Hi All!

Received an email from a student named Debbie about time frames for disclosures and documents. Here's my response. I hope it helps! :-)

Debbie: We (company) are using Docusign which is a great time saver but I’m still confused as to how to determine time frames for all the various disclosures to be completed.  Any help or suggestions I can get is appreciated.  

Diana: If you take a look at the CAR contract, the seller usually has 7 days  from acceptance to deliver all required disclosures and reports to the buyer. (See page 5 14A) .

I like to see the disclosures and reports delivered to the buyer at MINIMUM 5 days prior to the buyer’s inspection contingency removal is due (See page 5 item 14B(3)). There is a clause allowing the buyer 5 days from delivery of the disclosure or document to review prior to removing the inspection contingency 

The Inspection/Loan/Appraisal/Deposit and Increased Deposits usually have a specified date for when they are due on the contract.

Hope this Helps! 

Oh what a slippery slope we climb when trying to list and purchase a condominium.

FHA has tightened the thumb screws on condominium purchases.

The reason for this is they don't want to loan on condos where the homeowner's association (HOA) is unable to pays bills (i.e. maintain the common areas) due to too many vacancies or current homeowners behind paying monthly dues.

So what's the big deal? A lot of perspective buyers of a condominium will be using an FHA loan to purchase (decent rates and low down requirements). That leaves all-cash buyers and there are not that many running around wanting to purchase a condo with high dues and defunct HOA!

Both the above are creating a vicious cycle with some condominium complexes.

1-Can't get loans on units for sale

2-HOA dues are not paid

3-Complex is not kept up

FHA has created an approval process that all of us in real estate land need to pay attention to.

Condominium complexes must go through a complex certification process and be approved. This can take months! (Note there are no longer spot approval).

A pro-active HOA will have begun the process as an added value service to unit owners who are or may in the future be selling. A smart agent will have confirmed its approval status PRIOR to listing and/or writing an offer on the property.

There are two ways to determine FHA approval;

1-Contact a loan officer and ask, "Is this condo FHA approved?"  

Cost-FREE

2-Visit  https://entp.hud.gov/idapp/html/condlook.cfm to check status.

Cost-FREE

Buyer's Agents DO NOT WASTE TIME writing an offer on a condo until you have verified FHA status!  Status should be disclosed to ALL buyers.

Listing Agents Find out the status of certification BEFORE you list the property. Be willing to disclose this to any perspective buyers.

Being open and honest up front is going to prevent a lot of wasted time for the team and disappointment for the buyer and seller.  EYES WIDE OPEN BABY!

Looks like FHA is going to play nice and wave the 90 day flip rule again for 2011.

Below are general guidelines that HUD uses to identify properties that are exempt from the 90 day rule. As I mentioned, some banks have adopted this criteria as well. Others may not be willing to loan, period.

1-All transaction must be an arms-length loan with no identity of interest between the buyer and seller or other parties involved.

2-The property cannot have a pattern of previous flipping in the past 12 months (One previous flip a year people!)

3-If the seller is earning more than 20% of what they originally purchased the property for, then the lender has to justify the markup with information about renovation OR a second appraisal.

If you recall in my previous posting about this, many banks have adopted this same criteria for their loans and it becomes a problem when no one bothers asking the seller if they have owned the property for more than 90 days.

What this means to the team is that we all have to wait to fund the loan (occurs one business day prior to or on the day of recording) until the seller has a history of owning the property for 90 days! Types of sellers who might be in this situation would be REO and investment flippers.

Buyer and Seller agents should be pre-emptive and avoid unnecessary/unanticipated delays in close.

1-Listing agent should always ASK the seller if they have owned the property for more than 90 days.

2-Buyer Agent should always ASK the listing agent if the seller has owned for property for more than 90 days.

OK, I think I've made it clear that I LOVE the use of email for communication between team members during a transaction! It performs a number of functions at once which helps me save time!

Unfortunately, some people forget they are working in a professional environment and use email to personally attack other team members when they are frustrated.

My hubby taught me long ago to "Never Burn Bridges in Real Estate." Because you never know when you may forced to work with that person again.

I believe email Bridge Burning is even worse, because the documentation can be saved for many years to come by the recipient of the attack and possibly be used against you in the future.

A good question to ask yourself is does this letter reflect how you and your company want to be perceived? A friend recently received a scathing email from a disgruntled customer and I wondered what the CEO of her company would say if a copy had been delivered to them?!

When you believe you have a legitimate complaint about someone, stay away from personal attacks (You're lazy, you only want to get paid, you don't care, etc.).

Instead focus on the FACTS ONLY and clearly identify what you want. Also, provide consequences if they don't follow through (Note-consequences should only be used as a last resort!)

Here's an example;

Dear Bob,

I am writing this letter regarding your unresponsiveness to our email and phone requests.

Specifically, your input is required immediately to help assist the rest of the team in closing the transaction.

We have attempted to contact you via email and phone on the following dates with no response..

1/2 email

1/3 email

1/4 email and  voice mail message

1/5 left message with receptionist at your office

Once again, we ask that you immediately contact our office at xxx-xxx-xxxx by 12 pm tomorrow or we will assume that you are unable to perform and will contact your supervisor for further advice.

Thank you in advance for your cooperation in this matter.

As you can see, I am in no way personally attacking Bob by assuming I know why he is not responding (he doesn't know how to do his job, he's hiding something, he is doing drugs, his phone and email are down, he had a death in the family).

Bob may not be happy with me, but I have stated the facts only. I have maintained my professional integrity and asked him respectfully to follow through while assuming his also the consummate professional.

Spoke with another Attorney at California Association of REALTORS® last week about acceptance. It's interesting how different attorneys at CAR have separate interpretations of the contract.

3 things must happen to have a binding offer.

1-Buyer and Seller must sign the contract/counter

2-Offer and Counter must be delivered back to the maker of the Contract/Counter

3-Acknowledgement of receipt must be communicated by the maker of the contract/counter.

Many people are confused that as long as they deliver it (email/fax/mail/drop off) that a deal is consummated. But until the maker of the counter/contract personally receives it (Opens the email attachment/Retrieves the contract from the FAX machine/Picks up the contract from the front desk) and provides an acknowledgement (either in writing or verbal), you may not have a deal.

Time frames for the contract (acceptance date) begins the day the maker of the offer/counter acknowledges receipt.

This provides a challenge for the rest of the team identifying the acceptance date when an acknowledgement was verbal. I have ALWAYS advocated use of written acknowledgement on the Counter/Contract so it's very clear to all when the timelines begin.

NHD and REO Clarification

Although CAR's Natural Hazard Disclosure form is not REQUIRED to be completed by an Asset Manager, the seller is STILL obligated to disclose if the property is located in a high fire, flood and earthquake zone. This is best completed by ordering and paying for a Natural Hazard Disclosure report prepared by a neutral third party.

CAR recommends that if a report is not available the NHD be incorporated into disclosures for the property.

BTW it's not California Association of REALTORS®  who decides what disclosures are required. It's the California Department of Real Estate who passes laws. CAR helps us understand  the requirements and also offer recommendations from their attorneys and other specialists. Who Knew?!

WooHoo! CAR has released their 2011 disclosure requirements. Here

are several items I'm paying attention to for this year;

Smoke Detector and Water Heater Statement of Compliance

Hooray for California Association of REALTORS® for incorporating the smoke detector and water heater statements of compliance into the Real Estate Transfer Disclosure! As a result CAR has indicated if the RETDS is used, a separate disclosure is not necessary. This means one less disclosure to track and obtain signatures!

I have just one teeny, tiny concern though. For the newer real estate agent, they may not know what the compliance law is and fail to ensure a working smoke detector(s) in the house and the water heater is properly strapped prior to close. The separate disclosure describes this in detail.

If you are confident you won't forget this mandatory compliance for California properties, then by all means eliminate the separate disclosure.

Carbon Monoxide

New law effective July 1st requires  existing California Single Family homes  to have a Carbon Monoxide detection device installed. Per CAR, no additional disclosure is necessary as it's already addressed on page 1 of the Real Estate Transfer Disclosure Statement.  Again, let's hope agents remember to confirm this prior to close.

HERS

The Home Energy Rating System Program booklet is now a requirement and describes whole house home energy rating services and benefits, opportunities to invest in energy efficiency improvements a the time-of-sale plus more! Here's a link to download the booklet for your office http://www.energy.ca.gov/HERS/booklet.html

The bummer is it's NOT yet incorporated into our earthquake/lead/mold booklet and receipt. So a separate acknowledgement of receipt will need to be generated.

New 2011 Disclosure Charts and Summary Chart for Disclosure requirements

Remember to download a copy of the new 2011 disclosure charts from CAR.org. These disclosures are MANDATORY they be incorporated into certain transactions.

These charts help you to identify what to incorporate for REO/Short Sale/Probate/Land etc.

I always save a copy on my desktop so it's available any time I have a questions about which disclosure to use.

Be sure to also ask your Broker for their office disclosure requirement as well!

I found a VERY cool disclosure chart which further clarifies when certain disclosures should be used.

Check out CAR.ORG's website. Go to Legal/2011 Disclosure Charts/Summary Disclosure Chart

I have had several Transaction Coordinators (TC's) who attended my classes want clarification on agent responsibilities during a transaction.

It really depends on what the TC and agent needs are. If a TC is working for ONE agent and receiving a salary, they may be more willing to add on extra tasks to the job description agreement.

If a TC is working for multiple agents on a per transaction fee basis, then it's important for the TC to set limits on activities so she can be productive and fair to everyone!

First, let's discuss the differences between a licensed an unlicensed Coordinator and their responsibilities...

In my opinion, there are NONE!

If a licensed TC IS explaining contracts, disclosures and negotiating on behalf of  the client, then an Agency Disclosure should be signed by the TC and client, AND in my opinion, because the TC's liability is increased, SHOULD receive a portion of the commission and carry E&O insurance. See  a further dialog of this in my posting Licensed vs. Unlicensed Coordinators.

Now let's discuss the role of the agent using the professional services of a Transaction Coordinator (Full Service). These are GENERAL guidelines and will vary depending upon the job description agreement and relationship the TC has with the agent.

1-Provide at minimum once weekly updates to their clients

This is important-I have had buyers and sellers complain that their agents never contacted them once during the transaction.

2-Negotiate terms on behalf of their client

See above

3-Prepare and deliver Contingency Removals, Notices to Perform, and Addenda for signature and delivery to the other agent

These can be extremely time sensitive items that the agent should take direct responsibility for  preparing and delivering. A delay in delivery could mean disaster for the buyer and seller.

4-Follow through with TC requests in a timely manner.

If you are unable to follow through OR disagree, please do not ignore the TC's request! This is a waste of their time and yours. A good Coordinator will continue to request until they receive an answer. A quick response will reduce frustration for both of you.

5-Keep the TC and other team members notified of any changes to the terms, team and timelines of the transaction.

A TC will do a much better job for you if they have a clear understanding of when things are due and who is on the team

6-Participate in solving complex problems and communicating to other team members.

Agents who pass off complex problem solving to their TC are not doing their client any favors. A good TC can certainly provide you of examples of what other agents have done in the same situation, but ultimately it's up to the agent and their client to decide the best course of action. It is NOT the TC's job to negotiate, nor explain the agent's and client's position to the other agent. If an agent is unsure of  what to do, then they SHOULD speak with the Broker or Office Manager who are ultimately the decision makers on how an issue is to be resolved.

7-Obtain updates from the lender

The buyer's agent SHOULD dialogue with the loan officer before and during a transaction. Since the buyer's agent is preparing and assisting the buyer to remove the loan contingency, it's important they communicate directly with the loan officer to have a clear understanding of loan approval.

Confusion can be avoided between the role of the TC and agent by creating and signing a job description agreement before hiring. 

I created an agreement for TC's I hired for my hubby's office to help me to train and stay within the parameters of the agreement.

Visit my website for purchase of a downloadable pdf version. (Go to Escrow Coordination Secrets, then click on Products)

Guess the banks got caught with their preverbal pants down again.

Seems "representatives" of some of the banks who provided affidavits confirming their personal knowledge and "right" to foreclose on a property were in fact...NOT!

As a result, the judges who granted permission to foreclose were granting these foreclosures without having all the facts regarding who owned the property and who had the right to foreclose.

Oh, what an ugly can of worms. This means  that if it cannot be proven that the entity who foreclosed on the homeowners had the right to do so, then the homeowners may have a right to sue and get their property back!

But wait, the sellers can't just take the property back! It's already been sold to an innocent buyer. Will poor Bob and Betty Buyer be kicked out of their home?

No, thankfully they won't. What SHOULD happen is the title insurance that was HOPEFULLY purchased on the property will kick in and a cash settlement will be issued to the foreclosed homeowner.

HOWEVER MOST title companies don't want to do this! Some are FREAKING out about this loophole and have declined to offer insurance on REO properties until this mess gets worked out.

OK, now we have a potential ugly black CLOUD on the property's title and we can't get title insurance. What's the work-around the REO banks are doing?

They are offering the buyers to use the bank's company owned title insurance.

Well, that kind of solves our immediate problem of obtaining title insurance. But what about long term issues for the buyer and industry in general?

First of all, many purchase agreement contracts include language that the property shall be delivered to the buyer FREE of clouds on the title. Buyer's SHOULD insist on this because that cloud will still be there when they turn around to sell the property years down the road.

A new buyer will run into the same challenge finding an insurance company willing to issue title on the property, ad infinitum!

Could this potential affect the salability/value of the property? YUP!

The work-around for this problem is to have the same title company who was willing to insure with the cloud continue to insure ad infinitum! This means;

1-The buyer and seller will never have a choice on title company selection.

2-If that title company goes out of business, another title company (by law) will have to pick up the "dirty title". What other title company in their right mind is going to want to do that?!

My final concern is that if the banks are willing to insure on these clouded titles with their own title companies, then what happens if all of these previous homeowners DO decide to sue AND win?

Does the title companies that are owned by the banks have enough assets to pay-out for these potential issues? Or, are they figuring on a  government bailout to cover the cost if things get really ugly?

If the title policies are FORCED on another title company, will THEY have enough funds to cover the potential pay-outs?

I'm sure there are buyers out there that have pressured the transaction team to close the deal ASAP. In answer, real estate and bank industries have worked out a plan B, but I wonder what future ramifications are in store for our industry for what appears to be short-sighted decisions?

Congratulations, you finally received an approval letter from the bank! You note the expiration date and you have plenty of time to negotiate with the second (if applicable) to close the deal on time.

But wait, did you really read the approval letter? Some banks are adding additional terms to this letter (raising the sales price, asking the seller to come up with cash to close, etc.).

Be sure to double check the approval letters from the first  AND second bank, if applicable. Make sure everyone is dialed in on the rules to the game! And there are no hidden surprises that end up taking a chunk of your commission!