Posts Tagged ‘Consumer Education’

Tucson Active Adult Communities Run the Gamut…

Monday, December 14th, 2015

The Tucson area is home to a multitude of active adult communities which range in price and amenities available.
Some communities require that buyers be age 50 and others age 55. Some communities stipulate that the owner meet the age requirement. This means a child less than 50 or 55 cannot purchase a property for a parent who meets the age restriction.
Other communities have no restriction on who can purchase a property as long as the occupant meets the age requirement. Some developments ask for proof of age, others don’t. When purchasing a property in an active adult community, the Covenants, Codes and Restrictions (CC and R’s) will spell out the requirements.
Price points run the gamut from $60,000 to more than a million dollars. Popular manufactured home active adult communities offer lower cost options and yet have many of the bells and whistles of the more expensive communities. Most have pools and recreation centers and offer the camaraderie of like minded residents.

Active adult communities built by production builders such as Pulte and Robson sport a beginning price point of the high $100’s.   Add ten to twenty percent to the base price for new home construction upgrades. When considering new home construction, use a Realtor®.  Make sure you make your first visit to that community with the Realtor® since he/she can often save you money and guide you in terms of what upgrades you should consider for future resale value.  You want to have representation and not be represented by the builder’s site agent who is working for the builder, not you.

Your Realtor® should check the inventory in the community to make sure you are aware of what is available.  Pre owned homes will probably have landscaping completed as well as window coverings, fans, and other upgrades which make a house a home and will save you money in the long run.  He/she can help you compare and contrast various communities.

Understanding your wants and desires and trying to match communities throughout the Tucson area is the function and job of your Realtor®.  There are many smaller communities within town; condos, townhomes, patio homes, manufactured homes, in addition to single family homes which may meet your requirements.  Not all active adult communities are golf course communities with hundreds or thousands of homes.

Think about what you want in a home, how you want to live your retirement, and tell your Realtor® who can help you translate that into reality.

 

 

 

 

 

 

 

 

Active Adult Community? Questions to Ask Yourself…

Monday, December 7th, 2015

AdobeStock_80344017_WMSo you are thinking about a retirement community…or in the proper parlance, an active adult community.  There are several questions you should consider and discuss with your partner.

You can do what is known as a “Ben Franklin”- take a sheet of paper, fold it in half lengthwise, and on one side write all the pros – reasons you want an active adult community- and on the half, list all the cons – reasons you may not want an active adult community.  Both parties should do the same, and the fun of the game is not to talk with each other about your lists.

Give yourself two weeks or so to do this.  As you go about your daily business, you will think of reasons for either column, then write them down.  At a previously agreed upon time, over coffee or wine, in a relaxed atmosphere, pull out your lists and discuss them.

You may want one thing and your partner another…this is a time to sit and discuss what is on the list and prioritize what you have created.  You will find that this exercise will help you both formulate what is important to you both, or what is important to one, but perhaps not another.  It will help you to understand what you features you can comprise.

Do you want a single family home?  And if so, what kind?  A regular Single Family home or a patio home?  Or do you want a town home or a condo.  In my last blog, I discussed the differences.

Are you looking for a community which provides a plethora of activities which are pretty much contained within the community?  Or do you want to participate in activities such as classes at Olli, classes and activities from Parks and Rec which run the gamut from learning how to play tennis to advanced pottery classes.  Or are you a volunteer type of person who would become a docent for the Symphony, for the Desert Museum.

This is your retirement and this is your opportunity to do what you have always wanted to do!  Unfortunately many people never think about this and just kind of stumble along in life.  Make this time for you, for you are the most important person in your world!  Do the hard work now so you can enjoy your time in retirement, wherever it is!

Condo? Town Home? What’s the Difference?

Tuesday, December 1st, 2015

golfing-620x412The blue skies of Tucson and the inviting warm climate beckon, especially during drizzly, cold and bone chilling December through March weather.  Thoughts drift to a condo or a town-home in warmer and more hospitable climate, where golf can be played year round, hiking and birding are within a few miles of the city, and dining al fresco at one of the many establishments may become more than just a dream.

Tucson, Oro Valley and Green Valley have many condo and town home communities, many of which are limited to active adults with a minimum age limit of 50 or 55.  Condos and town homes are legally and statutorily different animals.

The Arizona State Statutes define condominiums in Title 33 which is the section governing property.  Chapter 9 concerns condominiums and Charter 16 governs town homes.

Condos do not have to be physically contiguous.  Some condo units are free standing, but the legal description is what separates a town home from a condo.  The owner of a condo owns the unit, but anything exterior to the unit is common property and is governed by the rules and regulations of the Association, unless that exterior element services only that unit.

A town home on the other hand, is a unit whereby the owner owns the land in the front and the back of the property and is responsible for that land.  It is not considered common property.  However a town home complex can have common property such as a recreation center, walking trails, or open space, just like a single family home subdivision.

These types of properties are governed by an Association which is comprised of the owners of the units, each having a specified vote according to the declarations of the community.  That Association is controlled by a Board of Directors which is elected by the property owners.

Rules and regulations of the Association must comply with state law, but dues structure, what the Association offers, and the types of maintenance such as roofing, landscaping, building painting, are determined by the Board of Directors and voted on by the members of the Association.

Often an Association will vote to outsource the day to day maintenance and collection of dues to a Management Company.  Many Homeowner Associations (HOA) pay a management company and this also includes single family home subdivisions as well as town home and condo complexes.

The rules and regulations of the Association are in the documents called the CC and R’s, Covenants, Codes and Restrictions.  Purchasers of properties which have CC and R’s should read the restrictions carefully.  Restrictions regarding the length of time children under a specified age can state are the property are important considerations for people in an active adult community who may want their grandchildren to visit, the policy on pets and weight of pets may be of concern, as well as information on how and when the Association can place a lien on property for non-payment of dues.

Your Realtor® should help you decide whether a condo or town home or single family home is best for you, and should guide you through the paperwork and CC and R’s to make sure the property you are purchasing suits your lifestyle and needs.

For help with purchasing a property in the Tucson area which includes Marana, Oro Valley, Tucson, Green Valley, and Sahuarita, contact Terry Bishop Broker Owner of Terry Bishop Realty, 1802 West Grant Road, Tucson Arizona 85745-1232 – cell:  520-349-4785, office:  520-232-3911.  

Why Read the Prelim and Title Commitment?

Tuesday, November 24th, 2015

title-commitment-600What does the preliminary title report and commitment for title contain?
In addition to the findings of the title search, the prelim includes the legal description of the property and this should be checked with the legal description on the sales contract. The sales contract describes the property three ways; the street address, the parcel identification number or the assessor’s number, and the legal description.
There will often be a plat map showing the location and dimensions of the property and often a partial plat map of the subdivision. There may be drawings showing easements of the property on the plat map.
In the description of the property, easements will be described; most property contain utility easements. If there is common property, this too will be noted on the commitment.
If there is a Homeowner’s Association, the commitment will make reference to that fact and indicate where the HOA documents can be found in the recorder’s records. This will include the original documents for Covenants, Codes and Restrictions, and any amendments.
CC and R’s originally were put in place for the benefit of the builder and upon the build out of the subdivision, the Association is turned over, along with any common property, to the residents of the subdivision. There is nothing which requires a HOA; I live in a subdivision built in 1979 and upon the transfer of the “Association” to the residents, the residents promptly voted to abandon the HOA. This document is recorded.
Builders protect their investment by requiring standards so a resident doesn’t paint his house purple or store junk cars in the front yard. This would make the area less desirable for potential buyers and infringe upon the builder’s ability to sell new homes.
HOA dues must be brought up to date if in arrears, prior to transfer of title. Likewise, property taxes will be referenced and must be current prior to transfer of title, including late fees and penalties. The name of the association and management company with contact information is specified.
All liens on the property must be cleared prior to conveyance. And in community property states, the marital status of the buyers are specified. If a married person takes title alone, the spouse must sign a disclaimer deed which is recorded.
And of course any and all mortgages are itemized with the recording number, and including any Home Equity Lines of Credit. And the deed must be recorded from the grantor to the grantee.
Requirements to be fulfilled prior to recordation are itemized as well as the manner in which the documents must be signed, such as margin requirements.
The preliminary title report and commitment for title are important documents and must be read by the buyer, the seller, and both agents so that any errors can be corrected or problems with tile be solved prior to recordation.

Why Have Title Insurance?

Monday, November 23rd, 2015

red-flags-collection_23-2147512332Why have a title search? Truthfully you may be purchasing a piece of property which actually may not be yours. Liens follow the property, not the people.
Suppose I sell you a piece of property at a rock bottom price, offer to finance it for you, tell you I will do everything, and all you have to do is give me earnest money of $20,000. It’s such a bargain you hop right on, so you give me good funds for $20,000. We sign the paperwork and alas, the property is now yours. I file all the paperwork and you think I am absolutely wonderful….Until you realize when you purchased that property from me, you also purchased all the liens; they are now your responsibility.
They can be mechanic’s liens for work completed but not paid; medical liens from doctors and hospitals, judgment liens handed down by a court for accidents or other legal entanglements, back child support, internal revenue service liens, HOA liens for back dues–liens for just about anything—you have just purchased all of them and they could be hundreds of thousands of dollars.
That’s just one of the reasons you need a title report. Maybe this is a second marriage and the property was purchased during the first marriage and there are children by that marriage. These children may have claim to the property when that spouse is deceased, and the living spouse actually has nothing.
Perhaps one spouse has died and the surviving spouse has not probated the estate. This happens frequently and the property is in the name of both spouses. A dead person cannot have claim to a property, it must be dispersed as the will deems or intestate (by the state). This must be completed before any transfer of property so that the legal owners can be found and possibly agree to the transfer.
Very often it is an investigative mission to find surviving heirs. I had a situation where the woman who was in a second marriage, wanted to sell her property. She had children by her first marriage and her first husband had died. The wife never took care of the first husband’s estate. He wanted his children to receive his portion of the property.
Immediately that means the wife receives only half of the value of the property, not the full value she anticipated. There were five children, spread all over the country. One of the children had died so his heirs were in line to inherit one fifth of one half of the proceeds of the property. We couldn’t find him and this was going to tie up the conveyance of the property. Finally we located him, and then we were able to put the property on the market. Had we a contract waiting, we probably would have lost the deal.
Good agents always check title prior to putting property on the market. Usually there is no problem, but sometimes a real estate/estate attorney needs to be called to unravel the title in a legal manner. Title insurance insures that good title is being passed to the buyer. Always read the preliminary title report and immediately take care of any red flags.

The New Closing Document?

Thursday, November 19th, 2015

signing_document_4Before October 3, pre Consumer Financial Protection Bureau (CFPB) regulations, the title company drew up the closing disclosure statement which used to be known as the HUD-1. With the implementation of CFPB, in Arizona, it is now the responsibility of the lender to draw up the closing disclosure and get it to the escrow officer with whom the buyer and seller will “close escrow”. The real estate agent should also be present and explained the closing statement to the clients prior to close of escrow.
Lenders, under CFPB, are now required to get the closing disclosure to the parties three business days prior to the scheduled closing. It is a simpler form that the HUD-1 and spells out the loan amount, the interest rate, the monthly principal and interest and any prepayment penalty .
The projected payments show how the payment is calculated with principal, interest, mortgage insurance and estimated escrow which includes taxes and insurance. Projections are for Years 1-7 when Mortgage interest is required and then from years 8-30 or the life of the loan when mortgage insurance is no longer required. Estimated taxes and insurance are spelled out in a separate box. These are not static costs, they can rise yearly as taxes increased as well as insurance.
Closing costs are estimated and the cash to close is spelled out. The second page is a breakdown of the closing costs detailing all loan costs; loan origination fee, services the borrower did not shop for; and services the borrower shopped for.
Taxes and government fees which include recording fees are spelled out as well as all pre paids which include hazard insurance premium, mortgage insurance, prepaid interest, and tax escrow accounts on a monthly basis. The initial escrow payment at closing will include insurance, mortgage insurance if applicable, and taxes and these are computed in the closing costs needed by the borrower to close escrow. Other fees will include Homeowner’s Association fees, Real Estate commissions with the amount and to whom it is paid, and owner’s title insurance.
The third page includes a calculation of “cash to close” which includes total closing costs, anything paid out of escrow such as an appraisal, any closing costs which are financed, and the down payment, any deposit, the funds for the borrower from the loan, any seller credits or other adjustments, and then the cash to close figure is derived.
The remainder of page three is a summary of all the transactions from the previous pages, and shows the borrower’s transaction as well as the seller’s transaction so the net due seller is calculated. Any deposits, amount of the loan, and seller credits are displayed; adjustments such as taxes or HOA fees, showing as a debit or a credit for the buyer and the seller. Any mortgage payoff is shown on the seller’s side.
Page four are loan disclosures about features of the loan, whether there is a demand feature, if the loan can be assumed, what happens with a late payment, if there is negative amortization, and will the lender accept a partial payment. The escrow or impounds will be spelled out, and the estimated property taxes if the buyer declines an escrow account will be shown.
The last page shows the total amount which will be paid if the buyer holds the property for the length of the loan and makes payments as scheduled. The amount of interest paid during the life of the loan is shown as well as the amount financed. The higher the loan interest rate, the greater the amount of interest paid. The annual percentage rate is shown and is different than the interest rate for the loan. The APR includes all the funds necessary to close escrow. And then the box which will show the total interest rate percentage over the life of the loan will knock your socks off! It is the total amount of interest paid over the loan term as a percentage of the loan amount.
Contact information for the lender, the mortgage broker, the real estate broker for the buyers and seller and the settlement agent are listed with name, address, identification number, state license number, contact person and the contact identification and state license number, e mail address and phone number.
To view this form: http://files.consumerfinance.gov/f/201311_cfpb_kbyo_closing-disclosure.pdf

 

Taking Title in Arizona…

Tuesday, November 17th, 2015

2926345The manner in which a buyer takes title to a property in Arizona has legal and tax consequences.
Arizona is a community property state.  Neither the real estate agent nor the escrow officer can give legal advice on how to take title. However general guidelines have been published and are reproduced here.  These are definitions provided by Fidelity National Title Agency, Inc.  Thank you.

 

COMMUNITY PROPERTY WITH RIGHT OF SURVIVORSHIP:  Community property with right of suvivorship is a method of ownership by husband and wife that vests title in the surviving spouse upon the death of one of the spouses.

COMMUNITY PROPERTY: Arizona is a community property state.  There is a statuary presumption that all property acquired by husband and wife is community property.  Community property is a method of co-ownership for married persons only.  Upon death of one of the spouses, the deceased spouse’s interest will pass by either a will or interstate succession.

SOLE AND SEPARATE:  Real Property owned by a spouse before marriage or any acquired after marriage by gift, devise, descent, or specific intent.  If a married person acquires title as sole and separate property, the spouse must execute either a disclaimer deed or quit claim deed.

JOINT TENANCY WITH RIGHT OF SURVIVORSHIP:  An undivided interest in property taken by two or more joint tenants.  The interest must be equal; occurring under the same conveyance, and beginning at the same time.  Upon death of a joint tenant, the interest passes to the surviving joint tenant or tenants, rather than to the heirs of the deceased.  If a married couple acquires title as joint tenants with right of suvivorship, they must specifically accept the joint tenancy to avoid the presumption of community property.

TENANCY IN COMMON: A method of co-ownership where parties do not have survivorship rights and each owns a specific undivided interest in the entire title.

CORPORATION: Any group of people “incorporating” by following certain statutory procedures many take title to real property in the name of the corporation.

GENERAL PARTNERSHIP: Title may be taken in the name of a general partnership duly formed under the laws of the state of the formation of the partnership.  A partnership is defined as a voluntary association of two or more persons as co-owners in a business for profit.

LIMITED PARTNERSHIP:  A partnership formed by two or more persons under the laws of Arizona or another state and having one or more general partners and one or more limited partners.  A certificate of limited partnership must be filed in the Office of the Secretary of State, a certified copy of which must be recorded.

 

 

 

 

Title? Escrow? What’s the Purpose?

Monday, November 16th, 2015

title-deed-paper-document-rolled-isolated-white-background-41043141Arizona is a title company state. The escrow company- escrow officer- closes escrow, not an attorney. In attorney states, close of escrow takes place with the attorney for the buyer and seller.  The attorney is responsible for clearing the “chain of title”. In title company states, it is the title company which insures the chain of title.
The escrow company and title company are often used interchangeably, but they are different. The escrow company is responsible for preparing all documents and ordering the title report from the Title Company. The escrow company holds the money and disburses it according to instructions from the lender, reviews the files to make sure all the conditions of the contract have been met and makes sure all contingencies have been fulfilled.
Some of the larger Brokerages have relationships with title companies; on the purchase contract, the Title Company and the Escrow Company are different.   Often the prices for title and escrow are higher than if the same company performed both functions. It is the buyer’s choice to choose the title and escrow company.
In Tucson, we are seeing real estate agents “recommend” in the MLS listing, that a specific title company or escrow officer be used.   The buyer and buyer’s agent can choose any company and does not have to abide by this “recommendation”. The purpose is to generate more business for that company (owned by the brokerage) which generates more money for the brokerage, which is allegedly used for additional marketing.   (These relationships also exist  for the lender and the home warranty company.) The Consumer Financial Protection Bureau, is investigating whether this is a violation of RESPA rules –The Real Estate Settlement and Procedures Act since consumers allegedly pay more.
Most big brokerages have disclosures in the myriad of paperwork which clients are asked to sign. Whether those disclosures are explained to the client depends upon the agent;some agents can’t explain the documents to be signed.
Once the contract has been signed, the agent “opens escrow”. The earnest money check and the purchase contract are given to the escrow officer. The escrow agent orders the title search.  The preliminary title report is issued and it is important for the agent to read the “prelim” in case there are red flags.

Often a person with a common name will be flagged for back child support, or a lien on the property. These must be cleared prior to transferring title. If the buyer/seller is not this person, he/she will have to sign a “not one in the same” document and provide proof he/she is not that person.
Other onerous title issues may occur. If there has been a death of one of the owners and the estate has not been probated, often heirs must be located and/or the estate probated prior to the surviving spouse transferring title.
On occasion, I have had to refer these title issues to a real estate/estate lawyer. However, it is far better to insure the title is clear prior to listing the property so that any transaction can flow smoothly. Waiting until escrow has been opened and title problems solved may put the kibosh on the transaction.
When dealing with sellers where one party may be incapacitated, it is important to get a durable power of attorney. Sometimes this takes a while; agents are often eager to get property on the market. Being knowledgeable about title issues prior to putting a property on the market is essential for a smooth transaction.

Appraisals?

Thursday, November 12th, 2015

PreviewThe purpose of an appraisal is to protect the investment of the lender’s investors. Actually the lender bundles the loans and sells them on the secondary money market and often they are resold which is why the buyer must purchase an Alta Lender’s policy which assures that the lender is always in first lien holder position. This is why you may purchase a property and the check for the loan is made out to xyz company; eight years later, you receive notice it is to be made out to 123 company and then even later, you write your check to abc company. The mortgage notes have been sold. But I digress.
If you have a loan on the property, usually you must have an appraisal. The appraisal is nothing more than an opinion of value. Hopefully that is what your Realtor® has provided you; an opinion of value substantiated by homes of similar age, quality, size and amenities within a reasonable range. The Realtor® is very aware of the fact the property has to appraise. It does no one any good to put a high price on a property, receive a contract for that high price, and then have the property not appraise.
So what happens then? One of three things. Let’s say the property is priced at $275,000. The appraisal comes in at $260,000. The buyer is putting 10% down or $27,500 and carrying a loan for $247,500. Scenario One: The buyer can come in with the additional $15,000, the difference between the $275,000 and the $260,000 and put $42,500 down. But why would a buyer pay $15,000 more for a property than it is worth?
Scenario Two: The seller can lower the price to $260,000 on the basis that the property, according to the appraiser, is not worth $275,000.
Or Scenario Three: The seller and the buyer can meet someplace in the middle and each give up something, the seller can come down $7500 and the buyer can put down an additional $7500. It’s a re negotiation.
Or the seller’s agent can “fight the appraisal” but will generally loose, especially if it is a VA appraisal.
I had a property which sold immediately for $162,000 with a VA loan. The appraisal came in at $156,000. The seller went down $2,000, the buyer came up $2,000 but there was no meeting of the minds. We cancelled the contract, and put the property back on the market but indicated we would not accept VA financing. The VA appraisal stays with the property for six months and I did not want to constrain my seller to the $156,000 appraisal.
Within 48 hour, I had another contract, also for $162,000 but with a conventional loan. The appraisal was done within a week and a half of the first appraisal, and came in at, you guessed it, $162,000. And ironically, that same first buyer came back with another back up offer but of course the second buyer closed on the property within three weeks.
The lesson to buyers is simple. If you have a property you want, be prepared if the appraisal comes in low. Your agent should give you comps to support the price you are offering. Your agent may also know how other agents price: some price high, some price on target, and some give you about 3% to negotiate – often to account for the 3% concessions buyers often request.
The lesson to sellers is equally as simple. Your agent should price the property with supporting comps in a realistic range based on properties in the neighborhood of like kind which have sold. These are the same comps the appraiser will be using. Don’t fall for the old argument, price high, you can always come down. Generally that is a recipe for not selling your home, or a series of price reductions which will net you less than the price your agent originally suggested. Remember, the property has to appraise!

What is the Loan Status Update? LSU?

Wednesday, November 11th, 2015

stock-photo-young-couple-meeting-financial-advisor-for-investment-254297140The Lender must issue Loan Status Updates, otherwise known as LSUs, when requested by either the seller’s agent or the buyer’s agent. The first page of the LSU is similar to the Pre-Qualification form but is issued after mutual acceptance of the contract.
The close of escrow date is specified, the name of the buyer, the name of the seller and property address as well as Assessor’s number, and the city.
It is page two however, which tracks the progress of the loan from the reception of the contract and all addenda from the buyer’s agent. Understanding these items which the lender must fill out with the date completed and his/her initials, marking each box a yes or a no, is a journey through the loan process.
Once again, the lender must assure that he/she has the buyer’s name, income, social security number and the address of the property, as well as the estimate of value of the property and the amount of loan requested. The lender verifies that the loan estimate has been sent and the buyer indicates his/her intent to proceed with the loan.
The lender receives a signed Form 1003 (http://www.mortgagesanalyzed.com/gyan/docs/fnma-form-1003/fnma-form-1003.php) which is the loan application form as well as all of the lender disclosures.
CFPB regulations now have the appraisal being ordered almost immediately and usually prior to the home inspection. In the “olden days”, pre CFPB, the home inspection was done first and then the go ahead given to the lender to order the appraisal. Buyer’s agents should now order the home inspection upon mutual acceptance of the contract as soon as possible.
Down payment sources are identified and the lender must review the Title Commitment to make sure there is no clouded title on the property, then the lender can lock the loan program, interest rates, points, and specify when the lock expires. Once the lock expires, that interest rate is no longer guaranteed and the buyer may have to pay a higher rate which potentially could prohibit him/her from purchasing the property since the total loan amount would exceed the amount of pre-qualification.
The appraisal is received and the property must appraise for the loan amount requested. We will talk about low appraisals in another blog tomorrow. If the appraiser has requested any repairs, the list must be provided to the buyer and the buyer and buyer’s agent must acknowledge receipt. These repairs must be completed and the appraiser must go out again and ascertain that the repairs have been done as a condition before the lender can issue documents for signing. The second trip is an additional expense to the buyer. These repairs are called PTD, prior to documents conditions.

The lender package goes to the Underwriter, the silent but powerful person in the back office. It is the underwriter who makes sure the conditions of the loan have been met and issues the final decree that the buyer has loan approval without PTD conditions.
The lender now orders closing documents and completes the closing statement, formerly a task done by the closing agent. This was called the HUD-1 and is now called the Closing Disclosure Statement. The lender reviews all, making sure all prior to funding conditions have been met and then orders funds to be sent to the escrow company. The buyer and seller sign the loan documents and another property has transferred ownership.

To see the new documents, check this website:
http://www.consumerfinance.gov/know-before-you-owe/compare/