Your earnest money check is deposited. This is usually refundable during inspection and until the loan is acquired. It may become non-refundable in case of breach of contract or if determined to be non-refundable in the contract.

You will receive a package of escrow documents from the escrow officer including:

• How you want to take title to the property (joint tenants, tenants in common, sole and separate, in a trust or in an LLC)
• Your social security number
• Where you want documents sent
• If you are paying cash or getting a loan

Fill out these papers and return to escrow as soon as possible.

You need to work with the lender if you are getting a loan and provide the documents of your finances that they ask for:

• Tax returns
• Bank statements
• Any monthly payment account statements
• The source of your down payment funds
• A copy of the property listing (will be sent by your agent)

Your agent will help schedule your inspections within the normal 10 day inspection period. You should attend the inspection if at all possible.

Your agent will prepare a Buyer’s Inspection Notice and Seller’s Response form detailing the repairs that you feel are needed on the property. The seller’s agent will fill out the Response from the seller and deliver it to you within 5 days.

You have the right to either cancel the purchase, accept it as is, or ask for repairs.

Most bank-owned foreclosures will not do any repairs. However, if the property has a septic, they must have the system certified by AZ law.

You need to prepare to have your down payment, plus any other closing costs, ready  to send in to escrow before the closing date.  Ask escrow for wiring instructions. Wiring the funds in is the safest way to get the money there.  Personal checks and credit cards are not accepted. The wire can take a day to go through so prepare and send it in advance.

You will receive a title report. That is the findings of the title examiner who searched the county records about the property. Ask questions if anything is of concern. Your agent or the escrow officer can be of help.

You will receive a Seller’s Property Disclosure Statement within 5 days of contract acceptance detailing any problems that exist or that have been repaired. Some properties require an additional Affidavit of Disclosure that is to be recorded by the escrow officer with the closing documents.

The loan process is lengthy and must be kept moving forward.  Here is the process:

• The application is taken by the loan officer who issues a Pre-Approval based on a conversation about your finances and job
• You will be asked for all the documentation about your finances and job
• Once all the documents are gathered and submitted, the file goes to the loan processor to see if it is complete
• The loan processor then gives the file to the underwriter who makes sure you fit the criteria of the loan that is being requested. This step is lengthy and may take even longer if the underwriter has several files on their desk
• You will then be “Approved” or “Rejected”
• The underwriter prepares the loan documents that you will be signing for the purchase. The documents are sent to the escrow officer for you to sign
• Once the documents are signed they are returned to the underwriter who sends the file to the Funding Department. They will review the file again and may pull your credit report again just before funding.
• The funder then wires the money to the escrow officer.

Escrow process:

Escrow is the 3^rd party neutral who handles all the paperwork for the principals and lender.

• The escrow researches the property recorded documents
• They check with the seller’s lender for a payoff amount to close out the loan
• They look to see if the taxes and any assessments are paid and prorate them through the closing
• They send you a preliminary title report
• They make sure all the conditions of the contact are met such as repairs and insurance
• Escrow is the clearing house for the money. They receive your money and the loan finds and disburse them accordingly
• They prepare the Deed to transfer the title into your name
• They schedule you in to sign all the documents and disburse the documents accordingly
• They send the Deed to the County Recorder

Insurance is another component. The seller will provide a CLUE report,  which discloses any claims in the last 5 years. The buyer must obtain homeowner’s insurance to escrow or the bank will not fund the loan. If either you or the property have had too many claims, there may be trouble getting insurance. Get your insurance handled early in the process.

Your agent is responsible for assisting you along the way. They have been through this process before and can be your guide. You and the agent will be doing a final walk-through within a day of closing to be sure the seller is out and the property is in the same condition as when the contract was written and all repairs are completed.

Possession of the property:

The property keys are turned over to the buyer once the agent gets a call that the deed has been recorded. You do not own the property until that time. Do not expect to get in until that time. Have a backup plan in case there is a last minute delay. Delays are not uncommon.  Final reviews or late wiring are the most common cause for delays. But a seller may not be out in time either. There are just a lot of steps and people involved and all must happen at the right time and completely.

Post-possession and pre-possession of properties

Often the buyer or seller wants to be in the property when the other party actually owns the home. This is a very dubious proposition.  Liabilities are huge in these situations.

Post-possession is when the seller needs a few extra days to move after the closing has taken place. Legally they become a tenant and you become a landlord. If there is a fire, injury, or any other insurance claim that takes place during that time your regular homeowners insurance will not cover it. You need landlord’s insurance and tenant’s insurance in place for this short period of time. Make sure your insurance agent knows about this. Not all insurers will provide these coverages for short periods. They   may only sell you coverage for a longer period such as a 6 month minimum.  This is the time when your friends are helping with the move and the potential for injury is greatest. It is a time when fires can occur. It is a time, after the final walk-through, when damage can occur moving large items out. What about the utility bills? You can now see just some of the issues that arise with pre and post possessions.

Under certain circumstances these arrangements may make sense. An Addendum to the contract can be written to deal with it. So do not just go on the handshake. The addendum will discuss timing, insurance, utilities, and what happens if there is a breach.

The safest way is just to have the seller out at the close and for the buyer to wait until close.

Utilities

Remember that you need to have the utilities in your name. The seller will most likely have the utilities ordered for turn off the day of closing. It is best to TRANSFER the utilities into your name. There are higher fees if the utility company turns off the service because they need to send someone out to turn them on. It there is a TRANSFER, they just switch the billing over to you. Do not wait. Get the transfer arranged well in advance. Do it before the seller turn them off and have the lights on the day you move in.

Your primary residence is covered under a homeowner’s policy. A second home is not occupied daily and requires a special homeowner’s policy for that use.  If you rent out the property you become a landlord. Your homeowner’s policy does not cover you for that use.

You need to purchase Landlord’s Insurance. That policy has different coverage. It is for the structure and the liability that comes with having tenants.  It does not cover the furnishings unless you have contents coverage added in case you are renting it out furnished. The tenant purchases renter’s insurance for their furnishings and liability.

Should a claim incident occur without the proper insurance in place, you may find that your claim is denied. Insurance companies employ investigators to review claims of higher amounts. If the property does not have the right coverage in the policy, they will refuse to pay. Imagine renting out your home for the summer while you vacation abroad and a fire occurs. If you did not call your agent and obtain landlord’s insurance you could be left with only the land and may be exposed to liability with your tenant.

At the time a home is sold we often are asked to write a provision for the seller to remain in the house “just for a few days”.  Or we may be asked if the buyer can store their furnishings at the property “just for a few days before it closes”. That happens a lot when the home being sold is vacant. This falls under the same category of a landlord-tenant relationship.  We do not recommend post or pre possessions because of these issues. However, with proper insurance in place it can be done. Just call your insurance agent and get the proper coverage for the situation. Some insurers may require a minimum of 6 months polity term. Others will just convert to a homeowner’s policy once the new owner is the occupant.

Be aware that if you move before your home is sold you need to also notify the insurance company. Vacant houses require different coverage than occupied homes. There is more risk for the insurance company when a home is vacant. There is no one there to notice when a pipe bursts or to ward off a break-in.  We see sellers getting notices from their insurance company when a home is vacated. The call is triggered when they apply for coverage on their next home.   Many policies have specific wording stating that the policy may become VOID after a certain number of days vacant!  Some become void in as few as 30 days!

Always let your agent know about these types of changes and follow their advice.

Jerry Germansen, Associate Broker

eXp Realty

Seller Financing terms

• The supply of existing homes on the market is at the second lowest level in 11 years.  New listings have dropped by 30,000 units from 2010
• The median price is lower than 2010.
• The number of units sold is the second highest in 11 years and second lowest in price.  Supply and demand are becoming more in balance.
• The average days on the market for homes dropped 13% in 2011.
• Foreclosures have slowed dramatically because the lenders are looking at short sales to resolve underwater properties.
• The most underwater owners have largely been through sale or foreclosure already.

All this, coupled with higher numbers of jobs creation, is signaling the bottom may have been reached. Arizona was 3^rd nationally in jobs creation for 2011. Many were hi-tech jobs.

Homes have become more affordable and the cost of homeownership is lower for every household after the market adjustment of the past 5 years. Costs have come more in line with income.

The Phoenix MLS reflects mainly Maricopa County. However, as Maricopa County goes, so goes the State of Arizona. Sales in the Valley will allow those sellers to relocate to the secondary markets in the state. Jobs will follow in those areas.

Another factor that is beginning to take effect is that homeowners who had to short sell, goes through foreclosure, or file bankruptcy during the Great Recession are beginning to have their credit healed by the passage of time. They will become a wave of buyers.

As we see a turn strengthen it is likely that interest rates will start to climb. Those who have been on the sidelines may decide to buy now rather than risk the market and interest rates rising out of their reach.  Now is the time to buy and lock in a low rate of interest.

A Short Sale occurs when the seller owes more to the bank than they will receive from the sale of the property. The Seller will not receive any funds from the sale. The bank that is the current mortgage holder must approve the sale and on THEIR terms. Our Short Sale Purchase Contract will be discarded if they accept your offer. It will be replaced with their contract and addendums that only protect the bank. That banks will choose the title policy they offer and the escrow office that will handle the sale. We see sales in Arizona closing escrow in Texas. Can you imagine that?

In order for a short sale to be accepted by the bank, the Seller must have a real hardship such as a job loss, death in the family, or divorce. They must fill out financial documents more extensive then if they were buying a home and taking out a loan. They must have no assets to use to pay the bank for the shortage. They may be required to liquidate any assets of value and pay the proceeds to the bank. They may also be required to sign a promissory note to pay back some or all of the shortage. Under these conditions many Sellers find it difficult to deal with all the paperwork that is required and they either don’t send it in or are just not able to complete it. They stop caring for their home and hold off making any repairs and doing any maintenance. We have seen landscape die because of lack of watering, dishwashers inoperable at close, ruined carpeting, even missing appliances and cabinets.

If you are a Buyer you must be prepared for a long wait to even get an answer from the Sellers. And when the Seller accepts your offer it is subject to their bank’s approval of the sale at the price offered and with a substantial loss. You must be prepared for the bank to reject your offer or come back with a price even higher than the asking price. This could be 4 or more months after your offer was accepted by the Sellers. You must be prepared to have your dreams stolen from you. You must be prepared to close the sale if and when the bank says you will. The banks will not respond to our inquiries. They totally disregard your wishes, and in many cases they disregard the law and common decency. Often the person we were dealing with is no longer at the bank or transferred to a different department during all this negotiation.

As soon as ALL of the paperwork required from the Seller is gathered it will be submitted to lender immediately — they will typically acknowledge receipt in 4-6 weeks. If the paperwork is incomplete or they forgot to send you a form, it starts all over again. In another 4-6 weeks after that they’ll order an appraisal — they will typically acknowledge receipt of the appraisal in another 4-6 weeks after that. The appraisal may be totally off from the amount they priced the home at. The initial price is set by the bank paying a minuscule amount to a real estate agent to give them their opinion of value. That agent could be from over 100 miles away and not familiar with the local market. Within 4-6 weeks of acknowledging the appraisal they will begin negotiating — they will typically come to the table with their final offer in 4-6 weeks after that. Once we have the final offer, the closing will take place in 4-6 weeks:

        4-6

        4-6

        4-6

        4-6

        4-6

    +  4-6

    = 24-36 weeks (6-9 months) at best

There is a possibility that even with an approval in 6-9 months they will reject the sale at the last minute. They often LOSE the paperwork repeatedly. This often occurs because of the high percentage of turnarounds of employees at the lender’s short sale department.

If the bank asks for additional documentation from you/your wife, or the Sellers, you will need to respond and provide the documentation– the quicker you can get it to them the better.

Typically the collections department has no clue that the negotiations are in process with the short sale department and they may continue to call the seller weekly. When the Sellers tell them that a short sale is being negotiated they will say that they have no record of a short sale negotiation and the Seller should send them the paperwork. They will be telling you the truth — the collections department will have no clue that a short sale negotiation is in process and no matter how many times you tell them they will not put it into their system and they will continue to act as if nothing is in process — the bank departments rarely talk to each other. This is typical. The departments are likely in different states. They do not have a clue what another department is doing.

Do not expect to hear anything for 2-3 months at a time because there will be absolutely nothing to report for 2-3 months at a time — the banks are that slow.

Basically, sit back, and in 6-9 months from now or more we’ll know if the bank is willing to do the short sale. Sickening, maddening, and crazy I know, but that’s the way these banks operate. I’m prepared to close on these deals in 2-weeks, but the banks keep the process to a crawl. For your own sanity, just put it out of your mind and rest assured we’re working on it. If anything important happens we’ll let you know. Nothing important will happen for months.

Most of all your need to be prepared for your offer to fail. Even if the bank accepts your offer, there is a high probability that the Seller will have stopped making payments and the bank will foreclose before the short sale is completed. The process then starts all over with a new price, a new listing when the bank decides to release the property for sale, a property that has been neglected or purposely damaged by the Seller, and a new asset manager for the property.

One of the main reasons that the banks will reject your offer is that in a Short Sale the bank VOLUNTARILY accepts the loss. If they wait and foreclose their loss is INVOLUNTARY. In an involuntary loss they then can go to the government and receive the loss difference because of the government loan guarantee.

Short Sales lead to heartbreak. They are not for the average buyer. You may have a difficult time obtaining your own loan. The seller’s bank will not accept a sale contingent upon you selling your home. So, sell before you buy. You will need a plan “B” in case the close is delayed by the Seller’s lender reviewing the file one last time.

Unless you are willing to go through all this and still have your home purchase fall apart at the last minute, you should be looking at homes that are traditional sales or have already been foreclosed. They are the best homes with the sellers motivated and in control of the sale.

Jerry.Germansen@SearchonPrescott.com

Fasten your seat belt.  Your life has changed.  Those customers that were tripping over the threshold to get to you are no longer looking for an agent’s office. They are looking for property online.  Get real folks.  Where do you go to book a flight or hotel room?  Where do you go to get info on the value of your used car or find a new one?  Where would you go to find your next house?  Your customers are going there too.

Is your brokerage working in the new environment? If not your market share is certainly dropping. What you may think is an extremely weak market may be a weak marketing plan. Old stoggy brokerages with fancy offices and big overhead are dead. There is no need for offices with today’s clients.

I gave up a traditional brokerage model over a year ago once I found eXpRealty and the future. I could not keep throwing BIG money at an old model.   It was not in my best interest to keep feeding a hungry office overhead when I could do the business more efficiently without the gorilla looking to get fed every month. I knew the future was here and we were not going back to the old ways.

eXp Realty was founded by a person with the vision of the future. Glenn Sanford comes from an internet marketing background and not from a real estate background.  Glenn used the internet once he got into the real estate business to close 75 sales his first year. That is the kind of company visionary I want to follow.  He saw what I saw happening in the industry. He knew that a downturn in the market had to be met head on with a downturn in overhead for the broker/owners as well as the agents. Brick and mortar offices had to go and the time was now because technology and the need to reduce overhead were merging.  The public was even leading the way with their tech savvy lifestyles and desire for privacy when making decisions so impacting for their families. A tough economy meant tough decisions. Those decisions were to be private and calculated.

Glenn’s started eXp just 2 years ago. We have grown into 14 states in that time.  He assembled the apps to make it happen. The industry press is on to us.

The office space GONE. The huge office machines GONE.  The filing cabinets and their space GONE. The agent’s desk fees GONE. The technologicly dead-ended learning curve GONE. The coffee machine and water cooler GONE taking the water cooler and coffee clotch mentality with it.  In came the paperless office in the agent’s home without the travel expenses or distractions. In came a virtual office building with meeting rooms and classrooms. In came online files in the cloud accessible from anywhere. In came easy access to the broker and admin people right from home.  In came training like never before. In came recorded training session available when I am available. In came our hired-gun tech gurus to lead the way and develop the future platform of real estate.  In came blogging and WordPress to allow the public to find us in virtual space. In came a commission structure based on all the overhead savings passed to the agents. In came a company growth plan rewarding every agent who helps grow the company into the future. In came a way to retire from the industry and be rewarded for helping redevelop it. In came the agents with the right talent leaving those not savvy or willing to become so in the dust.

I can get up, make my coffee, and talk to someone like minded and working from any location in the country who is also in our virtual office. I don’t need to drive there. I don’t need to find childcare for that meeting. I can take the training I really wanted yesterday or last month but I was too busy working or playing to take.  Our training and office space never closes. All business days have live training with agent participation. Our meetings are short and informative in our virtual space with video and live chat.

I have a direct line to the thinkers and movers in eXp Realty. We are a collaborative brokerage that is always changing with the market and technology to simplify our business machine and work smarter.  What we glean together gets implemented system wide quickly. We do not see each other as competitors. We are collective collaborators with a common focus.

I can contact our tech gurus any time and get answers or help and a a solution. These guys are specialists in real estate technology. They know the business model and have built out the online technologies we use. They know how to get the information across and implemented.  They will work with me on my website, Facebook, SEO, presentations, databases, or my smart phone.  We can brainstorm.  We get to know each other at the same time.

eXp Realty is the best place for the new generation of real estate professionals who want the freedom to work in their own environment.  We have the tools. Just bring your talent.

Are you with me yet? If you see that same future NOW, you need to be part of it. Contact me for a guest tour of our office space from your own home. See if you agree that the future is here and you should not be left behind. You are invited to the eXp cloud.

Jerry Germansen, Associate Broker, Prescott Arizona Market of eXp Realty

928-632-3906 jerry.germansen@searchonprescott.com

Building our team through real estate technology.

www.AllofPrecott.com

While sitting at my desk overlooking the Prescott Country Club 12th tee I heard a loud bang against my glass door.  I looked out and found this eagle perched on the chair back about 4 feet from the door.  The bird had crashed into the door while on a training flight.  Just then 2 adult eagles flew over and checked on her.  They were looking around to protect her.  Both stayed around for about 10 minutes then flew a large area checking for trouble.  They stayed within view from a tall tree about 1000 feet behind the house and took recon flights over the house periodically.

The young bird had a drooped left shoulder.  I was very concerned as time ticked by.  An hour later she had not moved and looked dazed.  I called animal control for help.  I was told that a bird like this was probably suffering a big headache after having her bell rung.  But the disheveled feathers and drooped wind did not look good.  Animal control said that a brid will often take hours to recover and eventually fly off.  Just then she took off.

This was quite an experience.  The size of the adults and their talons kept me inside not wanting to test their fervor.

I  love this place!

This week the Arizona Corporation Commission voted in a 4-1 decision to reinstate free power-line extension to new customers within 500 feet of Tucson’s Electric Power Companies distribution system. This decision comes after much uproar from Arizona residents after the long standing “line extension” policy was eliminated for Tucson Electric Power (TEP) and UniSource Electric (UNS Electric) in 2008. To note, in 2007 the Arizona Corporation Commission eliminated a policy of more than 50 years that required Arizona Public Source (APS) to extend power lines at no cost to any development within 1,000 feet and up to $25,000. The reversal of all three of these policies left many landowners with unforeseen costs that reduced the value of their properties.  The Arizona Association of REALTORS® witnessed firsthand the negative impact the reversal of these policies had on our members and homeowners throughout the state. As a result, AAR has worked diligently with members of the public, stakeholders and Commissioners to revert to the pre-2007 line extension policies, for TEP, UNS Electric and APS. As many will recall, we were successful in our endeavors this past January when the Corporation Commission voted 3-2 to reinstate the line extension policy for UniSource Electric, which serves customers in Western Arizona. In regards to APS, we continue to inch closer to a resolution as it pertains to reinstating a line extension policy under a rate case filed last month.  The reversal of Tucson’s Electric Power Co. 500 feet free line extension policy should take full effect in 30 days and will allow those with uncompleted contracts to come back in and benefit from the new rules.  Look for additional Capitol Insider articles as progress is made on the Arizona Power Source line extension rate case.

At the same time sellers are having a tough time selling their homes because of tight lending.  They need buyers and the banks to get their house sold and be able to move on. Life goes on.  Seller financing is a good tool for them too.

Who are these buyers?

• Anyone who is sellf employed.
• Anyone trying to buy a second home.
• Anyone with another property to sell.
• Investors who own other rental properties.
• Someone who has a new job.
• Someone who has had a bankrupcy.
• Someone who was way upside down and left their prior home to get out from under it.
• Someone who has had credit issues because of medical problem.
• And, of course, anyone who can’t ontain financing because of poor credit and the mishandling of their lifestyle and finances in the past.

All but the last group may have good income, a solid job, financial resources, and a change in their health for the better that allows them to be the same solid citizens they were before getting ill.  They are capable of making their payments on time and for the length of their mortgage. These people are the buyers that are a fit for buying a home with seller financing. If you are one of these people we can definately help you buy a home.

Around half the bankrupcies in America are related to medical problems. It is not the fault of the injured or sick person. It is a fault of our broken health care system to a great extent. Not everyone is covered. Not everyone can get coverage. Pre-existing conditions may not have been covered under your policy. In the current economy a job loss may lead to an extended period of time without coverage. Isn’t that the time things always happen?

What is seller financing? It is the seller of a property acting as the bank at the time they sell their home.  That seller will earn little interest on the cash they get out of the sale just putting it in savings.  They may even want the monthly income and the deferred income for tax purposes.

How does it work?  The seller reviews the credit report of the buer to see why they need this type of loan. They have the right to refuse the loan just like a bank would. But they do not have the tight guidelines to follow and may elect to grant the loan to the buyer. If the buyer and seller agree on the loan, the escrow company acts as the account servicing agent for both parties and handles the payments. There is a small fee that the buyer pays. The buyer is assured that their payments are credited toward the purchase. The escrow company also can collect the taxes and insurance monthly just like a regular bank mortgage payment does. The down payment requirement is based on the credit and reason for the seller financing but will be at least 10% to 20%.

The buyer may just need tome to be able to fit in the box of a regular bank loan. Maybe they need more time in their job or need to get a bankrupcy further behind them.  Their money may be tied up in a certificate of deposit. They may be expecting a large inheritance or payoff in the future. They may need to sell their existing home. Seller financing can bridge that time frame. The payments may be make as though the loan was for 30 years but the balance may need to be paid off with a balloon payment in 3 or 5 or 7 years. At that time you, the buyer, should be in better position to get regular bank financing. You may be paying a higher interest rate. But anyone who is at all outside the box with a bank also pays more for their loan. But there are savings too; no big fees up front or rolled into the loan total and no required appraisal or related fee. Any you can buy a property that may not be able to fit a typical bank profile too such a land or a manufacture home.

See http://allofprescott.com/seller-financing-for-buyers-and-sellers/ for a blog post about seller financing from a seller prospective too.

So there is a solution for all those who are outside the box for obtaining a mortgage. Seller financing is the key. We are experienced at structuring these arrangements in Prescott Arizona. We have the team of agents, inspectors, escrow officers, and accountservicing departments to put all the pieces together for you. You can own a home and not have to pay rent and a landlord’s mortgage. we can help you rebuild your life.  Just give us a call.

Jerry Germansen and C’Ann Simpson,  Associate Brokers eXp Realty in Prescott Arizona

928 632 3906

Futurist Jacque Fresco presents his vision of the future. It includes not only his vision of houseing but social issues and the environment as well as energy, travel, education, and more.   http://www.youtube.com/watch?v=hc7x79kJ1S0  See the trailer.

I found his vision fascinating. This is a must see.