Real Estate Information Archive

The relationship between Realtors and Lawyers is interesting.  Lawyers do not want Realtors intruding on their turf.  When a foreclosure proceeding is filed, it may be considered a lawsuit depending on the foreclosure procedures in your state.  Many foreclosures are done by a power of sale in the deed of trust, so it is just a series of notices and other requirements leading to a non-judicial foreclosure.  In other words, it is not a court proceeding.   However, in many states a foreclosure is a filing with the court, so it can be considered a legal proceeding or lawsuit.

In North Carolina, the Short Sale Addendum to the Listing Agreement says “If a foreclosure or other judicial proceeding is filed with respect to the Property, although Firm may continue to solicit and negotiate offers to purchase and contact, communicate with, obtain information from and supply information to Lienholders,  Firm may no longer negotiate the terms and conditions of a Short Sale with Lienholders, as such negotation would constitute the practice of law.”  Other states have similar interpretations of the line between what a Realtor can do and the practice of law. 

If you are not licensed as a lawyer in the state where the property is located and where the client lives, you need to know about the rulings that may restrict what you do in negotiations when a foreclosure has been filed.  One other pitfall to avoid is the regulations on debt counseling. If you charge the seller a fee that is not contingent on the closing of the sale, it can be argued that you are doing debt counseling.

How do you stay out of trouble?  Follow the wording in your forms.  How do you find the line?  Talk to your broker in charge.  You may also want to talk to an attorney, particularly if your firm has one on retainer. 

For a more detailed discussion on this topic, pelase go to http://shortsalesr.us/short-sale-dos-and-donts/dont-practice-law-unless-youre-a-lawyer/.

After you successfully get a contract, what is next?  As a first time homebuyer, the process will be new to you, and it can be stressful.  A good Buyers Agent can review the main steps and options with you before you go under contract.  The key areas are loan approval, repair negotiations, legal arrangements, utilities/insurance setup, and funding. 

As the buyer, you must stay on top of gaining loan approval, providing required information quickly, paying required bank fees, and keeping in touch with your lender.  Your agent will schedule the inspections called for by the contract and help you draft a repairs request.  You will need a closing attorney, who will review the contract, initiate a title search, order a survey (optional), work with you to schedule the closing meeting, work you’re your lender to properly record all related costs, conduct the closing meeting including explaining lots of documents, record the deed, answer questions, and an abundance of other services.  You will need to select a company to provide home owner’s insurance a couple weeks before closing, in order to allow the attorney and the insurance agent to communicate.  At least a week before closing you will need to contact appropriate utilities and arrange for the electric, water, gas, cable, and other services to be turned on in your name.

Think of moving from the point of signing the contract to a successful closing as a project, and select a Buyers Agent who will act as a good project manager – one with the communication skills, work ethic, and attention to detail to handle all the things that come up. 

For a more detailed discussion on this topic, please go to http://solonglandlord.com/steps-for-first-time-home-buyers-to-take/getting-a-first-time-homebuyer-from-contract-to-closing.

Closing a short sale takes more talent than closing a regular sale, so it is critically important that you use a closing attorney or escrow officer who has experience with the requirements of a short sale.

Angie Turner is a paralegal with Clifton and Singer, one of Raleigh’s premier firms in the field of real estate law.  Here is what she has to say about the differences in closing a short sale and a regular sale:

“Short sale transactions are very different from standard closings. They require real estate professionals that understand the process, that can negotiate with the bank, and that can coordinate with multiple parties to complete the transaction.  One of the important parts of the short sale package that is submitted for the lender’s review is a draft HUD statement, in other areas called a closing statement.  The lender will determine whether to accept the short sale based upon the amount of the payment to the lender shown on the draft HUD statement.

The closing attorney’s responsibility is to provide fair and upfront pricing for the seller’s side of the draft HUD statement.  While the pricing for the seller’s side of the draft HUD statement is estimated, the estimates must be as accurate as possible.  Estimating the seller’s fees is often difficult due to the lack of a closing date and other variables.  If the seller or closing attorney is in doubt about the estimated fee, the closing attorney’s office should err on the high side because the bank will be unwilling to accept a higher fee later.  In other words, if the bank settles for a certain amount as a full payoff of their loan, you do not want to go back to them with less money being paid to the bank than what was shown on the draft HUD statement.

The closing attorney’s office is also responsible for making changes to the draft HUD statement and submitting it to the bank and Realtor.  Often the HUD statement will be changed 15-20 times before the bank agrees to the short sale.

Once the negations are completed, the closing documents are signed, and the keys have changed hands, the closing attorney’s job is far from over.  In order for the seller to give good title to the buyer, the deed of trust securing the loan must be canceled of record.  The

loan(s) paid off in a short sale transaction have numerous stipulations and precise instructions that must be followed exactly before the bank is willing to cancel its deed of trust.  Since the bank is taking less that a full payoff, they are even more difficult on the requirements for eliminating the lien on the property that was sold.  Therefore, after closing, the closing attorney is still working with the bank and meeting its requirements to ensure that the deed of trust is successfully cancelled.

Due to the additional requirements in completing a short sale, you will need to choose a closing attorney that is knowledgeable in short sale transactions.  You need a firm that is willing and able to work with you and the bank before you have even scheduled a closing.  For example, even before you have a sale approved, you will need to have a draft HUD statement to estimate the proceeds to the bank.  Also, you need a firm that will follow through with the numerous detailed tasks that occur after closing.”

For a more detailed discussion on this topic, please go to http://shortsalesr.us/short-sale-dos-and-donts/select-the-right-closing-attorney-or-escrow/.

The Package Option Technique for counter offers is to give your counterpart a choice, i.e. a two pronged counter offer. The benefit of this type of counter offer is that the counterpart frequently picks one, as they are so busy concentrating on the two choices that they do not concentrate on the fact that they can choose neither one and make another counter offer. Another benefit is that the counterpart does not feel like they are being pushed into a corner by being forced to take one option, as they have two (or more) options, and they have the last word.

Be aware that there is a frequent response to this type of offer. The counterpart will take the best of both choices. If you are looking to close negotiations, give your counterpart a Package Option, but be sure you will be happy if they take the best of both choices.  A related concept is giving people two choices when you want to get a any decision.

For a more detailed discussion on this topic, please go to http://createagreatdeal.com/principles/techniques-tricks/the-package-option-trick/.

While it is almost always true that owning a home is better for your financial health than renting, that is only true if you buy a home that can be sold again, when you choose to sell it. Some homes are a lot harder to sell than others. Here are some key things to avoid when selecting your first home – homes that may look like great deals but really are not.

1. Homes on busy roads. Keep in mind that traffic will likely increase, not decrease, and roads may need to be widened in the future.

2. Homes close to industrial or commercial facilities. Some are definitely worse than others – homes within walking distance of shopping may actually be a great investment. Being next to hazardous waste sites might be the worst.

3. Flood zones. It is not always obvious by looking at a home – have your Realtor confirm whether or not the home is in a flood zone.

4. Flat out ugly homes. I’m sorry, but we’ve all seen them.

5. Most expensive home in the neighborhood. This may not turn out to be a big problem if the neighborhood might catch up over time – people adding on or even tearing down and building new.

There are other issues that affect resale value that you and your Realtor should consider.  The ones mentioned here are bad moves, so don’t do them.

For a more detailed discussion on this topic, please go to http://solonglandlord.com/first-time-home-buyer-dos-and-donts/warning-to-first-time-homebuyers-dont-make-these-bad-moves.

Some short sale sellers will make your life extremely “interesting” with their talent for putting on multiple mortgages and collecting liens.  You get to negotiate them all,  because if any one will not sign off, the short sale does not close.  This is why some Realtors will not take short sales with too many mortgages and liens. 

The first issue is how do you negotiate with all the liens.  Some of the people providing Realtor training say to negotiate with the last one first.  In other words, if you have a first loan and a second loan, find out what the second loan will settle for first, then negotiate with the first loan. 

You can also negotiate all of the debts at once.  The reason is that there is not a linear relationship between them.  How do you break a standoff? You have to know what is allowed under your local rules, the disclosure rules for lenders and the National Association of Realtors code of ethics.

When you get good at short sales, you can handle many liens at once and get them to a closing at the same time, and be able to avoid foreclosure at the same time.

For a more detailed discussion on this topic please go to http://shortsalesr.us/short-sale-how-to/short-sales-with-multiple-loans-and-liens/.

Knowledge is power. This is one of the most important concepts in negotiating.  Your client wants to buy this house, and the price seems good. If you knew that the seller had just received a notice from the mortgage lender beginning the foreclosure process, would that affect your offer? Isn’t that an easy question? Intuitively, you know knowledge is power.

Internet Equals Information

We are in the Internet age. This means you have a golden opportunity to find out as much about the property and the person as you can before you start negotiating.  To learn about the property look to similar Internet sources and public records. In most states, the tax records will tell you when the property was purchased and for what amount. Use every bit of information you can to help your proposal succeed.

Just Chat

You need to get the formal disclosures to find out what is revealed about the property. But, there is an even better substitute for the required disclosure: just chat. Start with something personal about the real estate agent or yourself, just to be cordial. Then, once you are telling each other friendly stories, go on to the property and the client.

You Need to Know the Real Estate

Not only do you have to know about the property, you have to know the real estate market, in detail. Not just the market in general, but the portion of the market that the property is in.

You Need to Know the People

You have to know the personality type of the people involved. There are dozens of psychological treatises that have divided people up into different personality types. You need to know the ability of the other agent involved in the sale. An agent working on a first sale needs to be treated differently than a twenty year veteran.

For a more detailed discussion on this topic, please go to http://createagreatdeal.com/featured/become-powerful/.

After you buy your first home, you need to look forward to the profit you can make when you sell your first home.   You will frequently hear the term “equity” and what it means is the value you have in the house.   How do you build equity?  Make the home more valuable, and avoid problems that make it less valuable. 

To make the home more valuable, do some home improvements.  The most cost-effective improvements are carpet and paint.  Upgrading the light fixtures and the plumbing fixtures will keep your home looking current. 

The kitchen and master suite are some of the most important parts of the home for adding value because they are the parts of the house that are the focus of the buyers’ attention. 

If you want to get seriously involved in changing the house, you can add on a bonus room, additional bedrooms or additional baths.  If you finish off a basement or an attic, you might think that the value goes up by the same cost per square foot as the rest of the house but it usually does not.

Overbuilding the neighborhood is a concern if you are increasing the size of your home.  If all the other homes in your area are around 1,800 square feet, and you are increasing the size of your home to 4,000 square feet, you will have a hard time getting the money back for your improvement. 

If you are going to live in the home for an extended period of time, and you are going to really enjoy the improvement, you may not care if it adds equity. 

For a more detailed discussion on this topic, please go to http://solonglandlord.com/first-time-home-buyer-dos-and-donts/first-time-homebuyers-should-plan-for-becoming-first-time-homesellers.

Negotiating a short sale requires an understanding of the process. When you submit the short sale package, you are dealing with a servicer, who collects the payments and administers the loan. You need to be able to involve the investor to get the right result.

The Internet provides an abundance of information but keep in mind the legal requirments.

In order to use the online services for Fannie or Freddie, you need written authorization from the borrower.  What if Fannie or Freddie are not the investor, which is a frequent even for luxury housing. Many servicers will not tell you who the investor is, possibly because they do not want the investor to know how poorly they are processing your short sale request.  However, many servicers have rules that require them to furnish the investor’s information if the borrower/seller requests that information in writing.  

Some commentators say that another way you can find the investor is to look them up in MERS, the Mortgage Electronic Registration System. It allows borrowers to see which company manages and owns their loan. The site was made public as part of The Helping Families Save Their Home Act. 

Why do you want this information? When the servicer knows that their client, the investor, will be looking into how the short sale is being processed, the servicer wants to make it look better.

For a more detailed discussion on this topic, please go to http://shortsalesr.us/short-sale-how-to/negotiate-short-sales-better-find-the-investor/.

The ability to negotiate commissions properly has the most dramatic effect on how much profit you make in your business, because if you are talented you make more money on the same sale. If you do not handle this part of negotiations well, you will do all the work for nothing.

As far as your own income is concerned, you do not get what you deserve, you get what you negotiate.

Negotiating Listing Commissions

Real estate commissions are highly negotiable. Real estate as a profession is one of the most creative in offering different models of service that provide for different amounts of payment.

Concentrate on Value

One of the best ways to negotiate the commission on a listing is to provide such an image of marketing, service and advice that the clients would not ask you to negotiate your commission. Explain the features of your marketing, the exceptional services you provide, and the benefit of your negotiating skill to give the client an appreciation of the value.

Confidence

Brodrow’s Law from Negotiation Bootcamp is to be willing to walk away, always. The sellers will sense if you are desperate. They will also sense if you are willing to walk away. Convey your interest in listing their property, but also show your willingness to walk away in order to strengthen your bargaining position.

Higher Authority

Another approach is to use the higher authority technique. Indicate that your firm has a policy of charging a particular commission, so you cannot lower the commission for them, as you would have to lower the commission for everyone.

Set Aside

Another way to deal with commission negotiations is to set the issue aside. Explain that you and the seller are a Team, both in this effort together. You depend on them to have a good house in good condition that is available for showings at reasonable times. They depend on you to get the attention of potential buyers, make them appreciate the special features of the home, and negotiate offers to a great deal.

If You Have to Cut the Commission

If you are going to cut your commission, try to negotiate it in dollars, not percent. After all, a one percent reduction in a six percent commission is actually a seventeen percent reduction in the commission. The commission rate will vary, as there is no standard commission rate, so use whatever is appropriate for you.

Do You Want to Make a Decent Living?

In order to provide for your family, you have to keep your clients from taking your money when you list a home for sale. Do you know how to negotiate when a discount broker is an option? Do you know how to use the basic economics of supply and demand to your advantage in order to get a commission that is higher than your competitors? Do you know how to get your client’s respect when you refuse to cut your commission?

For a more detailed discussion on this topic, please go to http://createagreatdeal.com/featured/commissions-your-money-your-life/.