Team Reba Real Estate

If you already own rental property, or you are considering getting into owning it, consider attending these upcoming classes sponsored by the Rental Housing Association of Puget Sound.  If you’re looking for information on the side of financial due diligence I can also recommend the class that Team Reba sponsors at Discover U - Real Estate Investment Analysis taught by our own Michael Lindekugel.

I’m just finishing up an estate sale for a client and a new twist came up that I just have to write about.  In this case we had prepped everything in advance to make sure that estate issues would not impact the sale - we had the estate planning attorney on board, we had reviewed documents ahead of time including the preliminary title commitment; we had our proverbial “ducks in a row.”

The house went on market and we got a buyer to purchase it.  All was going well in the transaction till we got to the last days of the contract.  For some reason the lender decided that they must have a particular paragraph removed from the title report.  I will post it almost verbatim below but will remove client details to maintain privacy:

Pending probate proceedings in —– County Superior Court of the estate of —–.

date of death  00/00/000

case number  00000000

personal representative - ****** (name of executor)

attorney for the estate - pro se

The Personal Representative(s) has/have been granted non-intervention powers to sell, convey or mortgage the property.

So, here’s the rub….  the lender wanted us to remove this part of the title report.  Here is the reply I sent to them:

“There seems to be some miscommunication as to what Paragraph 6 really is and its function in the title report.  I just got off the phone with Judy Williams at Chicago Title and these are the points that she and I discussed.  It seems to me that there is either someone at ***** Funding that either doesn’t understand estate sales/probate, or there is some other issue going on, because ****** generally has not had a problem understanding this issue before when working with the title company.

1.       Closing out this item (paragraph 6) as a special exception is not something you want to do for a probate sale.  When probate is closed the executor can no longer sell the property.  This needs to remain as part of the title report. 

2.       The lender’s policy will not have this item included.

3.       Probate is not like a divorce where the proceedings and a divorce decree must be complete before a sale can occur.  It’s actually the opposite for probate cases like this one.

4.       You have documentation showing that ********** is the executor of the estate and he has full powers to sell the property.

I would like to ask for the name of the person at ********* that you are working with so that we can get them on the phone with Judy Williams at Chicago Title to get this sorted out.  There is no rational reason why this should be holding up the lending process unless we have someone working the file that is unfamiliar with estate sales.”

We did get the condition lifted but only after the title company had to do something that they normally don’t do in these scenarios. The supplemental commitment basically just stated in print that the lender policy would not include that provision.  It was ridiculous and superfluous for the lender to ask for it, but at least I had a good relationship with the title company that they did this to move things along.  The attorney involved in this transaction agreed wholeheartedly as well.  You don’t want to close out probate!  It must be open to transfer the property under the estate.

This situation also shows how nervous lenders are nowadays.  They’re doing more “CYA” work than ever before since the craziness and media bashing enveloped their industry starting last August.

I’ve been asked this question quite a lot lately. Most people think of escrow as the account in which a lender pays taxes and insurance from or where you go to sign your closing papers in a real estate purchase or refinance transaction. Both are good examples of escrow. For those who have always been curious about what escrow is and what an Escrow Officer does, well here it is.

Whether you are the buyer, seller, lender or borrower, you want the assurance that no funds or property will change hands until ALL of the instructions in the transaction have been followed.

Escrow is the process in which money and/or documents are held by a disinterested third party until the terms, conditions and instructions of all interested parties are satisfied.

In a real estate purchase transaction, once the parties have a written agreement and in most cases loan approval too, the closing process begins and escrow is opened with an Escrow Agent. The Escrow Officer then reviews the preliminary title report and obtains information and documentation necessary to clear title. When title is clear and loan documents have been received from the lender, the Escrow Officer prepares the HUD Settlement Statement which contains a breakdown of all fees, payoffs and settlement costs associated with the transaction. Next, the closing documents need to be signed. In most cases, there are documents that must be Notarized. In other words, signed before a Notary Public licensed in the state where the documents are signed. Most Escrow Officers have this license but Notary services can also be found at UPS stores, FedEx Kinko’s, banks, etc. Outside of the United States, the documents would have to be signed before an officer at a U.S. Consulate.

After all documents have been signed, the Escrow Officer forwards the documents to be recorded on to the title company with instructions to review and hold until further instructed. If there is a loan, the original loan documents are delivered to the lender for review. On the day of closing, after all conditions have been met and all the necessary funds are received by the closing agent, the title company is instructed to record. Once the conveyance document (ex: Statutory Warranty Deed) and/or security instrument(s) (ex: Deed of Trust) have been recorded, the Escrow Officer will disburse funds according to the Final HUD Settlement Statement. In Washington State, once the documents are recorded and funds are available for the seller, the transaction is considered “closed”. The parties are notified and the real estate agents usually coordinate getting keys to the buyer. 

Even after closing, there is still work to be done. If there were underlying Deeds of Trust paid off at closing, a Full Reconveyance must be recorded for each Deed of Trust. The escrow company may charge a reconveyance tracking fee in order to track the recording of this very important document.

This was a brief explanation but I hope you now have a better idea of what escrow is and what I do as an Escrow Officer.

For information on escrow accounts held with a lender for payment of taxes and/or insurance visit http://www.hud.gov/offices/hsg/sfh/res/respafaq.cfm

(The above information is not intended to be used as legal advice and pertains mostly to residential properties located in Washington State. If you have legal questions, please contact your Attorney. Of course, not all scenarios are the same and processes may differ from those explained above.)

GSEs (Government Sponsored Entities) and MI companies have recently released soft market policies to protect themselves from high LTV/CLTV lending in areas that have declining values and/or have values projected to decline. The main purchasers of mortgages, Fannie Mae and GSEs (Government Sponsored Entities) and Mortgage Insurance companies have recently released new policies to protect themselves from high loan-to-value ratio lending in areas that have declining values and/or are in areas where values are projected to decline.

Real estate appraiser are required to indicate on their reports whether the property is located in such a market. If so, it is possible that the minimum down payment will be increased by 5 percent!

Soft-market areas are rated Category 1-5, just like hurricanes. A property in Catetory 4 or 5 will not be eligible for maximum financing. Category 1-3 loans must reduce maximum financing by 5% if the appraisal indicates a) Declining Market, b) Oversupply or c) Marketing time over 6 months. This rule applies to conventional loans only. FHA, VA and State Bond loans are not affected by this rule.

The Seattle/Everett/Tacoma area has markets listed in Category 1-3 but so far not in Categories 4-5.

What does this new rule mean for home buyers? It means Don’t count on your down payment until the Appraisal has hatched. You could be initially approved for a loan with zero or 5% down, only to find out later that your zero down loan needs 5% down, or your 5% down loan now requires that you cough up 10 percent!

Sorry to give you all one more thing to worry about.

The writer at Seattle Bubble wrote this post about Consumer’s Wish List that resonates with me on several levels.  I’ll credit my assistant, Nina Shorten, for having noticed it on today’s SB blog and saying to me “you fit this article to a T, it’s everything that you do”.  What it is is a consolidated list of items that the real estate buying public is asking for in a professional.

I’ll say that we’ve offered pretty clear cut answers here at Team Reba for some time that address pretty much every item listed.  I’ll give a bit of a break down here for you, our reader based on the list that was posted:

1. being treated like a “partner” and not a lead - we begin our relationship with most clients in a 2-3 hour meeting where we learn what a client is looking for.  This covers much than just the criteria of the house or investment they want to buy; we cover what this purchase means to them (personally, financially, long term plans), their expectation levels in working with us, and much more.

2. relevant information, fast and accurate - we do a lot of research on a property and we even put in writing that we’ll provide anything and everything that we possibly know about it to our client. We provide sources of information that are outside of our expertise (required by law) but we know enough about many areas of expertise that impact real estate that we can refer appropriately to attorneys, accountants, school websites or teaching professionals, and other sources where applicable. One person can’t know everything but the idea is to have the resources available to try and do as much due diligence as possible in the relatively short time alloted for a real estate transaction.  We tell our clients that “you’ll know when I know” so if information comes to light we are getting info to you.

3.  info on why I should buy a house and why I shouldn’t - if we’re talking purely about the situation where a client likes a house and is considering making an offer, this is easy.  I always tell my clients that part of my job is to act as a devil’s advocate. That means after I’ve listened closely at our first meeting, and any thereafter, I make sure to bring back the items that my clients have mentioned that may not match the house they’ve chosen. In some cases, the issue might be layout, location, size, price, meeting family needs, yard, etc.  It can be all kinds of things. But, if after going through the “here’s what you told me you wanted before…” list and the client still wants the house my attention then turns to getting them what they want in the terms they want it.  If we’re talking about whether now is a good time to buy or sell - you go through the same steps. Does it meet a need for the client?  What is their motivation?  Does it meet a tax or financial need?  Is your financial house in order for it to make sense? Does the investment meet your required return on investment/hurdle rate of return?  We’ve told plenty of people not to buy or sell property for a variety of reasons.

4.  if my investment objective is equity, solid advice based on ownership horizon - let’s get real.  Not everyone has a crystal ball, nor could a single person stop the media from over-hyping elements of the industries that impact real estate.  If, of course, a reasonable person is paying attention you can possibly foresee some impacts but since real estate is so localized in nature regarding supply and demand, which translates into value and potential appreciation, you can give general advice.  There is also the access we have to the NWMLS that can help us provide data which we can utilize in a number of ways for reporting.  We’ve done this for years and before our appreciation slowed down in Puget Sound we had forecast it. A general feel doesn’t mean it applies to all situations in an area. I can think of certain neighborhoods that are doing much better than others.  The housing stock available and the condition of those properties make up part of the difference.  I will tell you that we turned away more speculative investors than I can count in the past few years.  We wouldn’t touch a deal that seemed like a bad idea for our clients and we walked away from a lot of potential clients because we didn’t agree with their investment philosophy.

5.  I want to know who is paying my agent, and how much - this is also really easy.  We have a buyer’s agency contract that spells out my compensation and who is supposed to pay it, in what order, and it’s at the buyer’s direction. Our contract meets WA laws with regard to disclosure and we give out the agency pamphlet in every client meeting so they understand what we are required to provide them - which includes information about how we are paid.  If you’re a listing client then we have listing forms that spell out compensation as well.  We also tell our clients that if a seller is offering a higher than usual (than our stated fee) payment to a buyer’s agent then we let them know about it and we frequently either split the difference or we give the full difference amount to the client.

6. I want to know about referral or other financial arrangements between companies ahead of time - again, an easy one.  We cannot receive any kind of financial incentive or referral fee from a vendor we work with without the agreement of our client. And, we don’t do it anyway.  All of the vendors we use are non-affiliated with Team Reba, and usually also our broker’s office.  We have to disclose if there is any management or financial sharing between these businesses.  There is also a law against some of these things, called RESPA (Real Estate Settlement and Procedures Act) that prohibits kickbacks. This doesn’t apply to the lender’s side of the transaction although they must still follow RESPA but they frequently will do disclosures of affiliated business relationships.

7.  mortgage fees, how do I know they’re real? - we typically offer to help our clients review their Good Faith Estimates (GFE) if they want help in seeking out “junk fees” or just to learn more about what each fee means. A GFE is also a RESPA requirement, by law.  We also advise them to ask about yield spread premiums (YSP) and if a mortgage broker will notify them of these fees up front or only with a notice of (POC) paid outside closing on the HUD Settlement Statement.  I know several good mortgage folks who give discounts on their fee to clients if a YSP is paid on the back end. What the public doesn’t really understand is that agents are not required to do this for their client - we offer it as a service but not everyone takes us up on it.

8.  look out for my financial and personal interests - doing all of the above helps accomplish this and we spend a lot of time getting to know our clients so we can do just that - we educate them so they can make good decisions, we can’t make decisions for them.

9.  make me aware of market conditions now rather than after the fact - it’s part of our job to do this but it is also part of the client’s job to be aware of it as well.  There are so many places to find this information out that it’s disengenuous to believe that you can’t know anything about it.  Also, not everyone buys or sells strictly on market conditions alone.  We’ve learned that in our business there are several outside forces that cause a person to either buy or sell a property not the least of which are divorces, children, death, relocation, etc.  If you are buying real estate with a long term view then you have the ability, like the buy and hold philosophy of stocks, to average out your returns.  If you’re being speculative - then you better be a more aware of the market than the average consumer as a matter of your own due diligence.  You wouldn’t believe how many people want me to bring them the most gorgeous investment on a silver platter without any effort on their own part.  These are people that we move on quickly from in our business.  If you want to be treated like a partner in our business then that also means you do your work and due diligence too.

10.  benefits and detriments of a multiple buyer situation - we help clients analyze these situations to help prevent them from paying too much or getting themselves into a risky position by removing contingencies such as inspections.  We’ve walked away from several of these situations with clients.  When the client wants to go for it we give our best advice and then it’s up to them to decide if they want to move forward and even then we’ll continue looking out for their best interests.

11. putting your trust in us - my life’s work has been built on my reputation and I guard it fiercely.  If you can’t trust me, then don’t work with me.  Because my relationships are what my business is built on it’s in my best interests as a business person to treat you with respect, to tell you when I don’t know something but to also have resources to go to find what we need (information, services or otherwise), and to create a positive working environment between us.  Communication is an absolute requirement in the relationship that we will build between us.  I expect the same commitment from you.

12.  Incentives and how they affect you as a client - part of this falls under the compensation discussion but it also can be in impact to your financing.  We’ll discuss these items with you and also look into what the requirements are in each scenario.

13. I expect you to be responsive and collaborative with everyone in the transaction - I put a similar statement as this in a list of pledge items to my clients which is part of our client packages. We work around issues and because we know our processes (and the ancillary services) so well we can usually anticipate issues and circumvent them.

14.  I want to work with a professional - Ditto.  A professional relationship is what we’re creating.  We’ll provide you with a professional service.  We put it in our C.A.R.E. statement: Conduct becoming of a professional, Aggressive and effective negotiating, Representing you exclusively, Excellent communication throughout the process.

15.  react to problems before they occur, not after - while we can’t read minds we do know our processes and we can usually anticipate most situations. The times we have been blind sided have been when a problem exists on the other side of a transaction that was hidden from us (ie. seller/agent fights) or a client hasn’t been straight up with us. We know our stuff and we can usually head off most issues or at least be able to work through them successfully for our client.

16. I don’t want my loan documents at the last minute - well, honestly, unless you’re staying on top of your lender there is less control over this than the average consumer realizes. We follow up with lenders regularly but if last minute changes are occurring because a client changed his loan product at the last minute, you’ve just created your own problem.  Open communication between the client, lender and agent help to make these things go more smoothly but it’s a common issue when getting loan documents out the door from a lender that it’s pushing time limits for closing. Sometimes it’s an underwriting issue, others it might be slack customer service, another might be changes to the loan package near the end of the process, issues with documentation, missing client info, and more. Many things impact these issues and it will depend on the kind of lender and loan product you’re using along with the experience of the individuals involved.  Another thing that will help clients is if they don’t ignore all the paperwork that comes to them between the purchase and closing. Many documents like GFE’s, escrow instructions, lender disclosures and what not get mailed out in the process and many buyers ignore them till the last minute.

17.  I don’t want to pay for inexperienced agents  - with us, you won’t.

18.  I want choices in the service levels I receive/purchase - no problem, just interview several agents and you’ll get a choice.  We offer some service options for our listing clients but we generally have a standard package. Keep in mind too that as a buyer’s agent, while I may have a buyer’s agency agreement that states my typical fee, I have many times received less than my usual fee because of what a listing agent has posted as the buyer’s agent commission or fee on a sale.  I give the same level of service despite frequently having to “lose money” on a client’s purchasing decision.  To me it’s all about the relationship so I really don’t focus on the fee part but rather on creating a positive experience for my client so they’ll use me again in the future and refer me to their friends, colleagues and family.

Comments are always welcome, but I hope that this has given you a little more insight into what it’s like to work with Team Reba.  Back to work!

Alright, a play on words here (as usual for me) but I’m really talking about a woman I know named Andy Capelluto who is a former interior designer turned staging coach extraordinaire.  We met a few years ago when I took a class of hers about staging properties for real estate listings.

I’ll admit that I went to the class not only for the clock hours but also to do some R&D.  You know, rip off and duplicate.  I wanted to see her ideas and get access to her contacts for certain kinds of work or rentals that I might need in my own staging work for clients.  What she didn’t know till after the class was that, back in the early days of my career, I’d worked in retail - specifically, 3 years as a manager of a retail furniture business (3 locations and 1 warehouse) where we had to merchandise room vignettes on a daily basis.  Plus, in my current real estate business I’ve been providing staging services as part of my regular services program and have so for several years.  At the time I attended this class I was upping the ante of the kind of staging I would supply and Andy’s class was a good forum to get those ideas and tips.  We ended up hitting it off very well and we have stayed in touch since that class.

A few months ago Andy contacted me to say that she was partnering up with firm called Realty U, based in California. They have taken her class content and turn it into an online clock-hour course and designation called AHS or Accredited Home-Staging Specialist. This is going to make Barb Schwartz, the real estate agent turned staging entrepreneur, work harder for her money. She’s had a monopoly on this kind of training material for some time within real estate circles so Andy is taking on a big player, and one who has been making a lot of money on her 2-day courses.  Barb started out as an agent and turned into a staging coach/instructor - Andy did the reverse by going designer first and then seeing the potential in the real estate market for her craft.

The fun bit for me is this, I now have this designation from Andy’s school and I’ll be supplying some photos to their program to use on the company website showing the power of staging.  It will be fun to have some of my work highlighted on a “national” site and to have it promoted among other real estate professionals.

Do I worry that I’ll have some folks critique and criticize my work? Maybe a little.  But the bigger plus is that it will get people looking, talking, and working harder to do a great job for their real estate clients. Professionalism is something I’ve promoted the past 5 years I’ve been in the business and this is one more way an agent can do that.  We see hundreds, if not thousands, of homes each year and we know what looks good and what doesn’t.  We should be able to bring that expertise into a client’s home to help them make the best of their home and how it is seen as a product - which is what it is when it goes up for sale. 

Do you think staged homes are “worth it”?  Give me your feedback if you think it’s junk or if it’s a great idea.  To what lengths would you go to stage a home?

In a future post I’ll provide some of my classic before and after photos for you to judge and compare…

Happy New Year Everyone!

As we start the New Year and January comes to a close I thought this would be a great place to begin. We’ve all made those New Year’s resolutions to get more organized. Well, here is something to help you get started. It’s important to keep a home inventory, but the process can be time-consuming and difficult. Thankfully, the newest version of the Insurance Information Institute’s Know Your Stuff tool, available via free download, can make doing a home inventory a breeze.

Know Your Stuff helps customers enter items by room and upload photos or scanned receipts. Once the information is in the system, items can be sorted by price, date of purchase or type (silverware, major appliances, etc.). Customers can even customize their own categories.

Once completed or updated, the Know Your Stuff report also can be printed, saved on a computer, e-mailed or burned on a CD.

The tool is easy to use. Just go to www.knowyourstuff.org the web site takes it from there. A computer must be running Windows XP, 2000, or Mac OS 10.3 or higher for the software to work correctly. (Note: According to the Insurance Information Institute, a version compatible with Windows Vista should be released sometime around May 2008.)

New secure-storage feature
Version 3.0 of Know Your Stuff is compatible with Vault 24, a global data security resource for financial and inventory information.

For a yearly fee ($14.99-79.99) Vault 24 is designed to store critical information, such as Know Your Stuff Home Inventory files, on a secure server in Switzerland. This way, if your home is destroyed, you can access this information remotely at any time.

Note: Customers are not required to use Vault 24 with the free Know Your Stuff tool

agents start getting sued over market forces beyond their immediate control.  This story in the REALTOR online magazine, culled from the New York Times, and also reported in the Seattle Times outlines a case where an agent (regrettably a RE/MAX agent) in California is being sued by a former client who state that he misled them into buying a home that they are now underwater on financially because values have been declining in their neighborhood.  I fear that there will be more of these situations coming up in the next year or so as homeowners in markets that have significant value declines want to take their anger out on others; and it won’t be too surprising considering the masses of people that jumped into selling real estate during the boom years, as well as the number of people jumping into buying at the same time.  There is bound to be some conflict coming in the courts.

This story isn’t clear as to whether or not the buyers thought their purchase was an investment or if they planned to live in the house for a long time, nor does it state if they perhaps had a major change of circumstance (job change or move) that forced them into selling shortly after purchasing.  The devil is really in the details, which of course won’t be reported clearly, meaning we’re all left as the reading public to wonder what the outcome will be.  From what I’ve been reading, many courts are putting tighter reins on buyers regarding these kinds of lawsuits with respect to forcing them to prove that there was an occurrence of fraud, coercion or otherwise.

As it relates to our own locale, the NWMLS forms used in the Puget Sound area have a lot of new language that specifically says to buyers that it is up to them to perform their due diligence when purchasing a property.  We’re not back at the lowest days of “caveat emptor” (buyer beware) but it will likely get ugly for a little while in the courtrooms of America as the shift in the national real estate market continues and then settles back down.

Yes, the holidays are over and we all get to look forward to doing taxes again.   :(  If you need assistance from the IRS (is that an oxymoron?), information or to track that elusive refund (if you get one) go to:  http://www.irs.gov/

Along those same lines of tax preparation; I want to pre-announce that we’ll soon have a new contributor to this blog venue.  His name is Rick Mangan and he’s got a slew of acronyms after his name that are similar to mine but that mean entirely different things (CPA, CFP, PFS).  Rick formerly worked with a CPA firm in town (Foster + Co) where I met him, and he also spent a time working at a wealth management firm; now he’s working with his wife, Traci (also a CPA), providing both services via his new company, Mangan Wealth Management, info shown below: 

Mangan Wealth Management
Rick Mangan CPA, PFS, CFP
Traci Mangan, CPA
2200 Sixth Avenue, Suite 1250
Seattle, WA 98121
Phone: 206-441-1980
Fax: 206-441-5803
Email Rick:
rick@manganwm.com

I know I’ll be looking forward to his contributions to the blog and I hope you will too! 

Welcome, RICK!!!!!

Ok, the title’s a little tongue in cheek.  In other MBA news, the City of Seattle is looking for feedback on the new Stormwater Code Revisions.  See the notice below for details:

Comments on Stormwater Code Revisions Due by Jan 31st

Seattle’s Stormwater Code will change by the time fall rolls around, but comments on those changes are due in two weeks.  

In short, Seattle’s changes will include:

·         Adding natural drainage systems, low impact development, on-site BMP designs, and new modeling methods;

·         Simultaneously addressing needed changes in: Stormwater Code, Grading Code (new), Side Sewer Code, and associated Directors’ Rules;

·         Increased readability and a more user-friendly approach;

·         Addressing “alternative compliance” & “special circumstances” such as:

1.       Integrated Drainage Planning     2.       Voluntary contribution (fee-in-lieu)3.       Multiple blocks/sub-divisions    4.       Excessive costs5.       Requests for exception   6.       Engineering impracticability7.       Capacity limitations8.       Dewatering/underground injection9.       Critical Areas issues10.    Sanitary sewer connections11.    Utility Cuts        12.    Others;For more specifics, please goto  Stormwater Code Revisions Overview.  Comments must be made to Dr. Robert Chandler, Ph.D., P.E., Project Manager with Seattle Public Utilities (206) 386-4576, or SPUStormwaterCodeRev@Seattle.Gov by January 31^st.