Short Sale My Queen Creek Home: September 2008

I'm in the process of negotiating a short sale with CitiMortgage.  The property is my client's only rental property.  The tenants just had an independent appraisal completed that came out to $184k (they had an offer in but bailed after the appraisal came back).  My highest and best offer is for $210k with no seller concessions!! Citi came back to us with an "acceptance" but one with strings.....reduced commissions (of course) AND they are asking the sellers/owners to pay back $8400 over an 84 month period with payments at $100 per month.  My clients are unsure what to do.....$100 per month is a lot for them right now, they are in FINANCIAL HARDSHIP and are struggling to keep their payments current on their primary residence....of which Citi holds the note on.  Arizona is a non-deficiency state. Has anyone else had experience with this? Are they bluffing...or simply playing hardball and seeing just how much they can get out of my clients?? Has anyone had success negotiating their clients out of having to pay this monthly payment agreement?   

It is estimated that 1 in 10 homeowners with mortgages are upside down in their homes, as of March, 2008. There are now an estimated 9 million US homeowners in that predicament, according to Moody's Economy.com.

As alarming as that is, the projection is that as home values continue to plummet, 1 in 3 home owners will be upside down by the end of this year, 2008. "Upside Down" simply means that you owe more than your home is worth. Another term for this situation is "screwed" :-)

Now before anyone goes too far off the deep end, being upside down is less of a problem if you don't need to sell or refinance. You just keep making the payments and everything is fine. It may be possible that real estate won't eventually return to the pattern of appreciation we've come to expect these last hundred odd years, but that's not the way the smart money is betting. I think that we're going to stabilize relatively soon and may even start seeing small amounts of appreciation.  For those people who have sustainable loans, being upside-down is a non-event.

Where it becomes a serious problem is when you've got a non-sustainable loan. Whether it's negative amortization, or a 2/28 or something short term interest only, you're looking at a time when refinancing is going to be pretty much mandatory. If you could have afforded the payment it's going to adjust to, you could have had a sustainable loan. But people have a tendency to stretch too far and buy more of a property than they can really afford.

I ran across this website that advertised "short refinance" assistance (http://www.mortgagehelphotline.com/) and it got me thinking.....are lenders "doing it"? This is unchartered territory for me, so I would love to learn more about it. Is a short refinance a viable alternative to foreclosure, in line with a loan modificiation or short sale?

What is your experience with short re-fi's? Thoughts?

You Should Hire A Homebuyer's Agent Even When Buying A New Home.

Surprisingly, homebuyers will hire a buyer's agent when purchasing a resale home; yet rarely consider that "no-cost" advantage when looking at new homes. There are many reputable home builders in the Greater Phoenix area that build a quality product, but new homebuyers need and deserve the benefits of exclusive representation to protect their rights. Buying a new home without representation is like GOING TO COURT WITHOUT AN ATTORNEY! Following are several factors to consider.

1. Generally, Representation is Cost-Free
The seller generally pays a sales commission to the buyer's agent. They see it as a gratuity or incentive for an agent to bring them business.  Most home developers extend a "courtesy to independent buyer agents" meaning they build sales commission into the selling price and have a commission-sharing program between the designated broker and the buyer's agent. The reality is, every buyer has the right to their own representation and the builder automatically allocates for paying an agent in the home price.  When you don't use an agent, the builder just gets to put that money back in their pocket.  It is absolutely illegal for the seller to offer you a "better deal" specifically because you came in without representation. That doesn't mean it never happens, but it is pretty rare that they will put that savings back it into your pocket, as the assumption is that they simply don't have to. The money allocated for real estate commissions comes from a different account and is taxed differently. Besides, the next buyer who comes along may not have one anyway!

2. There Could Be a Negotiation Advantage
Rarely will a homebuilder discount the selling price, earnest deposit, etc. to a unique buyer. However, if that advantage is a possibility an experienced homebuyer agent will have a better opportunity of negotiating a discount than the homebuyer.

3. Re-Negotiation may be necessary.  In this turbulent market, price adjustments are not uncommon. As your buyer's agent, I will stay on top of the current market pricing and interest rates to be certain you are getting the best deal possible from contract to close.  The builder's agent can't and won't, as it is in the builder's best interest to keep you contracted at as high of a price as possible.

4. A Buyer's Agent Exclusively Represents Your Interest
The builder's broker represents the builder (seller) and not you as the buyer. Their allegiance is to the builder's interest. Period. Particularly when it's cost-free, a new homebuyer deserves equal representation. A skilled, experienced buyer's agent knows your rights and will carefully review every aspect including the "fine print" to protect your interests. They know the right questions to ask and are obligated to give you their best advice.

5. Builder's Financing. Most clients who purchase a home from a builder also finance with the builder's preferred lender.  Some builder's lenders are better than others.  My knowledge of finance and mortgages can come in very handy when negotiating a loan with a builder's lender.

6. Always Have a New Home Professionally Inspected
Even new homes can have hidden defects and less than standard quality workmanship. A buyer's agent can help you arrange for an expert licensed inspector and even assist by attending on your behalf if you are out of state or accompanying you on the "final walk through inspection". 

7. We Can be Your Eyes and Ears if You are Not Local.  A buyer's agent can be present when you cannot.  We can also take pictures throughout the construction process to keep you in the loop on your new home's construction process.  We can refer to you and meet with contractor's, landscaper's, pool builders, and anyone else on your behalf. 

8. Your Agent Will Have No Emotional Attachment to the Home.  Remember that emotions can run high in real estate transactions; agents can act as a buffer to help things run more smoothly and take some of the stress load off of your shoulders.

9. Many Builders are Going Out of Business.  Do you know what you would do if the builder closed their doors before your home was complete?

10. Take Your Buyer's Agent On Your First Visit
Most builders will only consider commisioning a buyer's agent if he or she accompanies you on the very first "sign-in visit". Therefore, it typically doesn't matter to the builder if the agent is present on return visits.

Here is an emal alert that I received from the ADRE. Anyone contemplating buying a new home may want to review the information on the AZRE.gov site.


Consumer Alert
August 18, 2008

Most Arizona homebuilders continue to meet their obligations to customers however; there are some who are currently facing challenges in meeting their commitments to consumers.

"Homebuyers and their real estate agents have the right to know if a builder is in financial trouble and what the status of their earnest money or home completion is. The Department of Real Estate can help provide this information and give assistance to consumers in need," stated Sam Wercinski, Arizona's Real Estate Commissioner.

The Department is now posting information on builderswho are in bankruptcy or are having financial difficulties so consumers can make informed decisions and take steps to protect themselves. A list of known builders is available on the Department's website: www.azre.govConsumers should also reference the Commissioner's Advisory No. 2on the website's home page which provides guidance for homebuyers, real estate agents and others impacted by a builder ceasing operations.

Sam Wercinski
Arizona's Real Estate Commissioner

List of Phoenix Area Home Builders who are in the list: 

< Click here to see the full list of Arizona Builders in financial trouble >

ADRE advisory provides guidance to Arizona homebuyers who have questions if a homebuilder fails to meet commitments. Much of this information is applicable for homebuyers in the resale market also.

Liens that appear after closing:
1. Contact your homebuilder. A lien could have been filed erroneously or the builder may have withheld payment to a subcontractor for incomplete or substandard work in the subdivision.
2. If you purchased a resale home or the homebuilder is not helpful, continue below with other options.
3. Review your title insurance policy for protection against liens. Contact your title insurer for assistance.
4. Contact the Registrar of Contractors at www.AZROC.gov or 1-877-692-0762 (1-877-myazroc). They regulate licensed contractors and may be able to help.
5. Contact your lender. If a mortgage was used to purchase the property, an ALTA Lender's Title Insurance Policy was likely issued which may offer protection against these liens.

Home defects and warranties:
1. You may file a complaint with the Registrar of Contractors within two years of work being completed in a dwelling. Visit www.AZROC.gov for more information or call 1-877-692-0762 (1-877-myazroc).
2. The homebuilder may have provided a construction warranty through a separate company. Check your closing documents for warranty information, coverage and who to contact.
3. Check your documents for subcontractor information and contact them for available warranty coverage.
4. If a defect is infrastructure related such as roads, sidewalks or drainage, contact your local jurisdiction's public works or development services department.
5. If vacant homes or lots are causing blight in your neighborhood, contact your HOA or local jurisdiction's code enforcement department. The current owner may be responsible to maintain the properties to community standards.

Earnest Money and Deposits:
1. Refer to your purchase contract regarding protection of prepaid money. The purchase contract will tell you if your money is protected in a neutral escrow account or if it was placed in the builder's general account where the builder can use it.
2. The purchase contract should describe if and when earnest money or prepayments are refundable.
3. Visit the Registrar of Contractors at www.AZROC.gov or call 1-877-692-0762 (1-877-myazroc). You may be able to access their Recovery Fund if a project is abandoned.

Homes under construction or waiting to close escrow:
1. Read your purchase contract to determine available remedies.
2. Contact the Department of Real Estate at 602-771-7730 or CAT@azre.gov. We may be able to assist you in working with the bank or new investors to complete your home and close on it.

Requesting an Investigation / Filing a Complaint:
1. Department of Real Estate. Individuals may request an investigation by the Department if homebuilders or real estate licensees are believed to have violated real estate statutes or commissioner's rules. Please visit www.AZRE.gov for instructions on filing a complaint or contact us at 602-771-7730 or CAT@AZRE.gov.
2. Registrar of Contractors. A buyer of a dwelling has the right to file a written complaint against a licensed contractor with the Arizona Registrar of Contractors within two years of occupancy or close of escrow. Visit www.AZROC.gov for instructions on filing a complaint or contact them at 1-877-692-0762 (1-877-myazroc).

Financial Restitution:
Real Estate Recovery Fund
1. This fund was established in 1963 for the benefit of consumers who suffer an actual and direct out-of-pocket loss due to a licensed real estate agent or broker violating real estate laws or commissioner's rules in a real estate transaction.
2. If an Arizona real estate agent or broker was involved in your purchase of Arizona real estate, you may be eligible for financial restitution.
3. A court judgment indicating the financial loss must accompany the application along with other items.
4. Please visit www.AZRE.gov for additional information and application procedures or contact the Recovery Fund Administrator at 602-771-7760 or recovery_fund@AZRE.gov

Condominium Recovery Fund:
1. This fund was established in 2007 for the benefit of real estate consumers who purchased a condominium that was not completed by the developer.
2. A court judgment indicating the financial loss must accompany the application along with other requirements.
3. Please visit www.AZRE.gov for additional information and application procedures or contact the Recovery Fund Administrator at 602-771-7760 or recovery_fund@AZRE.gov

Registrar of Contractors Recovery Fund:
1. This fund was established for a "person injured" due to poor workmanship or non-performance by a licensed residential contractor.
2. A request to this Recovery Fund must be commenced within two years from the commission of the act of the contractor, the cause of the injury, or from the date of occupancy.
3. The homeowner can pursue the fund by way of the administrative procedure or the civil procedure.
4. Visit www.AZROC.gov for instructions on filing an application or contact the Registrar of Contractors at 1-877-692-0762 (1-877-myazroc).

Seek Legal Counsel:
The Arizona Bar Association has a list of Real Estate Certified specialists. Contact them at: State Bar of Arizona, 4201 N. 24th Street, Phoenix, AZ 85016-6288 Phone: 602- 252-4804 / 1-866-482-9227 (toll free outside of Maricopa County) www.AZBAR.org

Source: Arizona Department of Real Estate