Jessica Steele

I've been out of touch for the past month, keeping up on my real estate news through friends' blogs and Facebook updates. Upon arrival in the Valley of the Sun yesterday, I was not only started by the oven-like heat that smothered me in a choking hug, but by all of the hype about a new short sale/anti-deficiency law that comes into effect on September 30. The more I read about the new law, the more puzzled and perplexed I became. To the best of my knowledge, here is a brief overview of what this new law means, and the changes it will instill.

SB 1271 involves some major changes to today's current short sale and anti-deficiency legislation. The law, sponsored by Senator Sylvia Allen, could hold homeowners liable for their debts if they had not lived in their home for six consecutive months. This is a dramatic change to the current law, Arizona Revised Statutes (A.R.S.) 33-814, which states that a lender may NOT seek a deficiency judgment against a trustor, or foreclosed homeowner, if the property is 2.5 acres or less, and is used as a single-family or single two-family dwelling. This current law has assisted an astounding number of homeowners throughout the current financial crisis, as they have dealt with job less and financial cuts, as well as losing their place of residence.

The new law will become effective on September 30, 2009, and will require that homeowners have utilized the property in question for 6 consecutive months, and a certificate of occupancy must be issued as proof. "Utilized", in other words, means "lived in", based on some interpretations of this verbiage.

Some speculators of this new law claim that it is interesting that the Senator who passed this law is not even a resident of Maricopa County, where the majority of short sales and foreclosures occur in the state of Arizona, but is, rather, accountable to her constituents in the White Mountains area of the state. The co sponsors of this bill are supposedly not from Maricopa County either, which again, raises a red flag to those of us working hard in this part of the state to ease homeowners' current financial burdens. Further, some believe that this bill will only serve to frustrate a frightened and annoyed group of homeowners already at their wits end with this debacle, and force them to seek a bankruptcy to rid themselves of their financial burdens, rather than deal with a short sale or new anti-deficiency laws. I, personally, wonder, why are we taking away struggling homeowners' options, instead of assisting them in finding solutions to this crisis?

Although the broad effects of this law have yet to be seen, and can currently only be speculated, it is an issue of major concern for those of us currently working in the industry, and news definitely worth following as the pieces unravel these next few months.

I understand that in any real estate transaction, there can be confusion. There are so many parties involved in a single transaction that it makes it difficult to keep up at times. Add the current state of the real estate market on top of things, and you get an additional organizational mess. In the current multiple offer world we now find ourselves in here in Phoenix, it's only logical that we call to get an update on a listing before previewing or showing it to our buyers. It is a waste of time to view properties that clients really want, only to find that we are sixth in line.

This is where my frustration comes in:

I call on a property currently marked as "active" because it has been my experience that often these "active" properties are often, indeed already AWC-I. The agent gets an attitude, claiming, "everything in the MLS is current." So I state, "Oh, so there are no current offers on this property?" "Well, we have about five, but none have been accepted yet."

In other words, the MLS listing information is not, as you previously stated, up-to-date.

My partner and I have adapted to this however, so when I called on a property my clients were interested in last Thursday, I was stoked to find that not only had it not even been on the market a full 24 hours, but that, indeed, there were 0 CURRENT OFFERS, according to the agent. We viewed the property within that same hour, and faxed our offer at the nearest Office Max so as not to waste a single moment snagging the deal. I confirmed receipt of our offer with the agent, and awaited the seller's response. Keep in mind that this is an REO home.

I awoke the next morning to a question from the listing agent via email asking what I meant when I asked for 3% closing costs. I had, in fact, asked for this amount, but I had also added that 3% on top of the list price. We are making an aggressive offer, as my clients had already lost out on three homes. She then responded within a few hours, "The bank has accepted another offer."

Now, forgive me, but were we not the first offer at 5:00p.m. last night, and at 5:30a.m. that morning when the agent questioned the 3% closing costs? And how in the world did she get the bank to take another offer that didn't even exist by 8:00a.m. Unless there was, indeed, already an offer on the table that she neglected to tell us about, this situation just doesn't make sense.

After talking to my distraught clients, they felt as if they had been scammed, and I did too. If she had gotten the buyers as well in this transaction, and did not submit our offer to the lender based on this information, then that is inappropriate, unprofessional, and seemingly, unethical. All I know is that I am tired of getting the run around. Update your listings. If you don't want phone calls, make sure the info in the MLS is correct. And if someone inquires about a property, be upfront with them. We should all be working cooperatively through this market together, not just looking out for number one.

Some of my most frequent questions from clients, family, and friends in today's real estate market are about the short sale and foreclosure market. The general public typically doesn't know how Arizona's non-deficiency statues apply to them, or the specifics of the Mortgage debt Forgiveness Relief Act of 2007. Test your knowledge of Arizona short sale statutes and regulations here to make sure you are well-informed of what a short sale is, and how it affects you in today's complex market.

True or False?

1. Arizona's non-deficiency statutes apply to all types of property. False. For the non-deficiency states to apply to a property, it must be a single-family or duplex residence. The residence must be located on 2.5 acres or less, and the loan must be a purchase money mortgage. This means that the mortgage must have been obtained in order to acquire title of the property. For the purpose of this statute in the state of Arizona, any refinancing of a purchase money mortgage also serves as a purchase money mortgage. In general, a HELOC that is obtained after the close of escrow would not constitute a purchase money mortgage.
2. The Morgage Debt Forgiveness Relief Act of 2007 excludes any debt forgiven through foreclosure or a short sale from being treated as 1099 income for tax purposes. False. To be forgiven under this act, the property must serve as the seller's primary residence. Further, the total debt must be less than $2 million, or $1 million if the couple is filing separately).
3. Time periods begin in a short sale when the seller accepts the offer. False. The time periods in a short sale offer begin whent the lender provides all involved parties with the notice of the short sale agreement. This process typically takes between 30 and 60 days, depending on who the lender is in the transaction, and how many lien holders must approve the short sale agreement.
4. All REO properties are sold "as-is". This, in general, is true. The bank will typically not offer any guarantees or warranties. For this reason, it is highly recommended that buyers conduct a professional home inspection to be aware of any underlying issues that may exist, especially if the home has been sitting vacant for an extended amount of time.
5. An agent is required to submit all offers to the lender in a short sale transaction. False. An agent is required to present all offers to the sellers in a timely manner, unless the seller states that he or she no longer wishes to receive offers on a property. Once an offer has been accepted by the seller, however, it must be presented to the lender. Thus, the seller may accept back-up offers on the property, but once accepted, by law, they must be submitted to the lender.

Okay, okay, I know. HUD stands for the U.S. Department of Housing and Urban Development. HUD provides us with news about the housing market, home ownership, buying and renting properties, and community information. HUD also provides us with important information with regards to new legislation being developing within the housing industry. Forgive me if I'm wrong, however, but it seems to me that right now, HUD just can't seem to make up its mind in regards to the $8,000 First Time Home Buyer Tax Credit. It is leaving me, and more than a few consumers, feeling a little less confident, and a lot more confused.

Just a few weeks back, my lender sent me information about the monetization of the $8,000 tax credit. I thought it was really exciting news for first-time buyers, as coming up with the downpayment can often be the most tricky part of the home buying process for new buyers. Just yesterday, however, I discovered that HUD actually "re-announced" that this monetization of the tax credit is NOT going to happen, and that the money may NOT be used as a downpayment. It IS, however, eligible to be used to assist with closing costs and buydowns. Is any one else a little tired of all of this indecision and wonder? I know I am.

Further, although I reported in a previous post that lenders were ALLOWED to do this monetization through bridge loans, I was informed that NO ONE is actually DOING bridge loans currently. Just another glitch in what appeared to be a really great incentive for first-time home buyers. Unless agents can find a lender willing to lend the $8,000 to them, the tax credit will not be automatically used to assist home buyers in any way, shape, or form. The incentive is in the long haul, and I wonder if buyers are willing to wait that long?

I have heard horror stories in the past. Never did I think I would experience one first-hand. I though I was smarter than that.

And really, I am.

When a friend of mine called me about a listing I have with my partner, I was really stoked. I love to work with enthused, young, first-time home buyers, and when you know the buyer personally, the transaction is all the sweeter. In this case, my friend already had representation from another friend of hers, and I just played the role of the listing agent, along with my partner.

My partner has handled most of the short sale negotiation, as I have been working with other buyers. Today, however, I receive a perplexed phone call from the buyer, stating that her microwave and dishwasher didn't work. I asked her if they had been working during the home inspection, and she responded with the words that I fear most. "I didn't get a home inspection."

Ouch.

I called my partner, who had already received a call from the buyer's agent. She claims that she never gets home inspections on short sale properties, since they are all sold "as-is". Further, she declined the purchase of a home warranty for her clients.

Ouch.

It's unfortunate that buyers, especially those we are not representing, are misinformed of the short sale process. It is ALWAYS vital to get a home inspection, for although a microwave and dishwasher are fairly easy repairs, there could always be larger issues lurking, such as water damage, mold, or termites. Without a home inspection, the buyer doesn't truly know what he or she is getting into - and some of those major repairs could put a serious dent in the thrill of home ownership.

I feel sorry for my friend, and my hopes are that at the moment, it's only washing her own dishes that is a pain in her side. This only further confirms that importance of doing one's due diligence, and making well-informed decisions about home inspections, regardless of whether a short sale, lender-owned, or traditional resale transaction.