What's New In the Arizona Real Estate Market

Lessons Forgotten are Lessons Learned

Sun, 26 Oct 2008 20:31:00 -0700

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!

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@RealEstateInPhoenix.net.

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

Sun, 20 Jan 2008 19:27:00 -0700

Lori and I feel that if we, as REALTORS®, share the kind of Intel we offer below, with the public, they will think twice about giving any logical thought about 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 harms 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 families head and food on the table.

Keep in mind too, that the real estate markets of 2006, 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 could ring in similar years of productivity.

FACT:

In August 2008 ARMLS recorded a total of 3930 residential resale and/or new home transaction closed.
In September 2008 ARMLS recorded a total of 3171 residential resale and/or new home transaction closed.
In October 2008 ARMLS recorded a total of 2824 residential resale and/or new home transaction closed.
In November 2008 ARMLS recorded a total of 2629 residential resale and/or new home transaction closed.
In December 2008 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 of 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, from 7.7 in 2000 (**SOURCE: Realtor.org). If our agent is 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 fare 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 harms way. Lori and I feel that if we, as 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.

Buyers ask, "Should I buy?" - Sellers ask, "Should I sell?

Tue, 11 Sep 2007 23:59:00 -0700

September 12th 2007
By "G-II" Varrato II, Realtor®, Retired USAF Red Horse 820th CESePRO 500, ABR, RECS, Mentor
Coldwell Banker Residential Brokerage

We have all been tracking the increasingly frustrating real estate market. As Real Estate Practitioners for nearly two decades, we can tell you that this is, by far, the most frustrating of all of the down-trend scenarios we have experienced. The boom years, the period of time I refer to as "the nutty period", 2003 to 2005... came to an abrupt halt around July/August 2005. Lori and I have been through this type of down-turn in market conditions two times in prior years. We have abundant experience in dealing with these types of market conditions. The real estate industry is a cyclical animal. By that I mean, values go up and values go down; prices go up and prices go down and interest rates go up and interest rates go down. This is the nature of the beast. That said, the sharp course change from the upward out-of-control spiral to the nose dive... plummeting toward the center of the earth, we have all endured... is the fastest reverse direction we have ever seen.

In today's real estate market, when REALTORS® search the MLS system here in the Valley, we find over 60,000 homes available for sale on any given day. For buyers in today's market, they have the pick of the litter. Buyers are taking their time to make a decision. They are in no hurry to pull the trigger.

Unfortunately, for sellers, this is a frustration that is almost unbearable. Sellers are feeling the degradation of their property value. However, industry analysts, suggest that what is truly taking place not actually value degradation, but rather a correction of real estate values back to a point of sanity. Many of us have listened to the following scenario from friends or sellers in today's market; "My neighbor sold his home in 2005 for $325,000 and today I can't get $250,000 for my house." This story plays over and over again from community to community and from price point to price point.

Real estate market industry analysis's predict that the market price/value index could soften yet another 5% or more over the next 12 months. If this is true, buyers who are in the market for a home should begin their search within this time frame. Buying at the bottom of the market is always the a logical time to make a purchase; and the bottom of the market only shows its head about every seven to ten years. That is the approximate life span of an upward cycle trend in the real estate market. Remember, what goes up, will always come down and what comes down will ALWAYS go up.

Sellers who are selling in a down-trending real estate market should consider if they truly need to sell. If they do not, then they should get out of the market until the dust settles. However, if the seller is in a MUST SELL mode, then the seller will also have to embrace the reality of the market conditions. The seller will have to realize that he/she/they are not going to get prices that paralleled that of their friends a few months or a few years back. Seller's should however be able to get top dollar for their property. Top dollar does not necessarily mean that he/she/they will score a home run like their friends and neighbors a few months/years ago, but it does mean that, properly represented, the seller should be able to squeeze every dollar available... out of their home... that the market will support.

In today's real estate market, here in the Valley Of The Sun a.k.a. the ARMLS (Arizona Regional Multiple Listing Service) area we have over 60,000 homes for sale, including those that are in the pending category. About 63,000 licensees practice their real estate craft in this area. The ARMLS area hosts about 4,000,000 people, covering an area of about 213,700 square miles. In this entire area, in the month of August 2007 only 3,930 home sales contracts closed. In the first ten days of September 2007 in the same geographic demographic area, only 470 single family residential home sales contracts closed. So you see, if you are a seller in today's market and there is no overwhelming compelling reason you are selling now, DON'T! Take your home off the market and let the market conditions finish their adjustment process. If you must stay in this real estate market then it is this REALTORS® opinion that you may be best served by a REALTOR® who has been in this industry over 10 years. REALTORS® with this type of experience have weathered this "Perfect Storm" before. An experienced, well trained, seasoned real estate practitioner will know how to help you skipper your transaction through the storm of low-ball offers and unqualified buyers who come to the party with loan officers who have no clue of how to qualify a buyer for a loan.

If you're a buyer in today's market, BUY NOW! The FED is expected to suggest a relaxing of interest rates when the FED speaks on Capital Hill on September 18th 2007. If this occurs, and you are a buyer, get off your couch and get yourself a qualified, experienced, tenured, REALTOR® and buy NOW! It is this REALTORS® opinion that REALTORS® who have been in the business over 10 years are best suited to help you through the buying process. Experienced REALTORS®, or at the very least, REALTORS® who are being mentored by experienced, well seasoned REALTORS®, will help you process the intricate nuances of purchasing your home. Let's face it; you are not buying a head of cabbage. You are going to allocate time, energy, emotion and money into, perhaps the single most expensive investment of your life time. Do you really want to be tromping around this swamp with an inexperienced guide? Confucius say: "Man who foolishly embarks on a journey without a guide, is soon lost and bewildered."

Be wise! Be certain of your mission! Be diligent in who you select to represent your interests! It's a jungle out there and you don't want to end up shark chum for the buyer if you're a seller or for the seller if you're a buyer.

If you or any one you know is in search for a couple of experienced REALTORS®, be sure to point them in our direction. Lori and I have been teaching and mentoring new agents for Coldwell Banker Residential Brokerage for nearly two decades. We have been involved with processing thousands of transactions in that time. Check out A Report Card for Lori & G-II.

We can be reached by cell phone at: (602) 574-5674 for Lori or (602) 796-5674 for G-II and of course you can text us at LorisPDA@HomesInPhoenix.net or G-IIsPDA@HomesInPhoenix.net.

Why Won't My House Sell?

Sun, 27 May 2007 16:53:00 -0700

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
www.realestateinphoenix.net, www.homesinphoenix.net, www.iphoenixmls.com, www.airforcehomebuyer.info,
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
www.airforcehomebuyer.com, www.airforcehomebuyer.info, www.airforcehomeseller.com, or 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!

Builders and New Construction - Why Are Realtors Needed?

Mon, 5 Mar 2007 16:02:00 -0700

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 the 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.

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. 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 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 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 statute, 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.

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 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

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

Fri, 12 Jan 2007 00:42:00 -0700

Dual Agency, Practical or Impractical

What The Heck Is It, Anyway?

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 should know this but unfortunately, many 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, that the potential for an offer from a buyer who has been working with the agent in search of a piece of real estate to purchase. 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.

Bye till next time. Lori and I truly wish you and your family a Happy, Healthy, Safe, and Prosperous 2007!

This article has been written by
"G-II". All rights reserved

Builder Contracts, Be AWARE Of What You're Signing!

Thu, 4 Jan 2007 19:04:00 -0700

Builder Contracts, Be AWARE Of What You're Signing!

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

Builder contracts come in all sizes, shapes and versions. There is little opportunity for the alteration of any of the terms of a Builder’s Contract. However, that said, it is imperative that you fully understand what you are signing. Even if you have made several purchases of residential real estate in the past, unless you are specifically trained in the art of understanding contract language, this is not a swamp you should venture into without a seasoned real estate professional by your side to guide you through the murky maze of contract terms, phrases and conditions.

Confucius Say:
“Man who starts out on journey alone and without a guide is soon lost and bewildered and he who continues on his excursion alone has a fool for a guide.”

Arizona is one of the few states that engage a little understood protocol known as “The Threshold Rule”. “The Threshold Rule”, simply stated, means if a consumer literally crosses the threshold of a builder’s showroom office entrance, the consumer gives up his/her right to FREE transaction representation. That is to say, the overwhelming majority of builders in Arizona have an agreement with real estate brokers to pay a licensed real estate broker to represent the interests of a buyer at no additional cost to the buyer. However, the caveat to this seemingly altruistic gesture is that the buyer MUST bring his/her licensed real estate agent with him/her on their first visit to the builder’s showroom. Failure to do so automatically will forfeit the buyer’s right to have the builder pay for the buyer’s transaction representation.

Now, that is not to say that the buyer is not entitled to engage the services of a buyer representative, however, if the
buyer does choose to do so, the buyer will be responsible for paying the broker for that service.

Many consumers unwittingly believe if they do not engage the services of a licensed real estate agent, to assist them with the purchase of their new construction home, the builder will cut them a better deal because the builder will not have to pay the real estate broker. This could not be further from accurate. The money the builder has budgeted into the transaction to pay the buyer broker, if not spent on that mission, is not refunded to the buyer in any form. The builder simply puts those funds back into his profit portfolio and the buyer is left to tramp through the swamp of contract language, all alone.

Here are some passages from a few builder contracts. For professional reasons, the builders have not been named but these excerpts are quoted directly from builder contracts. If you would like more information about any specific language below, please eMail Lori.and.G-II@RealEstateInPhoenix.net or call us at 602-796-5674.

Builder “W” Contract: “…Buyer’s obligations under this Contract are not contingent upon Buyer obtaining any specific interest rate on the loan or other loan terms…”

Builder “X” Contract: “…FINANCING, Buyer understands and agrees that obtaining financing is not a contingency or condition precedent to Buyer’s obligations under this Agreement…”

Builder “Y” Contract: “…Any delay in the Closing by Buyer… …shall constitute a material default hereunder by Buyer… …It is expressly agreed that the House… …may be subject to certain “punch list” items for additional work… the existence of such punch list items will not give Buyer cause to delay the closing or cancel this Contract. Punch list items may include failure of operation of appliances, electric outlets, plugs or fixtures…”

Builder “Z” Contract: “…AGENCY DISCLOSURE: …Our sales agents at the project where the Home is located solely represent us…”

So, what could the penalties be if the buyer is late to close on the property.

Builder “W” Contract: “…a late Closing fee equal to $300.00 per day for each day from and including the original Closing Date scheduled by Seller to and excluding the actual day of Closing…”

Builder “X” Contract: “…a late closing fee equal to $75.00 per day for each day from and including the scheduled closing date and including the actual day of closing…”

Builder “Y” Contract: “…a late closing fee equal to $50.00 per day for each day and including the Closing Date, to and excluding the actual day of Closing…”

Builder “Z” Contract: “…You agree to pay us a $100 per day extension fee for each day Closing is extended…”

This message covers ONLY the tip of the iceberg of Buyer Representation for buyers who wish to purchase New Construction from builders in Arizona.

If you would like to know more about how to take advantage of Buyer Representation, paid for by the builder, please contact us. 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.

Bye till next time. Lori and I truly wish you and your family a Happy, Healthy, Safe, and Prosperous 2007!

Click Here To Read Some Really Inspection Stories

This article has been written by
"G-II". All rights reserved
Click to go to News in The Valley of The Sun

Live chat by LivePerson

A LITTLE FAQ ABOUT LOANS, LENDERS AND LOAN PRODUCTS

Sun, 5 Nov 2006 13:15:00 -0700


	Live chat with Lori & "G-II" If the chat window does not open, hold down the control key then click the Chat Icon above.

Ok... school is in... LOL

The first thing I want to say is that for some folks, using their VA benefits is a good thing and for some folks, using their VA benefits is not only NOT fiscally prudent; it could even be financially irresponsible. Over the past 15 months, Lori and I have closed well over 75 transactions of our own and mentored and have been involved in another 60 transactions with protégés. Of that number, perhaps as many as 2/5^th were veterans, active duty or retired or simply discharged from their particular branch of service. Of that 2/5^th, less than a dozen or so used their VA benefits. The cost of money today is so inexpensive that there is little reason and almost NO advantage to a vet to use his or her VA benefit. There are numerous optional loan platforms that emulate the benefits of a VA loan without causing the buyer to toss away thousands of dollars in a VA funding fee.

Suffice for now to say that Lori & I have been in this industry nearly two decades. The VA loan platform is one that we are extremely proficient with and since I too am retired USAF, we tend to draw a huge number of vets to our web site who ultimately secure our services to procure their home, help with arranging home inspections, termite inspections and... oh yes... sorting out what type of loan makes the best sense for that particular eClient.

So, Let's Chat...

QUESTION: There are a million mortgage calculators online, and they all differ from one another. The simplest ones just ask for the amount of the loan, any down-payment, and number of years. However, there are some that have blanks that require specific information such as Tax Rate and Insurance. I have no idea what to plug in, for those items. Can you help me with this?

Correct; there are literally millions of mortgage calculators on the internet today. Quite frankly, over the years, Lori & I have played with hundreds of them, searching for what we feel are some of the best and least confusing. We have found that nearly all of the mortgage calculators, found on lender sites, are very confusing. Some, quite honestly, are actually weighted so that eConsumers conclude that the Lender who provided a particular mortgage calculator, appears to offer the best mortgage deal on the Internet or even the planet. In our opinion, this is unfortunate and very confusing and can tend to be a bit misleading.

As for how to divine what figures to use for Tax Rate and Insurance, let’s first discuss Tax Rate. Here’s a good rule of thumb we have arrived at after reading hundreds, perhaps thousands of Arizona Public Reports; if you use a figure of somewhere between $10.00 and $13.00 per $100 of property value (not purchase price), you will come really close to the actual tax rate. Property values, as we discuss in this article can be researched at http://www.maricopa.gov/Assessor/. Tax Rate calculations are extremely complex computations. If you would like to know more about how a municipality actually establishes the tax rate, call the county recorder in the county you wish to live and ask to speak to a clerk of the County Tax Assessor’s office. They are very happy to educate the consumers with the math… but… make sure that, if you have a full head of hair when you begin, you’re not going to be disappointed if some if it is missing after the tax rate calculation class concludes.

Insurance is a bit trickier, only because there are several variables that play into the actual insurance rate a buyer will be charged. Two of the most important variables are derived from the C.L.U.E. (Comprehensive Loss Underwriters Exchange). C.L.U.E. is a database that all insurance companies use to assess the risk factor for insuring a particular piece of real or personal property based on both the real or personal property and the individual wishing to be insured. The first assessment is conducted around the real or personal property. The next assessment is conducted around the credit score of the individual and the individual’s history of filing insurance claims. The C.L.U.E. retains a five year history for the majority of all insured individuals and their widgets. Learn more about C.L.U.E. at http://www.choicetrust.com/. Many factors play a vital roll in providing the information insurance companies require to tender a firm-fixed quote for a homeowner's insurance policy. Even in the early quotes, the figures are truly speculative numbers and could vary a few hundred dollars up or down in the final analysis, and the final analysis can only be determined once you have settled on a particular home in a particular geographic area and on a particular price and on a particular amount to finance.

Back to mortgage calculators; Lori & I actually favor mortgage calculators that have been put up on the web by college students. These are truly unbiased mortgage calculators that offer honest unbiased results. Some are very complex and some are very simple. In the following paragraphs we have provided links to three of our favorites, one of which we keep on our web site in a secure location, offered to eClients that have selected us as their Realtor Representatives. They were all developed by college students, one in Japan, the other in Pakistan.

QUESTION: Some calculators have fields for loan components called “points”. What the heck are these things, and do I need to worry about them?

POINTS – Perhaps lead the pack of some of the most confusing parts of the loan package. So what is this thing called “points”? Points are often confused with “origination fees”. The two serve completely different rolls in the loan process.

An “origination fee” is an amount of money, charged by a mortgage company, to the buyer as part of the lender’s cost of doing business. However… what most consumers do not know is that the “origination fee” is a totally negotiable charge, assuming the buyer has relatively good credit. It has been our experience that buyers with FICO scores in the high 600s or higher can usually shop, with great success, for lenders who will charge minimal or NO origination fee in their loan process. Our suggestion would be to stand your ground. Assuming that all of the other terms of the proposed loan are acceptable, make it clear to the loan officer, that if he/she does not alter their costs of the “origination fee” you will simply take your business elsewhere. If you are currently searching for a couple of lenders, check out Coldwell Banker Mortgage, Rosemarie Cox (602) 565-6948 and/or Pacific Funding Group, Mark Schmidt (800) 245-6722.

Points, often called Discount Points, are the amount of money a buyer will pay to control the interest rate on his mortgage. The “point” is calculated against the amount of money that will be financed, I.E. your mortgage amount. So, if you’re going to make a purchase of $350,000 with a 20% down payment, your mortgage amount will be $280,000. Therefore one point (1%) would be calculated to be $2,800. There are numerous formulas bandied about on the Internet about how these fees benefit or hinder a borrower’s loan. In short, if you spend one point of your loan amount, you can affect your interest rate by about 1/8^th of a percent.

This means, if the consumer is quoted an annual interest rate of say... 6.5% but wants to reduce that rate (I.E. buy it down) to 6.0% by paying money at the time of closing to do so, the consumer would have to part with about $11,000. For some buyers this is a good idea, particularly if they are going to stay in their home or not refinance the home for many years. But keep in mind too, that another barometer to making such a decision is how long it will take to recapture the $11,000. By reducing the annual interest rate by 1/2 a percent, the payment reduction on a $280,000 loan is about $90 per month. That means that it will take about 10.18 years to recapture the interest savings. Not a bad scenario, and often a $90 reduction in the monthly payment can mean adding a little more tile in the house, or the cost of some appliances or any number of additional accoutrements or creature features that the buyer may want to add to the loan.

Here are a few thumbnail guidelines to help you decide if the return on this type of investment is warranted.

It may not be wise to spend money on Discount Points if:

you plan on selling your home in less than 3 to 4 years
you plan on refinancing your home in less than 5 years
you are applying for an ARM type mortgage
you are applying for an Interest Only loan product

It may be wise to spend money on Discount Points if:

you do not plan on selling your home in the next 5 years
you do not plan on refinancing within the next 5 years
your purchase is for investment and/or rental purposes

These are suggestions and not items to be thought of as “Set in stone”, but they are a good sound foundation for developing your loan strategy.

CLICK HERE for a very simple mortgage calculator, just plug in the numbers. Be sure to enter NO commas. The interest rate will accept a dot, for example 6.5 but do not include a % sign. This is by far one of the simplest mortgage calculators we have found and is GREAT for calculating VA loans because it does not automatically include MIP (Mortgage Insurance Premium). This calculator does not produce an amortization schedule but the next mortgage calculator does.

CLICK HERE to use a more sophisticated mortgage calculator. Again, only use numbers and no commas and too, the interest rate can be calculated using a decimal point in the rate, but again... DO NOT use the % sign. This calculator can produce an amortization that can be produced in HTML or Plain Text. In the " Monthly Principal Prepayment Amount " window, DO NOT enter any values and the same is true for the " Annual Principal Prepayment Amount (Enter B here for Bi-weekly Loans) " and " One-Time Prepayment Amount, to be paid before payment (month #) ".

CLICK HERE for an interesting mortgage calculator created by Hugh Chou. This is a mortgage calculator that compiles a maximum monthly payment that Hugh feels is appropriate for a home buyer. Keep in mind that Hugh built these calculators as a college project although now I believe he works in the financial industry.

There are many factors to consider when searching for a home loan, not only the total monthly payment, but also total loan costs. You asked about "Points". As we mentioned, this can be a confusing term. Often consumers believe that there MUST be points associated with ALL loans. As we explained above, that could not be further from the truth.

When considering a new construction home, remember, that in almost 100% of loans that are configured by a builder's lender, the builder's lender will add... at a minimum 1% to the loan cost (sometimes, incorrectly, referred to as a POINT). This fee is really an "Origination Fee". In our opinion, consumers with GREAT credit scores, also referred to as the "FICO" (Fair, Isaac and Company Inc) score, should not be subjected to these fees. Unfortunately, when builders offer incentive packages to the consumer, those incentive packages are tied directly to the requirement that the consumer utilize the builder's lender to secure financing for the purchase.

It would be sensible to consider not using the Builder’s Lender if the total incentive package hovers around the $5,000 mark. Some of our clients have had a GREAT deal of success using non-builder lenders, wherein our clients have given up as much as $5,000 in incentives from the builder and... even after doing so, have secured a much more favorable loan program and sometimes even lower monthly payments, with similar or lower closing costs, than they would have if they had used the builder's lender.

Another typical lender explanation for an Origination Point is: "An origination fee is the amount charged for services performed for handling the initial application and processing of the loan". Hog wash! While it is true that some loans should be burdened with such a fee, such as loans granted to buyers with less than perfect credit. The amount of effort and research that goes into locating an investor who is willing to purchase the loan from the lender can be intense. In our opinion, level of effort and perhaps even ‘arm twisting’ should be compensated. But if the consumer/borrower has a good to great FICO score, again in our opinion, there should be NO Origination Point... NONE... NADA... ZIP... ZILCH... got the picture? Why should a lender, granting a loan to a buyer with good to great credit, make profits on two transactions? The first transaction is between you and the lender. The next/second transaction for the lender is between the lender and his investor, the entity who will purchase the loan from the lender. Remember, if you keep your credit in good condition, you have a boat load of strength and negotiating power as you shop for your loan.

Another item to pay attention to are the ever swampy quagmire of Lender Fees... Ok... I know... so what does that all mean... ?... LOL Ok... Lender's fees are fees that offset the cost of producing the loan. Different companies may refer to them by different names, such as, processing fees, broker fees, tax service fees or underwriting fees; or you may have heard these fees referred to as Junk Fees. Most lenders are very sensible and fair about these fees. Obviously all businesses are in business to make a profit. Lender Fees are one of the vehicles that generate profits for lenders. Years ago I wrote an article for an On-Line Real Estate Forum, about Predatory Lending. CLICK HERE if you would like to read that article, but keep in mind that the figures in the article are very outdated, however the nefarious activities I write about are, unfortunately, still very much a part of the lending arena. I think that article will explain what you do not want to see in your lender.

I could write hours about the loan and lending process because the entire process is so interesting and is very involved. Here are a couple of more nuggets for you to ponder.

QUESTION: Is there a difference between APR and Interest rate?

You bet! The APR (Annual Percentage Rate) reflects the cost of your mortgage loan as a yearly rate. It also incorporates the cost to obtain the loan, such as discount fees and loan origination fee. The interest rate is the actual note rate.

When you finally get to the closing table, you will be presented with a TIL (Truth In Lending) statement. You will undoubtedly ask: "Why is the Annual Percentage Rate (APR) on the Truth-in-Lending Disclosure higher than the rate shown on my mortgage note?" Here is a simple explanation:

The rate reflected on the APR shows the cost of your mortgage loan as a yearly rate. This rate is generally higher than the rate stated on your mortgage note because, in addition to the interest rate, APR includes other costs such as origination fee, loan discount points, pre-paid interest, and mortgage insurance. The APR allows you to compare, in addition to the interest rate, the total cost of financing your loan, among various lenders.

CLICK HERE for an example of several loan scenarios in a spread sheet provided by one of our most reliable lenders to one of our past eClients. As you can see, the buyer was purchasing a home for $189,000 (that’s not going to happen again any time soon! LOL) and was pondering a VA loan VS. a conventional loan. This purchase was for an "as yet to be built" new construction home. If the buyer chose to NOT use the builder's lender, he would have given up $4,500 in incentives from the builder. This particular buyer had his own closing cost money and was able to put up to 5% down on the principal. All scenarios in the spread sheet are fixed rate loans, there are no ARMs (Adjustable Rate Mortgages), although to opt in for an ARM provided an even lower monthly payment for our buyer. The loan identified at the far right as an 80/20 is called a HELOC. This particular type of loan has been most attractive to our vets because it can be nearly 100% tax deductible and... as you can see... this type of loan produces a very low PITI (Principal Interest Tax and Insurance) payment. And... as you can see, if our buyer’s target ceiling were a $1,500 PITI monthly payment, he could actually increase his purchase well above $200,000 while still keeping his monthly payment well under $1,500. There is one catch to being able to take advantage of a HELOC, the buyer must have GREAT credit... the good news is... YOU DO!

Well... now that I have totally confused you...

Bye for now... and we'll be in touch in a couple of weeks. Lori and I trust that you are enjoying your FREE subscription to your CLUB membership.

Procuring Cause, What’s All The Fuss About?

Mon, 9 Oct 2006 21:45:00 -0700

Procuring Cause, What’s All The Fuss About?

By G-II Varrato II, ePRO 500, ABR, RECS, Mentor
Coldwell Banker Residential Brokerage

I recently had to help one of our Protégés navigate this very complex issue, the issue/concept of Procuring Cause.

Procuring Cause actions are, perhaps one of the most often registered complaints in real estate transactions, between Agents/Brokers. So what’s all the fuss about?

The Black Law Dictionary’s definition has been adopted by the National Association of Realtors® as the concept of Procuring Cause as it plays out in arbitration cases. The Black’s Law Dictionary definition has also been incorporated into the Realtors® Code of Ethics. You will find, in the NAR Arbitration Manual, reference to the Black’s Law Dictionary definition of Procuring Cause. The Black’s Law Dictionary definition is set in two sections or parts. The first part says of Procuring Cause: “A cause originating a series of events which without break in their continuity, results in accomplishment of a prime objective…”

In the world of real estate, at first blush, one might be predisposed to consider that this concept of, “…A cause originating a series of events which without break in their continuity, results in accomplishment of a prime objective …” shouldn’t be too difficult to establish. Not so, as you will see as we explore Procuring Cause.

The second part of the Black’s Law definition is where most of the confusion comes about. Black’s Law Dictionary goes on to say about Procuring Cause: "A Broker will be regarded as the ‘Procuring Cause’ of a sale, so as to be entitled to commission, if his efforts are the foundation on which the negotiations resulting in a sale are begun."

So how does this all play out in real life in the world of real estate? (NOTE for clarification; please understand that the terms Broker and Agent are interchangeable in this article.)

First, it’s important to understand that the NAR distills the concept of Procuring Cause to the following: ". . . for purposes of arbitration, Procuring Cause can be readily understood as the uninterrupted series of causal events which resulted in the successful transaction." In short, who or what, caused the transaction to conclude successfully? The questions that an arbitration panel would engage are which Realtor® was the most responsible for the Buyer’s decision to make an offer on the property. Therefore, that particular Realtor® would be the Realtor® with Procuring Cause.

Oooppss… not so fast. Before we get too far along, we must discuss the concept of Alienation. Alienation is interchangeable with two other words, Estrangement and Abandonment. All play a part in the concept of Procuring Cause.

The NAR Arbitration Manual states to conditions that would sustain Alienation. They are:

". . . [A] purchaser, despite reasonable efforts by the Broker to maintain ongoing contact, may seek assistance from another Broker. The panel will want to consider why the purchaser was estranged from the first Broker. .
. . [T]here may be no question that there was an ongoing relationship between the Broker and the purchaser; the issue then becomes whether the Broker engaged in conduct which caused the purchaser to terminate the relationship (estrangement)."

So, what types of events could cause Alienation? Perhaps the Agent conducted himself/herself in an inappropriate manner. Did the Agent say something that was offensive to the Buyer? Did the first Agent fail to stay in contact with the Buyer after their initial visit? Were there conditions within the emerging relationship between the Buyer and the Agent that were untenable to the Buyer? Did any of these, or similar actions, activities or inactivities, cause the Buyer to seek the services of another Agent? The NAR Arbitration manual makes it very clear that estrangement can be the product of actions or words by the Realtor®.

If the arbitration panel found that the Buyer had, in fact, been estranged by the first Realtor®, the arbitration panel would determine that there was good cause for the Buyer to seek out the second Realtor®. In this instance, the first Realtor® would not be entitled to compensation because he/she would not be the Procuring Cause.

Abandonment is perhaps one of the hinge-pins of many Procuring Cause actions. For example, what if the first Realtor® showed the Buyer a home and the Buyer tells the Realtor® he is interested in the home but, before he makes an offer, the Buyer would like the Realtor® to produce a list of comparable sales for the Buyer to review. This is not an unusual request or query by the Buyer. But, what if the Buyer feels that the first Realtor® does not produce the information in a timely manner; causing the Buyer to make contact with a second Realtor® in search of the comparable information? Who do you think is the Procuring Cause, Realtor® No.1 or Realtor® No.2?

What if the second Realtor® complies with the Buyer’s wishes and subsequently writes the offer on the property? Such an action, or in this case in-action, on the part of the first Realtor® could be deemed, by an Arbitration Panel to be abandonment, thus disallowing the first Realtor® Procuring Cause and awarding the Procuring Cause action to the second Realtor®.

Here’s a real twist for you. The Buyer is shown a particular home by a Realtor®. The Buyer tells the Realtor® that he is interested in the home but cannot move forward yet because he is waiting for a raise from his employer but that the raise is about 6 months away. The Buyer tells the Realtor® not to call him and that he would be in touch with the Realtor® when he receives his raise. The Buyer’s raise comes early, about seven weeks from when the Buyer and the first Realtor® last spoke. The Buyer calls at that time but the first Realtor® had not called the Buyer because of the Buyer’s specific instructions. Has the Buyer been abandoned by the Realtor®? Probably not. The Realtor® followed the specific instructions of the Buyer. In today’s world of electronic communication, it is not difficult for an Agent to prove that he/she has maintained contact with a client electronically. Even if the Buyer has no means of electronic communication, it is good practice to send a note, card or some form of communication in an effort to continue the unbroken chain of events with the Buyer prospect. The first Realtor® could probably make an effective argument that he/she was the Procuring Cause and that there was no break in the chain of events, caused by the first Realtor®.

Arbitration panelists who listen to Procuring Cause claims are just as bewildered by the “exact” definition. However, many arbitration panelists tend to center their focus on the “uninterrupted chain of events”. Here are some thoughts from arbitration panelists from around the country: **Source Active Rain – http://www.activerain.com

Sharon Simms ABR, CIPS, CLHMS, CRS CyberStar – Re/Max Metro St. Petersburg FL

**“One of the aspects they consider is whether there was a continuous chain of events. Did Agent 1 abandon the client? Did Agent 2 interfere in the relationship with Agent 1?”

Jim Lee – Realty Executives Associates Knoxville TN

**“I think the continuous chain of events thing is what usually weighs heaviest with me. Estrangement is also a big factor; did the first Realtor do something terrible enough to alienate the Buyers. Also where did Realtor #2 come from and how did they get into the act after the first Realtor.”

Stephen McWilliam ABR, CRB, CRS, GRI – Florida State Realty Group, Inc. Ft Lauderdale, FL

**“I agree with most in the continuous chain of events and emails (etc) that support this fact. I also look for what the relationship is between the Buyer and Agent 2 (relative, friend, etc). Where was this Agent 2 when the Buyer was dealing with Agent 1. Also, is there some financial consideration being paid by Agent 2 back to the Buyer. If so, the Buyer's creditability goes right in the toilet.”

As you can see, Procuring Cause issues can be very complicated. It is incredibly important that the issue of Procuring Cause be explained to your Buyer prospect at the onset of any communication between you and him/her. In today’s world of electronic communication it is even more critical than ever before to keep excellent records of your communication log between Buyer prospects. Lori and I have closed many transactions over the Internet in the last decade. We use some of the most state-of-the-art tracking software available today. And while it would be unlikely that we would ever lose a Procuring Cause challenge, we try to head off any possibility of such an event by explaining Procuring Cause to our clients. And if you think it’s difficult for the real estate community to ferret out all of the nuances of Procuring Cause, it is much more confusing for many of our clients to understand. Given most consumers have no interest in ever being subpoenaed to an Arbitration Panel to defend their Agent, they would rather chew on nails than try to understand the exasperating world of Procuring Cause. From our perspective, it is much easier to keep an egg from getting scrambled than it is to try to unscramble an egg, and much more time efficient.

One might wonder, shouldn’t the Realtor® who did most of the work, showing the property, writing the offer, negotiating the offer, arranging the inspections, processing the closing and all of the other multitudes of tasks associated with a transaction, be entitled to the commission?

NO! The Realtor® entitled to the commission, I.E. Procuring Cause, is the Realtor® who did the KEY work that was the effective reason the Buyer chose to buy the property, I.E. make the offer on the property. (But… you must keep in mind that if an Arbitration Panel finds that the Buyer was estranged/abandoned by the Agent who did the KEY work, the panel would find for the second Broker as the Procuring Cause.)

Many times Realtors® feel that their agency relationship trumps Procuring Cause or that this is an integrated part or component of Procuring Cause. This could not be further from reality. The NAR manual holds that “…agency relationships are not synonymous with nor determinative of Procuring Cause. Representation and compensation are separate issues.”

Agency could be an issue if the Buyer has engaged an “Exclusive Buyer Broker Agreement” with a Realtor® and a subsequent Realtor® comes on the scene and, even after the Buyer tells the subsequent Realtor® of his/her “Exclusive Buyer Broker Agreement” with another Realtor®, chooses to continue to work with the Buyer, show the Buyer homes and subsequently writes an offer. This is a violation of the NAR Code of Ethics as the Code prohibits a Realtor® from interfering with an “Exclusive Agency Relationship” of another Realtor®.

One of the most annoying scenarios Lori and I encounter is a Buyer, flitting from Open House to Open House with a Realtor’s® business card in his/her hand. The Buyer enters the Open House and announces to the Realtor® holding the house open, “I’m working with a Realtor®. He/she told me to go out and look at homes and then give him/her a call when I found one.” At best this type of behavior on the part of the Business Card Realtor® demonstrates an “open” agency relationship. There is absolutely no Code of Ethics violation by the Realtor® who holds the house open, to try and sell the Buyer that property. NONE!

How can the Business Card Realtor® assert that he/she is doing his/her job? Where is the “Representation?” What protection does the Buyer have from knowing what he/she should or should not say in the presence of the Listing Agent? Remember, the operative words for proving Procuring Cause cases are, “…the Realtor® who did, and can prove, that he/she did the KEY work that caused the Buyer to come to a conclusion to make an offer and buy the property.”

However, remember too, if the Arbitration Panel determines that the first Realtor® abandoned the Buyer, then the second Realtor® would be the Procuring Cause.

I often hear Realtors® ask why they are not “Automatically” the Procuring Cause if they are the Agents who showed the home to a passerby Buyer who stopped into their “Open House”?

The reason is because the NAR professional standards policy and bylaws PROHIBIT any Association from developing or implementing any rule that would predetermine the outcome of an arbitration hearing. Therefore to make a statement that, because a Realtor® holds a house open presets Procuring Cause would be a violation of the National Association of Realtors professional standards policy and bylaws. But again, remember, the Arbitration Panel would have the duty to establish which Realtor® did the KEY work that caused the Buyer to make an offer on and buy that property.

Remember too, that merely finding the property, I.E. sending MLS datasheets to the Buyer or simply showing a property to the Buyer is not, in and of itself, grounds to sustain a claim of Procuring Cause. The end result and decision of an Arbitration Panel will be based on the Panel’s perception of who did the most work that caused the Buyer to make the decision to make the offer and purchase the property. One of the most important ingredients to defending a Procuring Cause action is to have all of your documentation in good order. Don’t make claims that are not cooperated by solid documentation. Your defense will go down in flames if you rely on “he said/she said” testimony. This is another reason to keep, not only a communication log, but a GREAT communication log. Notes scribbled on little pieces of paper will be your death. It is our opinion that Agents should distribute the final communication log to their office files and of course keep the original one for your personal file.

Here is a word of caution to all! Do not present yourself as a threat to the cooperating Broker/Agent. This could be considered intimidation. If the Listing Agent feels that he/she has clearly provided evidence of an unbroken chain of events, has not abandoned the Buyer and has done all of the heavy lifting “KEY work”, but for some inexplicable reason Realtor® number two comes upon the scene and threatens the Listing Agent with taking the Buyer elsewhere, this could, and in all likelihood would, end up as a Procuring Cause case. The Listing Agent and Broker would allow the transaction to close and then could file a complaint with the Arbitration Panel, and, if they could prove their case, would in all probability be awarded 100% of the commission earned. So, be careful what you say and how you act. Be professional.

What I find confuses Buyers the most is this question; “Why can’t I buy my house from the Agent I want to buy from?” The answer is, You Can! Unfortunately, Representation is not about compensation. The two don’t mix and this is where the biggest confusion rests for the consumer. Unless a clear case of Alienation exists, if the Realtor® who did the KEY work is not the Realtor® with whom the Buyer writes the offer to purchase, and if the “Key Work” Realtor® files a Procuring Cause claim against the subsequent Realtor®, there is a very good chance that an Arbitration Panel will rule that the “Key Work” Realtor® is the Procuring Cause and thus entitled to the compensation/commission.

If you are ever faced with a Procuring Cause action, remember that NONE of your defenses or the defenses of the other party should be about what took place after the offer was written and/or successfully negotiated to an agreement to purchase. The proof of Procuring Cause is in the preamble of the transaction. By that I mean, just because an Agent is managing inspections, responses to Buyer Inspection Notice and Seller’s Response forms, writing additional addenda or any of the myriads of tasks that go along with our responsibility to process a transaction, means NOTHING in establishing Procuring Cause. It’s all about “Who did the KEY work” the “Heavy Lifting”; who caused or most logically caused the Buyer to make a conscious decision to make an offer on and purchase the property.

Regarding compensation, it makes no difference whether or not a property is listed in the MLS system. If the Listing Agent makes an offer to pay compensation to a cooperating Broker, then there is an offer to pay compensation. Oddly enough the NAR Arbitration Manual does not even require the offer of commission to be in writing. Of course, in Arizona, the Statute of Frauds could find its way into a court room, but… remember, arbitration is not a court room and therefore the Statue of Frauds will, in all likelihood, not be part of the Panel’s equation in determining Procuring Cause or compensation owed/earned.

Finally, I have a suggestion to all Realtors® reading this article. If a Buyer asks you to show him/her a property that he/she has been shown by another Realtor® and subsequently wants to make an offer on that property, try to work out a commission agreement between the first Realtor® and yourself.

Most of the time the first Realtor®, assuming there is a potential for a Procuring Cause claim, will be happy to work out some form of equitable compensation. If you are uncomfortable with approaching the first Realtor® yourself, ask your Broker to have that discussion with the first Realtor® for you.

Be aware that asking the Buyer to write a note and have the note/letter notarized and sent to the first Realtor® is not a guarantee that you, the second Realtor® would prevail in Procuring Cause arbitration. Even if the Buyer sites all the reasons he/she chose to ask you to write the offer. Your fate in such a case truly rests with the Arbitration Panel and in your ability to produce absolute and clear details of why you were the KEY reason the Buyer made the offer to purchase that property. Even after all that effort, there is always a chance that the Arbitration Panel could find for the second Realtor® and award him/her Procuring Cause. You would have done all the work to get the transaction to and through the closing table for absolutely NO paycheck.

In my last example, if you feel there is a good chance that you would not prevail in a Procuring Cause fight, then… don’t represent the Buyer. Going through the process of an Arbitration Procuring Cause hearing is mentally draining as well as extremely time consuming.

Lori & G-II are Mentors for the Coldwell Banker Residential Brokerage Metro Office.
You can reach Lori & G-II at Lori.and.G-II@RealEstateInPhoenix.net

FSBO (For Sale By Owner) Pointers

Fri, 14 Apr 2006 19:19:00 -0700

So, you’re going to sell your home in the For Sale By Owner arena. First… remember, whether you’re going enlist the services of a Semi-Assistance Real Estate Company such as “Buy Owner” or “Help U Sell” or “Seller 4 Less” or any number of alternate FLAT FEE companies, to get your home advertised in the local MLS computer or you’re going to handle all of the promotional efforts yourself, you may well be a For Sale By Owner (FSBO) Seller.

So… where do you go next? What’s the next step?

SECURITY AND SAFETY

The first and most important part of your project will be establishing a “Safety Net” around you, your family and your home. You don’t know anything about the folks who will barge into your home, announced or unannounced, invited or uninvited. You don’t know if the stranger who has called you to view your home is an honest buyer or a person with nefarious and ulterior motives. You don’t know if the stranger has arrived on site to case your home for a potential heist as part of a gang of individuals who target unwary FSBOs, or if the stranger is truly in search of a new house they too can call home. You only have you and your wits to try and glean the factual intents of your prospect.

Here are some tips that could be helpful… And remember… your best defense is a strong offense.

Every time you agree to allow someone to come into your home, let your family and/or friends or neighbors know what time you will have a stranger in your home.

Let your family and friends know when you intend to have your home open for showing to the public.

Let your local police department know that you will be offering your home open to the public for an Open House and give them the date and time.

Establish a safety plan. Here is an example:
1. Never let yourself get cornered in your home when showing your home to a visiting stranger.
2. Never let any stranger into your home if you are home alone, particularly if the stranger is accompanied by one or more strangers.
3. If you have small children, you may want to prearrange with a neighbor to babysit your children while you are showing the stranger your home.
4. Never let the stranger leave his/her car running in front of your home or in your drive way.
5. Stay out of small rooms like bathrooms, pantries or the garage while the stranger previews your home.
6. Always keep your body between the stranger and an exit door.
7. Always keep your cell phone or a cordless phone in your hand.
8. Never lead the way, always follow the stranger.
9. Establish and share a Secret Code Word or Phrase with your family or friends. Here is an example of how that might be used. For our example we’ll use Red Crock Pot as our Secret Code Word. Let’s assume that you feel uncomfortable with the stranger that is in your house. When you began the process of becoming a FSBO you told your family or friends that you will call and give them the Secret Code Word/Phrase if you feel you or your family or your home are in jeopardy. Here’s the way our scenario might play out.

Put all of your valuables out of sight. If you have weapons, be sure to have them locked or out of sight and/or reach by anyone but you.
Put your medications in a safe and locked area. Over the counter or prescription drugs can be a temptation to even the most earnest buyer prospect.
If the stranger calls to arrange a viewing of your home, ask the stranger to fax or eMail you a copy of his/her Loan Approval Letter and the name and phone number to his lender. It might even be wise to not allow anyone into your home who cannot produce this simple information and document. The better Realtors® in the industry do not take anyone into a home unless the Realtor® has confirmed the buyer’s ability to secure financing. Do you think you should do the same?
These are only a few suggestions… but they should get you started on the right foot. Remember… it does you no good to be a FSBO seller if you also are the biggest and brightest target on the shooting range.

MARKETING YOUR HOME

This is perhaps the second most challenging aspect of the real estate industry. Market places change in a pretty predictable pattern, although not in too predictable of a time line. The real estate industry is cyclical. By that we mean that the ebb and flow of the buyer vs. seller tug-of-war swings back and forth like the pendulum of a Cuckoo Clock. At one point in time there may be more buyers than there are properties to buy and at another time there may be more properties for sale than there are buyers to buy them. The real estate market also has its calm seas where there are a good mix of buyers and sellers at any one given time.

The Arizona real estate market has cooled quite a bit since about July/August 2005. For about 30 months preceding the July/August 2005 slowdown, homes sold in mere weeks; then in only days and then from about July/August 2004 through July/August homes sold within minutes of being posted to the MLS system. Anybody who had a beating pulse could call themselves “Real Estate Marketing Professionals”. It took no talent, no skill, no luck and no real estate experience at all to find a buyer for a home. Any monkey on a chain could do that. That is no longer the case.

Today’s real estate market is facing many forces that are working against sellers. In the $250,000 to $600,000 price range builders, who… in our opinion… are one of the major reasons we have seen such a dramatic shift in market trends, are offering incredible buyer incentives. For example, Richmond American Homes in Surprise has offered discounts off the list price of their SPEC homes of up to $80,000 and offered to pay as much as an ADDITIONAL $11,000 of the buyer’s closing costs. Continental Homes/DR Horton in Goodyear has offered discounts ranging from $35,000 and more and also has included an ADDITIONAL incentive of $10,000 toward the buyer’s closing costs on their SPEC home inventory. Centex Homes in Goodyear has offered $30,000 and more in the way of builder discount incentives to buyers who want to have a home built. All of the builders in the Marley Park subdivision, just to the north and west of Luke Air Force base are offering unheard of discounts; Randall Martin Homes is offering $30,000 to $40,000 off of certain SPEC homes and Element Homes is offering anwyere from $80,000 to $100,000 discounts and more off of their SPEC Homes This kind of competition is difficult to compete with, thus requires a very intense marketing strategy.

The Investor Buyers who purchased their properties between December 2003 and July/August 2006 are beginning to dump these properties back on the market. This is having a profound impact on the market place inventory. To demonstrate this; in July/August 2006 the total inventory of homes, priced between $100,000 and $10,000,000, listed in the Arizona Regional Multiple Listing (ARMLS) system hovered right around 7,000 to 7,500 residential resale properties. In just over 300 days, that number has grown to just over 45,000 residential resale properties. Each day between 600 and 800 more homes are introduced into the ARMLS system. That does not even take into account those homes that are launched into the FSBO market without MLS exposure.

The Buyer pool has all but evaporated. The hundreds of buyers who stood in endless lines at new construction sites in hopes of having their names drawn from a hat for one of the few lots released each week have disappeared. Where did they all go? Could they simply have been priced right out of home ownership? The rest of the buyers who tried to make purchases of residential resale homes, competing against other buyers or investor purchasers are also gone. Could they too have met with the same fate as the prospective new home buyer? The buyers who use to drive around looking for open houses to attend are also missing. Open houses are not producing the traffic they did years or even months ago. The National Association of Realtors’ statistics sites that over 70% of all buyers are heading to the Internet before they ever venture out of their homes, in search of their next or first home. Of that 70%, it is estimated that over 95% of them will enlist the services of a Real Estate Professional Buyer’s Agent to help them through the process. They are all too aware that they are not prepared to examine or interpret the reams of paper containing disclosures and other documentation that will be part of their transaction.

So, where do today’s buyers for today’s inventory come from? What’s a FSBO to do? Here are a few tip:

First and foremost… don’t toss out the old stand by staple of a good attractive For Sale Sign in your yard.
For the diehard buyers who are still driving the streets, looking for a new home, be sure to have flyers of your property in your Information Box that is hung on your For Sale Sign. But… you may not want to publish your asking price. There are two reasons for adopting this strategy. The first centers on security and the second on negotiating strategy.
1. SECURITY: It is not necessarily the most practical policy to publish your family’s monetary worth.
2. NEGOTIATING STRATEGY: Keep them guessing. Keeping your price close to your chest, as if it were your “Hold Card” in a poker game, is a good idea. If you give them no reason to pick up the phone to call you for more information then… they won’t! Another tried and true posturing method for negotiating is to never be the first person to speak and always be quite after you have asked for the sale. Remember… the first person to open their mouth, is usually the one whose negotiating position is compromised.
If you have hired a Semi-Assistance Real Estate Company, be sure they put your home in the MLS in the correct MLS Area and Grid; a Type-O during data entry could cost you thousands of dollars. Ask for a copy of the MLS datasheet so you can review it and request any necessary changes.
Make certain that your home has maximum exposure on the Internet. The majority of today’s buyers are not produced from print ads, open houses or radio and TV ads, they are the product of Internet exposure.
If you are going it alone, take advantage of the public FSBO web sites offered by all the major Internet search engines such as Google.com, Yahoo.com, AOL.com, MSN.com, Excite.com, AZCentral.com, RedZee.com, AltaVista.com and any number of other Internet ad space you can find. Check out ForSaleByOwner.com. This is one of the most popular FSBO tools on the market today.
If you have hired a Semi-Assistance Real Estate Company insist that your home be published on Realtor.com but not simply published on Realtor.com but published with not less than 6 photos and with a Virtual Tour and… most importantly, published on Realtor.com’s Enhanced Listing Pages. Realtor.com statistics show that the first homes passed over by visitors to their site are those homes without any photos. Next on the Hit List are homes without multiple photos and next to be introduced to the DELETE KEY are homes without Virtual Tours. Properties that are displayed in the Realtor.com Enhanced Property Listing Pages are the FIRST homes to pop up in the Realtor.com search list. It does you absolutely no good to get your home published to Realtor.com if you’re at the bottom of the list.
If you have hired a Semi-Assistance Real Estate Company, insist that your home is published on the real estate company’s corporate web site.
If you have hired a Semi-Assistance Real Estate Company, insist that you be informed of any prospects who might call their office or the real estate agent so you can follow up on the call.
Here’s a bit of pricing strategy. Many agents might suggest that you offer a bonus to the Buyer’s Agent if the Agent can get their Buyer to purchase your home. We find this logic a bit flawed. Remember… the Buyer hired the Buyer’s Agent to represent his/her best interest. Do you think it would be just a bit… self-serving… if the Buyer’s Agent began to bear down on the person he owes his allegiance and fiduciary to, to try to force the buyer to buy your home? Not to mention… do you have… even… just a little problem with the moral ethics or caliber of an Agent who might even entertain such a suggestion? Why not offer a cash incentive to the Buyer? Why not offer the Buyer some money toward his/her closing costs? All the builders are doing it! Obviously… you’re a little fish in a big pond and can, by no stretch of the imagination, offer tens of thousands of dollars in cash assistance, but… I gotta tell ya… $3,000 to $5,000 could go a long way when the buyer is ready to cast his/her swing vote between your home or a competing home.

Bottom line… Internet Marketing and Buyer Incentives will take you a long way in helping you find a buyer for your home.

WRITING THE CONTRACT AND WHAT IF THE BUYER BREACHES YOUR AGREEMENT?

You will need to have a Contract handy. It’s a good idea to have a few of them on hand. It is also a good idea to have a few pages of Addendum forms and Counter Offer forms. You can pick these up from your Title Company or you might be able to buy a few copies from your local Board of Realtors®. You will also need to pick up a form called Seller’s Property Disclosure Statement (SPDS for short). You will also need a few other forms: Loan Status Report (LSR), Loan Status Update (LSU), Cure Period and a Home Owner’s Association Disclosure Addendum and, depending on your price point a HUD Form called HUD-92564-CN, “For Your Protection: Get a Home Inspection and… again depending on the age of your home a Lead Based Paint Disclosure form.

Today’s real estate Contracts are pretty complex. The Arizona Association of Realtors re-wrote the Contract and released it for use in May of 2005. The old Contract was only 9 pages long. Even though today’s base Contract is 9 pages long, the boiler plate of the Contract is prefaced by a disclosure page entitled Disclosure Attachment as the very first page of the document set. Within the body of the Contract, the FINANCING portion of the Contract REQUIRES that the Buyer produce a Loan Status Report (LSR) with the offer, making the actual root Contract 11 pages long. If the home is located within an HOA community the Contract requires a Home Owner Association Addendum and Disclosure now making the Contract 12 pages long. Add to this the state statutory requirement of Seller’s Disclosure of Material Facts about their home by use of the 7 page AAR Seller’s Property Disclosure Statement (SPDS) and the 9 page Contract quickly grows to a staggering 19 pages. Page 5 of the Contract REQUIRES the seller to provide to the buyer a copy of the Arizona Department of Health Services approved private Pool Safety Notice. This is, at a minimum 2 pages and could be 3 pages, depending on where you acquire the document. Your Contract has now grown to 22 pages in total!

Any number of conditions or instances or additional required documents could increase the number of pages your Contract could grow to. Simply be aware of your state statutory required disclosures to the Buyer and follow the instructions in the Contract and your transaction should move along just fine.

The Contract does not allow an immediate cancellation of a Contract if one or the other party breaches their Contractual obligations. The Contract provides the party who failed to comply with his/her Contractual obligations an opportunity to correct the breach issue. When a party has failed to complete some portion of their Contractual promise, the non-breaching party MUST issue a Cure Notice. The Cure Notice allows the breaching party to revisit that task or obligation and give him/her 3 days to make the correction. If the correction can be accomplished and documented then there is no breach and the Contract continues in full force and affect. On the other hand, and depending on how the Cure Notice is worded, if the breaching party cannot make the required repairs to the failed Contractual obligation, the Contract could die. However… keep in mind… it is nearly impossible to retain the Buyer’s earnest money as damages to the Seller if the Buyer uses his/her inability to secure a loan as the escape portal from the Contract. Such posturing, by the Buyer is perfectly legal and available to the Buyer in the boiler plate language of the Contract.

FINANCING
CAN THE PROSPECT EVEN AFFORD MY HOME AND MORE IMPORTANTLY, IS HE/SHE APPROVED?

The Contract provides the Seller with a tremendous amount of clout in this area. First, the Contract makes the production of an LSR a Contractual obligation of the Buyer. That is, the Buyer must present that document to the Seller at the time he/she makes an offer on the property. Without an LSR the Seller has no information at all as to the Buyer’s ability to “make it to the finish line” I.E. close on the property and on time.

Even more exciting is the Seller’s control over the Buyer to force the Buyer to manage and be responsible for the Buyer’s lender’s competency or incompetence during the escrow period. In the boiler plate language of the Contract, the Buyer is instructed to instruct his/her lender that the Buyer’s Lender is to deliver the Buyer’s closing documents to the Title/Escrow Company not less than 3 days prior to the actual date of scheduled closing. If the Buyer’s lender fails to do so, the Buyer is placed directly in the line of fire and the Seller can, and should, serve a “3 Day Notice To Cure” this failure to perform upon the Buyer.

Just as important as the Buyer’s ability to close on the property is the Buyer’s Lender’s ability to perform. All too often, when the real estate market slows, the quality of lenders and loan officers also becomes a big problem. It is not unusual to encounter a Buyer who has engaged the services of a loan officer who has very little loan experience. When this happens, closings can be delayed or even worse, not occur at all. This is another reason the Arizona Association of Realtors developed the AAR LSR (Loan Status Report) form. This form requires that the Buyer’s Lender include not only his/her phone and fax numbers, but also their eMail address, snail mail address and most importantly, their Mortgage Broker Number. This information allows the Seller to research the Lender on the Arizona State Banking Commissioner’s web site. Here you can learn how long the Lender has been in business or if he/she has any pending complaints being processed by the Banking Commission or if his/her license has ever been suspended, revoked and/or any number of additional helpful bits of information that could give you an indication about the quality of the lender.

If you have a banking relationship with a favorite lender or loan officer that you trust, it is not uncommon for Sellers to insist that a prospective Buyer, even though the Buyer has produced an LSR from the Buyer’s Lender, qualify for their loan with a lender that the Seller has confidence in. This posturing is not a requirement upon the Buyer that the Buyer must use your lender… that would be a violation of the Real Estate Settlement and Procedures Act; this is simply one more tool you can use to assure yourself that the Buyer will be able to make it to the closing table on time and at no additional cost to you.

DABBLING IN THE REAL ESTATE BUSINESS

Here are some check lists that you might find use for:

Contract Process Flow Chart
List of systems and components in your home that MUST be maintained and repaired by the Seller
Information about termites and what roll they might play in the successful closing of your transaction
Questions to screen Buyers with
Questions to screen Buyer’s Lender’s with
Critical Date Check List that includes almost all of the types of conditions that would trigger a Cure Notice.

If you would like any of these helpful check lists for your For Sale By Owner efforts, please feel free to send an eMail to us at Lori.and.G-II@RealEstateInPhoenix.net. We’ll see that you receive a link to them right away.

FOOT NOTE:

On March 19, 2006, Linda Water Nelson of the Memphis Business Journal/MSNBC wrote:

National Association of Realtors statistics show that of those unrepresented Sellers who are successful in the sale of their property, 40% say they wouldn't do it again," she says. That's because do-it-yourselfers are unaware about the time commitment for showings, open houses and other events, or the cost of advertising.

Don't become a NAR (National Association of Realtors) Statistic

FSBO Methods Used to Market Home:

Yard Sign . . . 61%
Friends/neighbors . . . 46%
Newspaper ad . . . 37%
Open House . . . 29%
Internet . . . 17%

Most Difficult Tasks for FSBO Sellers:

Getting the right price . . . 14%
Understanding paperwork . . . 17%
Preparing/fixing up home for sale . . . 16%
Attracting potential buyers . . . 9%
Having enough time to devote to all aspects of the sale . . . 8%

Of course… it is never our intent to let you get dragged under a bus, so if at any time you feel like you have taken on an alligator with Lockjaw or a Lion by the tail, we would be happy to interview with you for the job of getting your home sold. To reach us, you can either eMail us at Lori.and.G-II@HomesInPhoenix.net or CLICK HERE to complete our CONFIDENTIAL Seller Information Form. YOUR PRIVACY is always our most sacred trust. Remember… any monkey on a chain can bring a Buyer to the front door; it takes a seasoned professional to bring qualified buyers to the door and to manage the transaction to and through the closing process!

If you think it’s expensive to hire a professional…

Wait till you pay for an amateur!

Bye for now… Lori & “G-II” ... til our next posting... Happy Easter to all!

What Could Possibly Go Wrong If You Are Buying a New Construction Home?

Sun, 2 Apr 2006 20:55:00 -0700

So what could possibly go wrong if your going to buy a brand new home, built by one of over 200 Arizona Builders, registered as General Contractors and Licensed with the Department of Real Estate? Read on my friend… read on!

Lori & I have been given exclusive permission, by the Buyers, to tell these inconceivable accounts of New Construction Terror. You have the opportunity to communicate with them, if you wish, to validate any portion of these mind-blowing stories.

An Emotional Safety Net or What do you mean… I have to simply live with it?

Story Number One:

Our clients asked us to represent them in the purchase of a new home, being built in the west valley. We accompanied the buyer to the builder’s site. During a tour of the site where the subdivision would be built, our buyers fell in love with a particular lot. The site sales person took us back to his office so we could examine the plot plan and projected placement of street lights, street sewers, and utility boxes for phone, cable and electricity.

Our buyer had a need for an RV gate on the property so it was “materially important” to them that the property was free of any utility boxes on the property and particularly no impediments to the ingress / egress of the RV gate. We spent about a hour with the site sales person, examining the site plans, checking with the city and with the builder’s construction team that there were truly no utility boxes that were going to show up on this property.

About 3 months into the permit process, the buyers and we were notified by the builder that the FINAL Commissioner’s Public Report approval had been delayed. We were given no reason for the delay, only that the fire access ingress and egress routs had been redrawn.

About 4 months later, and without any word from the builder that changes to the site plan had been collaborated between the city and the builder, we and the buyer learned that three utility boxes had been plumbed right smack-dab in line with the RV gate. Obviously our buyer was extremely angry, not only because of the existence of the utility boxes, but more importantly because they had not been advised of the site plan alteration.

The builder and the site sales person were well aware that the unimpeded access to the RV gate was the main reason our buyer had selected this particular lot. The builder’s contract stipulated that no changes to any part of the construction site or plans would take place without written notice and mutual agreement between the buyer and the builder. That notification never took place.

When the buyer approached the builder’s site sales person to express the buyer’s wish to be granted a lot site change, at the same price the original contract was written for, the site sales person retorted with, “The utility boxes are not that bad… you might have to make a few adjustments as you maneuver to and through the gate, but you should be able to do it…”

Then the builder’s site sales person said to Mrs. Buyer, “…if you don’t like the look of the utility boxes, I’ll buy you a bush to plant in front of them… and besides… do you even own an RV?..”

You can imagine the explosive anger that brewed within Mr. Buyer when his wife relayed the builder’s site sales person’s comments and demeanor to Mrs. Buyer. Mr. Buyer then spoke with the builder’s site person about the problem with the construction site. The builder’s site sales person, insisted to the buyers that there was nothing that could be done and that they were simply going to have to live with the unexpected appendages, protruding from their lot that interfered with ingress/egress to their RV gate.

The buyers thought that they had just been handed a blow that they could not recover from.

When the buyers came to us and relayed their stories, we went to work to help them recover from the emotional damage and to resolve their differences with the builder.

At the onset the builder’s site sales person was less than cooperative. We quickly departed from having any additional dialogue with the builder’s site person and began communicating exclusively with the appropriate people within the builders management group.

Lori & I attached the builder through his own contract, used every ounce of legal knowledge at our disposal and eventually got the builder to agree to allow the buyers to move to a different lot, in a different community at the same price they had gone to contract for, keeping the nearly $50,000 of appreciated value of the property. The builder also agreed to credit the buyers back a $6,000 lot premium as compensation for the contractual breach of “Non Disclosure of A Material Fact”.

The builder promised that the buyers would be able to select their new lot within a week or two. We waited nearly 6 weeks, giving the builder plenty of time to make good on his promises. During the 6 week span, the builder’s lender sent a notice to the buyer, advising the buyer that the buyer had opted to cancel the buyer’s loan application with the builder. That was totally untrue and incorrect. Then… right on the heals of that notification was another notice from the builder that the buyer’s earnest money had been returned due to the buyer’s wish to cancel the contract. This too was incorrect and in fact… never occurred.

Once again… the buyer’s were furious. The buyers contacted Lori & me with the news and… once again… we went to work, diving into the interstices of the builder’s incompetent management fabric. We were successful… once again to knit the damaged quilt of buyer and builder fabric of interaction back together.

About two or three weeks later we received a call from Mr. Buyer. He told us that he was finished with the builder and wanted to be done with the builder, wanted out of the contract and wanted his $5,000 earnest money returned to him.

I drafted a letter of contract termination for the buyer to deliver to the builder. The builder’s attorney’s worked the letter over and over and over but knew that they were going to have their heads handed to them if they tried to take this transaction to court.

About 5 days after the contact termination letter was delivered to the builder, we received a Notice of Cancellation, signed by the builder, in advance of any signatures by the buyer.

We had won the battle for our clients! They were free of the builder’s hold on them and their earnest money.

Story Number Two:

How to win the battle and the war in 4 minutes
or
Predatory Lending / What do you mean I have an 11% APR on my mortgage?

Ok… so the buyer in Story Number One simply did not have enough fun with builder number one… he had to take another run at this New Construction stuff one more time.

This time he had wandered into the builder’s model complex without his Realtor® by his side. That was the beginning of his nightmare.

Fortunately, through some extremely competent negotiations we were successful in getting the builder to allow Mr. Buyers wife represent the purchase. You see… Mrs. Buyer is a Realtor with Coldwell Banker and one of Lori & G-IIs protégés. After we successfully gain that bit of capitulation from the builder, Mrs. Buyer asked Lori if she and I would represent them in the transaction. Mrs. Buyer knew we had a proven track record when it came to protecting their interests. Mr. & Mrs. Buyer gave up the commission that would have been paid to Mrs. Buyer as a licensed real estate agent because she knew, that even though she was a licensed agent, she was not ready to take on any problems that might come up with the builder or any one on the builder’s team.

Lori & I agreed to represent the buyers but insisted that we credit some of the commission back to Mr. & Mrs. Buyer because of their loyalty to us and because they had that much trust in our ability to watch their backs in this next transaction.

On March 14th 2006 we met with the buyers at the builder’s office for the drafting of the contract. The site person was visibly annoyed that the buyers had successfully gain competent buyer representation. The buyers had settled on the purchase of a builder spec (inventory home). The builder was offering an $80,000 discount from the finished home price of $380,000. Plus the builder was offering 3% of the purchase price ($11,400) toward buyer closing costs if the buyer would use the builder’s lender. The house was set to be completed by March 29th 2006, only 15 days from the date of the contract.

The buyers agreed to use the builder’s lender so they could take advantage of the 3% toward their closing costs. The $80,000 discount was not tied to the use of the builder’s lender.

During the contract writing, the builder’s site sales person wanted to introduce into the document set a specific document that prohibited the buyer form using alternate financing if the closing date was within 30 days from the contract date. Lori insisted that this addendum would not be part of the document set. The builder’s site sales person was adamant that the document be included. Lori threatened that the buyers would leave the building and purchase in another community if the builder’s site sales person was going to insist that this document be part of the doc set. The Site person folded and the financing document was eliminated from the document set.

To set the stage it is necessary to let you know that the buyers have FICO scores that are near perfect. Nearly the best one can achieve in the credit world.

The contact documents were completed, Lori reviewed all of the necessary documents to confirm that all was contractually in order. Lori also reviewed the Commissioner’s Report, a document that must be presented to EVERY buyer before he/she signs a commitment to purchase a new home from a builder. All was in order.

On March 27th 2006 the buyers called us to let us know that they had received their loan documents for review over the weekend. They were alarmed to see that the terms of their financing had been railroaded. The loan documents, for the buyer’s 80% / 20% loan, delivered by the builder’s lender disclosed a first mortgage interest rate of 7.5% and a second mortgage rate of 11%. The buyers were very confused.

Once again, Lori & I were called to the rescue. We examined the documents and were completely exasperated with the obvious “Credit Rape” of two very well qualified buyers. There was absolutely no way that buyers of this caliber should be set up with loan fees that were so outrageous.

Before making a call to the loan officer’s office, I had Mrs. Buyer call Coldwell Banker Mortgage and USAA Mortgage to obtain competitive loan quotes. USAA delivered a loan quote of 6.875% for a 100% loan product. Coldwell Banker Mortgage delivered a loan quote of 6.375% for a 100% loan product. Both loan quotes were clearly better than the disaster that the builder’s lender was trying to sell.

I placed a call to the loan officer in an attempt to uncover what could have possessed her to write such an incredibly off the wall loan platform. The loan officer was very annoyed that Lori and I were involved with this part of the process. She challenged our intervention and refused to have any further conversation with me on the phone.

I gathered up Mrs. Buyer in to my car and off we drove, right down to the builder’s lender; walked into her office and asked to speak with her, in person. She kept us waiting for nearly an hour. I’m certain she expected that we would get tired of waiting for her and would leave the building. Nothing like that even crossed my mind. This loan officer was on a mission to commit an incredibly moral impropriety and I was hell-bent on keeping that from taking place. Finally, the loan officer got tired of trying to out wait us and she came into the lobby. She agreed to meet with us in a small conference room.

I presented the two quotes from the two competing lenders; each had been prepared on an industry standard Good Faith Estimate HUD form. The loan officer was visibly unnerved by having to deal with me and even more frustrated that I had forced the showdown.

She postured herself with a condescending tone to her voice and resistant body language. I told the loan officer that she would have to let me know within the next hour or two, (it was now about 2:00pm) if she was going to either meet or beat either of the two competing loan quotes. This is the conversation that followed:

Loan Officer: “Well… I don’t know if I can get you a response by then…. I have to call Denver”.

Me: “Who in Denver do you have to call… let’s get them on the phone now to resolve your quote”

Loan Officer: “I don’t know who I’m calling”

Me: “You mean you don’t know who you need to talk to about your quote for these rates”

Loan Officer: “I mean that I have to call my loan processor”

Me: “Let’s get him or her on the phone”

Loan Officer: “I don’t know her name”

Me: “Ok… there must be someone there in authority, give me a name. I have people in Denver who can be at your corporate office in less than 30 minutes”

Loan Officer: “I’m not going to make that call”

Me: “My buyer and I have to know within the next hour to hour and a half that you are or are not going to match or beat one or both of these competing loan products”

Loan Officer: “Since you didn’t come in with an appointment I don’t think I will be able to help you within that time line”

Me: “Ok… how about the builder’s general sales manager? Let’s talk to him”

Loan Officer: “I don’t know who that is and I don’t think he will see you”

Me: “Ok, so you don’t know who the builder’s general sales manager is, but your pretty sure that he will not see me? Ok… I guess I’ll have to work with that”

With the conclusion of that short and utterly useless conversation, I thanked the loan officer for her time and took the buyer with me back out to the lobby. I asked the receptionist to locate either the builder’s general sales manager, designated real estate broker or the loan officer’s supervisor.

Within a minute or so, a gentleman greeted us. He was the loan officer’s boss. The head cheese. The Big KaHuna. The Top Dog. He greeted me and the buyer and invited us into his office. He had the buyer’s file on his desk.

KaHuna: “What seems to be the problem?”

Me: “I don’t think we have a problem. I think there has been a misunderstanding”

KaHuna: “How can I help?”

Me: “My client has received two completive loan quotes that blow the builder’s lender current loan quote out the door. I think you can do much better than your quote and prepays even match or beat the two competing quotes that are in front of you”

As he begins to look over the buyer’s file, KaHuna: “Why do you have a loan like this. This makes no sense!”

Four (4) minutes later, our buyer had an 80% / 20% loan, with an Interest Only Front half with a 3 year rate lock at 3.88% and a Back Half loan of 8.5% fully amortized for 30 years with a 20 year balloon and a monthly payment that was $1,000 a month LESS then the loan originally quoted by the builder’s loan officer.

KaHuna promised that he would have the loan documents redrafted and that our buyers would close no later than March 31st 2006.

Today at 3:00pm, March 31st 2006 our buyers picked up the keys to their new home. They couldn’t be happier and they are even more convinced that there is no instance that any one, shopping for a New Construction Home, should ever try to enter that arena on their own.

Are either of these builders, the builders you wanted to engage on your own and without FREE Buyer Representation, paid for by the builder?

For obvious ethical reasons, we cannot disclose the names of these two builders, but… we are pretty sure, if you ask them, the Mueller’s will be happy to share that information with you. They are not tied to the same Realtor constraints that Lori and I are.

Our buyers are Joshua and April Mueller. You can reach April at april1013_98@yahoo.com and Josh at jwmueller99@yahoo.com to verify these stories or ask further question about the value of Buyer Representation in New Construction.

CLICK HERE TO READ, “WHY SHOULD I HAVE MY NEW CONSTRUCTION HOME INSPECTED”

Have a GREAT day and happy house hunting... but... we hope you decide to take advantage of your Arizona Statutory Rights to Buyer Representation... It's a Jungle Out There... and... don't forget... here in the Wild, Wild West, we still carry guns

Exploring Loan Platform Options

Sun, 19 Mar 2006 20:00:00 -0700

Hello again folks,

Not too long ago, a client asked us some interesting questions about Loans and Loan Platform Options. We thought we would share that post with you...

Our clients wrote:
"...We have been contacted by our Builder's lender about approval for a loan. They recommend doing an 80/20 with no down payment at 6% and 8.125% respectively (Loan will be ~$185.000). We have yet to get their papers in the mail, and also were planning on asking USAA if they could match or beat this. My question to you, is should we be looking at an 80/20 as our only option for mortgage? Or would a traditional 30 yr convertable and 3% down payment with mortgage insurance be a cheaper option for us?..."

While the Builder's lender has set you on a relatively accurate course, those directions could use a little tweaking... LOL

It is true that money is very inexpensive at this moment in time, it has been our experience that 80/20 loans are not necessarily the best product for all buyers. You should indeed check with USAA about what loan programs they offer, but you should also check with Preferred Mortgage, a Coldwell Banker Residential Brokerage affiliate lender at 888-315-6194. Keep in mind that, perhaps one of the most important and impacting portion of your loan platform, is the type of loan you secure. Oh yeah... wanna really help your sleepless nights... ponder this... there are hundreds of types of loan programs that you could research... perhaps even thousands... how's that for a head scratcher??

Consider this scenario; You do not intend to make this home purchase the last time you ever purchase a home. This will be a 'stepping stone' home... something to build some equity with so you can move up to a larger home in the future. You will most likely live in this home for three to five years and then make a move up. If that in fact takes place, then there are numerous types of loan platforms you should be looking at but... least of all a fully amortized, fixed rate 30 year mortgage. Like Danny Davito said in his hit move, Other People's Money... "Why should I use my money when there is plenty of Other People's Money to use!!!"

Let's explore some options:

The 80/20 loan- Arguably one of the most used loan platforms in today's lending arena. One of the beauties of this type of Hybrid Loan is that the federally required "Mortgage Insurance Premium" referred to as MIP is waived because the Buyer's first loan is for only 80% of the appraised value. (all this of course if the loan is a federally insured loan, I.E. a Fannie Mae or Freddie Mac loan) However, of late, 80/20s have come under extreme scrutiny by many loan underwriters. Appraisals are often challenged by the underwriter, forcing a 'review appraisal' to take place, sometimes at the expense of the Buyer. Some lenders require dual instances of Title Insurance to be purchased by the Buyer, dual instances of Loan Origination Fees, dual instances of Underwriting costs, dual instances of Mortgage Broker Fees and a whole host of other additional dual instances of fees. There are of course, those lenders who do not charge these additional fees into the transaction; but consumers have to hunt for them, or be allied with a Realtor (hummmm - that must be us!) who can put them in touch with such a lender.

Two other popular Hybrid Loans are the 80/10/10 and the 80/15/5- Both of these loans, like the 80/20 eliminate the need to carry the federally required MIP. However, they typically require the buyer to come up with some down payment money of their own. The 80/10/10 is two loans, a 1st for 80% of the appraised value of the home and a 2nd for 10% of the appraised value of the home, supplemented by 10% down payment of the Buyer's own funds. The 80/15/5 is similar. There are again two loans, the first of 80% of the appraised value and the second for 15% of the appraised value, supplemented by 5% down payment of the buyer's own money. Both Hybrid Loans eliminate the need for MIP. However, these loans too, can be laden with additional costs.

Perhaps one of the most important features to be aware of during your search for a loan is the PPP (Pre Payment Penalty). Usually, as long as the consumer's credit score has a minimum of a 625 FICO Credit Score, there is little reason to subscribe to loans with PPPs. If you do choose to engage a loan with a PPP, be sure you fully understand EXACTLY what the pre payment penalty is and how it functions within the construct of the loan. (usually the sum of 6 months of the loan payment).

LIBORs and other Interest Only Loan Platforms: Interest ONLY loans such as the LIBOR, COFI and CODI are very popular for short term investments, say... 3 to 7 years.

About Interest Only Loans

An interest only loan is a great tool to consider when searching out your financing options. This type of loan allows you to pay the interest portion of your payment for the first 10 years of the loan, and greatly reduces your required mortgage payments. Because the value of your home is going to increase (in most cases) regardless of how much money you pay towards the principle of the loan, an interest only payment frees up cash that can be used to maximize 401K contributions, to put money into an IRA or other investment, to save for college or to pay down debts.

In most situations, interest only loans are some type of adjustable rate mortgage.

This option should be cautiously considered and is not for everyone. An interest only loan makes the most sense for someone who is . . .

borrowing more that $200,000 (although not required)
putting down at least 10% (although not required)
planning on being in the house for 3-7 years
financially disciplined to take advantage of monthly savings

LIBOR (London Inter Bank Offered Rate)

A Libor Mortgage Loan is also commonly referred to as an "Interest Only" Loan or "Interest Only" Mortgage. Most libor loans have "Interest Only" payment features to them and are tied to the current rate of the popular Libor Index. In order to understand all your libor mortgage options (including those with "interest only" payments) you should consult a Libor Mortgage professional, like USAA, Preferred Lending and/or Pacific Funding Group.

CODI (Certificate of Deposit Index)

Some financial analysts feel a CODI loan is better than Other Adjustable Interest Only type loans

A CODI loan is based upon the most stable index currently available. Simply put, it is the aggregate sum of what banks are paying to their depositors on their 3-month CD accounts. As we know, these short-term CD's generally offer a very low rate of return. Currently, the average rate paid by a bank on a 3-month CD is approximately 1.40%. Here's how it works: we take the daily average of these 3-month CD's and add those daily values together for one month. We then divide that sum by the number of days in the month to reach a monthly value. Next we add that current monthly value to the previous 11 months and divide by 12 to give us the current CODI Index. Right now that aggregate index is 1.820% and dropping. Over the past 9+ years, CODI has been as low as 1.820% and as high as 6.53%. The average of the past 9+ years is 2.90% and STILL DROPPING! By comparison, the 30 year fixed rates have swung between 5.875% and 9.25%!

The CODI index is however the most stable in the industry and has demonstrated a linear downward trend. The loan although variable can be structured to emulate the properties of a fixed for a moderate period of time

COFI (Cost of Funds Index)

This stands for “Cost of Funds Index”, and is determined and calculated every month by the Federal Home Loan Bank of San Francisco. According to the web site of that Bank:

The 11th District Monthly Weighted Average Cost of Funds Index (COFI) is one of many indices used by mortgage lenders to adjust the interest rate on adjustable rate mortgages. The monthly COFI reflects the actual interest expenses recognized during a given month by all savings institution members of the Federal Home Loan Bank of San Francisco (Bank).

It should be noted that the cost of funds index (COFI) is not an interest rate; it is an index. Well... that is just a little bit about some of the loan options that many Arizonians are taking advantage of. Only you can make the absolute decision as to which loan product is best for you, but be sure to engage the counsel of a competent lender. Let me know when you will be speaking with each lender and I will set up a conference call with you and me and the lender on the phone together.

Hope this information is helpful to you.

Be sure to check in with us any time you have a question or just want to chat about what is next in the process: and... for goodness sake... please don't make any decisions without checking with us first. We have been doing this for nearly 20 years... but this may be your first outing... LOL

Bye for now... till our next posting...

Lori & "G-II"

Expansive Soil in Arizona

Fri, 3 Mar 2006 20:09:00 -0700

EXPANSIVE SOIL… So… what’s all the fuss about?

Sooo… what’s all the fuss about Expansive Soil… and what the heck is it anyway?

GREAT questions… and glad you asked…

Remember… way back in the Paleozoic Era, when Dinosaurs roamed the earth? Well… they also took up residence here in Arizona. Then… came Global Warming, the Ice Age and who knows what else… oh yes… we had that huge meteor hit the state in up-state Arizona… that couldn’t have been too helpful… Right!?!... and… don’t forget Sunset Crater one of the oldest inactive volcanoes in the state, or is it really inactive… Hummmm… I wonder?

And then… the Dinosaurs disappeared… Well… not all of them… LOL

I guess what I’m trying to share with you is just this… we Arizonians, that includes our ancestors, the Dinosaurs, have lived with all sorts of natural geologic inconveniences, and that includes expansive soil.

That said… this is a little bit of information about Expansive Soil. The soil in Arizona, in some parts of the state, has “clay like” tendencies. Specific areas of the state are prone to “clay like” tendencies, sometimes referred to as “EXPANSIVE SOIL”. It is not unusual for a home/building in Arizona to exhibit signs of settling by evidence of cracks in walls, doorways, garage floors, patio decks, drive ways, roof tie-ins and a number of additional locations in, on and around the home/building. The Registrar Of Contractors, sites any gap/crack in foundations or walls etc. That exceeds 3/16th of an inch in width is considered unacceptable and requires the attention of professionals to examine the cause of such cracks.

If a consumer purchases a home from resale inventory, the Buyer should always ask the Seller for a copy of the “Commissioners Public Report” for that subdivision. If the Buyer is purchasing a new build home, then the Builder is obligated to provide a copy of the “Commissioner’s Public Report” to the Buyer prior to the Buyer signing any contracts. In any case… no site sales associate, working for the Builder nor any real estate agent should ever issue a verbal warranty or claim as to the cause or nature or origin of these physical conditions, whether visible or hidden or whether disclosed or undisclosed.

It is the responsibility of a prospective homeowner to satisfy his or her concerns by securing an independent assessment of the home/building and the structural integrity of that home/building. A licensed, bonded and insured (PE) Professional Engineer or (PEF) Professional Engineering Firm should tender such assessments, in writing to the party or parties raising such concerns. A list of State Certified PE’s or PEF’s can be found on the Professional Registration Roster’s web site. Additional information can be obtained from the Arizona Registrar of Contractors and at the United States Department of Agriculture’s NRCS (Natural Resources Conservation Service).

¨ If the prospective homeowner has concerns about the condition of the soil under, near or around the subject property, it is suggested that the prospective homeowner contact one of the following agency locations to inquire about those conditions of concern.

Higley
Wilson, Robert W. Resource Soil Scientist Chandler Soil Survey Office 18256 E. Williams Field Rd. Suite 1 Higley, Arizona 85236
Phone: 480-988-1078 ext. 106 Fax: 480-988-1474 Voice mail: 9011-1875 e-mail: rwilson@az.nrcs.usda.gov

Tucson
Breckenfeld, Donald J. Resource Soil Scientist Tucson Resource Support Team 2000 E. Allen Road, Bldg. 320 Tucson, Arizona 85719-1596
Phone: 520-670-6602 ext. 242 Fax: 520-670-5123 Voice mail: 9011-1465 e-mail: dbrecken@az.nrcs.usda.gov

Flagstaff
DeWall, Alfred A. Resource Soil Scientist Flagstaff Resource Support Team 1585 S. Plaza Way, Suite 120 Flagstaff, Arizona 86001-7102
Phone: 520-556-7305 ext. 229 Fax: 520-774-2780 Voice mail: 9011-1605 e-mail: adewall@az.nrcs.usda.gov

§The 1997 National Resources Inventory (NRI) is the latest in a series of inventories conducted by the U.S. Department of Agriculture's Natural Resources Conservation Service (NRCS), formerly the Soil Conservation Service. It provides updated information on the status, condition, and trends of land, soil, water, and related resources on the nation's non-Federal land. The 1997 NRI is unique in that it provides a nationally consistent database that was constructed specifically to estimate 5-, 10- and 15-year trends for natural resources from 1982 to 1997. The 1992 NRI was instrumental in providing data on natural resources for the USDA publication.

ADDITIONAL INFORMATION
In order to maintain the structural integrity of your home, long after you close escrow, proper planning and maintenance of the finish grading, pool and landscaping are the responsibility of the homeowner. Many builders recommend the homeowner take the following preventative measures;

1. Make sure that positive drainage away from your foundation is maintained
2. No landscape plantings should be placed within 2 feet of the house.
3. Landscape plantings within 10 feet of the house should be limited to low water usage plant types
4. Do not over water plants near the foundation, patios or fence walls.
5. Care should be taken when backwashing pools to ensure excess water is not allowed near the foundation, patio or fence walls.
6. Care should be taken when adding pool or landscaping improvements to ensure that any mounding or grade changes direct surface water away from the home and are in conformance with the general grading plans of the home site.
7. Regularly monitor water on your lot after rains or normal watering to ensure these maintenance items are being followed

Lori & I hope you found this information helpful and useful. Remember… Expansive Soil is not a bad thing… It’s only bad if certain construction rules and end user rules are not followed.

Till our next posting... Bye for now…

¨ http://www.az.nrcs.usda.gov/soils/tss.htm ¨ http://www.az.nrcs.usda.gov/soils/flagsso.htm ¨ http://www.az.nrcs.usda.gov/soils/tucsonsso.htm
§ http://www.az.nrcs.usda.gov/nri/state.html

Learn a little bit about VA Loans

Sat, 25 Feb 2006 08:34:00 -0700

From time to time we field questions from clients about the lending process. The following post is a Q&A session, about VA loans, that occured between one of our clients who relocated from Italy. We think this exchange and the information contained within will be helpful to you as you begin the process of searching out an appropriate loan package.

In an Original Message on
Saturday, February 22, 2003 2:19 PM Michael wrote:
Lori and GII,

Question - (I'll trust your judgment). I am researching other financing options since I called USAA and they verified that they are unable to guarantee closing < 60 days.

Yes... my wife and I too keep track of USAA's closing time lines... problem right now is that with rates so low, they just can't seem to separate the Refi clients from their pool of new mortgage applicants...

While trying to nail various lenders down with all the applicable information on fees, timeframe and everything, one wrote the following:

"VA loans normally the sellers pay all of the VETS cost if not I would suggest you use a very good agent who can make this happen for you....."

This is the first I heard of this - not even the on base home buying seminar mentioned this. What is your perspective?

Mike and Nathalie

Well... now you've entered into a neck of the woods that Lori & I know very well. First let's take the lender's statement,

"VA loans normally the sellers pay all of the VETS cost"

There is some accuracy to in this statement. The VA, by federal mandate, forbid and prohibit VA buyer's paying certain types of fees. VA Pamphlet 26-7, 8.20 of Chapter 8 identifies these specific fees. A section of that pamphlet reads:

The lender's flat charge is intended to cover all of the lender's costs and services which are not reimbursable as "itemized fees and charges." The following list provides examples of items that cannot be charged to the veteran as "itemized fees and charges." Instead, the lender must cover any cost of these items out of its flat fee.

· Lender's appraisals
· Lender's inspections, except in construction loan cases
· loan closing or settlement fees
· document preparation fees
· Preparing loan papers or conveyancing fees
· Attorney's services other than for title work
· photographs
· interest rate lock-in fees
· postage and other mailing charges, stationery, telephone calls, and other overhead
· amortization schedules, pass books, and membership or entrance fees
· escrow fees or charges
· notary fees
· commitment fees or marketing fees of any secondary purchaser of the mortgage and reparation and recording of assignment of mortgage to such purchaser
· trustee's fees or charges
· loan application or processing fees
· fees for preparation of truth-in-lending disclosure statement
· fees charged by loan brokers, finders or other third parties whether affiliated with the lender or not, and
· tax service fees.

This is by no means the list of items in it's entirety... but it gives you a good idea of those fees you, as a VET, simply cannot pay. However... equally true is... there is nothing written into the statute that pushes these fees onto the Seller, or any other party to the contract. Thus... who pays these fees is the lenders problem. The VET is insulated from paying these fees.

Now... that said... why would you ever think it was just that simple? cause it ain't. There is a caveat to this mandate of fees a VET cannot pay. If the names of these fees are not listed in the closing statement, or on the lender's GFE (Good Faith Estimate) the caveat goes this way... the lender can charge the VET up to 1% of the loan amount as an allowable fee to be paid by the VET to the lender. This is the "flat fee" referred to above.

The education, required of a Realtor, to help their client process through a VA transaction is more complex than it may seem on the surface. A Realtor who does not fully understand the nuances of the VA loan may overlook items and/or contents of the lender's loan program that could unfairly impact the VA Buyer's out of pocket expenses. For example, most Realtors think that the VA Buyer can pay courrier fees. That is incorrect, the only time a VET can pay such fees is if the loan is for the refinance of an existing property. Some Realtors think that the Seller MUST pay the 'non-allowable' fees associated with a loan, I.E., those fees listed above that the VA Buyer absolutely cannot pay. As we have discussed above, this is an inaccurate assumption and, if not processed correctly during the negotiation stage of the transaction could cost the VA Buyer the home, thus loosing out to a competing Buyer.

Ok... now for the next part of the lender's comments. The lender writes,
"...if not I would suggest you use a very good agent who can make this happen for you..."

The lender has all the good will wishes for his prospective client, however... it is not as easy as it seems. Depending on the "Market Conditions" a Seller could be encouraged to support the VA Buyer's costs in their entirety or some portion of them or the Seller could opt to support none of them. And too... the Seller could refuse to pay those fees that the VA Buyer cannot pay by mandate of the VA Lending Rules.

So, what's a VA Buyer to do? First... the lender is absolutely correct... The VA Buyer should engage the services of a Realtor who understands the VA Loan Arena. Realtors who specialize in this area of our industry constantly update themselves with the latest information about the VA Lending Platforms,
maximum VA loan amounts for the particular part of the country they sell homes in and in general keep their finger on the pulse of the market as the market might be responding to VA Buyer's offers.

In our market and in your price range, it is often difficult to encourage the Seller to support all or even a portion of the VA Buyer's closing costs AND... include a discount of their property from the list price. Example of Buyer Costs: (for a home in the $160,000 price range, Buyer's Closing Costs could run between $2,500 to $4,000 depending on the loan product the Buyer selected and the points, if any, associated with the loan).

It is more practical that a Seller would agree to assist the VA Buyer with the VA Buyer's closing costs, including those fees the VA Buyer cannot pay, if the Seller was offered close to or exactly the list price of the property, assuming the property is valued within the "Market's Value Response Zone", I.E., the home will appraise for the agreed upon sales price.

Now that you have had a very cursory over view of the VA Lending arena, here is a nugget that you can take to the bank!

Over the past 6 or 7 months, most of the VETs we have represented in their real estate purchases, here in the Valley, have opted to not use the VA Lending Platform. That is because money is currently so inexpensive, that if the VET has the capitol resources to fund as little as 5% down on their purchase, the loan platforms available to today's Buyer's can save the VET Buyer up to and in some cases more than $100.00 per month in a house payment. There are loan programs that can even provide an escape from the dreaded MIP (Mortgage Insurance Premium) associated with conventional loans with less than 20% of the purchase price tendered for down payment.

Check out options such as 5/1 and/or 7/1 ARMs. Check out too, the LIBOR (London Interbank Offered Rate) loan One of our most recent VET Buyer Clients is closing next month and has selected this type of loan. He purchased a $176,000 home here in Avondale. Be sure to have
all of the nunaces of the LIBOR explained by the lender you select; for if you don't fully understand
why it is so attractive to the VA Buyer who is not going to be in their home more than 3 to 5 years, you could get the "Be-Gee-Bers" scared out of you. Also ask about "Piggy-Back" loans. These are conventional loans that help eliminate the mandate for MIP. You will see that any one of these loan platforms can be demonstratively more advantageous than a plane old 'Vanilla' VA Loan.

Since USAA is not going to be able to support your mortgage needs at this time and while you are
checking out your loan options, check with two of our preferred lending sources. Pacific Funding, Mark Schmidt at 800-245-6722 ext. 102 or you can reach Mr. Schmidt via e-mail at
mschmidt@pacificfundinggroup.net or... Coldwell Banker Mortgage, Rosemarie Cox at 602-565-6948 or you can reach Rosemarie via e-mail at Rosemarie.Cox@mortgagefamily.com.

In today's Hi-Tech Internet world, another extremely important part of a lenders abilities is to be able to harness all of the Internet technology available today. At this time, USAA will not be able to close you on time, that is if you are looking to close in a normal 30 day contract window. USAA also does not offer a 100% On-Line application process. Coldwell Banker Mortgage and Pacific Funding Group are our most trusted Mortgage Affiliates. Both lenders offer On-Line loan processing, offer competitive loan pricing (i.e. rate and points packages) and can in fact close your loan in a timely manner. Both lenders are featured on our web site. Pacific Funding can be reached at Pre-Approve
Me for A Home Loan with Pacific Funding Group and Coldwell Banker Mortgage can be reached at Pre-Approve Me for A Home Loan with Coldwell Banker Mortgage. Both lenders also offer a Rate Watch link too. We would suggest that you point your web browser to each of the links above and make your on line application. Also, send us a phone number that you can be contacted at, include the country code, and then let us know when you have completed the on-line process with each lender. We will then have representatives from each lender call you so you can discuss your particular needs with each of them, in a personal one-on-one phone conversation with a real live person.

Both of these lending sources offer products that are, in our opinion, extremely competitive to their market and, even more important to us and our clients is their superior integrity and attention to our clients. If the inevitable human attribute, "Fallibility" should show it's face during a transaction in that the "Fallibility" was present at the lender level, both of these lenders have stepped up in the past to cover our clients inconvenience even if it meant a monetary outlay of the lenders dollars. That kind of integrity is extremely difficult to find in the Mortgage Market today. Heck... it's a shark fest out there and you, the consumer, are the 'chum'.

"...This is the first I heard of this - not even the on base home buying seminar
mentioned this. What is your perspective?"

It is not unusual that you did not hear about this at a home buying seminar. You have only been at this loan/home buying stuff for several months, perhaps only several weeks. We do this all day long, 365 days 24 X 7. In our 15 years in the real estate business, we have helped over 1,100 families buy and/or sell real estate.

There are over 1,000,000 Realtors in the National Association of Realtors. There are between 70,000 and 75,000 Realtors here in Ariozna, many of them in Maricopa County and several thousand
in the Phoenix Association of Realtors. In all of those numbers, there are but a handful of Realtors who truly understand the VA Loan Platform or the VET Buyer's needs.

Lori and I do understand. That is so for several reasons. First, over 17 years ago, we were mentored by one of the best Realtors in the State of Florida. Next, I am Retired USAF. I made it a point to learn how to take care of our own many years ago and I do that on a daily basis. And last, but not least, Lori & I stay current with as much financing data as we can find. Every day we scower the Internet looking for new and/or updated information on different loan options for our prospective and current clients. And... we check in with our preferred lender pool to get a feel for the Bond Market, one of the economic indicators that has a huge impact on interest rates.

While many seminars are just chock full of great and useful information, you would have to make
a career of attending every Buyer Seminar you could locate to be fully aware of all that is available to the consumer... or... you could be come a Realtor .

You ask great questions... Your questions prove that Internet Buyers are more savvy than the average Buyer. Today's Internet Savvy Buyer has a wealth of resources to pull data from. Only thing missing is the element to convert the DATA to Information. That is where your Realtor comes in...

Well... now... you may have some answeres to questions that you hadn't even thought to ask... ;o) Hope we have helped just a bit...
Lori & "G-II"

Let us know what kind of a home you are looking for

Sat, 25 Feb 2006 08:21:00 -0700

Lori & "G-II"