So you think you’re pre-approved for a home mortgage loan because you have a letter from an on-line lender saying so?
 
Better think again.  I know I’ve told you about this before; but the on-line lenders are still out there making the home buying process more difficult than it needs to be.
 
When you apply for a mortgage with an on line company, all you do is fill out a form.  The lender doesn’t even speak to you much less ask detailed questions about your financial situation, history or plans.
 
In such a regulated and in some cases over regulated industry, answers to detailed questions are not only important; but are a necessity.
 
As an example, is your second residence leased?  Have you claimed the income (rent) on your tax returns?  Did you purchase it to live in or as an investment?  How much do you owe on it?  What is the current market value?  Why are you not living in it?  
 
These questions are pertinent to determine if you just purchased the first house because it was affordable with the intention of stopping to make the payments now that you want a larger home.
 
This is called “buy and bail” and there are a whole set of rules to follow when you buy another home without selling the first one whether seeking FHA or conventional financing.  Conventional being the more restrictive. 
 
The principal borrower may have to qualify with both house payments depending on the amount of equity in the existing property to be rented.  This would less any rental income from that property, if applicable plus any other indebtedness. 
 
Speaking of any other indebtedness, for FHA and VA loans , if the spouse has bad credit or has not been on the job for at least a year in the same field or two years in a different type of job, the principle borrower must qualify with the spouse’s debt as well even if the spouse will not be on the loan.  This is because California is a community property state.  Everything is shared – even the debt. 
 
So, if you are serious about purchasing a different house, before you write the offer, seek a lender that does an in-depth review of your situation. Your life really.  Because everything matters.  Divorces, bankruptcies, number of children, time on the job, amount of overtime, etc, etc.  Lenders are forced by government mandate to be very nosy.  And rules are constantly changing.  So don’t be offended. 
 
And it’s always better to have the research done up front rather than finding out there are issues when you are already in escrow.
 
Carol Wilson is Broker-Owner of
WILSON  & ASSOCIATES REAL ESTATE SERVICES
She can be reached at carolj@wilsel.com or
760-446-5959    
 
 

Come the first of August, yes, it may no longer be possible to close a purchase escrow in 30 days. 
 
Why you ask?  The answer?  Government meddling.  Again. 
 
Thanks to the Consumer Financial Protection Bureau, another newly formed government agency, lenders will now be required to prepare and deliver to home buyers two new forms three days before closing which will supposedly assist them in determining if the final cost of their loan is the same as it was quoted by the lender when the process began.
 
Really, people need a new form to compare costs?  How about comparing the first estimate with the final one.  If they don’t match, call the lender.  Why does such a simple solution require so much bureaucracy?  Because big brother is attempting, and in most cases succeeding to control us in every aspect of our lives.
 
Authorized by the Dodd-Frank Wall Street Reform and Consumer Protection Act, passage of which was a legislative answer to the financial crisis of 2007-2008, the CFPB began operation in July, 2011.   Never mind that the financial crisis was caused by obtrusive legislative pandering.  Never forget that everything can be fixed with more legislative tampering.
 
Formed in controversy at the insistence of radical leftist Elizabeth Warren, the CFPB is supposed to ensure lenders don’t gouge consumers by charging additional fees at the close of the purchase transaction.
 
While it may accomplish that end, (no lender is going to gouge consumers after the threats and fines that have already been imposed) it also manages to cause planning issues and guaranteed closing delays.
 
Home buyers will have to really plan ahead, pay attention and be readily available during the escrow period.  Even more than ever.  Don’t leave town without notifying your real estate professional.
 
Have your act together when you decide on the type of loan best for you. 
 
Be sure you ask for that chandelier you want to stay in the house and be sure it’s there when you do your final walk through.
 
Either of these issues could trigger another three day disclosure period causing additional delays.
 
 
 
The National Association of Realtors is recommending that agents add an additional week to the agreed upon escrow period.  Given past experience, I would add two weeks to allow for training, mistakes and misunderstandings.
 
NAR also warns that there could be changes to the procedure after it is tested in the field.  I bet so!
 
So, plan ahead, be diligent, precise and patient!  More than ever.
 
Carol Wilson is
Broker-Owner of
WILSON & ASSOCIATES REAL ESTATE SERVICES
She can be reached at carolj@wilsel.com
Or 760-446-5959
 

How exciting to get an offer on your house so quickly!  You had to pay closing costs; but at least now you can move on with your plans.
 
Your agent tells you everything is going well with the buyers’ loan, the inspections are completed, the termite report is clear and the buyer didn’t ask for any repairs.  Great!  Smooth sailing to the close of escrow, right?
 
Not yet.  Your agent calls to tell you the appraisal came in low.  Geez!  What happens now?
 
Here are your options:
 
.    You can accept the value of the appraisal and reduce the purchase price.
 
.    You can cancel the sale and stay put.
 
.    You can renegotiate the sales price.  Maybe the buyer will pay the contracted price regardless of the low appraisal.
 
.    You can challenge the appraisal.
 
You are totally convinced that the appraiser made a mistake.  You have seen houses similar to yours that have sold for the same price, maybe higher, and you decide to challenge the appraisal.
 
Okay.  Here’s what to do:
 
After the buyers’ agent has been notified of your intention, look for more comps.  (Recent sales to compare to yours.)  Your agent can help you with this.  The recent sales have to be located as close to the subject (that’s your house) as possible.  They have to be the same age, size and have the same amenities. 
 
Easier said than done.  Rarely are two houses exactly alike.  That’s why appraisers make adjustments.  And that’s why you have to be very careful about choosing the new comps.
 
You have been diligent in your research and now you ask your agent to send the list of sales to either the buyers’ lender or directly to the appraiser whichever is easier. 
 
The appraiser will reevaluate his work by analyzing the new information and send his new report to the lender.  The lender will then begin the review process.  This could take up to two weeks.  Be sure you consider your closing date before you challenge or you could lose your buyer due to the time delay.
 
If your agent has a good rapport with the appraiser, you can find out what the result of the challenge is without waiting for the lender.  You can then decide what action to take.  Generally it will involve renegotiation.  Rarely does a challenge change the value.  Especially if the appraiser is familiar with Ridgecrest. 
 
With all the rules and regulations currently placed on appraisers and lenders, it is next to impossible to effect a different result.  Appraisers research well and must follow specific guidelines in their analysis.
 
The most equitable solution is to split the difference between the contracted purchase price and the appraisal, ask your agent to prepare the counter and get happy again.  You could have done that in the first place and saved frustration and time. 
 
Carol Wilson is the Broker-Owner of
WILSON & ASSOCIATES REAL ESTATE SERVICES
She can be reached at carolj@wilsel.com or
760-446-5959   
 
 

Being an out of the area property owner, wouldn’t it be comforting to know that your property is being looked after during your absence?
 
Well you can rest assured your property will be taken good care of by following these logical steps:
 
First, choose a property management company whose personnel are knowledgeable in management/rental procedures and will attend to your home as if it were their own.  Most of our local companies use the California Association of Realtors standard forms for management services, lease agreements and related issues.  If you find something different, you should insist on using those forms.  They are written by attorneys who consider the best interests of the parties involved in the transaction.
 
Second, let the company do their job!!  No micromanaging!  Let the company call the home warranty company, contractor or the handy man and get back to you in writing regarding the cost.  If you call the repair people, it just causes confusion and possible misunderstandings.
 
If you hire a management company, stay out of the middle of their business!!
 
Third, understand that tenants want to live in a well maintained house just like you do.  You will not attract responsible people if your house is poorly kept.  No leaky roofs, worn out carpet, scuffed up walls.  If your manager tells you the house needs work, pay attention, do as suggested and relax knowing that your house will rent more quickly and to tenants who will appreciate your efforts.  Remember, repairs to your rental are tax deductible.
 
Another benefit of a well kept rental is that your manager will not be calling you so much regarding needed repairs!  You’ll be care free.
 
And when you interview a manager, be sure you tell them the current condition of the house and that you would like them to bring it up to good livable condition before you sign the agreement so all issues are on the table.  No surprises when the current tenant gives notice and tells the manager the roof has been leaking for months and mold is growing!  Wow, really?  It’s called full disclosure.
 
It is not necessarily the manager’s responsibility to repair your house for the rental market.  Managers generally take care of routine repairs/services during the term of the lease.  So be up-front with each other regarding your expectations.  This way, a mutually good decision can be made. 
 
Just a note about home warranties, they don’t take care of maintenance issues like rusted faucets and clogged sewer lines.  So a prudent owner should have a reserve account for major repairs so the property can be preserved especially since this is probably the biggest investment in your portfolio.
 
Fourth and finally, be available to your manager.  Even though the manager is in charge, there are times when discussion with owners is required.  So, be sure all of your contact information and that of your co-owner is communicated to your manager.
 
Follow these guidelines and you, your manager and your tenant should have a long happy relationship.
 
Carol Wilson
Broker-Owner
WILSON & ASSOCIATES REAL ESTATE SERVICES
She can be reached at carolj@wilsel.com or
760-446-5959
 

                                                                  DEEDS OF TRUST
 
I want to clarify some of the terminology used in last month’s article about deeds of reconveyance.
 
I mentioned “beneficiary” and “trustee” and wanted to define the terms. 
 
These are two of the three components of deeds of trust which are used in California to secure a loan  (any kind of money encumbrance) on a piece on property. They are recorded with the county when the escrow closes.  They become a matter of record.
 
The third component is the “trustor” which is the person who borrowed the money.  The one who has to pay it back.  The buyer.
 
The “beneficiary” is the entity (corporation, partnership, company) who gets paid by the trustor.  The buyers’ lending company.  Bank, mortgage company.
 
The “trustee” is the company, often the escrow company which assisted with the purchase and closing of the purchase, which is responsible for holding the legal title (factual ownership and control of the property) for the beneficiary until the loan is paid in full by the trustor and administrating the terms of the note and deed of trust for both the beneficiary and the trustor. 
 
The trustee is also the party responsible for recording the deed of reconveyance to clear the title of the lien when you pay it off or when you sell the property.
 
The house belongs to you (trustor) and the lender (beneficiary).  You hold equitable title.  You just can’t sell it until the beneficiary is paid off and the trustee releases the title. 
 
The deed of trust is always accompanied by a note.  Thus the term “note and deed of trust”.  The note sets forth the terms of payment to the trustor such as provision for a pre-payment clause, late fee and always an acceleration clause stating that the loan must be paid off before the property can be sold.   You don’t have to pay it off; but if you sell the house, your buyers’ lender will provide the funds to do so.
Then the title can transfer to the new trustee and buyer.
 
Hope this serves as a good explanation so you can better understand one of the most important aspects of a real estate transaction.
 
Carol Wilson is
Broker-Owner of
WILSON & ASSOCIATES REAL ESTATE SERVICES
She can be reached at carolj@wilsel.com or
760-446-5959
 
 

WHAT’S A LOST DEED OF TRUST SURETY BOND?
 
Well, thank the Lord the house is in escrow.  You worked hard and spent some money getting it all fixed up and ready to show.  Just when you think you can relax, your agent calls to tell you there is a major hold up in the process because a deed of reconveyance was not recorded by your lender when you paid off the house 5 years ago.  She said you will have to purchase a lost deed of trust surety bond.
 
Really?  What in the world does this mean?
 
It means you could lose the sale of your house!  However, as with most crises in real estate transactions, there is probably a solution. 
 
Here’s how it happened in the first place.  Your lender did, in fact, fail to record the reconveyance which would have cleared the debt, in the form of a mortgage or other lien you paid, from the title.  Without a clear title, the property cannot be transferred to the new buyer. 
 
Rest assured that the escrow company has made a diligent and exhaustive effort to clear the encumbrance before your agent was called.  This was accomplished by researching the information on the original deed of trust to try to locate the lender (beneficiary) that failed to record the necessary document or the title company/trustee involved in the transaction.  
 
This can be a difficult task because a lot of lenders and escrow companies have gone out of business since the big real estate boom in the early/mid 2000s. 
 
Your agent or escrow officer will supply you with the name of a bonding company which will ask you to fill out and return an application supplying all the details of the payoff, date paid, check number and copy of receipt if available.  Give them as much information as possible because the bonding company is guaranteeing the trustee and the beneficiary under the deed of trust that you paid off so title can be cleared and escrow can close.
 
The bonding company then notifies escrow so that the current trustee can prepare the deed of reconveyance for recording. 
 
A declaration must accompany the bond describing certain facts as stated in Civil Code 2941.7. 
 
What does this cost?  Money and time.  As usual.  The cost of the bond is generally based on twice the amount of the paid encumbrance because of the risk to the entities involved.  It is figured on a percentage per thousand dollars.  Your credit rating plays a part as well.   The bonding company can precisely figure it for you.
 
Now for the time involved.  You have to wait 30 days – yes, a whole month – after the bond has been recorded.  Then the bond is sent to the trustee of the old deed of trust for issuance of a deed of reconveyance.    As soon as this deed is recorded, escrow can move to closing.  This waiting period is done in case someone, generally a relative of the seller, comes forward to make an objection to the sale. 
 
To avoid this delay, follow these instructions: 
 
 

1.  Return your opening package to escrow quickly so the officer can compare your statements to the title report to see if any documents are missing.
2. Keep your receipts for any pay offs made on your house.

 
This is a brief explanation.  Your particular situation could be more complicated.  Just remember to keep all your receipts and now that you know what could happen, be sure your lender records the deed of reconveyance!
 
Carol Wilson is Broker-Owner of
WILSON & ASSOCIATES REAL ESTATE SERVICES
She can be reached at carolj@wilsel.com or
760-446-5959
 
 

The answer is “Maybe.” 
 
The seller has no objection to allow the buyer to occupy his (the seller’s) house before the close of escrow unless prior written arrangements have been made.
 
However, under certain circumstances, a willing seller might allow an early occupancy.  And guess what? There’s even a CAR (California Association of Realtors) form for that!  Six whole pages!
 
The form is called “Interim Occupancy Agreement”.  It’s almost exactly the same as a rental/lease agreement – with a few specific changes. 
 
Early occupancy is NEVER allowed on bank owned or HUD properties.  Don’t even think about it.
 
The purpose of this form is to allow a buyer access to the property for a short period of time before the escrow closes.   
 
The form asks for a security deposit which is refundable at the time escrow.  Due to the current hypersensitivity of lenders, this refund should be given back to the buyer outside of escrow in the form of a personal check, money order or cashier’s check.   
 
Prudent sellers (and brokers) should pay close attention to be sure the buyer has met the terms of the purchase contract to the best of their ability before permitting them to move in.
 
Moving in before the close is granted to the buyer as a convenience only to accommodate their needs and facilitate a smooth transition between buyer and seller.
 
Sometimes, buyers only need to store their goods in the house before close.  This is accomplished by use of the same form with a notation the rental is for the garage only when their shipment arrives. 
 
Buyers should be cautioned to be sure their insurance is in place in the form of a renter’s policy to be sure their goods are covered in case of an emergency.
 
Buyers should understand that problems have occurred in the past by sellers authorizing them access to the property before it becomes theirs.
 
So, it’s best to do some serious coordination with your moving company, lender and Realtor to ensure timely arrival of persons and goods.
 
But should you need a place to store your stuff, ask your Realtor about the Interim Occupancy Agreement and see if arrangements can be made.

Carol Wilson is Broker-Owner of
WILSON & ASSOCIATES REAL ESTATE SERVICES
She can be reached at 760-446-5959 or
www.wilsel.com

 

Right, if you know what to do.  So listen up!
 
So, you’ve seen a house you’re interested in on HUDhomestore.com.  Call the agent of your choice and ask to see it in person.
 
If you like it, tell the agent you would like to place a bid.
 
At this point I need to define “bid”.  HUD has its own set of rules about bids and they don’t tell the agents.   An acceptable bid must fall within certain guidelines to be adopted.  
 
Experience has proven that acceptance will happen only if the bid is full price or just a tiny bit less.  Like less than $1000.00.  Sometimes less than $500.00.  Since those of us in the field have not been told the rules, we can only guess.  So, I advise buyers to give it their best shot.
 
This bid is placed electronically.  Over the internet.  No physical paperwork at all is required; until you win the bid. 
 
It’s a simple form on line requiring your name, address, social security number and the amount you want to bid.   The agent will then give you a copy of the bid confirmation and depending on how long the listing has been on the market and whether or not it’s a weekend or holiday, the agent will notify you in 2 to 5 days.
 
When your agent calls with the good news that your bid was accepted, get your pen ready for initials and signatures and your earnest money deposit (EMD) in the form of a cashier’s check payable to the escrow company of your choice (local is better – that would be Placer Title) or you (Placer Title or Happy Home Buyer) and trot over to your agent’s office.   The paperwork – 12 to 15 pages - should be ready for you to review.  Do this quickly because HUD gives you a limited amount of time to return the contract package to the asset manager.
 
Please note this is HUD’s paperwork.  The CAR contract is not used to purchase a HUD home.  Offers are not submitted to the listing agent.  Further, there are almost none of the customary disclosures on a HUD transaction because they are sold as-is.
 
This contract package is then sent to the asset manager and the EMD to the listing office (that’s me).
 
The asset manager checks and rechecks the package before it’s signed off.  This takes another couple of days. 
 
After receipt of the ratified contract, escrow is opened and more paperwork is generated.  Keep your pen handy.
 
HUD allows buyers to inspect the property during the escrow process.  The utilities can be turned on only by following the activation process explained on the asset manager’s website.  There is a charge to the buyer and strict timeframes to be followed for utility turn on and turn off.   Your agent can tell you.
 
When you have completed your inspections and are happy with the results, (remember, HUD homes are sold as-is - HUD makes no repairs) let your agent know and then you wait for escrow to call about your loan documents or when to bring in your money. 
 
The seller’s package is then sent to HUD for final review.  This process can take 3 to 5 days.  Then recording is ordered and escrow closes.
 
The final step is for the selling and listing agents to meet you at the property so you can enter the house to change the locks and it’s all yours!
 
So, the process is different; but easy.  Especially if you know the rules!

Carol Wilson is Broker-Owner of
WILSON & ASSOCIATES REAL ESTATE SERVICES
She can be reached at 760-446-5959 or
www.wilsel.com

 
 
 

Sometimes sellers don’t fully understand how the repair or replacement phase of a real estate transaction works.   This is a normal part of the transaction and should not cause any undo concern or frustration.
 
Here’s how it works:  The buyer pays for a home inspection.  The inspection is sent to the buyer and the agent representing the buyer.  The buyer reviews the inspection (sometimes with the assistance of her agent ). 
 
If the buyer decides she would like to have some items repaired or replaced based on the inspector’s recommendations, then her agent prepares the proper form along with a copy of the inspection report and sends both along with any other supporting documentation to the seller’s agent.
 
The seller’s agent forwards all the information to the seller for review.  Sometimes, the seller asks his agent his opinion on doing the repairs.  Whether all or part of them should be completed.  Or what about “as-is”?
 
The first thing sellers need to know is that there is no requirement for him to do any repairs.  However, sellers need to understand that if the buyer is not happy with the sellers’ response to her request for repairs, she has the right to cancel the transaction and get her earnest money deposit back.  That is her sole remedy.  She can’t make the seller do the repairs.
 
Hopefully, both buyer and seller should understand that a resale house will never be perfect and as a result will be reasonable in her requests and her expectations.
 
So, a seller should repair electrical and plumbing issues; but maybe not replace a switch plate or a door bell button.
 
So, what about “as-is”?  Attorneys tell us there is no such thing in California.  Buyers have the right to have inspections and sellers should except to be asked to repair or replace broken parts of the house while understanding the consequences if they don’t.
 
Okay, say the seller decides he’s going to have a relatively simple plumbing issue fixed.  He asks his agent to get him an estimate to make the repair.  The estimate is then submitted to the seller for his approval.  Upon approval, the agent orders the repairs and instructs the vendor to submit his invoice to escrow for payment when the transaction closes.   This is standard procedure and gives the seller an accurate and full account of his expenses for selling the property.
 
There is no reason for the seller to be up in arms about the possibility of a repair override.  If the plumber finds some extenuating circumstance, he will notify the sellers’ agent and he will inform the seller. 
 
Neither repair people nor agents/brokers have carte blanche over the sellers’ funds.  They cannot spend the sellers’ money without their written authorization.  And we all know that.
 
Now you do too!
 
 
Carol Wilson is Broker/Owner of
WILSON & ASSOCIATES REAL ESTATE SERVICES
She can be reached at
carolj@wilsel.com or
^760-446-5959