This posting is provided by Scott J. Stein, Attorney with Stein Law. Scotts contact information is below.

Current law:  Under the current law (A.R.S § 33-814), lenders are prohibited from seeking a deficiency judgment where the trust property is 2.5 acres or less and is used as a single one-family or single two-family dwelling.

New law (effective September 30, 2009):  SB 1271 amends A.R.S. § 33-814(G) to require that for a borrower to get the benefit of the anti-deficiency protection, the borrower under the deed of trust must have "utilized" the property for six consecutive months and a certificate of occupancy must have been issued.  The law also places the burden of proof on the borrower to prove that the statutory requirements have been satisfied to prohibit a deficiency judgment.  Many borrowers will not be able to hand the keys back to a lender and just walk away.  They will remain liable for an amount equal to the difference between the outstanding about of the loan (plus costs) and the higher of either a court determined fair market value of the trust property or the sale price at the trustee's sale. 

Questions and Uncertainty.  The new law was aimed at protecting small community banks from losses resulting from unsold speculative new homes.  However, the only thing certain with this new law is the great deal of uncertainty that surrounds its unintended consequences.  Central to these questions is what it means for the property to be utilized by the trustor.  Is this a requirement for owner-occupancy?  Is the property being utilized if it is a rental property occupied by tenants?  What if the property was purchased for use by a family member?  What will be required to prove occupancy?  What if the property is in an Arizona jurisdiction, such as Mesa, that does not issue a certificate of occupancy? 

Where Do We Go From Here?  Representatives from the Governor's office met with Arizona legislators and real-estate advocates this past week to try and find a workable solution to the issues raised by the new law.  Many, including Arizona State Senator Steve Pierce - a sponsor of the bill, have called for its absolute repeal.

Until there is clarity, lending and real estate professionals are in search of answers regarding the consequences of the new law.  We help real estate investors and developers understand the issues this new law may bring about, to plan and protect them from deficiency judgments and reach their long term business and personal goals.

For the latest information about Arizona's anti-deficiency laws and how it will impact you, please contact Scott J. Stein at (480) 889-8948 / scott@steinlawplc.com and visit www.steinlawplc.com. 

It's the words of a song, and a popular phrase, and it certainly pertains to some listings that you might have. Some of them are flat-out un-saleable. You just might not realize it.

What is your time worth? Once you know that, you will work to avoid those situations that take up your time and do not provide revenue.

The current market of lender-owned and short sale properties, coupled with many sellers being in bankruptcy often creates a situation where the property that is owned is un-saleable. Here are the more common reasons why and the reasons why you should think of “folding” and moving on…

1. Uncooperative or uncommunicative seller. In short sales, the sellers are often frustrated and worried, and will be less willing to cooperate. In either case, such as making certain disclosures or not paying some of the buyer's costs might render the property un-saleable. If the seller has dropped out of sight, does not return any calls, e-mails, faxes or any other means of communication, you might need to walk away.
2. Seller turns down reasonable offers. You know what's reasonable. No matter what the list price is, if your seller refuses to accept a reasonable offer, or at least provide a reasonable counter-offer, that might be time to cancel the listing. Give this stronger consideration after the seller does this more than once.
3. Sellers are divorcing, fighting or not agreeing with each other. Certainly, sales can occur with a divorce situation, or sellers who are arguing with each other. But, at some point, when the situation becomes untenable, when you are constantly being put in the middle, you need to think about your options. When one divorcing party clearly defies a court order and does not cooperate, or one sibling has made it clear that they will not agree to sell mom and dad's place, it might be time to throw in the towel.
4. Sellers refuse to be reasonable on pricing or making repairs. Pricing today could be a moving target. If the seller does not agree to price adjustments to reflect the current market, and activity is slow or nil, then you might be wasting your time. If the seller refuses, either now before a contract, or in response to a contract, to make even the slightest repair, then it might be quitting time.

We never like to lose a listing. It often feels like failure. But in many cases it is not your failure. It is the seller. If they put you in the boxing ring blindfolded with your hands tied behind your back, how do they expect you to win the fight? Without their cooperation and assistance, you might just be wasting your time.

So, measure each listing with the above factors, and if the decision is to cancel the agreement, first confer with your broker to determine how you accomplish that.

For certain, the Phoenix real estate market has seen both sides of the emotions; either a rapidly declining market fueled by negative economic news, a downturn in employment or rising interest rates, or an increasing market pushed on by available money and eager buyers. Is there a middle ground for a normal real estate market? Some say yes, but that lasts almost as long as an ice cube on the sidewalk in Phoenix in July. (About 5 minutes).

In reality, Phoenix is most often a stable market, either on a moderate rise or a gentle pull-back. Rarely do we see the markets we saw in 2005 and 2006, when builders could not build them fast enough, lenders were pushing money to anyone who literally had a pulse, and sellers who saw their values increasing by the day. That was an oddity and most likely will not occur again for quite some time. Contrast that to a market we have been in for the better part of 2 years with an increasing inventory due to foreclosures, lenders pulling back and not making loans and sellers seeing a rapid decrease in values. The fuel to that fire is the fact that many borrowers in 2005 and 2006 obtained teaser rates at 3% or lower, paying only interest. Often, buyers ended paying less for a mortgage for a big house than they were paying for rent on a small apartment. That was very attractive. They never projected that they could not re-finance in 24 months when the rates changed. Lenders promised to refinance as the values would continue to increase 20 – 30% a year. Well, we all know that the values went in the opposite direction, and many of those borrowers have subsequently lost their homes.

So, where are we now, in the middle of 2009, and most likely at the beginning of the climb out of the bottom.

Here's why we feel we are climbing out…

May, 2009 saw 9760 sales in the Phoenix Metropolitan area. That was the 3^rd highest sales month in 5 years. (Sales are contracts in escrow waiting to close)

May, 2009, the existing inventory in the MLS system was 44,772 on May 31. It was 55,904 on January 1.

Some caveats to the improvements in the market.

1. We expect an increase in foreclosures through the summer and into the fall. Lenders sat back after the moratorium last winter and started the process up again in the spring.
2. Stricter FNMA and HUD regulations have slowed the lending process, causing frustration among buyers and sellers and causing deals to cancel.
3. Government regulations such as the HVCC laws (Home Value Code of Conduct) have hamstrung appraisers, lenders and agents with a bevy of convoluted regulations that befuddle many buyers and sellers.
4. Local statutes or regulations, such as revisions to a statute here in Arizona that relates to mortgage deficiencies, can cause confusion and in some cases panic among homeowners. While good intentioned, the net result is a law that places an unfair burden on homeowners in default. 

Thus, we are cautiously optimistic, seeing more lenders willing to loan, more buyers ready to buyer, foreign investors buying with cash and available inventory for them to buy. Lenders who have foreclosed have become more realistic in pricing, willingness to do repairs and incentives to the buyers. We are confident that we are climbing out of this hole and will return to a normal, stable market by the spring of 2010.

SUMMARY OF S.896, TITLE VII-Protecting Tenants at Foreclosure Act of 2009

On May 20, 2009, President Obama signed into law a mortgage rescue bill that included the above referenced Act.  In short, any foreclosure of a federally-related mortgage loan or any residential real property foreclosed on after May 20, 2009 is impacted by this Act.

The major change to existing Arizona law is that arguably any successor in interest to such property shall assume the interest in the property subject to the existing bonafide lease.  If that lease was entered into by anyone other than the mortgagor or the child/spouse/parent of the mortgagor, that lease was entered into more than 90 days before the notice of foreclosure, the lease was the result of an arm's length transaction, and the lease requires rent substantially the same as the fair market rent, then that tenant shall have the right to continue to reside in the unit under the same terms and condition of the lease.  The tenant must pay rent, permit access pursuant to ARS 33-1343, etc.  If they do not, the new owner has all rights and remedies under the lease and Arizona statute.

There is one major exception:  In the event that the new owner wants to occupy that unit as their primary residence, the owner must give the tenant a 90 day written notice of termination of the existing lease.

If there is no written lease or if the tenancy is month to month, the new owner must give the tenant a 90 day written notice of termination of the tenancy.

Section 8 leases are subject to this law.  However, short sales are not.  Additionally, the tenant has no rights under this Act until and unless the home is foreclosed on, the loan was a federally related loan, the lease was in place at least 90 days before the foreclosure, and the lease was an arms-length transaction for at least market rent to someone who is not the owner's child, spouse or parent.  Simply receiving notice of a pending foreclosure does not trigger this Act.

Is that true? In Arizona, do we see a significant slow-down of sales when the temperature climbs to 100 and above?

Not necessarily. While some agents feel that the heat stops people from looking at homes, that is simply not true. Our market is truly a 12-month market, certainly with peaks and valleys. April historically is the strongest month for real estate sales, both locally and nationally, while December is the weakest month. The strength of April is generally associated with weather; as the northeast and other parts of the country start to thaw out, those that hibernated in the winter come out and start looking. December, however, is not weather-related. It is that time of year from Thanksgiving to New Years where people are simply focusing more on family, gifts, etc and not real estate.

June, July and August are statistically strong months in Arizona. And, this year, we predict it to be even stronger, as several factors are in play. They are…

1. The market is coming out of a severe downturn and by simple timing, is improving.
2. Home prices have not been lower in decades, and many buyers are getting into the market.
3. Lenders, while actually tightening the rules, have money and are lending. In this market, however, someone needs to have a strong credit rating and a down payment in order to qualify. Believe it or not, lots of people do and they are ready to buy.
4. Investors are still grabbing foreclosed properties and placing them in the rental pool, believing that since many people cannot qualify to buy will still look to rent.

As a result, we expect a strong 3^rd quarter for 2009 going into the fall. While lots of real estate agents take the summer off, or a considerable amount of time, those staying in town and working are the ones that will grab these deals.

With the flood of foreclosed homes on the market, many agents are faced with the task of convincing the lender/seller of their statutory obligations to make certain disclosures or provide certain services. They are:

Federal Lead-Based Paint Disclosure. This is a federal rule and lenders are not exempt. Although they will try and cite the exemption to the rule that states it is not needed “…in foreclosure transactions…” they fail to realize that they are misinterpreting that rule. When they foreclose on the property; THAT is the foreclosure transaction. But, when they sell it to your buyer, they are not exempt and if the property was built prior to 1978, they must provide the disclosure.

Septic Certification. This is a state law that went into affect a few years ago, whereby upon transfer of title, any property that has an in-service septic tank must have the tank inspected and serviced and thus, certified before title is transferred. This is a statutory obligation of the seller, even a lender who foreclosed, to provide that certification, and the agents should be proactive in getting this accomplished.

Affidavit of Disclosure. Another state law, that went into affect around 2002, which requires a seller of real property that is in the county (not in an incorporated city) and never subdivided, to provide a disclosure statement to the buyer as to certain information regarding the property. The actual form itself is required by statute, so the seller must complete and sign it, have it notarized, provided to the buyer 7 days before COE. Our AAR purchase contracts change that last part to 5 days after acceptance. Once completed and signed by the buyer, the Affidavit must be recorded.

In all three cases above, the seller is obligated to provide the disclosure or service, and they cannot be waived. Even if both parties agree to waive either their rights or obligations under a statute, any such waiver would be deemed unenforceable y the courts.

Thus, the agents; both listing agents and buyers agents, must be aware of the necessity of any of the above, and be instrumental in making sure they are completed and delivered to any buyer.

Technology scares many people, including real estate agents for many reasons. Are you one of those that are intimidated by technology? Probably not, if you are reading this blog (on a website). But, are you using all the tools you could without maxing out your credit cards?

When a new agent joins the business and asks, “how much will it cost to get started?”, most brokers and managers respond with the typical answers… schooling, testing, license fees, start-up fees to the broker, the local association, MLS etc. What is often overlooked are the costs for the necessary basic tools to get started. Agents often think in terms of what type of car, what clothes they need, etc, yet so often a new agent is not guided on the levels of technology that would help develop a career quicker. Waiting to make enough money to buy the needed tools would be like receiving a prescription for a needed drug but not filling it.

We asked an expert on real estate technology, Jeffrey Raskin, to give us the three levels of technology that an agent should look at.

Bare minimum essentials: (total cost averages $1100 plus monthly fee for internet and cell phone usage)

• A home computer with high speed internet access and a printer (preferably with a fax built in)
• A decent point and shoot digital camera
• A cell phone (you probably already have one, but be careful to separate business and personal) with basic voice service. 

More sophistication and use: (total cost averages $2700 plus monthly fee for data plan)

• Replace the home computer with a laptop computer. (or add the laptop)
• Replace the point and shoot camera with a single lens reflex digital camera
• Add a smart phone for your business line (remember, separate business from personal) for access to e-mail, Internet, downloaded material. (would need a monthly data plan with the phone).

Top of the line: (total cost averages $3500 plus fee for fax service)

            Tablet or notebook computer allowing digital signatures

            Full function scanner

            Add e-fax service

            Add a high quality (HD) video camera

Here are some other tips for professionalism with technology:

• Your voice mail message should be clear and short… No music or background noise. Don't allow your voicemail to fill up.
• Don't use your home or personal phone numbers. You do not want children or visitors answering your business calls.
• Use a profession e-mail domain; either your server (such as mine, jon@desertsageseminars.com) or your brokers'. Avoid using the web based free programs such as Yahoo, Google, Hot Mail or MSN, since your clients will believe that you are not professional enough to have your own.
• Use a professional e-mail address, such as your name at your server or broker. Avoid complicated, lengthy addresses or those that could be deemed unprofessional. You want people to remember your e-mail address. One such as the#1bestagentphx@yahoo.com sends the wrong message.

Once you buy any tool, you must have the drive and commitment to learn how to use them to the fullest. In the Phoenix metro area, Jeff Raskin offers classes on technology and the use of most of the tools we have described here. Visit Jeff's website at www.technology4realestate.net  or e-mail him at jraskin@usa.com for information about his classes.