Your Val Vista Lakes Home for Sale has Ghosts? Disclose that Material Fact

Kristine Ginsberg posted this great blog:

http://activerain.com/blogsview/2729869/did-you-just-say-there-s-a-ghost-living-in-your-house-

which prompted many comments, and unfortunately many of the comments were giving wrong advice. Many of the commenters made statements saying that ghosts were not required to be disclosed in their state, and one of those states was Arizona where I am licensed.

Kristine’s blog discusses a Seller informing her Realtor that she had a “friendly” ghost. The Seller said: “He’s harmless. He only moves things around, shuts off lights and turns the pictures off center, but he’s never done anything bad. He just lets me know he’s here.”

The Realtor didn’t want to hear this so she told the seller: “keep that to yourself if you want to sell your house and trust me, plenty of people don’t want to live in a home where someone took their own life and is now “rumored” to be a ghost!”

The Realtor was giving wrong advice. Her statement admits that the presence of a “ghost” is a "material fact" which will affect a Buyers decision. She also made the probable mistaken assumption that a person took their own life in that home. She has no way of knowing where the ghost died, nor how it died.

Let’s fast forward, and assume the Seller heeded the Realtor’s advice and did not disclose that there was a ghost in the house.

Mr. and Mrs. Buyer loved the home and bought it for full listed price. After moving into the home, the Buyers were told about the “ghost” by the neighbors. The Buyers were frantic; they did not want to live in a house with a ghost. So what is their natural course of action? File a law suit against the Seller, the Realtor, and the Realtors Brokerage firm for failure to disclose a “material fact” that would have affected their decision to buy or not buy that house." The result would most likely be that the Buyers would win the case.

Why was that Realtor, and the Realtors responding to Kristine’s blog making the error of not disclosing?

Some say there is no requirement to disclose a ghost. Well, as hard as I search, I cannot find anything in the Arizona disclosure law, nor the Sellers Property Disclosure Statement, that states that “ghosts” are not required to be disclosed. So, what leads people to the assumption that a ghost need not be disclosed?

In Arizona, it does state that a death on the property does not have to be disclosed. Therefore, I believe what is happening is, the Realtors are assuming that the ghost died in the home, and since a death is not required to be disclosed, they deduce that a ghost need not be disclosed.

The problem with that deduction is twofold:

• The alleged “ghost” may not have died on that property. Perhaps there was never a death in that home. Therefore this ghost cannot be attached to the “no requirement to disclose a death in the home”. This is an alleged ghost who has apparently risen from the grave and is currently active in that home. It's a completely different issue from a death in the home.
  

• The ghost is “active” in the home. Whether or not we believe in ghosts, it is apparent from the Seller's statement that this ghost is reaching out from the grave and calling attention to itself for some reason. In Kristine’s blog, the ghost is very active. It moves things around, shuts off lights, and puts pictures off center, in order to let the Seller know it is there.
  

Now let’s examine a portion of the Arizona Sellers Property Disclosure Statement form, instructions on the first page:

Item (6) Other Conditions and Factors: “These blank lines provide space for you to disclose any other important information concerning the property that might affect the buyer’s decision-making process, the value of the property, or its use, and to make any other necessary explanations.”

This is an all encompassing statement. It very clearly states “any other important information concerning the property that might affect the buyer’s decision-making process”. Wouldn't it be logical to assume that an active ghost in the home would be an important piece of information concerning the property that a Buyer would want to know before making a buying decision?

Remember this ghost may not have died anywhere near this property. And at least in the mind of the Seller the ghost is very real.

• We know that many buyers will be freaked out in a house with alleged or real ghosts.
• Others may seek out a home with ghosts.
  
• In either case, the presence of an alleged ghost is “important information concerning the property that might affect the buyer’s decision-making process.”

Are you still one of the believers that a “ghost” does not have to be disclosed? Well keep reading…..

There is a famous case in New York (Stambovsky v. Ackley, 169 A.D.2d 254 (NY App. Div. 1991)) This case is discussed with attorneys in law school, and any time a case of non-disclosure of ghosts comes up, the attorneys will look to this citation.

In this famous case, the Seller had reported the house being haunted in national publications, and in local news; and the home was featured on a local ghost tour.

The Seller did not disclose this to the Buyer.

In 1990, she sold the home for $650,000 to a buyer from New York City who had not heard about the house being haunted. When he learned it was haunted he canceled the sale and sued to get his $32,000 down payment back.

The Court found that whether or not the house was haunted was not the issue, since even the reputation that a house was haunted may affect its value. The Court found that the law at the time did not require the seller to disclose the haunting on the theory of “buyer beware,” which places the burden on the buyer to inspect the property to ascertain the condition of the property they are purchasing. However, the court found that a normal inspection would not uncover the ghosts that allegedly haunted the home. Consequently, the buyer won the case.

The Holding and Rule of the case was: If a seller knows of a condition that is unlikely to be discovered by a careful and prudent buyer, and impairs the value of the contract, nondisclosure of this condition represents a basis for recission under equity.

• Remember, this is not about a death on the property.
  
• This is about the existence on the property of a poltergeist.

It was my opinion in the beginning that a “ghost” could not be tied to the non-requirement to disclose a death on the property. That’s because the ghost may not have died on the property, and at this time the ghost is allegedly being active in the home and making its presence known by its actions. However, to be certain, I felt it best to consult with a real estate attorney on the matter.

The attorney I consulted with on this question provided the case citation, and said that an alleged ghost must be disclosed. He further said that, no matter how bizarre this may sound, if the seller has experienced aliens from other planets attempting to kidnap him/her from the home, but not at any other place, then that is a material fact which must also be disclosed.

If the above information is not sufficient to convince those who think ghosts (or aliens) should not be disclosed, then I would advise them to consult with an attorney

If you are a home seller in Val Vista Lakes, Gilbert, Phoenix, or any other city in Arizona, and you have a ghost in your home, then be sure to disclose that material fact.

NOTHING IS NEGOTIABLE ANYMORE

Banks have developed the policy of non-negotiable terms, such as:

• Must use the banks title company
• Must sign multiple offer form in advance even if no other offers
• Must agree for buyer to turn on utilities if not on
• Must agree to close in 21 days, or pay $100 per diem
• Must not use electronic signatures
• Must be pre-qualified with their bank before submitting offer

Now, many agents are adopting those same onerous non-negotiable requirements on their short sales, and some traditional sales.

They have the seller sign instructions for the agent to "not submit incomplete offers". Therefore, if the "agents" amendment is not signed, then the offer is "incomplete" and will not be submitted. That means the seller may not see a perfectly acceptable offer.

In my opinion this is a policy by agents to reduce their workload at the expense of the buyer and their seller. Usually there is about 15 minutes of reading through their generic documents in the mls documents section in order to digest all their information and terms.

This onerous policy is detrimental to the Seller because Qualified Buyers will bypass their home with those non-negotiable onerous requirements.

RECENT REO EXPERIENCE:

My buyer is searching for rental properties to buy.

• He was pre-qualified by a reputable lender (pre-qual #1)
  
• To make an offer on an REO he was required to pre-qualify with BofA, which he did (pre-qual #2). We lost that offer.
  
• To make an offer on another REO he was required to pre-qualify with Chase, which he did (pre-qual #3). We lost that offer.
  

NON-NEGOTIABLE SHORT SALE:

Next he chose a short sale. Below is what I found on the Document section:

• Short Sale Offer Instructions (2 pages)
• Additional Short Sale Addendum (4 pages, must be signed by buyer and buyers agent)
• Quick Close Short Sale Guidelines (2 pages)
• Short Sale Addendum (Standard Ariz Short Sale Addendum with more non-negotiable terms inserted)

Below are some of the non-negotiable "dictated" terms:

• Items left on property by seller is considered a "gift" to the buyer
• Buyer must pay "upfront" HOA disclosure/transfer fee
• Buyer responsible to turn on utilities for inspection
• Earnest money to be non-refundable for 60 days
• Buyer must pay for termite treatment if required by lender
• Buyer to pay for septic inspection, repair and transfer
• No electronic signatures
• Buyer "and buyers agent" to be responsible for per diem fee if escrow does not close in 30 days.
• Buyer "must use" sellers (agents) favorite title company
  
• Buyer "must" be pre-qualified with Academy Mortgage.
  

Below is my position on each of these items:

Buyer responsible to turn on utilities

The seller is trying to short sale the home. The listing agent should instruct the seller that in order to attract a buyer, the seller needs to incur some expenses; and having utilities on for inspections is one of them. The tougher it's made on a buyer the more buyers will bypass the listing

Items left on property by seller is considered a "gift" to the buyer

This is license for the seller to leave all his trash. It's completely unreasonable and unacceptable.

Earnest money to be non-refundable for 60 days

This is a tough one. I understand they want the buyer to have "skin in the game". However:

• Seller can back out of the sale up until the moment before the deed is recorded
• There is no guarantee that the lender will approve the sale
• No guarantee that the listing side negotiator will do a good job of negotiating the sale.

Buyer must pay "upfront" HOA disclosure/transfer fee

The standard Ariz contract makes the seller responsible for providing the HOA disclosure and paying for that fee; although it can be negotiated. In this case the agent is not allowing any negotiation.

Here's the problem: Many HOA management companies (not the HOA themselves) are lumping the "disclosure" fee and the "transfer" fee together and requiring an upfront payment before providing the required disclosure.

One buyer recently paid a $395 upfront fee, and the disclosure statement showed that the seller owed around $9,000 in an accumulation of fines, which had not been disclosed by the seller. The buyer did not know if the listing side negotiator would be able to negotiate that amount down. The seller refused to pay so the buyer canceled; but it still cost the buyer $395, with no recourse.

Buyer must pay for termite treatment if required by lender

If termites are found, the buyers lender will require a treatment as a condition of financing. The minimum treatment fee is around $800 for a $1200 sq ft house. By accepting that term above, if termites are found, the buyer has already agreed to pay the treatment fee, and cannot cancel the contract on the basis of termites being found.

Buyer to pay for septic inspection, repair and transfer

Arizona law requires a seller to have an inspection within 6 months prior to date of sale, and provide the buyer with the completed ADEQ form along with any documents relating to premits, operation and maintenance of the system. It is the sellers property; they want to get it sold, and should be responsible for their cost of any "required by seller" inspections. Therefore, it is unfair to attempt to subject the buyer to paying for this inspection.

No electronic signatures

This is somewhat understandable in that some banks will not accept electronic signatures. However, in the initial offer to the seller the electronic signature should be acceptable as a means of expediting the initial process in the event the buyers are out of state or country. A wet signature can certainly follow. However, this is not a deal killer.

Buyer "and buyers agent" to be responsible for per diem fee if escrow does not close in 30 days.

As an agent, I cannot agree for my buyer to pay per diem fees. I am not a part of the contract, and will not agree to pay any fees myself. It is unfair for the listing agent to require any buyer to agree up front to pay a banks per diem fees. That gives license to the banks to hold tough to their 30 day close because the buyer has already agreed in advance to pay a $100 per diem fee.

Buyer "must use" sellers (agents) title company

This is a RESPA violation. The banks have been getting away with it because buyers haven't been pursuing it. Many buyers agents will agree to it mostly to avoid disagreements in the beginning. The argument listing agents use is that their "favorite" title company "knows shorts sales"; are more efficient; and have already opened escrow.

• Every title company and every escrow officer understands short sales today.
  
• They do not open escrow on a property without a contract and earnest money deposit.
  
• They just provide a preliminary title search and a HUD for the listing agent to submit to the bank.
  
• The title companies understand that the buyer has the right to choose their own title company, and that they may not be paid for providing the up front prelim and HUD.

Buyer "must" be pre-qualified with Academy Mortgage company

This is getting to the point of not just being onerous, but being ridiculous. My client already had 2 pre-quals and was asked to do a third; and if that offer isn't accepted, the next one would probably want a 4th pre-qual from "their favorite" lender.

The banks are requiring it so they can give a sales pitch to the buyers to use them for the mortgage.

The premise used by listing agents is that "their favorite" lender is better qualified to pre-qualify a buyer It is essentially saying that all the other lenders will fill out and sign a false pre-qualification form. That is all BS.

AZ has a standard pre-qual form where the lender must check off what they've done, and sign the form.

The listing agents are wanting to use their favorite lenders for their own personal reason; and part of that reason is that the lender will refer buyer clients to them in exchange for requiring the buyers to pre-qualify with them.

SUMMARY

I must follow my clients instructions. So if my buyer after reading the requirements, and my explanation of each of them, wants to proceed with making an offer on that property, then we'll write an offer.

My buyer elected to pass on this property, and I suspect there will be many other buyers who will pass.

Consequently, while these onerous requirements may be saving the listing agents time, and getting return favors from their favorite lenders, it is also losing their sellers a lot of qualified buyers.

Sellers should be aware of what these terms mean, and the possible negative effect on their sale. My advice to sellers would be to have the listing agent "PRESENT ALL OFFERS", and you make the decision on what to accept. After all it is your home that you're trying to sell.

Buyers should be aware of the consequences of accepting these onerous terms, and the extra costs in terms of money and time that may be involved.

Bank Demands Buyer Non-Refundable EM Forfeited to the Bank

Et tu, Brute?

Well, the banks are now taking a lesson from all the Realtors who have been asking for non-refundable deposits from short sale buyers.

One Realtor had the language that if the buyer defaults and the earnest money is forfeited it goes to the sellers Broker to pay for work performed (not to the seller).

Today I received an email from the listing agent with a form from the bank (actually a Credit Union). The credit union demands the earnest money to be changed to non-refundable for 90 days from Feb 18. Our contract was signed on Jan 18, so that makes 124 days that my buyers money could be tied up, IF they agree.

The bank form states if that form is not executed, that they will NOT proceed with the short sale. It further states that if the buyer forfeits the earnest money, that the money goes to the Credit Union to apply toward the mortgage balance.

They also want the buyers agent to sign "agreeing" to the terms of that agreement.

What's next? Well if the buyers and agents give in to these demands then you can expect all the banks to start doing it.

But if the buyers agents have balls and say that they are not going to sign an agreement because they are not a party to the transaction, then maybe the banks will back off.

I'm not a party to the transaction so I cannot sign that I agree to the terms; and I won't.

What will you do when you get one of these?

Short Sale Seller You may be in violation of RESPA and not know it!!!

Is your short sale listing agent asking you to sign a listing agreement that has language similar to this:

"Seller instructs listing agent to not present any offer that is incomplete. The listing agent's non-negotiable addendum is a required addendum and if the buyer does not submit that addendum with the offer, the offer is considered incomplete and shall not be presented to the Seller."

While it may seem that this will ease some of the stress from negotiating an offer that is "incomplete", and keep a buyer tied to your house for x number of days, it actually may reduce your chances of selling the home prior to the foreclosure date.

Here's why:

• Knowledgeable short sale buyers agents will advise their clients to not sign a non-negotiable addendum, and most buyers will follow their agents advice.
  
  
• It prevents the seller and the buyer from being able to negotiate a mutually agreed contract
  
  
• What you as a short sale seller need most, is an offer to accept and submit to your lender
  
  
• The lender makes the final decision (must be agreeable to you) and without an offer to submit to the lender, your home will go to foreclosure
  
  
• The odds of getting an acceptable offer are greatly reduced. You can pay a small fee to someone with mls access to check the "short sales Sold to Cancelled+Expired ratio" of any listing agent.
  
  The national average ratio of listing agent short sale success is reported to be around 30%. That is low because there are many agents who work short sales without getting sufficient education on all the bank guidelines and without gaining the necessary negotiation skills to negotiate with the banks. The average ratio for listing agents who are knowledgeable, skilled, and work hard for their clients is upwards of 80%.
  
  
• Some of these addendums require the buyers agent to sign as being in agreement with the terms of the addendum. An experienced short sale buyers agent knows that s/he is not a party to the agreement and will not sign that s/he agrees to the terms. In fact, s/he has may have advised the client to not sign.
  
  However, it's the clients decision to accept or not. If the agent has advised the client to not accept the terms, then the agent cannot sign the addendum because s/he is not in agreement. Since the agent will not sign, the addendum is considered to be not complete, therefore, you, Mr and Mrs Seller, may never see that offer.
  

How is the Seller in violation of RESPA?

The Real Estate Settlement Procedures Act (RESPA) is a consumer protection law that governs disclosures required at various stages during the home buying process.

That Act gives the Buyer the right to choose their own Closing Agent.

• "Section 9 of RESPA prohibits a seller from requiring the home buyer to use a particular title insurance company, either directly or indirectly, as a condition of sale.
  

• Buyers may sue a seller who violates this provision for an amount equal to three times all charges made for the title insurance."

What does that mean to a Short Sale Seller?

It means that if the non-negotiable addendum the listing agent has drafted requires the Buyer to use the Sellers Title Company, that you, Mr and Mrs Seller, are in violation of Section 9 of RESPA, and that you can be sued by the Buyer for three times all charges made.

It also means that many buyers agents may advise their buyer to not waste their time considering a property that has a non-negotiable addendum unless the listing agents "short sale Sold to Cancelled+Expired" ratio is at least 80%.

Therefore, you may lose many potential buyers and never know it.

Sign This Short Sale Addendum or I Won't Submit Your Offer to My Seller

I'm seeing more and more of these types of short sale addendums in the Gilbert AZ area. The listing agents are writing addendums that are non-negotiable.

They add a clause in the sellers listing agreement instructing the agent to not submit incomplete offers. An offer without the addendum is incomplete.

These are the terms that are in some of the addendums I've run across:

• Must deposit $xxxx earnest money on signing of contract, non-refundable for 90 days
  
• Seller can cancel contract at any time if they elect to not do a short sale.
  
• Must use sellers title company (Note: AZ is a buyers choice state)
  
• Buyer will pay to turn on all utilities and be responsible for any damage that may occur as the result of turning them on.
  
• Any personal property left on the property is a gift to the buyer
  
• Buyer agrees that lender will not pay for termite treatment if termites are found
  
• Buyer agrees to pay banks per diem charge if they don't close by the banks selected closing date
  
• Buyer and buyers agent must sign this addendum that agrees to the terms.
  
• Offers will not be submitted to the Seller if this addendum is not included with the offer

I would like to get others opinions on these types of non-negotiable listing agent short sale addendums.

How does this addendum benefit the seller?

How does it benefit the buyer?

How would you advise your buyer?

Would you use one of these type addendums and make it non-negotiable? If yes, Why?

Would you attenpt to negotiate the addendum with the listing agent? If yes, How?

As a buyers agent, which terms, if any, could you recommend your buyer accept?

As the listing agent, which terms, if any, could you drop? Why?

Would you sign this short sale addendum? If yes, Why. If no, Why Not?