MLS4owners.com Market Update - Statewide Open House June 27-28

1. Market Update Topics
2. Statewide Open House
3. Legislature changes Seller Disclosure Requirements
4. Improvements in the Marketplace
5. Updating your listing if it is a Short Sale
   

STATEWIDE OPEN HOUSE JUNE 27-28
The state association of REALTORS® is promoting a statewide open house on Saturday and Sunday June 27 and 28. What does this mean for you? It means some of your competitors might be having open houses. While we believe open houses are of limited value, if you would like to host an open house there may be no better time than next weekend. Just put a sign out front and attract the shoppers who are already in the neighborhood to visit your competitors!

LEGISLATURE CHANGES SELLER DISCLOSURE REQUIREMENTS
On July 26, 2009 the State Legislature is implementing new statewide Seller Disclosure requirements for residential real estate sales in Washington. The new forms won’t be available until July 26, but a preview is on the state website. We are told that properties in the closing process as of July 26 will not need the new form (usually known as a Form 17), but offers that are mutually accepted after July 26 will.

UPDATING YOUR LISTING IF IT IS A SHORT SALE
A “short sale” is one in which the proceeds of the sale will not be enough to pay off the mortgage. A short seller might have no problem making monthly payments, but the property’s value is not enough to cover paying off the mortgage and the closing costs. The NWMLS requires that we disclose to agents if a property is subject to a short sale. If you believe that your net proceeds will not be sufficient to pay off the mortgage and your lender will have to give approval for your buyer to take possession, please let us know so we can update your listing.

IMPROVEMENTS IN THE MARKETPLACE
In May we mentioned we had seen an improvement in residential market activity. While we are nowhere near the mid-decade frenzy and prices have fallen quite a bit, our customers are noticing changes. Since May 1, seven of our customers have closed sales that were on the market less than 30 days. For our customers currently in the closing process the median time on market is now 62 days, which is down substantially from earlier in the year. The NWMLS publishes a monthly analysis . Here are other studies of results .

Hang in there!

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What is the difference between a distressed sale and a short sale?

These real estate phrases are sometimes used interchangeably, but the meanings are very different. Following are oversimplified definitions for the state of Washington.

A “distressed home” is an owner-occupied property for which the owner is having problems making mortgage payments. Distressed sellers might have plenty of equity in their homes but they usually have cash-flow problems.

A “short sale” is one in which the proceeds of the sale will not be enough to pay off the mortgage. A short seller might have no problem making monthly payments, but the property’s value is not enough to cover paying off the mortgage and the closing costs.

These two situations sometimes overlap but in many cases they don’t, especially when real estate values are generally down. The rights and obligations of sellers vary depending on the circumstances, and there are several steps we recommend for those who are unsure how to proceed:

1. Work with a real estate attorney to protect your interests not only in the purchase and sale agreement but also in negotiations with lenders. Real estate agents are not permitted to offer legal advice or help you modify the terms of your loan, so an attorney is a good option for representing you not only in your purchase and sale but also in your negotiation with your lender. Protect your credit and your equity, and don’t get steamrolled.
2. Carefully shop for the best rates in title and escrow. It may seem that all the rates are the same, but they aren’t. Wells Fargo Escrow, for example, offers a flat fee that is substantially cheaper than what we have seen advertised elsewhere.
3. Minimize your closing costs by using a self service realty program such as MLS4owners.com (shameless plug). The money you save in closing costs can be the difference between being a short sale and just being a sale that isn’t as profitable as you had hoped.
4. If you don’t want to take ownership of the homeselling process and prefer to be represented by a real estate agent, let us know and we can refer you to agents who are experienced at working with short sales.

For more information, you can visit our Help From The Experts page.

WARNING to sellers - guard your prescriptions and cash when prospective buyers are in your house.

Thank you to the Northwest Multiple Listing Service for looking out for the safety of sellers. We received this warning about keeping safe at open houses in the Seattle area, but it applies to all sellers everywhere.

As the NWMLS encourages its members to educate their customers, here is their April 17, 2009 bulletin in its entirety:

WARNING - "Eric" has Reappeared
"Eric," who has stolen prescription drugs from open houses in the past, has reappeared. He is a white male, 5’10", mid-to-late 30s, stocky, spiky grey hair (sometimes dyed), neat, tidy and polite. He has been seen driving a white Acura with tan windows, WA license 241XMG. He has used several other names besides "Eric."

Be sure to tell your sellers that medication and money should always be taken out of the home or placed in a secure, locked area during open houses. Please remember to secure the property by locking all doors and windows after every open house.

If you encounter "Eric" at an open house, the Centralized Crime Analysis Unit encourages you to call 911 so that "Eric" can be apprehended. You may want to text a friend to call 911 for you so that you are not forced to call 911 directly in front of "Eric."

If you have any information or have had any contact with "Eric" please call Cynthia, Centralized Crime Analysis Unit, 206-205-7613, case number SO-08-099295.

Do buyers have to tell you the source of their down payment?

Following up on our last post about "Debunking industry myths and fairy tales", here is another myth busted by Washington REALTOR News. Myth Number 6 is shown below in its entirety, and is reprinted with permission from Washington REALTORS(r). This article is not legal advice. You should always consult your own real estate attorney, REALTOR or tax specialist.

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Myth Number 6: Buyer has no obligation to disclose the source down payment

There is a version of this myth that is true. But, the extension of this myth to all buyers leads many buyers to commit an act of fraudulent inducement. If buyer has sufficient cash or liquid resources to pay the down payment and all required closing costs, then absent a request from seller, buyer has no obligation to reveal the source of the down payment. But, if buyer is relying on gift funds, the sale of a house, car or boat, the extension of a line of credit, the refinance of unrelated property or any other source of contingent funds, buyer must disclose this fact to seller, as part of the purchase agreement. Failure to do so results in buyer fraudulently inducing seller to enter the purchase agreement [emphasis ours].

Paragraph (a) of the statewide purchase agreement (form 21) includes a statement indicating that buyer is not relying on any contingent source of funds, unless otherwise noted in the purchase agreement. When buyer attaches a 22A financing contingency, buyer notes the fact that buyer is relying on a contingent source of funds for the purchase of the property, with the exception of the amount of down payment specified in the first paragraph of form 22A and buyer’s closing costs. If buyer is also relying on a contingent source of funds for the down payment and/or payment of closing costs, then buyer must separately note that in the purchase agreement. Buyer does not have to make receipt of the contingent funds a separate contingency of the agreement. If buyer does not receive the contingent funds for the down payment or closing costs, buyer will not obtain financing and will be protected by buyer’s financing contingency, so long as buyer disclosed that the down payment and closing costs were from a contingent source. However, if buyer does not disclose that the down payment or closing costs are dependent upon the occurrence of some contingency, then if those funds fail to materialize, buyer will not be able to rely on buyer’s financing contingency because buyer will have fraudulently induced seller to enter the agreement by initially representing, in paragraph (a) of form 21, that buyer was not relying on a contingent source of funds.

As a side note, because of the unreliability of some lenders and loan programs in today’s market place, many sellers are now demanding that buyers provide documentation proving the cash resources that buyer represents to possess. This requirement is issued prior to seller accepting buyer’s offer.

Debunking industry legends and fairy tales

We read an interesting article in Washington REALTOR News, called "Mythbusters: Debunking industry legends and fairy tales." Myth Number 4 is shown below in its entirety, and is reprinted with permission from the Washington Association of REALTORS. This article is not legal advice. You should always consult your own real estate attorney, REALTOR or tax specialist.

Myth Number 4: The buyer's financing contingency expired.
The truth is, using the statewide financing contingency, form 22A, the buyer’s financing contingency never, never, never expires. The only way the seller can make the financing contingency go away prior to closing is for seller to force buyer to waive the financing contingency. After the number of days established in paragraph 2 of the contingency addendum elapse, seller can give buyer a “notice of termination” (form 22AR). If seller never gives that notice of termination, buyer’s financing contingency never expires. If seller gives the notice of termination, buyer has three days to either waive the financing contingency and proceed to closing or allow the purchase agreement to terminate and recover buyer’s earnest money. Seller can give the notice of termination any time after the number of days specified in paragraph 2 elapse, regardless of whether buyer provides the required letter of loan commitment and notwithstanding the quality of buyer’s letter of loan commitment. But, if seller never forces buyer to waive the financing contingency, then the financing contingency will be in place, protecting buyer, even at the closing table.

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Keep the above in mind as your sale goes through the closing process. For more myths and realities about the homeselling process, see our Real Estate Mumbo Jumbo page.

FREE Pollution Liability Insurance?

Do you have a have a home with oil heat, with an underground or aboveground storage tank? The Washington State Pollution Liability Insurance Agency offers free pollution liability insurance to owners of oil tanks used to heat their home and businesses. According the State of Washington, this insurance is free to the owner because it is partially funded by a fee dealers pay per gallon of oil they sell.

The Agency has more information on its website or by phone at 800-822-3905.

The $35,000 mistake - Why you should review your title report.

You hire a broker to represent you in the sale of your house, and eventually you get an offer you can live with. The buyers are ready, willing and able to close the deal. Sounds great, right?

Well, not if your driveway encroaches on the neighbor's property and you can't deliver clear marketable title to your buyer. A Mississippi court recently ruled that the seller owed more than $35,000 to their listing broker because the seller was unable to perform even though the broker bought them a ready, willing and able buyer.

This is an example of why we recommend eliminating surprises by ordering your preliminary title report upfront. While we don't know whether this particular boundary dispute would have been discovered without a survey, there are other surprises that sometimes show up in title searches. For example, do you have the same name as somebody who owes money to the state? Are there old liens on your property that should have been released but are still in the records? By fixing defects in title ahead of time, you can save yourself a lot of time and money during the closing process. And who knows, you just might save $35,000.

Thanks to Realtor.org for alerting its members about this important topic. Talk to your real estate attorney to learn more.