Real Estate Contracts

How do I tell if a house is a "meth home"?

Sadly, meth is always in the news. Here is a little helpful information and a few links to help potential home buyers and/or homeowners sort out the hype from the truth.

The U.S. Justice Department maintains a website of homes that are suspected to potentially be meth homes.

The Justice Department’s website contains a list of addresses – searchable by state – of some locations where law enforcement agencies reported they found chemicals or other items that indicated the presence of either clandestine drug laboratories or dumpsites.

The Arizona State Board of Technical Registration also maintains a list of meth lab homes.

The Arizona Attorney General’s office posts this information about meth labs and meth homes on their website.
As of July 1, 2003, those who sell property are required by Arizona law to inform prospective buyers if a property has been used to manufacture methamphetamine, ecstasy or LSD. They are also required to hire a drug laboratory site remediation firm that is registered with the State Board of Technical Registration, pursuant to A.R.S. § 32-122.03, to remediate the property of residual contamination. Until the site is properly cleaned, it is unlawful for any person other than the owner, landlord or manager to enter the property (see A.R.S. § 12-1000). Clean-up requirements and an approved list of drug remediation firms can be found at the Arizona State Board of Technical Registration. The owner is liable for the costs incurred to remediate the property of residual contamination, even if the owner had no knowledge of the criminal activity at the property. reports on a Pennsylvania couple who bought a meth home without knowing it. Tags:

How long do banks take to reply to an offer on an REO foreclosure home?

I wanted to use the title “when banks hold up their own closings”.  I also considered titling this “I hate banks.”

The short answer is “banks reply whenever they feel like it.” The longer answer is: usually, in Metro Phoenix, in Fall/Winter 2010, banks take about 2-3 business days to reply to an offer. Once you’re under contract and in escrow the bank’s reply time often slows down considerably. Try 2-3 weeks.

This is an email trail between myself and the Realtor representing a bank on an actual transaction currently in progress.

Me, on Nov 29 at 5:55pm:
The buyer's underwriter is ready to issue final approval but needs seller's signature on Amendment changing price. Still don't have that and it could hold us up. Otherwise, we're aiming to close on Mon, Dec 6 as planned.

Bank’s Realtor, on Nov 30 at 1:03am:
This addendum was submitted to seller on 11/17/10 when I received it. All we can do is wait for it to go through Fannie. It is reviewed by 4 people each of whom can take up to 3 days, not including weekends and holidays.

I will send the seller signed copy just as soon as I have it.

(note that Realtor was working at 1 o’clock in the morning! Being a Realtor is not all sweetness and light and easy money)

Me, on Nov 30 at 6:24am:
Ok, understood.  Just as long as seller knows that Buyer's lender is at a stand-still and Seller is holding up closing. I'm sure you know, but wanted to put it in black and white for seller's 4 people who have to review. thanks.

again, note the timestamp. Don’t go into real estate unless you consider yourself a workaholic. Tags: ,


Image ID 1152432 by Stock Exchange user macaruba (image credit, StockExchange user macaruba)

We’ve all learned a new word recently: robo-signing.

The Big 5 Banks* are holding off on foreclosure proceedings in lots of US states because the employees in charge of signing off on the foreclosure documents have admitted to robo-signing up to 8,000 documents per month without reading each.

Robo-signing and the moratorium on foreclosures, so far as I can tell, doesn’t apply in Arizona. Foreclosures continue in Arizona at their usual pace. Why?

All the states so far affected by the robo-signing scandal are judicial foreclosure states. Arizona is not. In a judicial foreclosure state, the lender must file a lawsuit in court against the homeowner to begin the foreclosure proceedings. Those filing documents are the docs that were robo-signed.

In Arizona, homeowners don’t sign a Mortgage so there is no need for the lender to file a lawsuit to begin a foreclosure proceeding. Arizona homeowners sign a similar but slightly different document called a Deed of Trust. It’s the same idea as a Mortgage, just with an extra party inserted into the process. It’s a threesome: there’s a borrower (homeowner), a lender and a Trustee. The Deed of Trust system works just like a mortgage except in the cases of foreclosure.

The Deed of Trust that Arizona homeowners sign allows the lender to skip filing a foreclosure lawsuit if the homeowner gets behind in their mortgage. The lender simply mails or delivers to the homeowner a document called a Notice of Trustee’s Sale (a “NOTS” or “NoTS”, i.e. a foreclosure). Usually the lenders issue a NOTS after 3-4 missed mortgage payments.

The NOTS is the only notice of their intent to foreclose that Arizona lenders are legally required to provide. It states that the homeowner has 90 days in which to bring the mortgage payments 100% current – including any fees, fines or legal costs – or the Trustee will sell the home at foreclosure auction. On Day 91, the home is auctioned off, unless the homeowner contacted the lender and made other, mutually agreeable arrangements.

Trustees are often attorneys and sometimes the auction takes place in their offices rather than “on the courthouse steps” as in some other states. At least in Arizona, lenders are frequently unable to sell the home to anyone at the foreclosure auction. In that case the lender takes the house “back” and usually lists it for sale in the MLS through a Realtor as an REO property.

We at The Phoenix Agents track REO listings to help us visualize the overall health of the local real estate market. Want to see our stats? Click on over, to <here>.

The Big 5 Banks are: Bank of America, GMAC, JPMorgan Chase, Citi and Wells Fargo. The Big 5 is just what I call them; it’s not a real thing. That I know of.

I’ve had it up to my eyeballs with banks

Really, I'm 110% over the bank owned REO thing. I’ve had it up to my eyeballs with banks and their stupid requirements.

I swear that lately the big banks and Fannie Mae, and especially the Realtors who work for them, are trying to make it hard to buy their properties.

Here’s a mere sampling of what I mean.

Please email documents to this email: [actual email address removed to protect the stupid]. Do not email the Realtor personally. Emails to the Realtor will not be accepted! Do not fax! Faxes will not be accepted.  After emailing, please note that originals of all documents must be delivered to the Realtor’s office.

Really? You won’t respond to my buyer’s offer documents unless I email them to your super-special address? And you wouldn’t like a chance to look at the offer if I faxed it to you?  And then after all that I have to “deliver” the original documents to your office, which is 1 hour away from mine? What do you mean “deliver”? Is US postal mail OK? Or do I have to hire a bicycle messenger? Or should I hire a guy in a gorilla suit to hand deliver the documents? Why?

Or this one…

(seller’s Realtor’s email to me) Buyer’s Earnest deposit will immediately become non-refundable if an extension to Close of Escrow is requested. ** BE AWARE that the Seller has been known to cancel a Contract if any deadline is not met or if extensions are requested. **

Um, yeah.  This is a Fannie Mae contract. It was written by federal government attorneys. Every single Fannie Mae home sold in Arizona – and possibly in the whole country – is sold using the exact same form of contract documents. They do not say this.

The seller’s Realtor cannot change the terms of the contract with something written to the Buyer’s Realtor in an email. Any first-year law school student would tell you that written contracts trump emailed threats.

More idiocy…

Seller requires a Lead Based Paint Addendum on all contracts regardless of age.

I assume you mean the age of the home, not my buyer’s age. Regardless, you are aware that lead based paint forms are a federal government requirement, and are only required on homes built prior to 1978? So you’re adding a layer of bureaucracy on top of the federal government’s bureaucracy? Great.  Because we all know how much everybody loves bureaucratic red tape.


You MUST provide a REVISED PURCHASE CONTRACT/OFFER that matches the REO As Is Purchase Addendum IN ITS ENTIRETY (if applicable due to counter-offer). Seller will not sign the Contract unless ALL TERMS in the Contract and Addendum MATCH!

Really? I mean, come on, really? The legal purpose of an Addendum is to override some of the terms of the original contract. Your lawyers created the Addendum, you should know that! By design, an offer and an REO Addendum will not match in their entirety. But because your clerks can’t be bothered to communicate with your corporate lawyers, I have to revise the 9-page contract buyers already signed, have them sign it again, and then send the entire shebang to your super-secret email address. Great.  I had nothing else planned for today.

Oh but wait, there’s more…

(received at 9:03am on Wednesday) . . . .You must return all documents with original ink signatures to our office by 5:00pm Central Standard Time today. If we do not receive your signed documents by that time, Seller will cancel your offer and accept offers from any other interested buyers.

Ok, let me get this straight. I emailed my buyer’s offer to your super secret email address 11 calendar days ago. I called to confirm you received it. After sitting on buyer’s offer for 11 days, now you’re demanding that my buyer sign and return your As Is Addendums in less than 8 hours?! What were you doing for 11 days? And why do you get 11 days but Buyers only get 7 hours?

And yet more…

You MUST provide a copy of the certified check in the amount of the earnest deposit as stated on the Addendum.

Me: OK, fine. Which title company do you require we use?

Bank’s Realtor: We don’t know yet. Bank will assign that later.

Me: How in the name of all that’s holy is my buyer supposed to get a cashier’s check from his bank made out to “we don’t know yet”? Head’s up, smartypants. Banks don’t like making out cashier’s checks to no one.

This is maybe my all-time favorite…

I submitted our buyer’s offer on a condo. I got an auto-responder email confirming the seller’s Realtor received it. Nothing happened for 5 business days.
Day 6, Me:  “I’m calling to see if the selling bank made a decision on our buyer’s offer that we sent to you 6 days ago?”

Seller’s Realtor’s Assistant: (clicking computer keys) “Hmmmm.  We don’t seem to have that offer. Could you re-send it?”

Me: “Do you have any other offers at this time?”

Assistant: “No, we don’t.”

I re-send the buyer’s offer. Within 4 hours, I get an email that goes like this:
"We now have multiple offers on this property. Please submit your buyer’s ‘highest and best’ offer within the next 2 hours in order for it to be considered. Please include original ink signatures, as the bank no longer accepts electronic signatures.

Please also include your buyers’ blood type and a sample, a stool sample and social security number, as well as his birth date and pictures of his first born child which may be used as collateral against the property at the seller’s discretion.”

OK. I admit it. That last bit about bodily fluids and children I made up. But sometimes I need a little comic relief from the exciting adventure of trying to help people buy REO foreclosure homes. And sometimes the bank’s requirements are nearly that ridiculous.

But really, the important thing is this: I sent you an offer that you sat on and did nothing with for 5 business days. Within 4 hours of me re-sending that offer, you mysteriously have multiple offers?! Do you think I just fell off the turnip truck yesterday?

I have had this happen three times in the past 2 or 3 years. Twice, my buyers called the banks’ bluff, held firm at the original offer price, and won the so-called multiple offer bidding war anyway.  Once, my buyer called their bluff and lost out to the phantom ‘other’ buyer. Five days after that, the property is still showing as Active, For Sale in the local MLS.

<I am now banging head against my computer keyboard.
Hard. And repeatedly.>

Oh, banks. You’re just so silly! When will you go away and leave us all alone?

Agents who don’t read their own contracts

It’s bad enough that banks issue their own As Is Addenda to the standard purchase contract. Those documents usually strip a lot of the typical buyer’s rights away from him/her.

Worse, lately I’m finding that the Realtors who work for the banks selling REO foreclosure properties don’t even read their own bank Addenda.

Realtors Who Can’t Read, example 1. . .

Hi.  Can you update me on the status of the signed counter/addendums?  They are due back to the bank today.

Actually, no. The bank’s As Is Addendum specifically states the documents are due back tomorrow, Friday the 27th of August.

Another. . . .

The inspection period starts upon sending these [bank As Is Addenda] out.

Actually, no. The bank’s As Is Addendum specifically states the buyer’s Inspection Period starts the day after the bank’s Asset Manager signs the Addenda. Which has not happened yet. So inspection period start date is sometime later this week, whenever the Asset Manager gets around to signing the documents created by the bank. Meanwhile, the bank’s As Is Addendum allows them to leave the property listed as “Active” for sale in the MLS, troll for backup offers and accept anybody else who comes along without telling me and my buyer client.

I sincerely wish it was just a little bit harder to become a Realtor.

All about Federal Fair Housing law

This is a reprint of an earlier post.

Federal Fair Housing law prohibits discrimination in the sale, rental or financing of housing because of:

  • Race or Color

  • National Origin (the country in which one was born)

  • Religion

  • Sex

  • Familial Status (whether one has children or not, whether married or not)

  • Handicap/Disability

Some states include additional groups, such as “sexual orientation”. You can check your state’s protected classes here. Fair Housing Law as it stands now is an amalgamation of various laws enacted during the late 1960s and mid 1970s.**

Notice that age is *not* on the list. Metro Phoenix has lots and lots of “active adult” communities which restrict the minimum age of their residents. As an aside, we used to call these retirement communities. Apparently we don’t retire anymore, we just get active.

The most common question I hear from buyers is “Is this a good neighborhood?”

What they’re really asking about of course, is either the crime rate or the type of people living in the area. Fair Housing law prevents me, your Realtor from telling you about the neighbors if that conversation might stray into discussing one of the protected classes. Most Realtors just don’t discuss the topic at all, for fear of violating Fair Housing law. It’s rumored that the FHA sends testers out to work with Realtors, secretly checking for violations of the law. True? I don’t know but I don’t want to find out.

Besides, my idea of “nice” or “good” neighbors might vary wildly from yours. Some people find the idea of living near folks of another race, religion or sexual orientation is a big problem. Most don’t care. My best advice to buyers in this scenario is to drive through and walk through the neighborhood yourself, at different times of the day, to see what you see. Talk to your potential new neighbors. Visit a grocery store, or a park in the area. See if you feel comfortable in the area.

As for crime, I can and will point you towards websites that list crime statistics, usually by ZIP code. I usually beg off answering the ‘crime’ question, because one person’s ’safe neighborhood’ is another person’s ‘fringe neighborhood’ is another person’s ‘hood.’

Housing not covered by the Federal Fair Housing law

  • Single family housing not sold through a broker

  • Owner-occupied housing of no more than 4 units (you own a duplex & rent the other side)

  • Housing operated by private clubs which limit membership (co-op’s)

The first bullet above applies to For Sale By Owner homes. Selling it yourself? Discriminate all you want. I’m kidding of course, but the government can’t interfere if you want to sell your home yourself but intend to refuse to sell it to Australians born in New Zealand who practice the B’hai faith.

The second & third bullet points don’t apply much in metro Phoenix. But there are  some duplexes and fourplexes in our Valley, and even a few co-op’s down in South Scottsdale. No one can force you to rent the other side of your duplex to a family with 17 kids if you abhor children. Similarly, the co-op board reviews applicants who want to purchase a unit, and they make their own rules about who can move in.

For more information, see the Federal Fair Housing booklet and information about updates to Fair Housing law. Think you’ve been discriminated against in housing? The National Fair Housing Advocate Online can help. Note that all these resources apply to housing you buy. For help with rental situations, see the Arizona Residential Landlord Tenant Act.

Related Posts

**As a side note, I do actually remember overhearing a mortgage banker telling my just-divorced Mother in the early 1970s that they couldn’t possibly transfer the mortgage on our home from “Mr. and Mrs.” to just “Ms.” because. . . well, she was a woman. . . don’t you see. . . she could get pregnant, and then how would she pay the mortgage? When you think about it, it’s really astounding that was only 40 years ago.

Is there a benefit in working with the seller’s Realtor when you buy a home?

Some consumers want to work with the seller’s Realtor because they believe that Realtor will reduce his/her commission if they don’t have to split the commission with a buyer’s Realtor. This thought process continues: a smaller commission reduces the seller’s cost to sell and effectively lowers the buyer’s purchase price.

There are a couple of holes in that theory.

First, the sellers and their Realtor signed a contract agreeing to the Realtor commission before the house was listed for sale. The standard-form listing contract used in the Greater Phoenix area doesn’t say the commission is dependent in any way on whether 1 or 2 Realtors are involved. That language can be added to the listing contract by the seller & their Realtor but it’s not standard and it’s not required.

As an aside, buyers who expect the seller’s Realtor to reduce their commission because the buyer doesn’t have a Realtor are effectively asking a complete stranger to take a pay cut after half the job is complete. And it’s not “only 1%”. If the commission is 5% of the sale price, a 1% commission reduction is a 20% pay cut.  (1/5th = 20%)

Second, buyers who work with the seller’s Realtor are actually getting limited representation in their purchase. The seller’s Realtor still owes the seller the duty of getting the highest and best price for the home.

Our broker, Jay Thompson of the, wrote a really eloquent blog post explaining why the “I’ll save money by working with the seller’s Realtor” logic is as holey as Swiss cheese.  He breaks it down into dollars and cents. And sense.

I’ll just say this: if you end up in divorce court and your ex hires a high-powered lawyer, you’d get yourself a lawyer too wouldn’t you? Sure, not hiring your own lawyer might save you some money. But you’d be on your own in divorce court and you could end up like a bad country song: “I lost my house, my spouse, my truck, my shirt and even my old sad, tired dog in the divorce. . . .”

Bidding Wars and Balls

Don't know whether this is a memory from real life or a movie**, but go with me on this. Imagine a scene with a politician at a podium taking questions  from reporters. Let's call one of the reporters James and pretend he's a notorious philanderer, because it makes my story better.

Reporter James lobs a stinger: "Senator, what about these rumors that you've been having an affair? Will you level with the American people about your private life?" Being a movie, everyone pretends this is unexpected, and there's an audible gasp from the audience.

The politician pauses, then returns fire, "Gosh Jimmy. I will if you will."

Bam! Tension diffused, politician gets off the hook. (this is fiction, after all)

What in Hades does this have to do with bidding wars?

It's all about balls. And not even the kind you're thinking about right now. Sellers who say “we have multiple offers” expect buyers to have the knee-jerk reaction of “Oh! I better offer more money.” Here’s a tip:

Just because somebody throws a ball at you, does not mean you have to catch it.

You’ll be given several hours or overnight to make your decision. Let the ball the seller just tossed at you drop. Take your time to decide whether you want to pick it up. Or not.

Does paying more make sense? For you? For the market? Sometimes paying a teensy bit more than you planned, for a home you’ll live in for 10-20 years isn’t such a horrible idea. What do the comparable sales tell you and your Realtor? Remember that tinkering with the terms of the offer can make it more attractive without spending additional money. Consider letting your offer stand as written – in other words, do nothing.

Whatever you do, remember you have the power to pick up the ball, let it lie there, or walk away.

Still not convinced that you can live through the stress of a bidding war? Check back tomorrow for a sure-fire, can’t lose, stress-free way to deal with bidding wars.


**the political scenario above might even have been Hillary Clinton fielding questions about her wayward husband. I just can't recall for sure. But if it was Hillary, then the story really is about balls, and Hillary's got a brass pair.

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Banks Pull More Nonsense

This doesn't top some of the other nonsense we've discovered banks pulling, but it's pretty nasty.

The bank selling the house our buyer fell in love with requires that the buyer's Realtor reduce their commission (i.e. take a pay cut) if the buyer wants the seller to help pay his/her closing costs or make repairs on the house.

Lots of first time buyers (nearly all, in our experience) have saved money for their down payment but take the opportunity offered by our current market to ask the seller to cover the cost of their closing costs. And lots of bank owned homes need minor repairs before their FHA loan will be approved.

So essentially, if our buyer makes a request made by most home buyers in the field today, the bank will decrease our paycheck? Great. Just great.

*edited to add - after talking w/ my partner Chris this morning about this, I realized my post needed some clarification on 3 points:

First, the Realtors' Ethics Code says agents can't ever allow potential commission  earnings affect what they advise their clients to do.  If our buyer loves a house whose seller is noodling around with our paycheck because they can, and it's a good house & deal for our client, we have to take the pay cut without comment.

Second, the bank buried this commission information deep within a set of forms buyer is required to submit with his/her purchase offer. The paycheck reduction information isn't clearly and transparently displayed in the typical spot on the MLS data sheet like everybody else's commission information.

Third, at the price point our buyer is shopping the bank's savings via this method is about $125. Bottom line - the bank is being shifty to save a buck and a quarter.

Appraiser’s HVCC Rules on Way Out?

Oh yay! Oh yay!  I might actually be able to talk to my buyer client’s appraiser again?

From mortgage officer Rob Chrisman’s blog, earlier today:

…It turns out that the HVCC, which has good intentions but arguably poor implementation and ramifications, could be on its way out. The House Financial Services Committee has just passed an amendment to the Consumer Financial Protection Agency Act to phase it out, and allow all loan originators, licensed or registered in accordance with the SAFE Mortgage Licensing Act, to order appraisals directly. H.R. 3126 is the number of this bill. Although this is just a committee vote, and still has a long way to go, it is a “first step”…

You mean I can explain how the condo the appraiser compared my buyer’s move-in ready new crib isn’t a really good comparable because it was flooded, moldy, missing all the appliances and backed up to a 6 lane road? Oh yay!

If you’re not in the business, you can’t really imagine how frustratingly difficult it’s been to not be able to speak with the appraiser on the house your buyer client is purchasing. That’s been going on since about May of this year. I’d say about half of our appraisals come in low these days. Some significantly low, as in 10% to 13%. We’ve recently had a home appraiser refuse to use as a comp a house that was an exact model match, in the same community, that sold within the past 2 weeks. He had it in his head (apparently) that the house wasn’t a good comp. And weren’t allowed to  speak with him to find out why he thought that. Neither was the buyer’s lender. The deal hung in limbo for over a week. Grrrr!

The HVCC rules can’t die off soon enough for me. Want to know why? Read some excellent in-the-trenches reporting:

Wrong On So Many Levels

Another example of REO lunacy, about which I’ve written before.

Our first time home buyer is being required to sign a document containing the following clauses. She must sign before the bank that owns the house will even look at her offer, which is one among many offers they received. These are the most heinous of the terms they’re demanding:

  • Earnest money must be at least 1.50% of the purchase price or $2,500, whichever is greater.

  • Once Seller accepts Offer, Buyers’ earnest money is non-refundable for any reason.

  • Buyer has “twenty-one (14) days from the date of Seller’s acceptance of Offer to” obtain final loan approval. (my comment – Welcome to the Homer Simpson School of Contract Law, Doh! 21? 14?  Ah, who cares?)

  • Buyer “agrees that any & all home inspections shall be made prior to contract acceptance

  • By signing [the document] Buyer agrees that she has either (1) completed all inspections and removes any inspection contingency and/or (2) waives inspections and removes any inspection contingency.”

  • Any access to the Property is prohibited unless accompanied by the Seller or Seller’s Agent.

  • Seller will not pay any real estate transfer, stamp or recording taxes/fees.

  • Seller will not pay for a Home Warranty.

  • “Buyer must pay Seller a $325 title clearance and document processing fee at time of closing…”

  • “Financing is not a contingency to this contract.” (my comment – if it’s not a contingency, why do you care whether Buyer takes 14 or 21 days to obtain final written loan approval?!?! If Buyer doesn’t get the loan, they either pay cash or forfeit the earnest money.)

This? Ought to be illegal.

Huntington National Bank owns the home in question. Avoid them or hire an attorney to review their contracts before you sign them.


Needless to say, our client rescinded her offer in writing, immediately. I included my own little note:
Dear Sirs,

I suggest you may have better luck getting a signature on this document if you approach the village idiot. Many of them are in Washington, D.C. at this time. Best of luck,

Heather Barr

Short Sales, A Buyer's Perspective

Buyer: “The price on that house is so low, and the house looks so good! Is that price in the MLS for real?!”

ThePhoenixAgents: “Probably not.”

We’re noticing an astounding number of short sale listings in the MLS that are listed for prices that seem too good to be true.  Remember what your dear old Mother taught you about things that sound too good to be true: they usually are.

It’s been said here and elsewhere a dozen time before: short sales are not short and they’re rarely sales. It’s estimated that something like 3% of short sales actually ever close.

Here’s a few salient points on short sales. Those in bold are the ones I think make short sales a silly-stupid idea for buyers.

  1. The sellers’ lender has not seen the list price before it hit the market.

  2. In fact the sellers’ lender(s) will not talk about value of the home, or discuss completing a short sale until the homeowner sends his/her lender(s) a buyer’s purchase offer.

  3. For that reason, there is no guarantee that the seller’s lender will accept your offer - even if you offer full list price. Or more than list price.

  4. The sellers’ lender(s) will probably take about 2 to 4 months to make a decision about the deal. They’re not reviewing the buyer, they’re reviewing the seller.

  5. Meanwhile the market value of that property is fluctuating. Metro Phoenix is in the middle of the worst price decline in it’s history. What are the chances the value of the property in the short sale is going up?

The points above are those I can easily put a monetary value on. Those below are a little more squishy, touchy-feely sorts of aggravation pile-on’s.

  1. Buyers’ loan approvals are only good for a few months, so you’ll probably have to re-qualify if the deal is ever approved. Aggravation factor = minor.

  2. The seller is financially unable to do any repairs to the house. Don’t even think about the sellers’ lender making repairs. They’re writing off a ton of bad debt, so they’re not going to spend money on repairs. Aggravation factor = minor, if you’re getting a really great price. But see point 5 above.

  3. On the other hand, some sellers are choosing not to pay their mortgage even though they’re financially able. If the sellers’ lender(s) get wind of that, how likely are they going to be to approve a huge writeoff? Not!  Aggravation factor = major, because it’s 100% out of your control.

  4. Sometimes sellers are angry or openly hostile about letting you in for showings or inspections. They are losing their house after all and even if that’s due to their own poor planning, people tend to feel mighty entitled when it comes to their house. Aggravation factor = major, because you’re just trying to look at a house for sale, and you’re being given attitude?!

These are the cold hard fact of short sales: even if you offer more than list price there’s no guarantee the sellers’ lender(s) will accept the deal, because they never agreed to the list price in the first place. While they dither, the property you offered on is losing value daily.

Sounds stupid? It is. That’s why – unless our buyer clients insist on looking at short sales – we prefer not to show our buyers these fake listings.

HOAs Get Creative To Beat REOs

Image ID 1191114 by Stock Exchange user mzacha image courtesy of StockExchange user mzacha

Homeowners Associations (HOAs) get knocked about pretty badly when a foreclosure happens in their association. They lose a good deal of money they budgeted to collect.

1. Typically the homeowner losing their home stops paying the regular HOA dues long before they actually get foreclosed on. Buh-bye money.

2. Post-foreclosure, banks don’t pay the HOA during the many months they own the property. Buh-bye mo’ money.

3. Usually the banks pay the back-owed HOA dues when they finally sell the home as an REO. So the HOAs get some money back there. Hello cashola! But we’re still missing a number of months of regular dues.

I served on my HOA’s Board and can vouch that many (most?) HOAs run on very slim margins indeed, and none are making a profit.  Lately I’ve noticed HOAs getting creative to make up some of that lost revenue.  Can’t really say I blame them: it costs lotsa green to maintain green lawns, common areas, mailbox depots and tot lots.

Earlier this year, a buyer client of mine at Landmark Towers (about which we’ve written extensively) paid a total of $600 in extra HOA transfer fees at closing. The detailed breakout of fees included: rush order fee $100, REO fee $100, disclosure on REO $100, and a couple 2-3 other items at $100 a pop. Wow!

Today I got an HOA transfer fee disclosure statement where the HOA is charging $3.50 for providing the buyer with a coupon payment booklet. The mind boggles.

Are REO Deals Breaking Contract Law?

See my original post about the great. Big. Fun! you can have while shopping for REO foreclosure properties and how the banks can change your contract closing date whenever they feel like it.

Today I found a a new wrinkle while I was reviewing the FAQs on an REO listing. This is a true gem:

REO Asset Manager will not sign the HOA Addendum or As Is Addendum. You can submit but Asset Manager will not sign. Also, no changes are to be made to the REO company's Addendum. Any cross outs, additions or changes will make the bank's Addendum void.

So, the bank can refuse to sign parts of the buyers' offer, and can change the buyer's purchase offer documents at will . . .  but the buyers can't change the bank's documents at all. How nice. It must feel so special to be an REO Asset Manager! Kind of like being the God of your own little kingdom.

I begin to doubt the wisdom of buying an REO property. I'm not sure the price buyers can generally get on foreclosures is far enough below market values to justify the (il)legal shenanigans the banks pull.

More REO Fun

Dealing with REO purchases is just. So. Much. Fun!

Two weeks ago my buyer clients and I received a bank’s verbal acceptance of our offer on their house for sale.  The parties verbally agreed to close August 3.

Last week the bank sends back signed docs. Closing date is now August 18. First we heard of it!

Note to asset managers everywhere: A real estate contract is a bilateral document. One party can't change the terms of the deal without the other party's written consent.

Apparently banks now have the power to change contract law whenever they feel like it. Wow, that Obama administration really is bringing change. Change I can believe in? Not sure I want to.

note: I’m just being snarky. Obviously I don’t believe Obama's team has anything to do with the fact that the banks practice the New Golden Rule:  “He who has the gold makes the rules.”

further note: Giving credit where it's due, the bank's asset manager was trying to do the buyers a favor. She took a week to get signatures back to us, so she thought she'd compensate by kindly giving the buyers more time to get their loan processed & closed. That's nice. But the buyers don't want a longer close. They want to close yesterday. It seems to me that the banks should require their asset managers to at least take a Contracts 101 seminar. A day of legalese for mid-level managers negotiating millions of dollars worth of bank assets. Really, is that too much to ask?

Do I owe my Agent a Commission?

A real-life question from our email in-box.


Hi, I actually am looking for a bit of advice from a realtor, and I'm hoping you can give me your opinion on this. My cousin who asked a realtor to show her some houses around the city recently found a house that she likes on her own. The house is being sold by the owner and isn't reporesented by an agent. The agent that my cousin used before helped her with finding financing for the homes that she was recommending and representing. If my cousin decides to go with the house that is "for sale by owner" but uses the financing that the agent helped with by referring her to a bank, does my cousin need to pay the agent a commission? I am arguing that she owes the agent nothing since the financing is between the bank and my cousin, and the agent has no business relationship with the bank. My sister argues that the agent helped with the deal overall, so is entitled to up to 3% of the value of the sale, which is about $9,000 in this case, even though the agent is not directly involved with the house in question. Can you please give me your opinion from an agent's perspective? Thanks!


You're asking a question that's difficult, if not impossible, to answer based on the facts you've given.  I'm not sure what agreements they had (in writing and not in writing), or even what state they're in.  And even with that info, it's probably not my business, nor am I an attorney to determine who is due what..

Personally, we rarely have our buyer-clients sign a contract with us.  But we also ask our clients, in very clear terms, to understand that we are committed to them and we expect the same commitment from them.  Our service is more than just finding a house - it's knowledge of the market, the area, the history, the contract, the process, the lending environment.  It's advice, opinions, protection.  It's listening, understanding, facilitating the emotional questions that go along with making a major purchase.  Our clients get everything we have to offer, without paying a dime up front.  The only time we get paid at all is when our clients successfully close escrow on a home.  We ask our clients to understand this and to not put us in the position you've described.

So while I can't answer your questions specifically regarding your cousin, I hope this helps a little bit..

Your thinking things would be easier if everybody used the same set of rules Realtor,

Chris Butterworth

Landlords, Need Help?

Landlord:  “Why didn’t you pay the rent on time this month?”

Tenant 1: We all had swine flu and we like you so much we didn’t want to give it to you so we didn’t mail the check.

Tenant 2: I don’t have time for this now. We’re all going to see the new Star Trek movie. I’ll worry about the rent another time.

Tenant 3: My dog at it.

Sometimes tenants’ excuses for not paying the rent on time are downright funny. In the way of the internet, I forget how I found the site these quotes came from, but it’s worth looking and bookmarking.

Beyond listing goofy late-rent excuses, the Landlord Protection Agency website can be a great resource for landlords, even those who have ideal tenants. The LPA site offer free forms like a Late Notice, a Key Receipt and even a Security Deposit Refund Receipt.

If you’re a landlord or thinking of becoming one, I recommend you visit this site. Disclaimer: if using forms found online, check with your attorney to make sure the language is valid in your state.

Foreclosures: Read the Fine Print

Buyers should read the fine print on bank addendums very carefully before agreeing to complete the purchase of a foreclosed (“REO”) home.

I’m reading a bank’s REO Addendum now and I’ve got 2 problems with it.  1) It removes the buyer’s financing contingency after the “Financing Commitment Date.” 2) The actual Financing Commitment Date is left blank.

In part, the bank Addendum says
. . . If Buyer delivers written notice to Seller that … financing has been declined (a “Notification of Decline”) prior to the Financing Deadline, then the Agreement to Purchase shall become null and void and the Deposit shall be returned to Buyer. If Buyer fails to deliver to Seller either a Commitment [i.e. full loan approval] or a Notification of Decline prior to the Financing Deadline, then Buyer shall be deemed to have waived the foregoing contingency and the Agreement shall remain in full force and effect without any such financing contingency.

If that doesn’t sound scary to you, keep reading to see why it IS scary.  If you already know how to read and interpret legalese, you know where I’m headed: caveat emptor.

What’s a Financing Contingency?

In a standard purchase contract, the buyer’s purchase is contingent on getting a mortgage.

If the buyer’s loan application is denied at any point in time – up to and including closing day – the buyer notifies the seller in writing “my loan was denied” and she/he gets his/her earnest money deposit back.

The buyer goes on his merry way. Or maybe it’s his depressed way. But at least it’s not his “poorer because I lost my earnest money” way. (there can be extenuating circumstances, but this is the gist of the contract language)

What’s Wrong With This Picture?

Back to the example above – remember, the bank’s REO Addendum removes the buyer’s financing contingency after the passing of the “Financing Commitment Date,” which is left blank.

What Does This Mean?

I can see this potentially going very, very badly.

  • IF my buyer client is denied her mortgage loan,

  • THEN we inform seller in writing “loan denied” and say “please give us back buyer’s earnest money.”

  • IF bank doesn’t feel like giving earnest money back because they’re bleeding red ink all over their quarterly government filings showing what they did with all that taxpayer bailout money,

  • THEN they could use the blank Financing Commitment Date to justify taking Buyer’s earnest money.

HOW? I used to work for a bunch of lawyers. I grew up listening to my Mom talk about the lawyers for whom she worked for over 20 years. Believe me, it wouldn’t be hard to find a lawyer who’d argue that that a blank Financing Commitment Date meant the buyer needed full loan approval at the time she signed the contract.

Slam, bam, thank you Ma’am. You’ve just been burned by legalese. Your earnest money? Gone.

(and I'm not even lawyer bashing; they’re just doing their job)

The Bottom Line

I’ve laid out a pretty far-fetched scenario. It’s highly unlikely the bank selling the foreclosed house expects the buyer to have a full loan commitment on the date she signed the contract to buy the house. (Technically, it’s 99.9%  impossible to have a full loan commitment on the date you make an offer.) It’s also pretty unlikely that a bank would actually take my buyer’s earnest money if we told them our loan was denied.

But as a buyer’s agent it is my job to anticipate and explain to my client the potential worst case scenario. Murphy’s Law says the minute I don’t, is the minute the worst case scenario hits my buyer in the face. Or the wallet, as the case may be.

Buyer Beware

Read the fine print on everything you sign. The banks selling foreclosed homes are not your friend. They do not wish you well. All they wish is to recoup as much money as possible on every house they sell.

My buyer is very likely to decide to go through with this deal. But at the very least, she deserves to know the risks she’s taking, upfront. And she deserves to make an informed decision, after hearing the potential risks (bigger risk of losing earnest money) and the potential benefits (nailing a screaming good deal on a solid little house).

More Thoughts on REDC Auctions

This is a follow up to yesterday’s post about the upcoming June 13-14 REDC auction of bank owned foreclosure homes.

Most auction houses don’t use the Arizona Association of Realtors’ (AAR) purchase contract form. They’re national corporations; they use their own forms.

REDC doesn’t publish their purchase contract online. However, I’ve seen other auction companies’ purchase contracts, and noticed that many of the buyer’s rights under the AAR contract are not in the auction contracts.

Most importantly, the AAR purchase contract gives buyers the right to cancel the purchase and receive a full earnest money refund if:

  1. the property doesn’t appraise for at least the purchase price

  2. the buyer isn’t approved for financing

  3. the buyer doesn’t like what s/he found during the home inspection period

Most auction houses don’t allow buyers these rights, known as “contingencies”.

Simply put, if the house doesn’t appraise for the winning bid amount, you must buy it anyway or forfeit your earnest money. Your mortgage lender denied you a loan? Oh that’s too bad. Will that be cash or cashier’s check? Oh, you don’t have the cash to buy the house? Ooooh. Well, we’re just gonna have to take your earnest money.  Better luck next time.

A Great Deal?

Two tips if you’re considering attending the REDC auction on June 13:

1) Consider the cost of the marketing fee the auction house adds to your purchase price.

At the REDC auction on June 13, a 5% marketing fee is added to the winning bid. That means the house must be at least 5% below prevailing market prices before it’s worth it to have bought at the auction.

2) Do a thorough home inspection before the auction, including a contractor’s estimate for repairs and a Realtor’s or appraiser’s estimation of value.

Know exactly what you’re buying. Does the roof leak? Does the A/C work? How about the water heater? Does the house have termites? Foundation damage? Slab leaks?

The old saying “you get what you pay for” has been around long enough to get old because it’s often true.

I’ll be attending the June 14 auction. If you’d like to attend with me, call or email.

602-999-8831 or

REDC Auction

REDC is one of the biggest home auction houses in the country and they’re advertising their upcoming June 13-14 Phoenix area auction heavily on local cable TV channels.

Here’s a few things you should know if you’re thinking about attending.

Access and Inspections

  • You can tour the homes and do inspections before the auction but not after

  • Open House dates for the Phoenix area are May 30, June 6 and June 7

  • Heather’s note: it’s nearly 100% certain that Realtors will be holding these open houses, fishing for unrepresented buyers, so be ready to say No or bring your own Realtor to the open house

  • It probably goes without saying that REDC probably won’t be happy if you do your home inspection during the Open House (but many homes are on Realtor's lockboxes so you can hire a Realtor to get you into the homes at time other than the Open House)

Attending The Auction

  • You have to bring $5,000 cash or cashier’s check to enter

  • You can bring your own Realtor to the auction and REDC will pay him/her a 1% commission

  • If you win a property at auction you must put down a 5% earnest money deposit that day

  • You cannot attend the auction for someone else (no assigning winning bids)

The Money

  • You can finance your home purchase

  • REDC’s lenders are on site but you don’t have to use them

  • If you use your own lender, you must purchase the home even if you’re turned down for a mortgage (no financing contingency)

  • You must close on the purchase within 30 days of the auction

  • Heather’s Note: Lenders a swamped with buyers lately so you might not be able to close within 30 days; start working with a lender before the auction

The Fine Print

  • REDC adds 5% to your winning bid to cover their marketing expenses (if you win a house for $200,000, they’ll add 5% - or $10,000 – to make total purchase price $210,000)

  • The 5% fee is added to your purchase price whether you use your own Realtor or not

  • REDC’s website says they usually auction 25 to 30 properties per hour (i.e. you’ll have 2 minutes, total, to decide whether you want to bid on each home, and how much

  • If you “win” the house at the auction your purchase is non-cancellable

If you want to read the complete FAQ for this auction you can find it on REDC's website. A few more thoughts on auctions tomorrow…

I’ll be attending the June 14 auction. If you’d like to attend with me, call or email.

602-999-8831 or