Credit There is a lot of focus in the media right now about the expiration of the current Tax Credit bill. Additionally, there is a lot of talk about whether or not it will be extended and potentially even increased. Did you know…? The greatest motivator for all people is... the fear of loss. Make sure that your buyer contacts know that they must close escrow prior to December 1st, 2009 to take advantage of the $8000 tax credit. That means that unless they are a cash buyer, they must have a home under contract by the end of October if they have a chance of getting it closed on time. Earnest Money Receipts and ADRE Rules Please remember that the Arizona Department of Real Estate requires that in accordance with our fiduciary duty of accounting, we must have escrow open within one business day of our contract date unless otherwise stated in the contract. In the event of an ADRE audit, we may be subject to a $1000 fine for each non-compliant file. Since contracts are due to the office for review by day 4, you should be able to submit the earnest money receipt with your contract for review. Our office policy is that you must submit the earnest money receipt within 24 hours of submitting your contract. If you represent the buyer, and you are aware of circumstances that will prevent your buyer from opening escrow within one business day, disclose that in the purchase contract. For example, if you have an out of state buyer that will be wiring funds, write in section 8a of the contract “Buyer will be wiring funds to open escrow within 3 days of contract acceptance.” If you represent the seller, and the buyer fails to open escrow in a timely manner, you should cure the buyer or have the parties sign an addendum disclosing the agreed upon change regarding the deposit of earnest money. Appraisal Issues In today’s market, it is very common for appraisals to not meet agreed upon purchase values. It is important that you are aware of the timelines associated with the appraisal contingency as the buyer only has 5 days to evoke their rights to cancel and retain the earnest money. When you receive notice that your buyer’s appraisal is less than the agreed upon purchase price, have the discussion with your buyer about their options: 1. The buyer can exercise the appraisal contingency in section 2c of the contract and elect to cancel the contract and receive their earnest money back. 2. They buyer can discuss with their lender the possibility of coming to the table with additional cash. For example, if the agreed upon purchase price is $110,000 and the buyer has an FHA loan with 3.5% down payment, but the home only appraises for $100,000, the buyer may be able to get the loan off the $100,000 price by bringing the $3500 down (3.5%) plus the difference to the contract price of $10,000 for a total of $13,500. 3. The buyer and the seller may be able to negotiate another price anywhere in between the appraised value and the original contract price. “Buyer and Seller agree to reduce the purchase price to $XXX,XXX. Buyer received notification on October 1, 2009 that the subject property appraised at a value of $XXX,XXX. Seller must sign and deliver this addendum back to the buyer by 5pm on October 6th, 2009 OR this contract will be deemed cancelled per the appraisal contingency in section 2C of the contract and all earnest money shall be refunded to the buyer.” This finite verbiage ensures that action will be taken during the five day period that the buyer has to cancel. If the seller does not return by the deadline, send cancelation paperwork to title with the incomplete addendum. If you represent the seller, I would certainly want to be able to show the seller a copy of the appraisal before I would suggest they agree to a price reduction. Additionally, it is important to read the appraisal. Many times there are errors in properties selected, values, etc. that may be contested with the intention of obtaining a revised appraised value. Sureclose Reminder: Per ADRE, all contracts and documents must be reviewed within 5 days of being signed by the buyer and seller. Please submit your paperwork to the office as follows: New Contracts: · Fax to 1.888.600.0161 · Email to revcontract@mysureclose.com New Listings: · Fax to 1.888.600.0162 · Email to revlisting@mysureclose.com Add to Files: · Fax to 1.888.600.0163 · Email to addtofiles@mysureclose.com When a closing package has been received, and a check is processed, you will be sent an email notification that will either state that your check is ready or that you have remaining file requirements. Please check your Sureclose file if you have remaining requirements, and you will be able to see exactly what we are looking for. ALL CAPS REQUIREMENT MESSAGES: We have recently changed our office accounting and record keeping software system. Our old accounting and file management system is no longer being used; however, it still has several current listings and transactions files. It is very possible that you will continue to receive some messages from the old system until all of the old files have been cleared. If you receive a “PAGE 01” email message with a message in all capital letters, please do not be alarmed. All file requirement or information about your checks will be sent through Sureclose.