VOLUME: 7 • ISSUE 49 • JULY 2013
RE/MAX Professionals INSIDER Newsletter Wraps, Assumptions, Carrybacks and Lease Purchases There is always a fair amount of confusion on these issues. My goal this month is to explain what they are, what is acceptable and what is not acceptable. Let’s start with a simple carryback note.
qualify for a loan. There are so many problems with this transaction that I will only list a few (you notice I said problems, not challenges – you can overcome a challenge, a problem, you cannot).
As of now, a seller can carryback a note to a purchaser. A simple example might be a buyer who needs more money for the purchase than is available and for whatever reason they are not using a bank for financing. Currently, this is an acceptable transaction for the buyer and seller, however, there are restrictions that may impact this in the future which are related to the Dodd Frank Act that is in Congress. My understanding is that these restrictions are not in place yet.
1. How and when do you price the property? If it is worth more down the road, the seller is not happy. If it is worth less, the buyer is not happy.
The property may be free and clear, and the seller may work with the buyer to help facilitate the transaction. Now, here is where people get into trouble. If there is a federally insured loan on the property already, the underlying loan becomes due and payable to the lender upon transfer of the title. This is what is referred to as a wrap. The seller keeps the loan in their name and “wraps” it with a new amount due to the seller, with the buyer putting down a set dollar amount for a down payment. It would look like this: $400,000 Purchase Price $40,000 Down Payment $360,000 New All Inclusive Deed of Trust to Seller Inside the new deed of trust is an underlying loan for $300,000 the seller has on the property, which the buyer and seller DO NOT intend to pay off. The buyer makes one payment to the seller and the seller pays the lender and keeps the rest. This is NOT an acceptable transaction. The lender is being defrauded by both parties. However, if there is no loan on the property the seller may carry the entire $360,000. Now let’s talk about the dreaded lease purchase and lease option. The buyer has a challenge obtaining financing today and wants to lease the property, until they are in a position to
2. Who is responsible for repairs? 3. Is there rent money going towards the purchase or down payment? If so, where are the funds being held? 4. What happens if the transaction does not close? Or the buyer never qualifies? And now for the two real biggies… 5. What happens if the buyer defaults on the rent? How do you evict them if they still have an interest in purchasing the property? (Yes this really happened and it was a mess). 6. What happens if the seller goes into default and the property is foreclosed on? These are just some of the problems (not challenges) I have had to deal with. At RE/MAX Professionals, we do not want anyone getting involved in litigation. It is our duty to give you the tools you need to stay out of legal problems (again with the problems). We don’t write these types of contracts for the above reasons. A great script for this would be, “I understand your desire to purchase this home. Some of the potential challenges are (state all of the above). Why don’t we proceed like this? Let’s put you into a lease with the owner. The owner does want to sell eventually. When we are sixty days out from the lease expiration date, let’s revisit with the seller and write a purchase contract at that time.” Lastly, please remember to have your compensation in the lease; if the purchase is completed, you should be compensated.
Have a great month!
- Frank Russo
7111 W. Bell Rd. Suite 101 | Glendale, AZ | 85308
Happy Birthday to you! Happy Birthday to you!
Ashley Belliveau Dan Gwin Tamara Wilson Lena Ofstedahl Anne Mehedinti Sean Rubek Orlando Diaz Shelby DiBiase Roxanne Scott Sheila Touhey Korine Liebman Patty Labenske Randy Kadavy Kelly Schrum Bill Campbell
Anne Mehedinti Kim Whitley Carol Webb James Lombardi Kelly Schrum Melissa Dierks Dee Costa Rebecca Boggs Roberta Voss
7/1 7/1 7/7 7/7 7/7 7/9 7/10 7/11 7/12 7/18 7/23 7/27 7/27 7/28 7/31
1yr. 1yr. 1yr. 2yrs. 3yrs. 3yrs. 6yrs. 7yrs. 12yrs. John & Erin McKampson 13yrs. Heather Phillips 15yrs. Linda Rehwalt 16yrs. Donna Lecki 16yrs. Lea Archer 16yrs. Irene Green 18yrs. Jim Ernst 18yrs. Jeri Toci 18yrs. Elaine Kovacevich 22yrs.
NW Valley Arrowhead South Arrowhead North Sun City West NW Valley Arrowhead South Arrowhead South Arrowhead North Arrowhead South NW Valley Anthem Arrowhead North Arrowhead North SW Valley Arrowhead North NW Valley Arrowhead North Arrowhead South Arrowhead South SW Valley Arrowhead South Sun City West NW Valley Arrowhead South Arrowhead North Arrowhead South Anthem Anthem Sun City West Arrowhead North Arrowhead North NW Valley Sun City West
West Valley Market Update Short sales continue to decline as a segment of the market in the Valley. The active listing count is down to 2,298, but only 554 are not under contract. Short sales disappear from the market as prices rise and fewer homeowners are caught in a negative equity trap. Homeowners who have waited until now to have positive equity in their homes may consider selling, but don’t expect many listings from this market segment. These homeowners are willing and able to sell, but they are worried that current market conditions will prevent them from finding a new home to buy for a reasonable price. Others are waiting to see how much their equity will grow as prices keep rising. The best hope for buyers right now is to stay in the market and keep looking for a new home. As supply remains low and prices continue to slowly rise, competing buyers may give up and drop out of the market, leaving new listings available for determined buyers to purchase. Now for a West Valley snapshot: The market is very, very hot for sellers. The monthly average price per square foot has increased 21% over the past 12 months, but the months of supply are still at a low 1.6, compared to a normal 4.5 months’ supply. Sellers continue to have a huge advantage over buyers. Contact me today for more information about accessing the most up-to-date data for your marketplace and to find out about the Cromford Report Website where you can access a subscription through Fidelity and pull customized reports DAILY!
C: 623-302-3684 • O: 623-256-6070 E: email@example.com • www.RobCannonFNT.com
*Anniversary years are based upon information received from RE/MAX, LLC Membership Services Dept.
24654 N Lake Pleasant Prkwy #103-139 Peoria, AZ 85383 P: 623-561-0803 • E: firstname.lastname@example.org
Do you have something important to share? The RE/MAX Insider is always looking for quality content each month. If you would like to contribute, please email the editor. Are you following RE/MAX Professionals?
TRAVIS ZIMMERMAN 602-757-2959 email@example.com
Outstanding Agents.Outstanding Results®
Jesse Abarca Claudia Artz Chuck Bills Lisa Bray Jason Campagna Paula Farace Paul Gebhardt Irene Green Lisa Groth Barbara Henderson
1 1 2 1 2 1 2 1 1 1
Candise Klackle Brandi Martinez Cecilia Mulroy Tiger Myers Carl Phillips Ryan Richardson Kelly Schrum Jim Scott Sandy Scott Dan Wheeler
1 2 2 1 2 1 1 3 2 1
REALTOR On Call leads received June 2013
Make Your Media More Engaging We’ve all heard about how important it is to engage with clients and how powerful a tool social media can be in that regard. Even if you’re relatively savvy with social media tools, however, one of the biggest problems folks run into is how to tie everything together effectively. Twitter, Facebook, Tumblr, YouTube, LinkedIn, Google+, your listing site, and myriad other points of online presence may coexist but most of them don’t truly work together and encourage cross-usage. ThingLink is an easy-to-use (and free) tool that makes big strides not only with better leveraging those various services’ individual strengths but also in enticing people to actually interact with the information you present. With ThingLink you can quickly take any image and add video, links, additional photos, and more and have it all instantly visible without having to leave the page displaying that image. For instance, you could post a picture of a new listing to your Facebook page and when a user hovers over the house number a Google map of the address pops up in a bubble over the photo. If they touch the front door they get a virtual tour video, right there on the Facebook page without having to click through to YouTube or another separate site. A touch point on a window could link to information about the low-e windows and other energy saving features the home is equipped with. Maybe you’re touting a recent remodel and on each interior photo you tag not only some of the specific upgraded features with close-up photos and/or additional information but also have a “before” picture of each space.
Or perhaps you could post a floor plan of a property with photos or video of each room. Take a look at these 2 examples to get an idea of what these media-enhanced photos look like and how they work (just displayed here on the ThingLink website): http://rem.ax/13UwY6x
Just as a rider for automated 24/7 info on a yard sign brings in more callers, you’ll get a good deal more views for your videos and other associated media due to the instant accessibility right from their Facebook timeline, Twitter feed, or anyplace else you share your ThingLink images. The increased interaction leads to more interest and conversation, which generally translates to more engaged and satisfied clients and, ultimately, more business! - Mike DeRosa
In an effort to make your jobs easier, we have created an email address for your contracts and other required paperwork. Please send all your documents to:
Give blood Give life Tuesday, July 16, 2013 10:00AM-3:00PM
7111 W. Bell Rd. #101 Arrowhead South Office
To schedule a time to donate or for more information, contact Carol Murr firstname.lastname@example.org 623-533-3111
Call us today to discuss, how we can help you today! Kurt Zimmerman Keith A. Knoeferl David David PinedaPineda Kurt Zimmerman Michelle Reale Sales Manager Home Mortgage ConsultantHMC Home Mortgage Consultant Sales Manager HMC 602.703.8123 602.390.0164 480.316.8064 P: 602-703-8123 P: 602-390-0164 C: 602-339-9443 email@example.com firstname.lastname@example.org email@example.com firstname.lastname@example.org email@example.com O: 623-878-2201 ID: 473029 NMLS ID: 418904 NMLS ID: 502440 NMLS NMLS ID: 473029 NMLS ID: 418904 firstname.lastname@example.org Fran Comer Michelle Reale Keith A. Knoeferl Fran Comer Home Mortgage Consultant Home Mortgage Consultant HMC 602.291.2822 HMC 480.620.2978 P: 480-316-8064 P: 602-291-2822 email@example.com firstname.lastname@example.org email@example.com firstname.lastname@example.org NMLS ID: 404801 NMLS ID: 978258 NMLS ID: 502440 NMLS ID: 404801
Outstanding Agents.Outstanding Results®
Each office is independently owned and operated
7111 West Bell Road, #101 Glendale, Arizona 85308
“The Real Estate Company You WILL Refer”
We are experienced professionals providing world-class service with integrity and respect. ARROWHEAD SOUTH 7111 W Bell Rd #101 Glendale, AZ 85308 623.643.1000
NORTHWEST VALLEY 15003 W Bell Rd #100 Surprise, AZ 85374 623.533.3100
SOUTHWEST VALLEY 10320 W McDowell Rd Bldng B #2005 Avondale, AZ 85392 623.344.7300
ARROWHEAD NORTH 20241 N. 67th Ave #A-1 Glendale, AZ 85308 623-362.3000
RE/MAX Professionals INSIDER Newsletter EDITOR AT LARGE: Sarah Bliss • email@example.com 623-643-1015
RE/MAX Professionals Newsletter is created and distributed on a monthly basis. All rights reserved. If you would like to submit an article or advertise in our newsletter, email Sarah Bliss at: firstname.lastname@example.org
ANTHEM 39504 N Daisy Mountain Dr #106 Anthem, AZ 85086 623.465.2300
Professional Commission Advance Friend us on Facebook
GRAPHIC DESIGNER: Orlando Diaz • email@example.com 623.643.1000 CONTRIBUTORS: Frank Russo Fidelity National Title Mike DeRosa
SUN CITY WEST 13940 Meeker Blvd #119 Sun City West, AZ 85375 623.214.3340
Follow us on Twitter twitter.com/REMAXProsAZ
If you find yourself in a financial struggle, don’t stress. We are here to help you! As an added benefit of services to our agents, RE/MAX Professionals would like to remind you that we offer a competitive Commission Advance Program to help our agents when transactions may not close on time. If you have any questions, please feel free to contact the office manager at your respective office.
RE/MAX Professionals July Edition of the Insider.