These tips are not legal advice. They should not be a substitute for advice from professional counsel or the assistance provided by an agent’s Designated Broker.
Risk Tip: Identifying Potential Buyer Fraud:
This scam is a longer process than the typical Seller Scam scenario.
Some of the red flags include:
- provides falsified proof of funds well beyond the offer price (i.e.$23,000,000 for a $800K purchase)
- does not respond in a timely manner
- decides, after a few days, to have their attorney handle the transaction
- purchaser is a business entity – inconsistency in documents
- the buyer’s exhibits sense of urgency
- overpaying the earnest money and requesting a refund
What you can do:
- contact the institution on the proof of funds document – don’t use the phone number on the document. If possible take the document to a local branch of that institution for verification of authenticity.
- ask for a second method to contact them (I don’t use email, my phone is being repaired…)
How does the buyer “win”? The buyer states that the funds are suddenly tied up for several months, but since he really wants the property, he asks to rent the property for a few months. He moves in, but never pays the rent. Likely a false identity was used so there is no recourse and the property may need repairs.
Risk Tip: Be a Pro, be in the know!:
Within one (1) business day of marketing a property to the public, the listing broker must submit the listing to the MLS for cooperation with other MLS participants. Public marketing includes, but is not limited to, flyers displayed in windows, yard signs, digital marketing on public facing websites, brokerage website displays (including IDX and VOW), digital communications marketing (email blasts), multi-brokerage listing sharing networks, and applications available to the general public.
Click here to view the Coming Soon Guide
Click here for more information on the Clear Cooperation Policy
Click here for NAR’s video on Understanding the MLS Clear Cooperation Policy
Risk Tip: Is your listed Condo Warrantable or Non-Warrantable?:
This is so important to know when you accept a purchase offer. Your purchase offer may become invalid if the condo is not an approved (warrantable) condo. Yes, there are condos with approved financing options for non-warrantable units, but the down payment and interest rate requirements may be greater than Loan Status Report may reflect. This may create a hardship for the homebuyer. Do not solely rely on the closed sales showing conventional financing.
It is easy to see if a condo is FHA approved, using the HUD website: VA financing will also use this site. HUD does allow lenders to do a spot approval for that specific unit and not entire condo project if the project does meet the established condo requirements.
Lenders must have FNMA/Freddie Mac Form 1076 completed to determine if a condo meets the requirements of being warrantable. This can be accomplished by sending this form to the condo management department or using their preferred website, HomeWise Docs. https://sf.freddiemac.com/docs/pdf/forms/condo_questionnaire_form_short.pdf. The red flags may be occupancy vs. investor ratio, cash reserves, ownership of multiple units by one party, delinquency of HOA dues, pending litigation, etc. Lenders do have the ability to do a lender’s certification of the condo approval, providing that it meets all the warrantable requirements.
It may be best to speak with your preferred mortgage lender to see if this condo unit can be warrantable
Risk Tip: Reducing Liability in Writing Sight Unseen Offers:
When writing sight unseen offers where your clients commit to purchasing or entering into an agreement without physically inspecting the property, it’s important to take certain precautions to mitigate potential risks and liability. Here’s a risk tip on how to lessen liability when writing sight unseen offers:
- Have your client sign a hold harmless to protect agent & Language should include acknowledgement of the risks to Buyer by submitting a sight unseen offer as well as acknowledgement that the Agent/Broker has advised client to view the property prior to offer acceptance and to attend inspections in person.
- Request and provide comprehensive documentation to your Buyer: photographs, videos, inspection reports, maintenance records, warranties, or any other relevant documentation.
- Engage professional third-party services. Strongly recommend and document such recommendations to hiring professional services to conduct independent inspections and appraisal of the property. This can provide an objective assessment and help identify any potential issues or discrepancies that may not be apparent in the provided documentation. The insights from these professionals can serve as valuable guidance and protect you from unforeseen liabilities.
- Encourage the Buyer to attend the final walk through in person – or at the very least have a representative meet you to represent the Do not perform the walk-through on behalf of your absent client. If no one is available to be present for the final walk through, ensure the Buyer signs the final walk-through waiver.
Remember, even with precautions in place, there are inherent risks in sight unseen offers. Carefully evaluate the situation, communicate with your client the potential risks, so they can make an informed decision based on the available information. And as with everything…document, document, document.
Risk Tip: Potential Fraudulent Sellers :
We have all noticed an increase in real estate fraud associated with free and clear vacant land (and even vacant homes). People are posing as “owners” of the property and contacting real estate agents in hopes of them listing their property… usually pushing for a quick cash sale for under market price. Click here to read the full risk tip.
The Residential Resale Real Estate Purchase Contract clearly stipulates that Earnest Money, if any, will be deposited UPON ACCEPTANCE of the offer. As such, it is incumbent upon all agents involved in the transaction to track and receive the earnest money receipt upon contract acceptance. If earnest money has not been received by the escrow agent, it may be necessary to issue a Cure Notice. Consult your broker for additional information.
Showing Etiquette and Safety:
Whether we are representing buyers or sellers, one of the most crucial pieces of our business is our relationships with other agents, our peers. Our reputation in dealing with them is built over time and often precedes us, setting the tone for collaboration in a transaction. If we have a good reputation, agents will feel good about showing our listings and will be happy when we show theirs. The opposite can also be true. What does your reputation say about you? Ensure your success with this ‘One Thing’ – LEAD with the Golden Rule. In your business, in your life.
In our current market, many buyers are prepared to do a marathon house hunt before they make the decision to put in an offer. Whether we show 2 homes or 20, each showing should reflect professionalism and courtesy to our buyer, the seller, and our fellow agent.The following are some reminders to ensure our good reputation as well as a professional, successful, and safe showing of MLS listings to our buyers:
Click here to read the full article
Fix & Flip:
Have you encountered a situation where a person or business is operating as a middleman acquiring, improving, and selling homes? If so, remember per A.R.S. 32-1121 (A) (14), all work performed for the purpose of selling the property, must be performed by licensed contractors if the total aggregate cost (materials and labor) is $1,000 or more, not minor in nature and/or requires a permit.In addition, the name of all of the licensed contractors who performed work on the property and their ROC number(s) must be disclosed in the purchase contract. (A.R.S. 32-1121 (A) (6). Please make sure these requirements are being met per Arizona laws and to protect all parties.
Unsure of when your AGENCY begins and ends or are you acting outside of your Agency relationship?
CHECK WITH YOUR BROKER!
Are You Using the Trademark Correctly?:
Are You Using the Trademark Correctly?
The National Association of REALTORS® (NAR) is monitoring the use of the trademark. If found in violation, you may be issued a 30 day cease and desist notice to correct your error.
You cannot use the word REALTOR® to describe your occupation. Use the term real estate agent or real estate broker instead. Also, be cautious when using the word realtor in your username. There are specific rules that must be followed.
Link: Top 5 Things You Need to Know About the REALTOR® Trademark
Link: Test Your Knowledge of the REALTOR® Trademarks
Click here to read the full article
Read the Prelim!
HB 2617, effective January 1, 2022, increases the homestead exemption amount from $150,000 to $250,000 and recorded money judgments become a lien against the debtor’s primary residence. Call your title company immediately when you see any judgements or liens in the preliminary title report. Closing could be delayed.
Click on the links below for more information.
Link: Homestead Law and Guidelines for Addressing Judgment Liens
Link: Arizona’s New Homestead Exemption Statutes
Link: Arizona’s New Judgement Lien Execution and Homestead Exemption Statutes
Agents need to be very diligent when working with home buyers who want to check out a New Construction home
1) The site agent DOES NOT represent the buyer, you do, make sure to explain your agency relationship with the buyer. Use the AAR READE form, and Buyer Broker Exclusive Employment Agreement.
2) ALWAYS attend the very FIRST contact with a New Home Site with the buyer-never let them wander there on their own.
3) Make sure to register the buyer at the home site and get a copy of the registration before you leave the home site.
Click here for the complete list
Flood Insurance- Is it needed? :
The Federal Emergency Management Association (FEMA) has determined that areas within Southern Arizona, especially parts of Cochise County, Santa Cruz County and Pima County, particularly areas affecting the Town of Marana, may be added to floodplain designations which are associated with a higher risk of flooding. Residents in those areas may be required to purchase flood insurance for their homes and businesses. Floodplain maps and flood insurance information may be viewed online. See www.fema.gov, www.floodsmart.gov. The municipality in which the property is located may additionally have its own floodplain designations and building restrictions. Check with the City of Tucson, Oro Valley, Green Valley, Sahuarita, Marana, and/or http://pcmaps1.pima.gov/mapps/rfcd/parcelsearch/ for additional information.
In addition, check out Floodplain Resources for Real Estate Professionals at https://webcms.pima.gov/cms/One.aspx?portalId=169&pageId=524569.
Also please note, Zone X does not automatically mean that flood insurance will not be needed. Per Pima.gov “ZONE X includes areas where the flood hazard has not been mapped by FEMA but may have been mapped by a local jurisdiction; therefore ZONE X does not necessarily mean there are no flood hazards.”