G-II's Blog

REO LISTING AGENTS – MANY ARE AS USELESS AS FEATHERS ON A LIZARD

G-II Varrato II (Coldwell Banker Residential Brokerage) — Mon, 20 Apr 2009 06:03:46 -0500

Ok... so I'm on a rant and boy this one has simply really got my goat!

My wife and I have been in this great industry for over two decades. We, like many of those of us who are seasoned professionals, pride ourselves in how we manage our business and how we respond to one another in our profession. We respect our clients property and offer the most up-to-date methods of securing ingress/egress to the property.

We ANSWER our phone
We RETURN our eMail messages
We use a secure SUPRA KEY Lock Box ingress/egress system
We DO NOT place our clients property at risk with unsecure mechanical lock boxes
We RETURN our text messages
We publish our cell phone numbers in our MLS listings

We make it nearly impossible for anyone to ever say that they couldn't get in touch with us. We maintain between 20 and 30 listings at any given point in time and all of our listings have all of our methods of contact such as cell phone, fax, office phone, text message and eMail. We know everything about our listings. If the listing is a short sale, we know who the lien holders are and we know how many lien holders are involved; we know who the negotiators are; we have points of contact for each lien holder negotiator; such as eMail, fax, phone and supervisors name and points of contact. We know if the properties utilities are active.

If the property is not a distressed listing, I.E. owned by some seller who simply wants to sell their home to move up or move down in size or for any number of normal, and some time abnormal, reasons, we know everything there is to know about that property. We know that one of the best ways to get another REALTOR® to show the property is if he or she has as much Intel as possible, and... can get that Intel from a real live person.

LACK OF SECURIETY AND RESPECT

Now, contrast that with many, if not most, REO Secret Agents who handle REO properties. These agents make it extremely difficult to show properties. Many of them don't use any form of secure ingress/egress control, I.E. a secure SUPRA Lock Box system. There is no way that these agents can protect their client's property without a secure and accountable method of monitoring who has entered the property. IMO, these less than professional acts of inexcusable lacks of professionalism show a total disrespect for their client's property.

My favorite all time reason that I hear REO agents use for not putting a secure SUPRA lock box system on the property is, "it's too expensive".

Do you really feel you have a right to not offer your client the most complete and competent protection of their property?
Do you not feel your client would like to be able to tell the police, in the event of a break-in and/or the property being vandalized... who the last persons were who entered the property?
Do you not think your client would like, at the very least, a small chance of seeing justice done to those who would destroy their property?
Do you not think it appropriate to hold real estate agents who are inattentive to their tasks to re-secure a property rafter showing, to be held accountable?
What in the world are you thinking? And... what in the world would your client think if you said, "I can't really afford to secure your property with a secure SUPRA lock box system, you'll simply have to deal with the consequences of not knowing who has entered your property last".

DISRESPECT OF FELLOW REALTORS

Try calling a REO listing. If you're lucky, you might get a recorded message that says something like, "If you see a listing that is showing ACTIVE and not under contract, that is accurate information, our listing are updated every day". Yeah, right! But that does not include updating their listings over the weekend. Oh here's a bute... you call on Friday afternoon, about 7pm so you can vet the list of homes you're going to show tomorrow. You begin to make phone calls to vet the availability of the home and you get this: "Our office is closed for the weekend. Please call back Monday between the hours of 8am and 5pm." Or my favorite, "Hello, you have reached Agent Brown. I am sorry I can't take your call at the moment. I return my calls between 2pm and 5pm Monday through Friday. If you have called after 5pm, please try to reach me the following day after 8am. If you have called me on the weekend, I will return your call the next business day. Please leave a message". Like heck I will!!! If you want my client's business, you should have answered your phone or at the very least, answered the voice mail message I left you.

WHAT ARE REO ASSET MANAGERS THINKING?

Would someone kindly let me know why any asset manager would want to hire a real estate agent or even better, an entire team of real estate agents who will not give the property the proper attention it deserves? Is there an asset manager out there who can explain why you would not want your property protected by a secure Ingress/Egress verifiable lock box system? Is there an asset manager out there who can explain why you insist on hiring real estate agents who are, well... Secret Sgents? That is to say, why don't you want the agent or team of agents, you hired to answerer their phone in response to a buyer or buyer agent? Do asset managers simply have a death wish for the property they represent? Do asset managers find wisdom in conducing business with real estate agents who do not have the best interest of their client at the forefront?

I just don't get it!

I could go on and on about the most unprofessional niche of our industry, the REO listing agent.

Now, don't misunderstand, there are some GREAT REO listing agents. They secure homes properly, they have a team of agents who really answer their phones or if they are lone wolfs, they answer their own phone. But... sadly, this gallant and noble group of REO listing agents is but fraction of an infinitely small fraction of REO agents and agent teams who manage and list REOs. To this truly noble group; Congratulations on a Job Well Done. This very small microcosm of REO listing agents even knows all about each listing. WoW! That's simply refreshing.

But to the rest of you... get the heck out of the kitchen if you can't stand the heat. You, who match up to my comments in the beginning of this post, do not belong in the REO business. GET OUT and get a 9 to 5 job... or... do the job the asset manager hired you to do, in a dignified and respectable and professional fashion.

Answer your phone!
Properly secure the property!
List your cell phone or the cell phone of an "On-Call" team member!
Return your voice mail messages!
Return your eMail messages
Return your text messages!

And... participate in our industry as professional agents, not "Secret Agents"

G-II Varrato II is a licensed REALTOR® with Coldwell Banker Residential Brokerage. You can reach G-II (G2) at 602-796-5674 or by eMail at G-II@AllAboutRealEstate.pro

$15,000 Tax Credit For Home Buyers - AllAboutRealEstate.pro by G-II Varrato II

G-II Varrato II (Coldwell Banker Residential Brokerage) — Sun, 08 Feb 2009 23:30:37 -0600

$15,000 Tax Credit For Home Buyers - How Will This Help Correct Depreciation Of Real Estate Values? - AllAboutRealEstate.pro - Things you should know about new amendment to the economic stimulus package. Property values are down across the US. According to recent figures released February 4th 2009 by the National Association of Realtors (NAR) property values lost ground in the past 12 months, sighting a net property value depreciation of 7.8% in the Northeast, 11.5% in the Midwest and over 30% in the Western United States and 8% in the South. That's a national average of value depreciation of right around 14.575%

How To Stop Foreclosures - AirForceHomeSeller.info by G-II Varrato II

G-II Varrato II (Coldwell Banker Residential Brokerage) — Sun, 01 Feb 2009 05:43:58 -0600

President Obama and Ladies and Gentlemen of the United States Congress, you have the ability to help stop the tsunami of foreclosures if you'll simply urge lien holders to work more aggressively to complete short sale transactions. Short Sales are one of the best and quickest way to turn the tide of the swelling inventory of real estate across the country. In nearly every instance, the short sale offers, made to lien holders provides the best and quickest way to mitigate any additional loss to the lien holder and hedge against continued declining values.

The History of Buyer Agency

G-II Varrato II (Coldwell Banker Residential Brokerage) — Tue, 13 Jan 2009 23:29:25 -0600

Real Estate Agency Relationship Disclosure is one of the most misunderstood and under-disclosed events between REALTORS and buyers/sellers. This video helps buyers and sellers, understand, WHY they have unique rights in a transaction. If you would like more info about Agency Disclosure Requirements, eMail G-II@AirForceHomeBuyer.info

What to say to a Loss Mitigation Negotiator

G-II Varrato II (Coldwell Banker Residential Brokerage) — Tue, 13 Jan 2009 18:45:38 -0600

Do You Have Enough Equity To Refinance?

G-II Varrato II (Coldwell Banker Residential Brokerage) — Tue, 09 Dec 2008 01:45:17 -0600

Do You Have Enough Equity To Refinance?

One of our clients recently expressed an interest in refinancing their home, given the incredibly low interest rates available today. Before they undertook such an ambitious effort, we thought it extremely important that they gave carful consideration to a more detailed view of current real estate conditions and became familiar with the projected real estate picture. To that end, we prepared a current market study of their home so they could compare it to the market study we had conducted just 60 days earlier.

We wanted to ensure for our clients, the information we offered would help them assess their next move and provided enough information to conclude that it was wise… or not… to invest additional capital into their home… given the current local and world economic climate.

Lori & I have been professional full time real estate practitioners well over two decades. We have been through four of these earth shattering real estate tsunamis but this is, by far, the worst one ever... even though we do see... light at the end of the tunnel, albeit a small dot at the moment.

In the market studies we prepared, we used properties that are as close to similar, to our client's home, as possible. We only used homes in their exact neighborhood and made all appropriate adjustments for differences between each of the 8 homes that have sold within the last 90 days.

We felt it was important that our clients stayed mindful that property values continue to plummet here in the valley. We explained to them that their home lost nearly $50,000 value in the last 60 days. [Side Bar - It is this REALTOR's opinion that until the flood of foreclosures comes to a halt and not until MI companies will once again underwrite conventional mortgages with less than 10% down, communities here in the valley will continue to experience depressed market values.]

The Market Study we conducted in October, of their home, found the value range to be between $190,000 and $275,000 which was consistent with the expected decline from when they first put their home on the market. The market study we concluded most recently now placed the value range of their home between $132,000 and $213,000. You’ll see that the study was conducted in exactly the same search grid, their very neighborhood. These statistical models can be duplicated in nearly every neighborhood in the valley. The value disparities grow wider as the price point of homes increase.

Our clients had already been in touch with a lender, Morgan-Stanley-Chase. The maximum amount their lender would loan on their home was 80% of the appraised value and could be as low as only 75% of the appraised value. We suspect that the appraised figure could come in somewhere around $175,000. Our client owed about $175,000 on their home. If their lender agreed to an 80% LTV (Loan To Value) loan, that would mean that our client would have to supplement their re-fi with about $35,000 of their own money plus any additional closing costs. While their monthly mortgage payment would drop significantly, perhaps as low as $950.00 PITI, if they were successful in securing a loan at 5% interest. The challenge we saw for them was that the recovery time for such an investment could be very objectionable to them... and in fact it was.

The reality is that local real estate industry analysts project, in some communities of Maricopa county, property values could fall an additional 5% to 10% over the next 12 months. If industry analysts and pundants are even partially accurate about the future of the economy and if the downward landslide of property values finally comes to rest in mid to late 2010 and then flat-lines until the end of that year, that would mean that the upward march of property appreciation may not begin until the first ¼ of 2011.

A Few Numbers To Consider

Our clients purchased their home in August 2005 for about $265,000. They spent an additional $80,000 in upgrades, brining their total investment to $345,000.

Given our market studies, let’s assume today their home is valued, by an appraiser, at $175,000. If property values decline even... only... an additional 5% over the next 12 months, such depreciation would devalue their home an additional $8,700 down to $166,250. That puts their property value nearly $100,000 below their initial purchase price of $264,605 in August 2005. Now add in improvements and upgrades they expensed, and you see that the economic ground to make up will be considerable; nearly $180,000.

If we agree that property values will begin their upward appreciation value march by January 2011 and if we use a 20 year historic statistic, here in the valley, of 3.75% annual appreciation, that would translate into our client not recovering, simply the original value of $264,000, until about 2026. If they have hopes of recovering all of their investment, such an aspiration may not occur until 2037. The time could be a bit shorter given the reality that, statistically and traditionally, as real estate markets recover from each cycle of downward trending, the annual appreciation scale may grow by .5% to 1% per year. However… we would wager that it will be decades, if not longer, before the valley or the nation sees the kind of property value inclines that were experienced between 2004 and 2006.

We are hopeful that our clients will give very attentive consideration to investing any additional capital into, what is currently a depreciating asset.

Here’s a really head twister about the word “ASSET”. Dictionary.com defines the word "ASSET" as (a single item of ownership having exchange value). Hummmm… exchange value… hummm… if our clients will need to add an additional $30,000 to $35,000 of their own money… just to obtain refinancing loan approval… is their home truly an “ASSET” at this point in time?

The origin of the word “asset” comes from the French word “asez” – “enough”. Now... there's a real enlightening word, "enough". When is it time to simply call it a day and say... "enough is enough"? One could argue that in today's economy, real estate is hardly an "ASSET". Oh... don’t misunderstand… real estate values will incline and rise again, they always do. The question is, how long is a property owner willing to wait to reach the point of ROI (Return On Investment?)

If you have sufficient equity in your home, to refinance at the terrific fixed interest rates that are on the table today, DO IT NOW. If you wait to see... "...just how low rates will drop..." you might just miss out on a golden opportunity. Simply use good judgment when you select your lender. It is usually best to stay with the lender who currently holds your note. You can usually work out relatively favorable closing cost concessions. Oh yes... the term, "sufficient equity" should not be confused with having to add additional capital to your investment in order to complete the refinance. If you plan on remaining in your home for a length of time that would translate into a recapture of any additional cash investment within a fixed and acceptable period of time, then take the step and make the investment. However... if you're upside down to the magnitude of the example in this BLOG, you may want to rethink carefully if such an investment is a prudent place to warehouse your hard earned dollars.

For buyers, it couldn’t be a better time to invest in real estate, as long as they have the intention of remain in their new home for, at a minimum, of 3 to 5 years. Anything less could prove to be a challenge when it comes time to sell their home. Real estate will always remain the fulcrum that helps balance the economic scales of our economy. The recovery time may take just a bit longer this time, when compared to other cyclical downturns then upswings.

Lori & G-II are licensed REALTORS® with Coldwell Banker Residential Brokerage. They can be reached by cell phone at either 602.574.5674 for Lori or 602.796.5674 for G-II or via eMail at Lori.and.G-II@GoAirForceHomes.info.

If you would like to chat with us live, simply click the Google Talk Icon.

WHAT DOES HUD HAVE TO DO WITH FHA?

G-II Varrato II (Coldwell Banker Residential Brokerage) — Sun, 07 Dec 2008 13:11:11 -0600

From time to time, we get some really great questions from our clients. We thought it would be great to share this exchange and post it to our BLOG.

QUESTION FROM OUR CLIENT: "...G2 regarding the FHA loan I started to remember FHA information from a class I had. The appraiser I worked with did not do FHA and also remember that there are FHA only appraisers at least here in Bozeman. I also remember that many appraisers did not like dealing with FHA because of the restrictions…”

You are correct in that only FHA certified appraisers can do FHA appraisals. However it is most common that FHA appraisers also conduct appraisals for conventional lenders and some FHA certified appraisers may also hold a third certificate, that to conduct VA appraisals.

QUESTION FROM OUR CLIENT: “…I apologize for not understanding more of the process, but why do we have to wait for the underwriter to approve this loan when the buyers were qualified before making the offer and the appraisal came in for the price offered, and what does HUD have to do with this. I thought HUD and FHA were separate processes and requirements...”

LOL… my chuckle is not because of the question but more because you are filled with some of the best questions I have had the pleasure to field, in a very long time… ;-)

FHA (Federal Housing Administration) insures lenders against loss in the event that borrowers default on their loans. FHA's mission has always been to encourage lenders to make loans that have higher default risk than traditional conventional loans. The FHA was actually given birth in the wake of the Great Depression of the 1930s. Lenders had all but stopped making loans of any kind. Enter the Federal Housing Administration. Today, FHA's roll has a very similar face to the one it projected as our country healed itself from the wounds of the Great Depression. FHA continues to insure, NOT GUARANTY, loans to low-and-moderate-income home buyers, who may have somewhat questionable credit or who find it difficult to come up with the required cash to complete the transaction.

HUD (The Department of Housing and Urban Development) is a Federal agency, with Cabinet Level authority, and is a voice for the consumer. HUD is responsible for ensuring that all fair housing laws are enforced, as well as assisting in the Nation's development of communities that address America's housing needs. HUD plays a major role in the loan approval process by underwriting homeownership for lower to moderate income buyers through its Mortgage Insurance Program, also known as MIP. In the conventional arena, this type of insurance is referred to as PMI.

Both insurance programs do a similar job of protecting lender's from financial disaster in the event of a mortgage failure or default. MIP is a HUD insurance product and PMI is a private sector insurance product. The larger private MI companies are Genworth (Genworth Mortgage Insurance), MGIC (Mortgage Guaranty Insurance Corporation), RMIC (Republic Mortgage Insurance Company) and Radian (Radian Mortgage Insurance). These companies set the tenor of the Mortgage Insurance industry and play a heavy roll in loan approvals.

At the end of the day, and even though a loan has been given the Stamp of Approval by the Fannie Mae or Freddie Mac, DU (Direct Underwriting) or LP (Loan Prospector) computerized loan approval systems, federal lending guidelines still require the final loan package to be submitted for an “Eyes-On and Hands-On” review by a human being.

Now to the point you made about the buyer being qualified or pre-approved, that is still the case, assuming the buyer has done nothing to jeopardize their loan approval such as buying a big ticket item like a Hummer or an Air Plane or a pair of Jet Skis or… well you get the picture. The other part of any loan approval is the property. Even if the buyer is made of GOLD, a loan can still fail if the property does not pass muster. That is why all FHA Loans have an additional FHA requirement of the FHA Amendatory Clause. The FHA Amendatory clause states that the property MUST appraise for, at a minimum, the price agreed to between the parties… or the FHA loan will not be granted. The appraised value referrers to the value that is finally approved by the underwriter. Therefore, if a FHA underwriter requires an Appraisal Review and if after the Appraisal Review is completed, the review appraiser finds a different “opinion of value” it is most likely that the FHA underwriter will devalue the properties value to that of the review appraisal. I shared a very real scenario of this type of goings on a while back when I sent you two appraisals for the same property, wherein the underwriter devalued the first appraisal, that came in at contract price, down by about $7,000.

I don’t want to put more squirrels in your stomach. But you have to be mindful of the nuances of the lending and appraisal world as it is today. All of yesterdays and yesteryears methodology is off the table. It’s a new day and a new world and we’re all stuck right in the middle of it. It’s simply a box of rocks that ALL FHA buyers and sellers must deal with.

(We forwarded a copy of the Preliminary Appraisal Report for her records. We explained that, as long as the FHA/HUD underwriter did not flag the appraisal for an appraisal review, the appraisal submitted would be the document that would stand as the accepted appraisers “Opinion of Value” by the FHA underwriter.)

We hope this exchange will help clear up some of your questions as you engage your next real estate transaction. Oh yes... at the end of the day, the FHA underwriter approved the appraisal for the contract price.

If you would like to chat with us live, simply click the Google Talk Icon.

Short Sale Loss Mitigation Tutorial

G-II Varrato II (Coldwell Banker Residential Brokerage) — Sun, 30 Nov 2008 13:55:23 -0600

As the Phoenix valley real estate market continues to deteriorate and more and more properties hit the market as REOs, also known as Foreclosures, property values continue to plummet. On Tuesday, November 25th, Adam Kres, reporter for the Phoenix Business Journal wrote " Home prices continue to plummet across the country, and Phoenix is leading the way. According to the S&P Case-Shiller Home Price Index, values in the Phoenix metro area are down nearly 32 percent compared with third-quarter numbers of 2007. Kress went on to write… of all cities in the national index, Phoenix posted the biggest loss in home values..."

It is time for short sale loss mitigation specialists to step to the plate and offer more in the way of cooperation with sellers who are in financial distress. The information shared in this video will better inform loss mitigation negotiators, their employers, investors and MI Company that in most cases when an offer is presented at market value or above, it is in the lender’s best interest and in the best interest of their investor and MI Company’s to accept the offer that has been presented.

In nearly every instance the seller has made it perfectly clear to their lender, or lenders, that the seller is in no position to repay any portion of the deficit that will be realized from the short sale of their home. As long as the prospective buyers are well qualified and ready to close on the property within 20 to 30 days, or less, of an agreement from seller’s lender to approve this Short Sale, current market conditions strongly suggest that the short sale should be approved by all factions within the seller’s lender’s collective of decision makers.

The following are examples of the potential financial devastation that awaits a lender who fails to work toward an amicable short sale closing. The following examples are consistent with the tenor of the Phoenix real estate market and I would suggest that this scenario will play out over and over again across the country.

In our first example, a property comparable to a current short sale listing, located on Mary Jane LN in Glendale Arizona was listed as a short sale between the months of November 2007 through the end of January 2008 for a list price between $200,000 & $197,500. All short sale negotiations failed with the lender, Countrywide Home Loans. Countrywide subsequently foreclosed on this property. After the foreclosure process Countrywide listed the property with a local brokerage and sold the property, as a REO for $144,000, a 27% loss in potential captured revenue. Had Countrywide agreed to the short sale offered months earlier, Countrywide could have sold the home for $53,000 more.

A second example is another comparable property located at on 56^th Avenue in Glendale Arizona. The property was listed as a short sale between the months of October 2007 through the end of May 2008 for a list price between $216,000 & $205,000. Again, all short sale negotiations failed with the lender… this time Citi Mortgage. Citi Mortgage later foreclosed on this property. Again, after the foreclosure process, Citi Mortgage listed this property with a local brokerage and sold the property, as a REO for $157,250, a net loss of 23% of potential captured revenue. Had Citi Mortgage agreed to the short sale offered, months earlier, Citi Mortgage could have sold the home for nearly $50,000 more.

In both examples, these figure do not account for any additional costs to Countrywide Home Loans or Citi Mortgage and their investors, such as the cost of the foreclosure procedure, possible eviction action of the owners, tenants or vagrant squatters, loss prevention and security, maintenance, repairs, H.O.A. dues, cost of sale and other internal fees that impacted reserves required under federal banking regulations to be maintained by Countrywide and Citi Mortgage and possibly their investors. Countrywide and Citi squandered an opportunity to resolve the state of the owner’s home loans.

Such misgivings of logic are exactly the kinds of events that continue to sustain the downward spiral of property values in Phoenix and across the nation.

Examples PDF

Real estate market conditions continue to deteriorate. Phoenix leads the nation in declining values. As I noted in the beginning of this video, between the third quarter of 2007 and the third quarter of 2008, property values plummeted 32%. Every month a property valued at $160,000 remains UNSOLD, the value declines an additional 2% or about $3,200.

Loss mitigation specialists and their employing lenders have an opportunity to eliminate the need to expend additional funds on foreclosure procedures, possible eviction action of vagrant occupants, loss prevention and security, maintenance, additional repairs, unpaid H.O.A. dues and fines, city and local municipality fines, cost of sale and other internal fees that could impact the lender’s reserves required under federal banking regulations to be maintained. Short Sale offers provide a chance for the lenders to resolve the current state of the owner’s home loan and mitigate their financial damages.

If lenders fail to complete successful Short Sale transactions between potential buyers and seller in distress but choose rather to execute their foreclosure rights, the lenders will participate in a very factual reality of real estate market dynamics. Here in Maricopa County REO properties tend to be listed below actual market value, statistically selling for up to 24% less than market value while Short Sale properties can sell for as much as full market value with minimal discounts below that point.

It is important that every realtor who is aggressively working with short sale listings take time to demonstrate these very real numbers to the banks loss mitigation negotiators they interact with.

G-II is one half of Lori & G-II’s eTeam of Professional REALTORS® with Coldwell Banker Residential Brokerage. Lori & G-II are Short Sale Specialist in Maricopa County Arizona. If you are a seller, in need of short sale assistance, please feel free to contact us at 602.796-5674 or eMail us at Lori.and.G-II@RealEstateInPhoenix.net for additional information about the Short Sale process.

The Fight for Down Payment Assistance Is Not Over Yet

G-II Varrato II (Coldwell Banker Residential Brokerage) — Thu, 13 Nov 2008 11:19:17 -0600

The Fight for Down Payment Assistance Is Not Over Yet

We received an eMail from NAR this morning. The post contained a pre-drafted letter for REALTORS® to print and send to their Congressional Representatives. While the letter is spot-on, we see an opportunity to add one more bullet point to the letter, that being to urge our Congressional Representatives, to support HR 6694 "FHA Seller-Financed Downpayment Reform and Risk-Based Pricing Authorization Act of 2008". To that point, we have included our version of the NAR letter in hopes that you have, our reader, have a vehicle to distribute our HyBrid letter to supporters of HR 6694. Download Our Version of the NAR Letter NOW! (Microsoft Word 2003 Format - MacAfee & Norton Safe)

All the sender needs to do is locate their representative’s mail address, type in the name of their senator and congressman/congresswomen in the places indicated and enter the sender’s information at the bottom of the letter then send it off. CLICK HERE to locate your state House Representative and CLICK HERE to locate your US Senator and tell him or her that you want them to support and vote for H.R. 6694

We are also in the process of posting version of the NAR letter on our all of our BLOGs and on all of our personal web sites.

* Down Payment Assistance Rescue H.R. 6694
* Part 2 - Down Payment Assistance Rescue H.R. 6694
* Congress Stabs FHA Buyers Through The Heart
* Congress has stabbed the FHA buyer through the heart. The little guy pays the price again.
* Down Payment Assistance Rescue H.R. 6695

We have also contacted three local TV News Outlets with our efforts.

We continue to try and push HR 6694 to the floor of the House and Senate.

Oh yes... one more quick side bar for our VA Home Owners; many Vets man not know that the VA has been authorized by the passing of the "Veterans’ Benefits Improvement Act of 2008" to offer refinancing of their sub-prime mortgages at a 100% Loan To Value (LTV). Prior to the signing of this bill into law by President Bush on October 10th 2008, the maximum loan amount allowed was only 90% LTV. If you are a Veteran with an available VA Loan Entitlement, you should contact your mortgage company and look into a VA Refinance of your current mortgage.

For more information about this new law, visit Re-Finance Program for Vets.

Lori & G-II are licensed REALTORS® with Coldwell Banker Residential Brokerage, specializing in VA Buyer Representation. They can be reached by cell phone at either 602.574.5674 for Lori or 602.796.5674 for G-II or via eMail at Lori.and.G-II@GoAirForceHomes.info.

Short Sale Experts, Certified Negotiation Experts, ePRO 500 Certified
Mentors and Trainers for Coldwell Banker Residential Brokerage
Coldwell Banker Residential Brokerage.

Re-Finance Program for Vets

G-II Varrato II (Coldwell Banker Residential Brokerage) — Mon, 10 Nov 2008 00:14:44 -0600

Re-Finance Program for Vets

For the past year or so, the economic condition of our nation has been splashed all over the Paper News Media, TV, Radio, the WEB and heck... I even think I saw a courier pigeon delivering some bad economic news the other day. Not really... but it has been nuts, not only on Wall Street but on Main Street as well.

We are always on the hunt for new finance platforms for our members and clients. And... to that end, we have some really cool information to share with our Vets, active duty and retired in all branches who qualify for a VA Guaranteed Home Loan. This is a national finance tool that could help thousands, perhaps hundreds of thousands of Vets, who are stuck in adjustable rate sub-prime mortgages.

For our Vets!
There has been much ballyhoo over all of the economic stimulus packages that have been pushed through Congress over the past few months. But... there was very little fanfare given to one of the most useful VA Loan tools our nation has ever seen. Finally, Congress did something to help Vets... before they go down in flames.

Sponsored by Senator Daniel K. Akaka of Hawaii - House Armed Services Committee, in December 2007, the bill was originally simply a resolution supporting the goals and ideals of a National Medal of Honor and to celebrate and honor the recipients of the Medal of Honor on the anniversary of the first award of that medal in 1863. The original bill did not contain any provisions for VA Loan Modifications. However around May of 2008 Senator Akaka introduced S. 2961 a bill to amend title 38, United States Code, to enhance the refinancing of home loans by veterans. Finally in June of 2008 the bill was passed unanimously by the Senate and subsequently signed into law by President Bush on October 10th 2008.

So what is the new law? Simply put the new law states;

*** SOURCE "...The new law makes changes to VA's home loan refinancing program. Veterans who wish to refinance their subprime or conventional mortgage may now do so for up to 100 percent of the value of the property. These types of loans were previously limited to 90 percent of the value.

Additionally, Congress raised VA's maximum loan amount for these types of refinancing loans. Previously, these refinancing loans were capped at $144,000. With the new legislation, such loans may be made up to $729,750 depending on where the property is located.

Increasing the loan-to-value ratio and raising the maximum loan amount will allow more qualified veterans to refinance through VA, allowing for savings on interest costs or even potentially avoiding foreclosure..."

Click here for a complete copy of the new VA Instruction Letter. (PDF format)

What a GREAT tool for our Vets to have at their disposal. Now... the next thing in my cross hairs is to see if Vets with mortgages that encumber the home for more than current market value, will be successful in getting the banks who hold those notes to release and discharge their debt and allow the Vet to secure a VA loan at the current market value. If this can happen, tens of thousands of Vets could finally find relief in this collapsing economy.

We'll report on more GREAT finance options for non-military buyers in our next post.

Lessons Forgotten are Lessons Learned

G-II Varrato II (Coldwell Banker Residential Brokerage) — Sun, 26 Oct 2008 22:36:35 -0500

Sellers today have a particular challenging decision to make, "Do I sell or do I sit out the market and wait for a more opportune time?" Today's Arizona Republic noted that property prices/values in the Valley have retreated from the gains realized during the boom days of 2003, 2004 and 2005 backward to a pre-boom era. Some Valley communities are seeing property values/prices retreat to those of 2002/2003. These sobering realities heap a very interesting set of scenarios on today's Sellers and Buyers.

As a Seller, consider the following:

The challenges Sellers face today is that most of the inventory Sellers compete against is foreclosed and/or Short Sale inventory, which in turn pulls the property values down in their neighborhood.

Being both a Buyer and Seller produces a double edge sword. On the one side, if a Seller is going to get in and stay in the game, the Seller will sell for far less than they had expected. The reality is... when the market finally corrects itself, property values will begin their slow and steady climb upward. But... keep this point in mind, once that upward swing begins... and it will begin... sometime in the future... perhaps as early as the second ¼ of 2010... if Maricopa County re-establishes her statistical bellweather appreciation curve of 3.5% to 4% per year, a property that would be valued at $265,000 in 2010 could be worth about $310,000 in 2015. The question that must be answered by today's Seller is, "Am I willing to wait 5 to 7 years to capitalize on the equity I will build in my home over that period of time, or do I cut my losses... in my current home... today... and target a purchase for... perhaps less capital investment and then deal with the same upward appreciation curve described above?"

As a Buyer, consider the following:

On the other side of the sword blade, a Buyer or Seller (turned Buyer) can capitalize on the pain of the Seller they purchase from, ultimately making a purchase of their next home for much less than that Seller thought they would sell for and in all likelihood for a price that could never have been attained only a few years ago. Perhaps equally important is the very real probability that the home purchased today, may indeed, devalue a bit more before the market corrects itself. Some market analysts project that the real estate market will "over correct" to the bottom and beyond, before making a swing back upward. One thing is certain, no one knows where the bottom is!

Unfortunately, there is no clear cut answer to these and other questions. Each Buyer/Seller must weigh their own investment portfolio and then decide for themselves, which direction to go. "Do ya hold-em or do ya fold-em?"

Before I close I ran a few numbers through the G2-O'Meter and here's what I pondered.

Mr. Buyer today wants to buy his first house. He has his eye on a charming little bungalow priced at today's market value of $150,000. Mr. Buyer earns $50,000 per year. He is unlike the majority of first time Buyers today and has saved $20,000.

He can secure a loan for 6.5% bringing his PI to $855.00. His TI will be $150 and his MI will be about $80 bringing his total PITIMI to $1,155.00. His DTI (Debt to Income) ratio is 28%, well within Fannie/Freddie/Sally/Ginny lending guidelines. Mr. Buyer has a modest car payment, one for each of his modest automobiles, only $300 per month for each auto. He has minimum credit card debt, only $200.00 per month. Therefore his total committed cash out each month is $1,955, not including his cost for fuel, food, insurance and disposable income. Therefore his total cost of living, month to month, including his new house payment will be right at $3,000.

Now... let's put Mr. Buyer in his new home. He has exhausted his savings account because he had to put a minimum of 10% down ($15,000) and he had to pay his own closing costs, about $5,000. Mr. Buyer has NO cash reserves any longer. His total monthly cash outlay is 73% of his monthly income. What if he gets sick? What if his wife gets sick? What if his children get sick? What if his health insurance deductable, if he has health insurance, is so great that his cash outlay exceeds his income? Can he continue to be the frugal saver he was before he purchased his home?

I postulated this scenario to demonstrate where our real estate market may be heading. Do you think that it could come to pass that our nation re-visits the philosophy of our grand parents, wherein major purchases were made, ONLY if you had the cash to make such a purchase? Do you think if our national mindset takes this road, that Buyer's of real estate, could put off their purchase until they have enough of a cash reserve to sustain an unexpected "perfect storm of life"?

I don't know the answer and I'm not sure anyone out there does, but what I am certain of is... we're in for a very different upcoming decade or two. A few decades of frugal living and thrift spending. Do you think the Real Estate Industry might see our ranks shrink as those agents who got in the business of late run for more stable income producing platforms? If we do see a shrinking of our REALTOR ranks, do you think there will be enough business out there to grow our business? To the last questions, I am convinced the answer is Absolutely YES!

For those of you reading this BLOG post, who are not real estate agents, lenders, appraisers or home inspectors, you may find some component of my post that will lend itself to your own profession.

I believe that the questions raised are good ones. I believe we must all take a good hard look at where we have come, what we are going through and then set our sights on how NEVER to have to endure this kind of damage again. The first time this happened, "The GREAT Depression" our country was still young. She had never seen an economic down turn like that. The shame of where we find ourselves, as a nation and as individuals... today... is that we lost sight of what our grandparents learned and what they taught our parents and what our parents tried to teach us. We must learn this lesson this time so that our children and our children's children never have to walk in this pit of fire again!

REOs vs. The Short Sale... Sale Prices

G-II Varrato II (Coldwell Banker Residential Brokerage) — Sun, 12 Oct 2008 21:51:30 -0500

Well... another bumpy ride on Wall Street last week... but then again... that's not news to anyone. Here's what you may not know though, the Real Estate Market may be in the beginning stages of stabilizing.

The Arizona Multiple Listing Service reports that there are over 6,200 residential properties currently in the Sale Pending category. This is about the same number of homes that were in the SOLD category in 2001, 2002 and 2006. Of the 6,200 homes in the Sale Pending category, a little over 2,000 were placed in the Sale Pending category between October 1st and 12th. Of that number over half are distressed property sales and of that number, over 80% are REO sales.

In the $125,000 to $175,000 price range REOs were reduced, from list price to sale price by as much as 24%. The difference between list and sale price for Short Sale transactions is only about 20% (*source ARMLS 10/2008). These statistics encompass all of ARMLS, an area spanning over 200,000 square miles. Nevertheless, the statistics demonstrate two important facts for real estate agents, sellers and buyer. First for the buyer; if the buyer is looking to purchase a Short Sale property, the buyer should be aware that lenders who negotiate Short Sale's for sellers are more inclined to hold out for sales closer to the actual value of the property. Second, these statistics also demonstrate the probable naïveté of the REO asset manager. ARMLS statistics show a growing trend for REO asset managers to accept offers that are far below the list price and even substantially below market value.

Buyers should understand that if he or she makes a purchase of an REO that is below probable market value, their purchase price helps set the value of the neighborhood. Therefore, making such a purchase could be considered a double edged sword; a great buy in terms of cash outlay but perhaps a detriment in terms of perceived value for future buyers of product in that community.

Why is this important? Because it is important for the buyer to know and understand market trends and to understand that these swings between list price and actual sale price can vary widely from community to community, city to city and state to state.

Here's an example. In the first 12 days of October 2008, in Surprise or El Mirage Arizona, the difference between list price and sale price for REOs was about 16%. Oddly enough, that was about the same statistic for sales of Short Sale transactions in the same cities. However, in Goodyear, REOs sold for about 13.50% less than the list price while Short Sale transactions closed only 9% less than list price.

It's important for sellers and buyers to seek out licensed REALTORS® who are well schooled in conducting these types of analyses. Making a real estate purchase in today's real estate market can be a huge win or a costly undertaking.

Part 2 - Down Payment Assistance Rescue H.R. 6694

G-II Varrato II (Coldwell Banker Residential Brokerage) — Mon, 15 Sep 2008 11:08:22 -0500

With the melt down of Lehman Brothers Holdings Inc., once the fourth-largest investment bank in the US, the buy out of Merrill Lynch by Bank of America, Insurance Giant AIG looking for $40 Billion in "shore up money", and over 117 banks on the FDIC Watch List (source www.cnbc.com), the negative impact to the real estate industry, particularly the conventional lending arena, could be legendary... perhaps more dynamic and life changing than the events of the Great Depression. These turns of events simply reinforce the need to do all we can to convince congress to pass H.R. 6694 before they adjourn for the year on September 26th 2008.

H.R. 6694 provides unprecedented control over how DPA loans are granted to borrowers. H.R. 6694, the DPA reform bill, eliminates all of the concerns HUD stated with DPA during their court hearing in 2007... including any potential impact on the FHA fund. Brian D. Montgomery, Assistant Secretary Housing - Federal Housing Commissioner attempted to alarm congress and the public during his press conference with the National Press Club when he said, "We had to book an additional $4.6 billion in unanticipated long-term losses, mostly due to the increased number of certain types of seller-funded loans in the FHA portfolio". No one is certain where Mr. Montgomery is sourcing his number as he never tabled even one verifiable event. He might have been suggesting that "unrealized revenue" would be $4.6, said another way is, if DPA was eliminated HUD could have made that much more in revenue. However, HUD does not reduce any loan volume due to the elimination of DPA. What is certain and verifiable is that the most recent independent review on FHA's fund (The Brill Report and The George Town University Report) found that HUD will make a billion dollars a year even with a high concentration of DPA and be at a 6% solvency ratio which is three times the required ratio of 2%.

Remember too that FHA loan limits vary from state to state and sometimes from county to county within each state. For example the current FHA loan limit in Maricopa County Arizona is $346,250 but in Alaska it is $362,790 and in Hawaii ranging from $618,750 to $793,750. FHA loans will become the corner stone of home loans, allowing Americans to continue to capture a piece of the American Dream... Home Ownership.

A final point to be made is that the sponsors of H.R. 6694 along with the many supporters of DPA voted for H.R. 3221 because of the larger and broader impact the comprehensive bill is intended to have on housing. Their vote for H.R. 3221 was coupled with a recognition and frequent statement that they will come back to fix DPA. Most notably Barney Frank, Congressman for the 4th District of Massachusetts and Maxine Waters, U.S. Congresswoman for the 35th District of California had a colloquy preceding the passage of H.R. 3221 memorializing in the congressional record that DPA is a good program, was not able to be accomplished in this housing bill but would introduce a bill to reform DPA before Oct. 1. To that end, they along with Al Green, U.S. Congressman for the 9th District of Texas, Gary G. Miller, U.S. Congressman for the 42nd District of California, and Christopher Shays, U.S. Congressman for the 4th District of Connecticut sponsored H.R. 6694 even before the ink was dry on H.R. 3221.

We have only 11 days left before Congress adjourns for the year. We MUST do all we can to encourage both the House and the Senate to pass H.R. 6694 and that President Bush signs the bill into law.

BLOG Part 1 - Down Payment Assistance Rescue H.R. 6694

Part 2 - Down Payment Assistance Rescue H.R. 6694

G-II Varrato II (Coldwell Banker Residential Brokerage) — Mon, 15 Sep 2008 11:06:04 -0500

With the melt down of Lehman Brothers Holdings Inc., once the fourth-largest investment bank in the US, the buy out of Merrill Lynch by Bank of America, Insurance Giant AIG looking for $40 Billion in "shore up money", and over 117 banks on the SDIC Watch List (source www.cnbc.com), the negative impact to the real estate industry, particularly the conventional lending arena, could be legendary... perhaps more dynamic and life changing than the events of the Great Depression. These turns of events simply reinforce the need to do all we can to convince congress to pass H.R. 6694 before they adjourn for the year on September 26th 2008.

H.R. 6694 provides unprecedented control over how DPA loans are granted to borrowers. H.R. 6694, the DPA reform bill, eliminates all of the concerns HUD stated with DPA during their court hearing in 2007... including any potential impact on the FHA fund. Brian D. Montgomery, Assistant Secretary Housing - Federal Housing Commissioner attempted to alarm congress and the public during his press conference with the National Press Club when he said, "We had to book an additional $4.6 billion in unanticipated long-term losses, mostly due to the increased number of certain types of seller-funded loans in the FHA portfolio". No one is certain where Mr. Montgomery is sourcing his number as he never tabled even one verifiable event. He might have been suggesting that "unrealized revenue" would be $4.6, said another way is, if DPA was eliminated HUD could have made that much more in revenue. However, HUD does not reduce any loan volume due to the elimination of DPA. What is certain and verifiable is that the most recent independent GAO review on FHA's fund (the actuarial study in Oct. 2007 that we cited in our BLOG of 091108, found that HUD will make a billion dollars a year even with a high concentration of DPA and be at a 6% solvency ratio which is three times the required ratio of 2%.

We have only 11 days left before Congress adjourns for the year. We MUST do all we can to encourage both the House and the Senate to pass H.R. 6694 and that President Bush signs the bill into law.

BLOG Part 1 - Down Payment Assistance Rescue H.R. 6694

Down Payment Assistance Rescue H.R. 6694

G-II Varrato II (Coldwell Banker Residential Brokerage) — Sat, 13 Sep 2008 23:24:40 -0500

By now, everyone, or almost everyone, is aware that the Housing and Economic Recovery Act of 2008 was signed into law by President Bush on July 30th, 2008. The bill was strongly supported by the NATIONAL ASSOCIATION OF REALTORS® (NAR). What many don't know is that NAR did not oppose SEC. 2113. CASH INVESTMENT REQUIREMENT AND PROHIBITION OF SELLER-FUNDED DOWN PAYMENT, a component of this bill that ripped away Down Payment Assistance Programs and increased the minimum down payment requirement of FHA buyers. I have searched everywhere to try and find an answer to why NAR would not take a stand on this very important issue but with little or no success. Now... here's a bit of trivia for you. It has been suggested that it was President Bush 1 who made DPA available to FHA buyers in 1999. And while it is true that it was his son, President Bush 2 who embezzled DPA from the FHA buyers on July 30th 2008, in an attempt to place blame for the current mortgage crisis on DPA type loans, DPA actually got it's birth in 1996 when... reportedly... Nehemiah's founder, Don Harris, who is also a real estate lawyer, found a mechanism within the statutes, that let charitable organizations make such gifts.

Section 2113 was inserted into H.R. 3221 at the eleventh hour, by the "Good O'l Boy's network on Capital Hill" just days before the President was to sign the bill into law; a typical underhanded trick perpetrated by many Washington "me first... you last" politicians.

To their credit, a group of honorable men and women, in the House of Representatives, launched an attack on Section 2113 of H.R. 3221. Less than 24 hours after President Bush signed H.R. 3221 into law and barely allowing the ink to dry, Al Green, U.S. Congressman for the 9th District of Texas along with Gary G. Miller, U.S. Congressman for the 42nd District of California, Maxine Waters, U.S. Congresswoman for the 35th District of California and Christopher Shays, U.S. Congressman for the 4th District of Connecticut sponsored H.R. 6694. H.R. 6694 is a bill intended to revise the requirements for seller-financed down payment assistance for mortgages for single-family housing insured by the Secretary of Housing and Urban Development. The bill does not address the increased down payment requirement but the bill does take an enormous step toward overturning the Down Payment Assistance regulation set forth in H.R. 3221.

H.R. 6694, FHA borrowers would need to meet a set of criteria that would help lay to rest the concerns expressed by the HUD over loans being granted to borrowers who have not demonstrated the necessary credit skills to maintain a mortgage payment. For example, the borrower would have to have a FICO credit score of not less than 680. However there are provisions where the buyer/borrower could have a FICO score as low as 620. You can read more about H.R. 6694 by CLICKING HERE.

There has been a lot of dispute leveled at the DPA programs, alleging that FHA DPA loans have a higher rate of foreclosure than those FHA loans that did not contain a DPA component. These allegations are simply not true. In fact a GAO (U.S. Government Accounting Office) study found that 91% DPA homebuyers were successful homeowners and were not in default on their mortgage! Contrast the DPA statistic with the current Fannie/Freddie crisis. Since late 2006 over 282 major lenders have gone bankrupt due to failed conventional Freddie/Fannie hybrid loans using either 80/20, 80/15/5, 80/10/10 and/or 100% LTV mortgages. Now... you tell me... which program has a better track record-the goofy NINJA (No Income, No Job, No Asset) loans of yesteryear or the FHA DPA loans? It really isn't rocket science!

When Brian D. Montgomery, the F.H.A. commissioner made the claim that FHA had to withdraw $4.6 Billion from it's $21 Billion capital reserve fund in May to cover the costs of losses, claiming that those losses were primarily due to the agency's seller-financed down payment assistance mortgage program, he would not and could not assign any figures to sustain his claim. One can only conclude that Mr. Montgomery was simply pandering to the fears of Congress and to the National Press Club he spoke to in June 2008.

There have been allegations that DPA loan programs placed an unrealistic and over-burdensome strain on our economy. In fact, this is far from the truth. DPA programs helped to add over $24 billion to the economy from 2000 through 2005. Additionally, DPA composes over 40% of FHA business and uses NO tax-payer dollars to fund their programs. In reality, tax revenues generated to State and local governments by new home construction bought with DPA: 150,000 x $82,269 (amount in tax revenue generated from an average single family unit) was in excess of $12.3 Billion (that's BILLION with a "B") between 2000 and 2005. Now... contrast that track record with the multi-trillion dollar bailout of Freddie Mac and Fannie Mae, that will use your/our tax dollars. Where is the logic to strike at the very heart of the buyer pool who has demonstrated the most stable and responsible component of our mortgage economy? Over 1 million home owners have been created through the use of DPA FHA loans since its inception.

Between January 1st 2008 and August 31st 2008, the real estate industry saw record sales, depleting the swollen reservoirs of unsold inventory. According to ARMLS (Arizona Regional Multiple Listing System) over 80% of the closed transactions, in this time period, occurred in the price range under $346,250. Lenders who processed FHA loans reported that over 80% of their pipe line was DPA type FHA loans. If this is any kind of bell weather for the rest of the nation then the end of DPA can only spell a resurgence of unsold inventory and a depletion of the buyer pool. It has been projected, by AmeriDream, that the real estate market could lose 25,000 buyers per month from the national real estate landscape.

In 2008, two different federal courts took the rare step of striking down the HUD regulation which would have banned seller-funded down payment assistance (DPA). The courts' decisions were NOT made on technical grounds, but for fundamental substantive reasons-the courts ruled that the HUD regulation violated the most basic principles of the Administrative Procedures Act (APA), that is, that an agency which issues a regulation must present at least some "reasoned decision-making" in support of its position.

The APA sets a very low threshold for an agency to meet for a regulation to be valid if it is challenged in court. An agency does not need to convince a court that a regulation is correct. An agency merely needs to present a plausible rationale and minimal evidence supporting the regulation. Yet the courts held that HUD failed to articulate any plausible policy rationale or provide verifiable data in support of its position.

The courts ruled in the Civil Action No. 07-1282 (PLF), AMERIDREAM, INC., Plaintiff, v. ALPHONSO JACKSON, Secretary, United States Department of Housing and Urban Development, Defendant. that;

"HUD's reliance on such flimsy anecdotal evidence ‘is not sufficient to enable [the Court] to conclude that the [Final Rule] was the product of reasoned decision-making.' Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co.,

After HUD had it's head handed to them by the courts, HUD again proposed a rule to ban charitable DPA, but this time sought legislation which would impose a ban without HUD having to present any rationale or data supporting that policy.

The choice is clear. We all must rally to the aid of the DPA programs. The data, presented by HUD and all pundents who are proponents of stealing DPA from FHA buyers, is flawed... and twisted to strike fear in the hearts of the American tax payers and congress.

Please help put DPA back on-line for worthy and qualified FHA home buyers. CLICK HERE to locate your state House Representative and CLICK HERE to locate your US Senator and tell him or her that you want them to support and vote for H.R. 6694 before September 26th 2008... before Congress adjourns for the rest of the year.

You have our permission to copy and paste this BLOG post into the eMail body of any post you send to your representatives. You also have our permission to republish this BLOG or any portion of the BLOG to your own BLOG, as long as you do not alter our text. If you wish to add your own text to our copy, please feel free to do so.

Thanks for your support... you can copy and paste the following text into the representatives eMail section of each of their web sites.

*********************************************

Dear (Enter Name of Representative here)

I ask your support of H.R. 6694. Please pass this bill before you adjourn on September 26th 2008. The passage of H.R. 3221, this past July 30th 2008, included a component that disallowed Down Payment Assistance for FHA buyers. This was, I trust, an inadvertant oversight on the part of our legislaters.

There has been a lot of dispute leveled at the DPA programs, alleging that FHA DPA loans have a higher rate of foreclosure than those FHA loans that did not contain a DPA component. These allegations are simply not true. In fact a GAO (U.S. Government Accounting Office) study found that 91% DPA homebuyers were successful homeowners and were not in default on their mortgage! Contrast the DPA statistic with the current Fannie/Freddie crisis. Since late 2006 over 282 major lenders have gone bankrupt (source www.mortgageimplode.com) due to failed conventional Freddie/Fannie hybrid loans using either 80/20, 80/15/5, 80/10/10 and/or 100% LTV mortgages. Now... you tell me... which program has a better track record, the goofy NINJA (No Income, No Job, No Asset) loans of yesteryear or the FHA DPA loans? It really isn't rocket science!

Additionally, with the aftermath of the devastation reaped upon the America by the past three hurricanes, Hanna, Gustov & Ike, FHA DPA, as modified by H.R. 6694, could become a logical and pivotal real estate purchase tool as our communities rebuild.

I appreciate your support in passing H.R. 6694 before Congress adjourns on September 26th 2008.

YOUR NAME
REALTOR

*********************************************

Lori & G-II are REALTORS® with Coldwell Banker Residential Brokerage in Phoenix, Arizona.

Lori & G-II can be reached for comment at Lori.and.G-II@RealEstateInPhoenix.net or send a text message to their cell phone by CLICKING HERE or by cell phone at (602) 796-5674.

Down Payment Assistance Rescue H.R. 6694

G-II Varrato II (Coldwell Banker Residential Brokerage) — Wed, 10 Sep 2008 13:25:29 -0500

Thanks for your support... you can copy and paste the following text into the representatives eMail section of each of their web sites.

*********************************************

Dear (Enter Name of Representative here)

There has been a lot of dispute leveled at the DPA programs, alleging that FHA DPA loans have a higher rate of foreclosure than those FHA loans that did not contain a DPA component. These allegations are simply not true. In fact a GAO (U.S. Government Accounting Office) study found that 91% DPA homebuyers were successful homeowners and were not in default on their mortgage! Contrast the DPA statistic with the current Fannie/Freddie crisis. Since late 2006 over 282 major lenders have gone bankrupt (source www.mortgageimplode.com) due to failed conventional Freddie/Fannie hybrid loans using either 80/20, 80/15/5, 80/10/10 and/or 100% LTV mortgages. Now... you tell me... which program has a better track record, the goofy NINJA (No Income, No Job, No Asset) loans of yesteryear or the FHA DPA loans? It really isn't rocket science!

I appreciate your support in passing H.R. 6694 before Congress adjourns on September 26th 2008.

YOUR NAME
REALTOR

*********************************************

Lori & G-II are REALTORS® with Coldwell Banker Residential Brokerage in Phoenix, Arizona.

Lori & G-II can be reached for comment at Lori.and.G-II@RealEstateInPhoenix.net or send a text message to their cell phone by CLICKING HERE or by cell phone at (602) 796-5674.

Congress Stabs FHA Buyers Through The Heart

G-II Varrato II (Coldwell Banker Residential Brokerage) — Sun, 27 Jul 2008 18:21:33 -0500

Just when buying a house couldn't be any more challenging today, Congress and President Bush railroaded the FHA buyer with a last minute addition to HR 3221aka, - The Housing and Economic Recovery Act of 2008 - aka, The Foreclosure Prevention Act of 2008 - aka, The New Direction for Energy Independence, National Security, and Consumer Protection Act - aka, The Renewable Energy and Energy Conservation Tax Act of 2007 - and... aka, The American Housing Rescue and Foreclosure Prevention Act of 2008.

First, and before I launch into my tirade about Section 2113 of HR 3221, I want you to take just a moment to reflect on what the much ballyhooed, Foreclosure Prevention Act of 2008 really dealt with. This BILL had so many heads growing out of it, that it began to look like the mythical hydra. This is a typical "Washington Maneuver" when creating legislation and/or laws. Our legislators just can't seem to focus on simply one single item. No... they have to tie one idea to another and then to another and to another and so on and so on. Soon enough, the idea that spawned the initial BILL, is loaded with all types of other issues and subjects that simply don't tie together, yet are lobbied for by each of their respective groups and authors... who in the end threaten to vote against the BILL, if their legislative baby does not survive. That is exactly what happened in the last 7 days to HR 3221.

HR 3221 was portrayed to the public as the "end-all" for homeowners who are in desperate straights with their mortgages. In my opinion, as a homeowner and REALTOR, the initial concept of HR 3221, Foreclosure Prevention Act of 2008, the Senate version and American Housing Rescue and Foreclosure Prevention Act of 2008, the House version was initially intended to help the homeowner escape the looming potential for foreclosure. Fortunately, that portion of HR 3221 survived pretty much in tact.

Somewhere along the line, Congress added the Housing and Economic Recovery Act of 2008, both the House and the Senate had their own versions of that portion of HR 3221 too. Then... one of our congressional wizards in the House came up with the New Direction for Energy Independence, National Security, and Consumer Protection Act, adding that component also to HR 3221. But it didn't stop there... nope... the nation began to really feel the pain at the gas pump so... enter the Renewable Energy and Energy Conservation Tax Act of 2007. Now, tell me... how the heck do we go from helping folks stave off foreclosure to "Renewable Energy and Energy Conservation Tax Act". It's simply amazing!

Each additional component of HR 3221 carried with it, its own set of lobbyists, special interest groups and of course, hours and days and weeks and months of debate in both houses. At one point, President Bush threatened to veto the BILL for reasons, yet unclear to me. Nevertheless, to appease the President and his pals on Capital Hill, more garbage was rolled into the BILL and two weeks ago, the crowning touch was added to HR 3221. Congress agreed to add a component to HR 3221, SEC. 2113. CASH INVESTMENT REQUIREMENT AND PROHIBITION OF SELLER-FUNDED DOWN PAYMENT ASSISTANCE. This sneaky, underhanded, despicable, hurtful, lousy addition to the BILL not only stripped away all forms of DPA (Down Payment Assistance) program help for the FHA buyer, but... to add some salt to the wound of the already bleeding pool of potential home buyers, our brain dead House of Representatives, also saw fit to increase the minimum FHA down payment requirement from 3% to 3.5% of the purchase price.

Even though FHA loans are not FICO driven, due to the recent mortgage meltdown, most... if not all, lenders are simply scared to death to make loans to buyers who don't fit the more stringent guidelines of conventional loans. It isn't bad enough that lenders, who are processing FHA loans will not even look at an FHA buyer unless he/she passes muster under Fannie/Freddie guidelines. Now Congress and our current administration sees wisdom in making it even more difficult for FHA buyers to secure financing. This means that an FHA buyer buying a $200,000 home must now bring an additional $1,000 to the closing table. And... this same buyer is now also paying upward of $4.50 for a gallon of gas. It appears that Congress and our current administration has lost all sight of the plight of the "little guy". Some how they find justice in forcing the average working class home FHA buyer to belly up to the bar, and suck it up. In this REALTORs opinion, there is NO logic in adding Sec. 2113 to HR 3221. The President should use his "Line Item" veto authority and rip this component out of HR 3221 when he signs the law into affect this week.

The bottom line is just this... if you are a buyer, in the market for a home under the current maximum FHA limit of $346,250 and if you were planning on taking advantage of a (DPA) Down Payment Assistance program such as AmeriDream, Nehemiah, DOVE or any other charitable down payment contribution loan vehicle, you MUST, MUST, MUST, secure your loan NOW. You MUST connect with a licensed real estate professional and then get allied with a reputable lender and get your home loan approved NOW. As of October 1st 2008, any home buyer, who wishes to use the FHA lending platform, will not be able to use any form of DPA loan.

Congress has stabbed the FHA buyer through the heart. The little guy pays the price again.

If the President really understood what this component of the HR 3221 bill meant to buyers all over the nation, he might... just maybe... rethink using his "Line Item" veto authority and remove Section 2113 from HR 3221 when he signs the BILL into law this week.

We truly hope that President Bush will rethink what he is doing when this law gets signed. Overall, the HR 3221 is a good bill. However, who ever the brain dead politition or group of polititions was/where, who authored this amendment, simply doesn't care about the working class FHA Buyer. That said... the amended component, SEC. 2113. CASH INVESTMENT REQUIREMENT AND PROHIBITION OF SELLER-FUNDED DOWN PAYMENT ASSISTANCE is simply BAD for FHA buyers, BAD for the Real Estate Industry and simply BAD for the economy.

Lori & "G-II are REALTORS with Coldwell Banker Residential Brokerage in Phoenix, Arizona. You can reach us at (602) 796-5674 or eMail us at Lori.and.G-II@GoAirForceHomes.info or Lori.and.G-II@RealEstateInPhoenix.net.

FHA & VA Home Buyers Have A Golden Opportunity

G-II Varrato II (Coldwell Banker Residential Brokerage) — Sat, 26 Apr 2008 13:26:50 -0500

FHA & VA Home Buyers Have A Golden Opportunity

Consider this; new figures out today on the continued housing market slump making news, yet again, with new construction brining in national number of an 8.5% drop in sales for the first three months of this year and the National Association of Realtors sites a continued lag in March 2008 real estate sales of just under 17% of the March 2007 figures. These numbers are equal to figures we saw over a decade and half ago, back in 1991. Your FOX 10 MLS-Experts have the right answers to help educate sellers about selling in today's real estate market environment. Buyers also need to learn why buying in today's market is a good idea.

THE NEGATIVE

In April 2008, new underwriting guidelines were published to most, if not all, of the major lending investors, such as FlagStar, IndyMac, Provident, Countrywide, BofA, Wells Fargo and the other mortgage lenders, still in business (check out http://www.mortgageimplode.com/ where you can read about 252 mortgage lenders and/or investors that have gone out of business since the middle of 2006)

The major MI (Mortgage Insurance) companies, Genworth, MGIC, RMIC and Radian have all increased limitations on mortgage insurance requirements. The MI parameters are even more restrictive in markets that are characterized as "declining". Oh yes... and BTW... Maricopa County, Coconino, Yavapai, Gila, Pinal, La Paz, Yuma, Mohave and Pima are all considered to be DECLINING markets.

MORTGAGE INSURANCE IS NOT AVAILABLE FOR THE FOLLOWING:

Any LTV (Loan To Value) with FICO below 620
Any LTV above 97%
All Stated Income Loans LTV's over 95% with FICO below 680
Loans with potential negative amortization
Cash Out Refinances on Investment properties FICO less than 680 on LTV's over 90% in a declining market

This means that purchases that do not fit the parameters above are INELIGIBLE for conventional insured loans.

Also in April, the Maricopa County Tax Assessor published his expected value window for properties, across the county. The Assessor is projecting devaluation of as high as 41% in the West Valley with an average devaluation of property values hovering around 15%.

THE POSITIVE

The Temporary Loan Limit Increase for FHA loans, passed by President Bush's economic recovery act, has altered (only until December 31st 2008) the maximum FHA loan limit from just over $263,000 up to, in Maricopa County, $346,250. According to the Arizona Regional Multiple Listing system, nearly 70% of the homes that sold, and closed, within the past 150 days, sold for under $346,250. Only a micro-fraction of the closed transactions took advantage of the FHA loan platform. Single family residential home existing inventory currently hovers right around 57,000 units. Nearly 65% of that inventory will fit the FHA finance platform.

Even better news! About two or three years ago, FHA/HUD implemented a hybrid of the popular FHA 203(k) financing platform. Today, qualifying buyers and homes can take advantage of what FHA refers to FHA 203 "Streamlined (k) loan platform. These types of loans allow a buyer to finance up to $35,000 for minor repairs and upgrades and these repairs and/or upgrades can be completed AFTER the transaction closes.

The use of FHA loans has been dormant since the beginning of this millennium. With lenders tightening lending parameters for conventional loans, the "Govies" FHA and VA loans, are going to be the product of choice, a staple of the lending arena and a necessity.

FHA loans are not, in and of them selves, FICO driven, although many lenders are placing FICO requirements of not less than 620 on borrowers. Again, this FICO requirement is not HUD/FHA driven. It is simply lender's, and major investors, showing their nervous feelings about lending any money to anyone who cannot demonstrate a somewhat solid credit worthiness.

VA loan limits, for Maricopa County, are currently set at $417,000 and... what most vets don't know, is that the vet can use their VA loan privileges again and again, once the previous VA loan has been paid off. Additionally, many... if not most... vets don't know that if they have used their VA loan privilege in the past and still have an active VA loan... if that existing loan has not consumed their entire VA entitlement of $417,000 they can use the balance to purchase a new/additional home with the remaining entitlement.

Please feel free to give us a call at (602) 796-5674 if you have any questions.

PS:
Feel free to eMail this post to your friends and family... and let them know that you learned about this at www.GoAirForceHomes.info and Lori & G-IIs eTeam, aka Lori & G-II

Bye for now,

Lori & "G-II"

Real Estate Prices Are On The Mend

G-II Varrato II (Coldwell Banker Residential Brokerage) — Thu, 20 Mar 2008 09:36:04 -0500

Real Estate Prices Are On The Mend

The Real Estate market has been in the tank for the past 24 to 30 months. Last week, when the HUD announced the increase to FHA Loan Limits from $263,300 to $346,250 it was like a huge burden had been lifted from the back of the real estate industry.

Every agent we have spoken with in the past week has declared a market increase in buyer activity. Listing are seeing more activity and even encountering multiple buyers.

While Eliott Pollack, arguably the most intelligent Arizona economist in the valley, noted that the worst of the value decline has subsided but the slow down in buyer activity could continue through 2008 and into 2009, we in the field, feel that the bottom has arrived.

There are still some fringe communities, like Buckeye, Queen Creek, Tollosen and Laveen and a few inner cities like El Miarge and Surprise, that are feeling the downward pressure to property values, but if you're looking for that "Bell Weather" sign to tell you when to make your move with your real estate purchase, the article below should help you figure that out with crystal clarity. It's time to make your move.

Talk with your Realtor and get them on the stick to find your new home for you. You'll be kicking yourself in a few months for waiting for more down to come. It's simply not going to happen.

These cycles come in waves and the down turn usually lasts a couple of years and then the upward climb begins. The upward movement will be in very small steps at first but the movement will increase in speed and price point as we enter the selling season April through September. Get the lead out folks... get the lead out!

By "G-II" Varrato II, Realtor®, Retired USAF Red Horse 820th CES
ePRO 500, ABR, RECS, Mentor
Coldwell Banker Residential Brokerage

Catherine Reagor and Ryan Konig
The Arizona Republic
Mar. 15, 2008 06:16 PM

Median prices of Valley homes are all over the map

The housing market's troubles are showing up in many neighborhood home prices, but not all.

Home sales are pretty much down across the board, but prices were flat or even up in one-fourth of Valley ZIP codes last year, according to The Arizona Republic's Valley Home Values Survey.

Most of the areas that posted increases in values were closer in and more centrally located, while affordable, new-home communities farther out continued to see the biggest declines in prices.

· The north-central Phoenix neighborhood ZIP code 85021, peppered with historic homes, posted a 16 percent increase in its median price during 2007.
· Condominium prices in the west Phoenix ZIP code 85037, which is at the junction of the Loop 101 and Interstate 10, climbed 21 percent. This area is also south of Glendale's sports stadium hub and the new Westgate shopping center.
· The central Ahwatukee ZIP code 85042 saw home prices climb 9 percent.
· None of the ZIP codes in Tempe, surrounded by other communities, fell by double digits. The median condo price in ZIP code 85281 climbed almost 11 percent.
Home builders continued to drop prices in fringe neighborhoods, which worked to pull down those communities' overall median price.

· The north-Phoenix ZIP code 85050 saw a 22 percent drop in its median price because the area's new-home prices plummeted 47 percent. Builders were cutting prices but also constructing smaller homes.
· In Pinal County, the Queen Creek ZIP code 85242 posted metro Phoenix's second-biggest overall drop: 20.2 percent. The area's median new-home price fell by almost 22 percent.
· Home values in the Buckeye ZIP code 85296 were down 18 percent overall, while the area's median new-home price dropped 15 percent.
Neighborhoods farther out with higher-end housing developments are an exception to the fringe trend.

· The median home price in the Mesa ZIP code 85207 climbed 17.7 percent, to $365,000.
· The median price in north Scottsdale's 85262 ZIP code, home to high-end golf developments, increased almost 7 percent, to $1.1 million.
Some areas are correcting from zealous prices increases.

· Glendale's 85305 ZIP code posted a 23 percent drop in its median home price. But the area, home to the Arizona Cardinals' University of Phoenix Stadium, the Coyotes' Jobbing.com Arena and Westgate, saw resale prices climb 27 percent jump in 2006 and a huge 71 percent increase in 2005.
· In Phoenix's Camelback Corridor/Biltmore area ZIP code 85016, condo prices fell 29 percent.

"The bottom of the housing market may occur in 2008 or 2009, but a full recovery will probably take three to five years," said Elliott Pollack, an Arizona economist and real-estate investor. "This slowdown ends when housing prices stabilize."

To Be or Not To Be Represented - That Is The Question

G-II Varrato II (Coldwell Banker Residential Brokerage) — Sun, 20 Jan 2008 19:33:02 -0600

Lori and I feel that if REALTORS®, share the kind of Intel we offer below, with the public, the public may think twice about giving any logical thought to engaging a real estate agent who is willing to work for less than poverty wages.

From time to time, Lori and I come across buyers and sellers who believe that real estate agents... simply make way too much money for the job that they do. That may be true in some instances. We also know of real estate agents who promise to give a good part of their earnings back to the buyer or seller when a transaction closes. We have heard of practices where real estate agents offer as much as 1/2 of their earnings and as much as 2/3s of the agent's earnings back to the buyer or seller at the close of escrow. Could such an altruistic position be putting the buyer or seller in harm's way?

To that end, we thought it appropriate to offer our thoughts on this practice.

Lori & I do not believe that any agent who is giving up 1/2 to 2/3s or more, of his or her income can consistently keep a frame of mind that puts his/her client top of mind and above the real estate agent's need to keep the agent's car payments current, a roof over his/her family's head and food on the table.

Keep in mind too, that the real estate markets of 2006 and 2007 did not produce an abundance of closed transactions in the entire country, Arizona or the ARMLS (Arizona Regional Multiple Listing Service) region. 2008, 2009 and perhaps as far out as 2011 (depending on the economic forcaster you believe) could ring in similar years of productivity.

CONSIDER THIS:

In August 2007 ARMLS recorded a total of 3930 residential resale and/or new home transaction closed.
In September 2007 ARMLS recorded a total of 3171 residential resale and/or new home transaction closed.
In October 2007 ARMLS recorded a total of 2824 residential resale and/or new home transaction closed.
In November 2007 ARMLS recorded a total of 2629 residential resale and/or new home transaction closed.
In December 2007 ARMLS recorded a total of 2591 residential resale and/or new home transaction closed.

You can review a complete seven year tracking of the real estate market's activity by CLICKING THIS LINK.

In the first 20 days of January 2008, ARMLS recorded 1,201 single family residential listings closed escrow. Now, keep in mind that the National Association of REALTORS® study sited that the average real estate agent closes 10 transactions per year (**SOURCE: Realtor.org). If we subscribe to the belief that, as of December 2007, Arizona now hosts over 110,000 licensees and that, perhaps 1/2 of them or more, practice right here in the ARMLS area, how may transactions do you think the average ARMLS real estate agent is closing each month? Contrast the first 20 days of January 2008's figure of 1,201 single family residential listings closing escrow with the first 20 days of January 2007 when 2482 single family residential listings closed escrow. The industry is 100% off target from the preceding 12 months.

However... Do not be disheartened. Even though these numbers look pretty dismal, the number of closed transactions are not too far off from January 2000 when the first 20 days of January 2000 produced 1642 closed transactions. The two biggest variables are the increase of licensees by nearly 115% since December 2000 and the staggering number of failing mortgages which now helps sponsor nearly 60,000 properties that remain, on the market and UNSOLD!

NOW... DO THE MATH!
The average sales price for homes in the valley, priced between $100,000 and $800,000, in 2007 was $286,000. Assume an average commission paid to the buyer or seller agent of 3% or $8,580. Let's also assume that our REALTOR® works for a 100% office, wherein the agent receives 100% of the compensation, less a usual franchise fee payment to his/her broker of 6% of the earned commission. (franchise fees vary but 6% is a good number to use as an average) In our example, the agent will receive a Gross Commission Check of $8,065.20. If our agent gives his/her client 2/3s of his/her commission, he/she earns a total Net Commission, before taxes, of $2,685.71. Now... Let's assume that our agent is in a 30% tax bracket. That means that our agent's take-home pay for this transaction is $1,879.99. Remember, the National Association of REALTORS® sites that the average real estate agent closes 10 transactions per year (**SOURCE: Realtor.org), up from 7.7 in 2000. If our agent is even 1/2 again more efficient than the average real estate agent and closes 15 transactions per year, our agent will earn a total, Take-Home income of $28,951.84 which is just $4,800 above the 2007 USA National Poverty level for a family of 5 in 48 states and. **SOURCE: Federal Register, Vol. 72, No. 15, January 24, 2007, pp. 3147-3148

Now... What if our real estate agent worked for a traditional real estate company where the agent's commission is shared with his/her brokerage on a SPLIT. The majority of the REALTOR® population work for traditional real estate firms and even the most senior agents capture only 80% to 90% of the commission dollars, after their traditional franchise fee SPLIT.

Let's move our benevolent agent into a traditional real estate firm, such as ERA, Century 21, Coldwell Banker, Better Homes and Gardens or any number of other companies that host traditional real estate commission SPLITS. Let's assume that he/she has achieved an 80% SPLIT agreement with his/her company, less his/her 6% franchise fee. That means that the 80% SPLIT is really 74%.

Now... Let's assume the same transaction with a total earned commission of $8,580. The agent's total Gross Commission, at a 74% SPLIT (after the 6% franchise fee) is $6,349. Now let's assume that our altruistic agent gives his/her buyer or seller 2/3s of his/her income netting our agent a grand total, before taxes, of $2,147.52. Remember, our agent is also in a 30% tax bracket, which in realty nets our agent a grand Take-Home income of $1,503. If our agent performs better than the NARs average REALTOR® and closes 15 transactions in one year, he/she will earn a grand total of $22,545 or $1,550 below the National Poverty level for a family of 5 in 48 states, Hawaii and Alaska's poverty level have a bit higher income ceiling. **SOURCE: Federal Register, Vol. 72, No. 15, January 24, 2007, pp. 3147-3148.

Lori and I believe that human nature will prevail and the client, on some unfortunate day... may pay a very heavy price because the real estate agent may not be able to conduct too many transactions with the altruistic contributions described in our scenarios. It is simple economics and human nature. This does not make REALTORS® bad people, it makes them human and as humans, we believe that REALTORS® should earn a fair price for performing their duties to protect the public. Remember, as Arizona licensees that is our charter, as defined by the ARS Title 33, to protect the public's interests.

How in the world can a real estate agent hope to assist a buyer or seller if the real estate agent is going to put himself or herself in financial harm's way? Lori and I feel that if we, as a real estate agent community of REALTORS®, share this kind of Intel with the public, the public will think twice about giving any logical thought to engaging a real estate agent who is willing to work for less than poverty wages. Would you be willing to work for less than Poverty Wages? Do you believe that you would be able to put your client's needs ahead of the needs of you or your family if you were working for Poverty Wages or less?

It simply makes no sense to us... How about you? Think about it.

Is the LSR Absolutely Necessary?

G-II Varrato II (Coldwell Banker Residential Brokerage) — Thu, 03 Jan 2008 17:43:52 -0600

In May 2005, the AAR (Arizona Association of Realtors) purchase contract was rewritten. Many major changes were made during that rewrite, not the least important being the inclusion of the LSR (Loan Status Report), which replaced the CLA (Conditional Loan Approval).

The biggest difference in the two documents was that the inclusion of the LSR is now an integrated part of the AAR contract. Lines 62 & 63 of the AAR contract stipulate that the LSR be integrated into the contract as an included attachment thereto. So, what does that really mean in plane English?

Well...

There has been much bally-hoo about the AAR LSR. The one question I field almost every time one of our protégés encounter resistance from either a Buyer or Seller is, "Do I really need to include an LSR with the offer". The answer is not as clear cut as Yes or No.

What one must keep in focus is that all offers are... simply that... an offer of a set of terms and conditions proposed by one party to the other. When the buyer presents an offer to purchase real estate, using the AAR contract, the buyer, by default by way of lines 62 & 63, commits to deliver a LSR with the offer, with... at a minimum, the top portion of the LSR completed and signed by the Buyer.

Unfortunately, there are very few Buyers who understand the information the Buyer is to provide in the LSR. Terms such as LTV, CLTV, FHA, Points, Initial Rate, Loan Contingency and more have a tendency to make most Buyers feel like they need to take a college course in lending terminology. Therefore it makes good sense for the Buyer to complete the top portion of the LSR, while conversing with the Buyer's elected lender.

The bottom portion of the LSR was designed to cajole, out of the Buyer's lender, a commitment to cooperate with, not only the Buyer, but also with the Seller and both Buyer and Seller Brokers in open dialogue about the status of the Buyer's loan at any given point in the process. In the old CLA, and the previous revision of the AAR contract, a week effort was advanced to solicit this cooperation by instructing the Buyer to "instruct the Buyer's lender to send copiers of the loan approval to the Seller and Brokers. The old CLA also contained a line that read, "...Buyer authorizes the lender to provide loan status updates to Broker(s)..." Most lenders refused to comply with this instruction, citing the GLB (Gramm-Leach-Bliley) Act. Lenders, who were having difficulties with the borrower's loan, chose to hide behind this federal law and claimed that they had no authority to divulge any information about the loan or progress or loan process. And... while the lenders were incorrect in their interpretation of the GLB Act, there was all too often little success, if any, to gain cooperation with the Buyer's lender.

Enter the LSR. The LSR added a line that read, "..Lender agrees to provide loan status updates to Seller and Broker(s) in this transaction..." It can be argued that LSR is an agreement between the Buyer and Buyer's lender and when signed by both parties, Buyer and Buyer's lender, commits the lender to comply with his agreement to communicate with the Seller and Broker(s) in the transaction.

Now to the question of, "... is the LSR a REQUIRED document to the offer written on an AAR contract form..." No, the LSR is not required in as much as the AAR contract could be appended by the parties to eliminate the LSR. However, it would be unwise to do so, if for no other reason than for the Buyer, Seller and Broker(s) to have ingress into the lender's camp for regular updates.

The article below, written by Michelle Lind Esq., General Counsel to the Arizona Association of Realtors, explains this very clearly.

What would happen if an offer is presented without a Loan Status Report (LSR)?

** Loan Status Report (LSR)

First, contact the buyer's broker and request that the Loan Status Report ("LSR") be provided. If the LSR is not immediately forthcoming, present the offer, but advise the seller against accepting the offer without the LSR. The buyer's obligation to complete the transaction is contingent upon the buyer obtaining loan approval for the loan described in the LSR. If there is no LSR, no loan terms are included in the Contract, which creates an ambiguity in the terms of the loan contingency.

Further, the information contained in the LSR will allow the seller to better evaluate the buyer's offer. The LSR addresses purchase price, loan amount requested (the first and second, if applicable), loan to value, combined loan to value, term of loan, maximum interest rate, loan program, and occupancy. the buyer is also to indicate whether the buyer is relying on the sale or lease of a property to qualify for the loan.

A recent addition to the LSR requires the buyer to establish the interest rate and "points" by separate written agreement with the lender during the inspection period or the interest rate provision of the loan contingency is waived. For example, if the buyer does not lock the interest rate specified in the LSR during the inspection period at 6%, but can get the other loan terms described in the LSR when the rates increase to 7%, the buyer will be obligated to close escrow or will be in breach of the contract (after the expiration of the cure period). However if the buyer does not lock, but cannot obtain loan approval for some other reasons, the Loan Contingency is unfulfilled and the buyer is entitled to a return of the earnest money. Finally, and most importantly, the buyer is asked whether the buyer has had the opportunity to consult with a lender.

Loan Status Update ("LSU")

The LSU is a companion form to the LSR. In the Contract, the buyer authorizes the lender to provide loan status updates to the seller. These updates may be provided on the LSU form. The LSU is divided into three sub-sections: Documentation, Underwriting and Approval, and Closing. The first sub-section asks whether the lender has received the Contract and whether the appraisal has been ordered or received. (Note: The buyer has five days from notice that the property did not appraise for the sales price to cancel the Contract or waive the appraisal contingency). The Underwriting and Approval sub-section asks whether the lender has obtained loan approval with or without "prior to" doc conditions. The Closing sub-section addresses closing documents and prior to funding conditions.**

At the end of the day, simply put, the AAR LSR is a valuable component to the AAR contract. If the parties choose to create a work around of any kind, the transaction could be placed in jeopardy. If the Buyer has no contractual agreement from his/her/their lender to cooperate and communicate with the parties and their Broker(s), there is very little that can be done to force capitulation with the Buyer's lender, in terms of complete and honest disclosure of the Buyer's loan progress and process.

Keep in mind too that the current AAR contract holds the Buyer accountable for the performance of the Buyer's elected lender. If the Buyer's lender fails to support the Buyer's contractual time-line requirements, the Buyer could pay a steep price; perhaps the collapse of the transaction, or even forfeiture of the Buyer's earnest money, given evidence that the Buyer failed to perform his/her/their contractual obligations.

Even if a Buyer's lender provides a Lender's Letter Of Approval, there is little chance that all of the points contained within the LSR would be addressed and this Realtor is convinced that there would be few, if any, banking or lending institutions that would allow the loan officer to fashion a Loan Approval Letter that created or even loosely implied a "Contractual Commitment of Cooperation and Communication" with the Buyer, Seller and their Broker(s).

It is this Realtor's opinion that allowing either side, Buyer or Seller, to deviate from the intention of Lines 62 & 63 of the contract is simply creating an extremely weak link on the contractual agreement between the parties.

So, is the LSR required, NO... Would eliminating the LSR in its entirety be a prescription for potential disaster? In this Realtors opinion, YES! It is this Realtor's opinion that allowing either side, Buyer or Seller, to deviate from the intention of Lines 62 & 63 of the contract is simply creating an extremely weak link on the contractual agreement between the parties.

The Mortgage Sky Is Not Falling. But...

G-II Varrato II (Coldwell Banker Residential Brokerage) — Sat, 15 Dec 2007 11:54:23 -0600

it is certainly raining cats and dogs...

Of course, as we are all aware, these days... it is in deed a Buyer's Market. That has been abundantly clear and demonstrated by the conclusion of negotiations for the property after property across the USA. That continues to be the case, and... even in this Buyer's Market, the mortgage industry continues to be pummeled by changing terms and conditions of loan products.

On Thursday, December 6th 2008, FlagStar Bank, one of the nations largest lenders put out a list of states and communities with those states that are identified as "Declining Markets". California was perhaps the hardest hit with nearly 1/5 of its counties the target of the FlagStar Bank decision. Other states that have been put on the "Declining Market" watch list and that have been hard hit by the additional lending restrictions are, Colorado, Florida, Michigan, Ohio, Virginia and several other states to a lesser degree.

Fortunately, Arizona has not been identified as being in a "Declining Market" ...YET..., but with changes noted above, one could say that the mortgage industry is a tinder box of change with volatility unparallel since the late 1980s. It could be argued that the memo from FlagStar Bank is a signal from Fannie-Mae and Freddie-Mac, that Fannie-Mae and Freddie-Mac are throwing in the towel, and... figuratively saying... "...we're going to distance ourselves, as best that we can, from any borrower who does not have a substantial investment in their purchase..."

Those buyers who use good judgment and act quickly will preserve the best of what is available to them today, in terms of loan product and costs for these loan products. However, buyer's who dilly-dally and want to become "fledgling bond traders", rolling the dice on where interest rates and loan costs land, may well find themselves locked in loan products that are unappealing.

Of course, buyers with credit profiles in the upper 700 FICO range, and above, will fit into nearly any of the loan platforms that remain viable options for mortgage consideration. Therefore the decisions and demography noted in the FlagStar Bank memo do not directly impact these borrowers or their loans YET! However, that does not mean that this pool of buyers don't have to be proactive in taking appropriately expeditious steps to protect the loan products that are available to them TODAY. Working with a lender, such as Pacific Funding Group or Coldwell Banker Home Loans, puts any buyer in the Cat-Bird's chair. Other lenders who are trolling the Internet in search of buyers who are less informed will try to bait the buyers with promises of loan products that are simply not attainable. (SIDE BAR: Visit RealEstateInPhoenix.net for access to all types of mortgage calculators)

If you have been watching the mortgage market, you know that it has been on a roller coaster. On Monday, December 3rd 2008, one of our clients locked an interest rate on a 30 year fixed loan at 5.75 with .125% point. Twenty four (24) hours later, that rate and terms has evaporated and is no longer available. On December 6th 2007 the 30 fixed rate was back up to 6.375. The BOND market will most certainly spin out of control over the next few days with the news that FlagStar Bank has taken steps to identify nearly 1/5 of the USA as being in a "Declining Market"; and again, fortunately Arizona has not made the Hit List yet. And... as we noted above, while the move by FlagStar Bank would not directly impact the loans for buyers with better than good FICO scores, this will impact the type of loans available to the majority of the public as other major lenders adopt similar strategies.

After being in this industry for nearly two decades and having survived similar market conditions, it is our belief that many of the other big players in the mortgage industry will follow FlagStar Bank's move with in the next 15 to 30 days; industry mortgage leaders like Countrywide Home Loans, IndyMac Home Loans, Well Fargo, Bank of America and many others. We have already heard from the Vice President of Coldwell Banker Home Loans today... that Coldwell Banker Home Loans is bracing for even more tightening of mortgage lending parameters over the next few weeks. Today is a GREAT day to be a buyer and an even better day to be a buyer who can make prompt and decisive decisions about their loan platform.

Even though the FED spoke on December 11th 2007 and lower interest rates again by 250 basis points, any movement that was made by the FED will most likely not impact new loans for many months, if at all. These rate reductions are designed to help the wholesale market, the guys/banks who buy money from the FED at the "Discount Window". These types of rate reductions are not designed to help consumers who are profiling new loans.

Lori and I have been in this industry a very long time. We have seen markets similar to this on three prior occasions, however none where course corrections or changes in direction were so rapid. We believe that the rapid course corrections to real estate and mortgage market dynamics are directly related to the speed that information travels at today. Today we have the Internet, in the 1980s, only the military had the Internet, or a very elementary semblance of an Internet. Today, good news as well as bad news travels at lightning speed. The rapid movement of news, good or bad, impacts all industries, but none more dramatically than the Stock and Bond market and Real Estate and Mortgage industry.

If you would like to receive a FREE analysis of the real estate market in the area you are going to purchase your home CLICK THIS LINK.

If you would like to receive a FREE analysis of the real estate market in the area where your current home is located CLICK THIS LINK.

We wish you and your family a very prosperous closing of 2007 and a happy and healthy new 2008.

Why Won't My House Sell?

G-II Varrato II (Coldwell Banker Residential Brokerage) — Sun, 27 May 2007 18:38:14 -0500

By Lori Klindera, Realtor®, ePRO, ABR, RECS, Mentor
"G-II" Varrato II, Realtor®, Retired USAF Red Horse 820th CES
ePRO 500, ABR, RECS, Mentor
Coldwell Banker Residential Brokerage
May 2007

We often field eMail questions and/or phone calls from sellers, asking... Why won't my house sell? The information below might help explain the real estate market dynamic we are currently experiancing.

A SELLER WROTE: "...Hi my husband and I are trying to sell our home. We are selling a one story 1681 sqr ft. We are currently asking 215.000. We have had it on the market for a very long time and want something to happen. I am just wondering how you feel about the market and our situation..."

There are several factors affecting the traffic you have experienced to date, not the least of which is the sliding real estate market. It is no secret to anyone today that the real estate market hit its peak around mid-2005. It was at that point, around July/August 2005, that the market began its rapid readjustment. This had to happen. Real estate prices had raced ahead of their time by about 10 years.

For example, if you purchased your home in early to mid 2004, residential resale inventory in the ARMLS region (all of Maricopa County and a small portion of Pima County, an area that services just under 5 million people - according to the 2005 Census) had just begun to recede from about 30,000 units available for sale, a historic high set in February 2003, to about 22,900. Builders were holding lotteries for lots and long lines were forming in the scorching desert sun populated by anyone who wanted a piece of the American Dream, homeownership. The party was just getting started. Residential sales inched their way upward... 8,900 units in April, 9,000 units in May and upward to 10,000 units in June. And as is typical when the holiday seasons begin, sales began to slow... down to 9,000 units in July, 8,900 units in August, 8,600 units in September, settling out at just over 6,600 units in January 2005.

Inventory continued to shrink. The roller coaster ride down the steep hill continued throughout 2004 and into March of 2005 when inventory hit an historic low of only 3,500 units. Immediately, the party was over. The period of readjustment had begun. It was as if we were riding a Japanese Bullet Train and someone pulled on the emergency break and our necks snapped from the whiplash of the sudden jolt!

In less than 30 days, the period of time from March 2005 to April 2005, inventory had tripled from an historic low of 3,500 units... up to just under 10,000 units. Inventory continued to climb and by August 2005, inventory had reached 15,000 units. The climb in inventory continued, now at an almost exponential pace making leaps of 3,000 to 5,000 units per month. By January 2006, residential inventory had reached all time record high of just over 31,000 units. The adjustment continued, well into the year each month ringing the bell for a new all time inventory high. In September 2006 residential inventory made yet another record, hitting the mark at 48,443 units. Recorded sales were declining steadily and in September 2005 were down to just over 9,000 units, but the writing was on the wall, the number of buyers no longer outweighed the number of sellers. In fact sellers were out gunned 4 to 1. This was the beginning of the growing time on market, gradual that it was.

In April 2007, residential inventory hit another milestone, toping 52,500 units. Adding to the seller's frustration was the reality that only 11% of the homes on the market sold in April 2007, leaving over 47,000 homes unsold.

Compound the market dynamic of the residential resale competition with the incredible incentives, being offered by Builders. According to the Ultimate New Homes web site http://www.ultimatenewhomes.com/ (Proprietary Realtor Web Site), by October 2005, Builders were already feeling the pinch. Builders began to inch up the compensation to the Buyer Agents. Buyer incentive packages began to work their way back on to the scene. By January of 2006 builder spec inventory had begun to grow out of control. Toward the end of 2005 about 58% of the builders were offering Buyer brokers more than 3% commissions. By January 2006 86% of the builders were now offering MORE than 3% commissions. Today, we receive eMails from builders on a daily basis, offering to pay Realtors commissions of 4%, 7%, 10% and even as high at 15%, if the Realtor will sell their residential resale buyer a new construction home. By April 2006 the builder spec home inventory had eclipsed the 2,400 units record set in May 2003 and had now skyrocketed to more than 4,100 units. That was an off the chart increase of over 1,700 units from the opening month of January 2006. The tables had turned. The builders had boxed themselves in and now they were going to have to peddle fast to undo the damage their greed had caused. CLICK THIS LINK to view just a few builder incentives and buyer broker commission packages.

These are conditions sellers can do nothing about. The seller's home is located where it is. The seller can't change that. The seller's home is so many square feet in size. The seller can't change that. The seller's home is usually kept in good condition and that is something sellers can control, although I'll bet that most seller's homes are kept neat to the 10s.

THE SELLER CLOSED WITH: "...We currently have a realtor but he is a friend and is not aggressive. We would want to switch if we thought it would help our situation. Please let me know what you think..."

There are several things that can be controlled by the listing agent, however. Generally, as we review homes in the MLS system and on Realtor.com, the world's most searched real estate search engine, we find that many home's presence is not optimized. Let me explain.

First, we are Internet Realtors, or eRealtors. There are only about 1/2 of 1 percent of the entire population of the National Association of Realtors membership who can make this claim. eRealtors generate 100% of their business from their web presence and from the use and deployment of technological tools. Therefore what we tell you in the following paragraphs is fact, not fiction.

Many homes, marketed by real estate agents today, do not always deploy all of the technical tools available to our industry that will help maximize the visibility of the property on the Internet. Because of the lack of use of these technologies, most homes will not even register as a blip on the radar screen when folks search Realtor.com. That is because the home is not optimized. At Realtor.com, properties are delivered to the visitor's search results in the following hierarchy. At the top of the list are homes that are hosted on a Realtor.com "Enhanced Web Page". The Realtor.com web page must sponsor a Head Line, a Scrolling Banner in a Virtual Tour, no less than 6 photos and use the 2,500 characters of space provided for additional comments about the property. Homes that have less than these components are almost never seen by visitors to Realtor.com. The Realtor.com search algorithm simply pays no attention to properties that are, bland, in description and enhancements.

This is an example of a property that is "Optimized" at Realtor.com. CLICK THIS TINYURL link to view one of our listings on Realtor.com

Check out some other properties on Realtor.com. If you were looking at the property displayed in the link above and one of the other properties you have found for our demonstration purposes, at Realtor.com, side by side, which one would you find more interesting? Which property would you spend more time reviewing? Which property do you think would prompt you to contact the agent to gather more information?

Additionally, and equally important is the ability for the consumer to make immediate contact with a live person. At Realtor.com, and on all of our web sites, we deploy a button or link that allows the consumer to do just that. CLICK THIS LINK to see how fast you can reach us. This consumer contact technology is proprietary to Coldwell Banker agents. Once the consumer completes the form, the prospect information is immediately delivered, right to the listing agent's PDA or cell phone. If the consumer offered up a phone number in the contact information section of the form, the Coldwell Banker agent will call the prospect back within two or three minutes. At the very least, the prospect's eMail address has been sent to the Coldwell Banker agent for follow up. Now... if a prospect really wants to make "First Contact", he/she can CLICK THIS LINK and be immediately connected directly to our cell phones. This technology is not part of the Coldwell Banker arsenal of tech-tools. This is something that Lori & G-II deploy as part of our marketing strategy.

We mentioned above, the Realtor.com Enhanced Web Page; the Enhanced Web Pages are not inexpensive. The system costs the agent upward of $700 annually. A Virtual Tour can cost the agent anywhere between $60 and $100 or more per Virtual Tour. It also costs an agent an additional $25 to post the Virtual Tour to Realtor.com. Making the commitment to a seller, to expose their property with the most aggressive use of tech-tools offered to the real estate community is not inexpensive. Nearly every real estate agent on the planet has a web site; that's not rocket science. Knowing how to create interest in the agent's web site, knowing how to position the agent's web site on the first page of the major search engines... now... that's exposure to the public.

If a home has only one photo shown in the MLS system, this could be very unhelpful, in terms of aggressive marketing. We often see homes that have languished on the market for 120 days, 180 days, 240 days, 360 days and more. This also translates to why the home will rank poorly in the Realtor.com search algorithm. Without a Virtual Tour and 6 photos, any home might as well be invisible to the public at Realtor.com.

Web presence is another critical factor in "Optimization". Type any agent's name into any web browser, search window, and see if you can find him/her on the first page of the search engine. Now type Lori Klindera or type Lori & G-II into any search engine's search window. See if you can find any of our 13 web sites in the first page. I'll wager that we take up the top quarter to top half of most of the major search engines.

It is also extremely important for the real estate agent's web site to be "organically optimized" so that the web site registers high in the search results for key words, targeted by the agent. For this example, type the following (coldwell banker phoneix or coldwell banker goodyear) into Yahoo.com, Google.com, MSN.com, WebCrawler.com, AltaVista.com, Excite.com or Ask.com and notice the search results. Look for any of our webs such as http://www.realestateinphoenix.net/, http://www.homesinphoenix.net/, http://www.iphoenixmls.com/, http://www.airforcehomebuyer.info/, http://www.airforcehomeseller.com/ or any other webs or cross webs that we might be linked to. Try typing this, air force home buyer, into YaHoo.com, AltaVista.com, Excite.com, MSN.com or Ask.com and see if you can find http://www.airforcehomebuyer.com/, http://www.airforcehomebuyer.info/, http://www.airforcehomeseller.com/, or http://www.airforcehomeseller.info/.

However simply ranking high on the search engine ladder is not the end all to web presence. The web visitor has to be able to make contact with the agent and... even more critical, the agent has to be ready, willing and able to respond immediately to the consumers requests. That is something we excel at.

Of course, pricing a home is very important too. Homes priced a little above sold homes, similar to their home, in their neck of the woods may not always be the most appropriate strategy. However, simply reducing the price is not the end all to getting it shown, but it is a good start. All of the components above are still needed if the seller is to have a fighting chance of selling his/her home in any reasonable length of time. Oh yes, in today's real estate world, the average time on market in the ARMLS region hovers between 4 and 5 months.

Now something to consider; if the seller has over leveraged his/her home, that is, if the seller has refinanced the home and owes too much on his/her home... it may not be a good time for him/her to sell the home at this time. Remember, sellers often need to replace the home they are selling with another one. Today's financing arena is quite different than it was in the early part of 2007 and it is projected to become, possibly, more challenging for buyers.

One last note about today's real estate agents. It is our opinion, after being in this industry nearly two decades, that many of today's agents have never been through a real estate market like we are experiencing. This is our third time through a down trend like this. Agents who have less than 10 years' experience have never seen this type of market. Many of them may not know how to manage their time, their financial resources or their clients' anxieties. They simply don't have the experience. They have never been in this kind of fire fight. It is expensive to market homes in today's real estate market environment. It is extremely time consuming and... holding open houses, plopping a for sale sign in the yard and tossing the listing into the MLS simply will not get the job done.

Everything sells, eventually. The seller's home may not sell tomorrow, but it will sell. If the seller is not in a "I Gotta Sell This House NOW Mode" then he/she should simply relax. There is no pressure him/her. There is no fire to evade. There is no speeding truck to jump out of the way of and there is no falling sky. However, and while everything sells, the efforts put forth to make that period of time as short as possible is all in the marketing. Today, EVERY seller's home is one of 52,500 homes for sale. The seller's home is like a pea in a box of marbles. It will never been scene if it is not marketed with every ounce of technology available today.

If you find yourself in need of a marketing specialist, and not just another Realtor, we're happy to chat with you, any time...simply call Lori at 602-574-5674.

Bye for now... we hope this information is helpful!

<script language="javascript" src="http://server.iad.liveperson.net/hc/67868540/x.js?cmd=file&file=chatScript3&site=67868540&&category=en;woman;5"> </script>

Dual Agency, Practical or Impractical and What The Heck Is It, Anyway?

G-II Varrato II (Coldwell Banker Residential Brokerage) — Sat, 31 Mar 2007 15:48:45 -0500

A lot has been written and debated about the subject of Dual Agency. So, what the heck is the big deal?

Let's break it down. The assumption is that most people are aware that a real estate broker or salesperson ("Broker") is an agent with fiduciary duties to the party that the Broker represents. The reality and the problem is that most people do not know this. Now... most real estate agents know this but unfortunately, some do not. You see, an "agency relationship" is most often created by express agreement, I.E. a listing agreement and/or a buyer broker agreement. Normally, both documents clearly outline the fiduciary relationship and duties of the real estate agent. However, an agency relationship can be legally implied by the parties' "agent's" actions. Regardless of whether the agency relationship is express or implied, the agency relationship imposes on a Broker the fiduciary duties of loyalty, obedience, disclosure, confidentiality, and accounting.

In King County, Washington State, in Busk v. Hoard, 396 P.2d 171 (1964 Wash. 1964). , the King County Supreme Court held that: "...The concept of agency is one of law. Its existence depends upon factual elements that enable a determination, as to whether an agency relationship existed, to be made from all the peculiar circumstances of the particular case. No one fact, seized from its setting, should be regarded as conclusive or controlling under any and all circumstances..."

So, what is "fiduciary duty"? First let's define what the Realtor's Code of Ethics says of Fiduciary Duty

· Standard of Practice 11-2

The obligations of the Code of Ethics in respect of real estate disciplines other than appraisal shall be interpreted and applied in accordance with the standards of competence and practice which clients and the public reasonably require to protect their rights and interests considering the complexity of the transaction, the availability of expert assistance, and, where the REALTOR® is an agent or subagent, the obligations of a fiduciary. (Adopted 1/95)

Ok... so what the heck does that all mean? For me, perhaps the best definition of "fiduciary" was found on the Internet at
www.websiteupgrades.ca/glossary/free/F.shtml:

Here Fiduciary is defined as:

"A person charged by law and equity with a higher duty of care for another person. A person who, as a result of a relationship with another person, is required by law to place the other person's interests equal to or ahead of his own in all dealings involving that other person. The relationship is often created when the other person approaches the fiduciary to use the fiduciary's special skills and knowledge, for a fee, to benefit the other person."

I think this definition best describes what we do as Realtors and/or real estate agents. We either represent the best interests of a client, buyer or seller or we take some subservient roll. By subservient roll, I do not mean to imply that our services are any less valuable, only that our services take on a different face.

Consider the agent acting as an advocate/fiduciary for a buyer or seller. For our example, we'll assume that our real estate agent is involved with a buyer who wishes to purchase a particular piece of real estate listed by the agent's brokerage, we'll call them Dual Agency Inc. The agent will, first discuss with the seller, the potential of an offer from a buyer who has been working with the agent in search of a piece of real estate to purchase. And... not until the seller agrees to the potential of limited disclosed dual agency, should the agent present the offer to the seller and not until the buyer has agreed to the potential of limited disclosed dual agency, should the agent prepare the offer for the buyer.

It is also extremely important to remember that, here in Arizona, we are blessed... or cursed... with the privilege and responsibility of being able to write contract language to a transaction. Arizona is the ONLY state in the US that empowers licensed real estate agents with this component within the real estate transaction. This right is entrusted under Article 26 of the Arizona Constitution wherein Article 26 reads:

"1. Powers of real estate broker or salesman
Section 1. Any person holding a valid license as a real estate broker or a real estate salesman regularly issued by the Arizona State Real Estate Department when acting in such capacity as broker or salesman for the parties, or agent for one of the parties to a sale, exchange, or trade, or the renting and leasing of property, shall have the right to draft or fill out and complete, without charge, any and all instruments incident thereto including, but not limited to, preliminary purchase agreements and earnest money receipts, deeds, mortgages, leases, assignments, releases, contracts for sale of realty, and bills of sale."

Ok, so why is this important? Because Article 26 sets the foundation for how real estate agents engage the public. We have an inherent duty to understand our craft. If we engage a consumer in a transaction, we have an obligation to lay out all of the nuances of the transaction, all of the nuances and peculiarities of each document that becomes an integrated part of the transaction. Our duty is not only to help negotiate the transaction, but more importantly, our duty is to help the consumer fully understand their duties to the transaction.

Too many folks, real estate agents and the public, place way too much emphasis on the negotiations of a transaction rather than the complexities of the transaction. Any monkey on a chain can fill in a contract form, it's not rocket science. And, while we, as an industry are heralded as learned negotiators, we are all too often dismissed for our knowledge of the intricacies of keeping a transaction together. It is this Realtor's opinion that we are not paid the big bucks for our slight of tongue or negotiating strategy; we are, or should be, paid the big bucks for making sure that the transaction makes it to the finish line. We are entrusted with an overwhelming responsibility to fully understand and explain the meaning of the contract, the meaning of each form to the contract, the ins-and-outs of surveys, disclosure of waste water treatment requirements, the ability to dissect the potential pot-holes in a transaction and how to navigate around or through them and to explain the particular responsibility of each party to the transaction. We have an obligation to the parties to help them complete the transaction with as little inconvenience as possible. The particulars of who "gets the best deal", buyer or seller, is an arguable point if the transaction never closes!

In no way is Dual Agency an obstacle to these duties! Just because one party or the other loses the edge of gaining an advantage of 'covert knowledge gained' about the other side, has little bearing on the real estate agent's responsibility to deal fairly and honestly with both the buyer and seller in a Dual Agency transaction or any transaction!

Article 26 of the Arizona Constitution places Arizona Real Estate Professionals on a playing field that is far more different than any real estate agent in any other part of the United States. Moreover an excerpt from the AAR-On-Line publication March 2006 written by Michelle Lind, General Council to the Arizona Association of Realtors read:

How Article 26 Affects a Licensee's Legal Obligations

Few court cases have interpreted the provisions of Article 26. However, in Morely v. J. Pagel Realty & Insurance, 27 Ariz. App. 62, 550 P.2d 1104 (1976), the Court of Appeals states:

Having achieved, by virtue of [Article 26 Section 1 of the Arizona Constitution], the right to prepare any and all instruments incident to the sale of real property, including promissory notes, real estate brokers and salesmen also bear the responsibility and duty of explaining to the persons involved the implications of these documents. Failure to do so may constitute real estate malpractice.

Id. at 66. In a subsequent case, Olson v. Neale, 116 Ariz. 522, 570 P.2d 209 (App. 1977), the court states:

[A]rticle 26 § 1 of the Arizona constitution . . . authorizes brokers and salesmen to engage in limited law practice involving real property transactions. If a broker can practice law in the area of real property sales, it is reasonable to hold him to a full understanding of the implications and ramifications of the Statute of Frauds.

Id. at 525. These cases, and subsequent clarifications by the Arizona courts, indicate that Article 26 imposes a duty upon brokers and salespersons to give competent advice to their clients and to understand the legal implications of the documents they prepare.

So, where does this all lead with respect to Dual Agency? In this Realtor's opinion, simply stated, as an industry we have an obligation to be fair and honest with the public, the consumers of our services. We have a duty to be honest and upfront about how Agency Relationship works and what it means. There are numerous instances of case law, in Arizona and around the US that tell of tales of dubious dealings by agents, knowingly and unknowingly, mismanaging the public's expectations of these relationships. This is not a bi-product of Dual Agency, this is a bi-product of inexperience and incompetence by real estate practitioners who do not take the necessary steps to fully explain the fine distinction between advocacy and fiduciary VS fair and honest dealings with the public.

If we, as an industry, take a more responsible roll in explaining Dual Agency Representation VS Single Agency Representation, we will find that there will be many fewer complaints filed with the Arizona Department of Real Estate over this subject.

Yes, there are advantages for a buyer or seller to be represented by an exclusive agency relationship. For example, the ability to take advantage of misguided disclosure of the motivations by one side or the other can be valuable during the initial negotiations and throughout the transaction. But... if the buyer or seller has been properly schooled by his/her real estate agent, there is little chance of either side ever coming across such, foolishly disclosed, information.

Lori Klindera and "G-II" Varrato II are Realtors with Coldwell Banker Residential Brokerage, 3050 W. Agua Fria Freeway, Suite 110, Phoenix, AZ. 85027. We can be reached at cell phones 602-574-5674 for Lori, 602-796-5674 for G-II or by eMail at any number of eMail addresses, such as Lori.and.G-II@RealEstateInPhoenix.net or Lori.G-II@AirForceHomeSeller.com.

Builder Contracts - Why Are Realtors Needed?

G-II Varrato II (Coldwell Banker Residential Brokerage) — Mon, 05 Mar 2007 18:49:46 -0600

By G-II Varrato II
Coldwell Banker Residential Brokerage
Phoenix, Arizona

I'm often asked by new agents, "Why do buyers even need a real estate agent if the builder isn't going to negotiate their contract?"

The answer is somewhat complex and yet, equally, quite simple, really. Buyers, for the most part, will truly understand very little of the massive amount of paper they are going to review, agree to and sign. My comment is, by no means, intended to impugn the integrity of any builder or their site sales staff. By and large, the builder community is populated with very wise and reputable real estate licensees. However, all too often unrepresented buyers are presented with documents for review and subsequent acceptance that they really do not fully understand. And... more to the point, our inherent nature, as humans, often will let our pride get in the way of asking for more detailed and clear explanations of what we are reading. We simply don't want to sound dumb.

Understanding the loan process can add additional challenges for the buyer. Buyers are often given a crash course in industry jargon. GFE, LTV, APR, TIL, 1003, HUD-1 and the list goes on. By the time the buyer has made it through the loan package, the mounds of paper and jargon has stunned many to the point that they are much like the deer, standing in the street, looking at the oncoming truck with that "Deer In The Headlight" look.

The simple truth of the matter is that we, as industry experts, are needed to help guide the buyer through that swamp of inked up manufactured pulp. And while we are not expected to have the understanding or knowledge of inspectors, landscapers, lawyers, roofing contractors or any number of hats that buyers want to toss on our heads, we do have an obligation to offer our expert opinion of what all those words on all that paper really means. And... if we don't know the answer, we had better be able to direct our clients to the appropriate resource for the answers they crave.

Here in Arizona, we have an obligation to be able to understand the content of the Commissioners Public Report (CPR) and point out items within the report of particular importance. This document may have different names in other states, but trust me, you have one in the state you will make your purchase. All too often buyers either simply gloss over the CPR or even worse, don't even read it, subsequently signing the document only to learn later that the content of the CPR or the CC&Rs contained information that they would have found objectionable had they known the exact meaning of the content before they closed on their new home.

A case in point follows: A buyer purchased a home in a community that met all of the requirements set forth by state statute, in terms of disclosures and content within the CPR. Several months after the buyers had closed on their home, the buyers found their house developing cracks in nearly every wall in nearly every direction, inside, outside and across the ceiling. The builder was called to the property and has paid regular visits to the property for the past three years to make repairs to the home. (By the way, this subdivision may be involved in a class action law suite in the not too distant future).

The buyers made their purchase, (the couple was not represented by a real estate agent), signed all of the disclosures required under state law and statutes, conducted their inspections and closed on the property. What they did not realize was that the CPR contained a potential red flag, a notice of potential risk, for homes built in this particular subdivision. The CPR contained words such as earth fissures, ground subsidence, and a line that read "...This risk of this earth fissure to Unit 2A... ...is very low." Oh yes, the parcel the buyer's house is located on is in Unit 2A.

If the buyers had been represented by a competent real estate agent, these disclosures would have been pointed out to the buyer and... again under the tutelage of the competent real estate agent... the buyer would have been directed to the appropriate resources for further explanation of this information. The buyer would then have been able to make, not only a decision based on the required disclosures, but also would have had the opportunity to make a decision to move forward, or not, with their purchase based on a more knowledgeable understanding of the potential risk in owning a home in Unit 2A.

Again, it is important to point out that it does not appear that the builder or their employees have conducted themselves in any inappropriate manner. My point however is that, in this instance with this buyer, the buyer might have decided against the dice roll when making this purchase if they had fully understood that their purchase was, in fact, a dice roll with regard to the soil stability.

Beyond the scope of being, "really GREAT transaction guides" is our ability to offer competent council in terms of the loan platforms being digested by the buyer.

Another case in point: One of our buyers made a purchase from a particular builder who, at the time, offered a certain amount of money in the way of a purchasing incentive. As usual, the incentive was tied to a requirement that the buyer use the builder's preferred lender if the buyer wanted to take advantage of the generous incentive. The builder also had designated what title company would close the transaction. Nothing out of the ordinary here.

About three weeks prior to closing day, the buyer received the Good Faith Estimate (GFE) and, after reviewing the document, felt that the figures were fair but, just to be certain of their assumption, forwarded the GFE to us, their Realtor®, for review. The buyer's profiled loan was set up as an 80% first loan with a 20% second loan. The buyer also shared their FICO score, well over 780, with us.

After reviewing the GFE, we counseled with the buyer and advised them that we felt the proposed closing costs were high by about $1,000 to $1,200 both in terms of escrow fees and lender origination fees. Our clients agreed to allow us to speak with the escrow company and with the lender about the fee structure. At the conclusion of our conversation with each entity, the total closing costs had been reduced over $1,100.

Our next call was to the builder. The builder had recently increased the buyer incentive package from what our client was offered, when we went to contract several months earlier, to a considerably larger incentive package offered to today's buyers. We placed a call to the builder, and after several conversations with the builder, we successfully negotiated an increase of the incentive package for our client that was exactly equal to that being offered to today's buyers. This scenario is a prime example of the negotiating power a professional Realtor brings to the transaction. Remember, negotiating is not all about getting the lowest price, negotiating is involved in every facet of a transaction, including helping the buyer negotiate title fees, loan costs and, in this case, an increase of $5,000 to our client's incentive package.

The bottom line is just this folks; Realtors® know how to read contracts. We know how to read Good Faith Estimates (GFE's). We know what all those really weird words are and what they all mean, and if we don't, we know how to get the answers. Most consumers do not have these skills! They need us and we owe it to them to truly represent them when they make their purchase of new construction.

What buyers don't need is to be car-pooled to a builder's showroom by a real estate agent who acts as nothing more than a door man/woman only to leave after the buyer walks through the door way and then return for his/her commission check when the new home closes escrow. Such actions are not indicative of buyer representation. Such actions should be unthinkable by any real estate professional.

If you would like to know more about New Construction Buyer Representation please drop us a post at Lori.and.G-II@RealEstateInPhoenix.net.

Here are a few useful links for Buyers and Realtors alike:

CLICK THIS LINK to read some Really Scary Inspection Stories
CLICK THIS LINK to read, What Builders Hope Buyers Never Learn
CLICK THIS LINK to download a copy of the Arizona Registrar of Contractors Workmanship Handbook