Over the course of several months vandals have broken into the maintenance yard and stolen equipment and vehicles that are used by the crews. They have driven over the greens causing damage to the course. Some of the equipment was even driven into the ponds. These events made the news in the Prescott area and in Phoenix. Prescott Golf and Country Club was impacted by this destruction.  Th greens have been damaged, and with winter here, nature was on hold to repair it. The cost of fixing the damaged equipment will be borne by all of us that play on this beautiful golf course too.

Our thanks go out to someone that was able to give police a lead that resulted in capturing the culprits. Who knows if the vandalism would have spilled into our neighborhood and our homes eventually. We actually see so little crime in our area. That is just one of the many reasons Prescott Country Club is such a wonderful place to live.

To here read a news account

The Myths and Facts

I had the facts all wrong

After attending training I now realize that there is a place for a reverse mortgage for many seniors.

Common Misconceptions:

• Reverse Mortgages are only for poor seniors
• Senior gives up ownership
• They are expensive
• Senior loses equity over time
• Senior is left with a large debt at the end
• Senior can never sell the home

All these Misconceptions are wrong.
There is a way to use a reverse mortgage to your benefit and change your life.

I now understand the process and the effects. You can even buy a second home or downsize with a reverse mortgage and not have any payments.
It can relieve your family from the cost of maintaining your lifestyle and health care costs.
The only requirement is that you are 62 years old or have a qualifying disability.
You can take monthly payments or a lump some disbursement or a blend of both.
If you outlive the equity in your home, you continue to receive payments until death when your loan is forgiven and the house turned over to the lender.
Reverse Mortgages are federally guaranteed.
The money continues to be paid to you as long as you live in the home as your primary residence.
All owners receive counseling, under the law, from an independent third party before meeting with a reverse mortgage banker. You will know your rights and obligations.
You can turn your monthly payment TO the bank to a payment FROM the bank.

To find out more give me a call at
928-632-3906Jerry Germansen
Associate Broker
eXp Realty

Any closing statement for property bought or sold in 2012 for 2012 taxes

• All closing statements from the purchase of property you still own
• Receipts for any home improvements for your primary residence or rental property you own
• The maintenance and repair receipts on rental property you own
• Utility bills for rental properties if you rent them with utilities included
• Property tax bills
• Mortgage payment statements

There are costs associated with a property transaction that are deductible on your income taxes. The closing costs and any commissions are deductible  Any taxes prorations paid through the escrow will also be shown on your closing statement. Your tax accountant will need that information.

Profit on the sale of your primary residence is tax exempt for single tax filers up to $250,000 and up to $500,000 for married couples. How is that figured? You accountant will look for a cost basis and a selling price. Your basis is the original purchase price, plus the cost of capital improvements, minus any depreciation. What are not included are maintenance costs and repair costs. Only real improvements are included. As an example, painting the outside of the house is not an improvement. It is considered maintenance. But adding a room or adding solar would qualify as an improvement. A full remodel of a kitchen will also be an improvement. Just changing the faucet and flooring is not.

If you bought in the last 10 years you may think it unnecessary to keep all your receipts because you will not reach the tax-exempt cap. Not so fast. That may be true under the current tax code. But I believe that those caps will be changing. Congress will be looking for ways to increase revenue. Your taxes are going to go up. One way that Congress will ease that way we look at the numbers is to place the burden off the general tax payers and on to those in smaller numbers. Rather than lower the mortgage interest expense allowed for all of us, they may just lower the profit that is currently tax exempt. Only about 1 in 10 will be affected that way. It will be an easier pill to pass on to us to swallow.

Remember when gathering papers for your tax return this year to include property tax bills for all property you own. Bring in the closing statements on transactions for 2012 and the cost of improvements since your purchase.

If you have income property you have all the write-offs that come with operating the rental. Replacing a refrigerator and painting the exterior are examples of deductions on income properties. Replacing the kitchen faucet or adding new flooring are deductions too. Those are business expenses and unrelated to the cost basis we talked about.

There is a difference between the expense deductions when calculating your regular income tax or calculating your gain on a property value when sold. Your accountant will know where the costs are to be allocated. When in doubt plan to bring in all the expenses. You pay them to categorize expenses properly .

Here area some links that will guide you:

IRS rules on deductions

Capital Gains on homes changing

How long to keep records

When discarding old files, check for any that might contain your social security number. This is a time of year when the bad guys will look through trash to find info they can use to steal your identity. Rather than tossing a social security number out, burn the document or completely shred it. Your social security number will be on closing papers from escrow. Once the property is sold the taxes filed and the required time has passed, look through the closing for that hidden social security number. Or just call one of the bad guys. He will know exactly where it is!

Jerry Germansen

eXp Realty Associate Broker

928-632-3906

Your primary residence is covered under a homeowner’s policy. A second home is not occupied daily and requires a special homeowner’s policy for that use.  If you rent out the property you become a landlord. Your homeowner’s policy does not cover you for that use.

You need to purchase Landlord’s Insurance. That policy has different coverage. It is for the structure and the liability that comes with having tenants.  It does not cover the furnishings unless you have contents coverage added in case you are renting it out furnished. The tenant purchases renter’s insurance for their furnishings and liability.

Should a claim incident occur without the proper insurance in place, you may find that your claim is denied. Insurance companies employ investigators to review claims of higher amounts. If the property does not have the right coverage in the policy, they will refuse to pay. Imagine renting out your home for the summer while you vacation abroad and a fire occurs. If you did not call your agent and obtain landlord’s insurance you could be left with only the land and may be exposed to liability with your tenant.

At the time a home is sold we often are asked to write a provision for the seller to remain in the house “just for a few days”.  Or we may be asked if the buyer can store their furnishings at the property “just for a few days before it closes”. That happens a lot when the home being sold is vacant. This falls under the same category of a landlord-tenant relationship.  We do not recommend post or pre possessions because of these issues. However, with proper insurance in place it can be done. Just call your insurance agent and get the proper coverage for the situation. Some insurers may require a minimum of 6 months polity term. Others will just convert to a homeowner’s policy once the new owner is the occupant.

Be aware that if you move before your home is sold you need to also notify the insurance company. Vacant houses require different coverage than occupied homes. There is more risk for the insurance company when a home is vacant. There is no one there to notice when a pipe bursts or to ward off a break-in.  We see sellers getting notices from their insurance company when a home is vacated. The call is triggered when they apply for coverage on their next home.   Many policies have specific wording stating that the policy may become VOID after a certain number of days vacant!  Some become void in as few as 30 days!

Always let your agent know about these types of changes and follow their advice.

Jerry Germansen, Associate Broker

eXp Realty

Your earnest money check is deposited. This is usually refundable during inspection and until the loan is acquired. It may become non-refundable in case of breach of contract or if determined to be non-refundable in the contract.

You will receive a package of escrow documents from the escrow officer including:

• How you want to take title to the property (joint tenants, tenants in common, sole and separate, in a trust or in an LLC)
• Your social security number
• Where you want documents sent
• If you are paying cash or getting a loan

Fill out these papers and return to escrow as soon as possible.

You need to work with the lender if you are getting a loan and provide the documents of your finances that they ask for:

• Tax returns
• Bank statements
• Any monthly payment account statements
• The source of your down payment funds
• A copy of the property listing (will be sent by your agent)

Your agent will help schedule your inspections within the normal 10 day inspection period. You should attend the inspection if at all possible.

Your agent will prepare a Buyer’s Inspection Notice and Seller’s Response form detailing the repairs that you feel are needed on the property. The seller’s agent will fill out the Response from the seller and deliver it to you within 5 days.

You have the right to either cancel the purchase, accept it as is, or ask for repairs.

Most bank-owned foreclosures will not do any repairs. However, if the property has a septic, they must have the system certified by AZ law.

You need to prepare to have your down payment, plus any other closing costs, ready  to send in to escrow before the closing date.  Ask escrow for wiring instructions. Wiring the funds in is the safest way to get the money there.  Personal checks and credit cards are not accepted. The wire can take a day to go through so prepare and send it in advance.

You will receive a title report. That is the findings of the title examiner who searched the county records about the property. Ask questions if anything is of concern. Your agent or the escrow officer can be of help.

You will receive a Seller’s Property Disclosure Statement within 5 days of contract acceptance detailing any problems that exist or that have been repaired. Some properties require an additional Affidavit of Disclosure that is to be recorded by the escrow officer with the closing documents.

The loan process is lengthy and must be kept moving forward.  Here is the process:

• The application is taken by the loan officer who issues a Pre-Approval based on a conversation about your finances and job
• You will be asked for all the documentation about your finances and job
• Once all the documents are gathered and submitted, the file goes to the loan processor to see if it is complete
• The loan processor then gives the file to the underwriter who makes sure you fit the criteria of the loan that is being requested. This step is lengthy and may take even longer if the underwriter has several files on their desk
• You will then be “Approved” or “Rejected”
• The underwriter prepares the loan documents that you will be signing for the purchase. The documents are sent to the escrow officer for you to sign
• Once the documents are signed they are returned to the underwriter who sends the file to the Funding Department. They will review the file again and may pull your credit report again just before funding.
• The funder then wires the money to the escrow officer.

Escrow process:

Escrow is the 3^rd party neutral who handles all the paperwork for the principals and lender.

• The escrow researches the property recorded documents
• They check with the seller’s lender for a payoff amount to close out the loan
• They look to see if the taxes and any assessments are paid and prorate them through the closing
• They send you a preliminary title report
• They make sure all the conditions of the contact are met such as repairs and insurance
• Escrow is the clearing house for the money. They receive your money and the loan finds and disburse them accordingly
• They prepare the Deed to transfer the title into your name
• They schedule you in to sign all the documents and disburse the documents accordingly
• They send the Deed to the County Recorder

Insurance is another component. The seller will provide a CLUE report,  which discloses any claims in the last 5 years. The buyer must obtain homeowner’s insurance to escrow or the bank will not fund the loan. If either you or the property have had too many claims, there may be trouble getting insurance. Get your insurance handled early in the process.

Your agent is responsible for assisting you along the way. They have been through this process before and can be your guide. You and the agent will be doing a final walk-through within a day of closing to be sure the seller is out and the property is in the same condition as when the contract was written and all repairs are completed.

Possession of the property:

The property keys are turned over to the buyer once the agent gets a call that the deed has been recorded. You do not own the property until that time. Do not expect to get in until that time. Have a backup plan in case there is a last minute delay. Delays are not uncommon.  Final reviews or late wiring are the most common cause for delays. But a seller may not be out in time either. There are just a lot of steps and people involved and all must happen at the right time and completely.

Post-possession and pre-possession of properties

Often the buyer or seller wants to be in the property when the other party actually owns the home. This is a very dubious proposition.  Liabilities are huge in these situations.

Post-possession is when the seller needs a few extra days to move after the closing has taken place. Legally they become a tenant and you become a landlord. If there is a fire, injury, or any other insurance claim that takes place during that time your regular homeowners insurance will not cover it. You need landlord’s insurance and tenant’s insurance in place for this short period of time. Make sure your insurance agent knows about this. Not all insurers will provide these coverages for short periods. They   may only sell you coverage for a longer period such as a 6 month minimum.  This is the time when your friends are helping with the move and the potential for injury is greatest. It is a time when fires can occur. It is a time, after the final walk-through, when damage can occur moving large items out. What about the utility bills? You can now see just some of the issues that arise with pre and post possessions.

Under certain circumstances these arrangements may make sense. An Addendum to the contract can be written to deal with it. So do not just go on the handshake. The addendum will discuss timing, insurance, utilities, and what happens if there is a breach.

The safest way is just to have the seller out at the close and for the buyer to wait until close.

Utilities

Remember that you need to have the utilities in your name. The seller will most likely have the utilities ordered for turn off the day of closing. It is best to TRANSFER the utilities into your name. There are higher fees if the utility company turns off the service because they need to send someone out to turn them on. It there is a TRANSFER, they just switch the billing over to you. Do not wait. Get the transfer arranged well in advance. Do it before the seller turn them off and have the lights on the day you move in.

The Arizona Legislature has been inundated with requests to stop the requirement discussed below from taking effect. The lobbyest for the Arizona Association of REALTORS has a bill to vacate the requirement on the floor of the legislature. You would have received the Affidavit  by now with your property valuation on residential property if the requirement was not temporarily stopped in the legislature.   Stay tuned for more info as it develops. Read the original message below.

========================================================================

The legislature passed a Bill in 2011 that requires every owner-occupied property owner to file and Affidavit of Primary Residence. The form will be sent to all property owners of Class 3 (owner occupied) homes stating that they are using the property as their primary residence and not renting the property out more than 90 days per year. Use by close family is allowed to be considered owner occupied. You will be required to file a new affidavit every 2 years on even numbered years.

Failure to file the affidavit within 60 days will remove the owner occupied status of your property and take away the owner occupied tax rebate. The result will be a higher payment of property taxes for the owner. It is urgent that you comply.

Any fraudulent filing of a property you do not actually occupy will result in a fine of double that rebate amount. The state and feds are going to be auditing these for fraud too. They will use connecting the utility bills and ownership records and home insurance records to find violators. In addition, any property where the tax bills are not mailed to the actual property will be red flagged. The same holds true for properties held in an LLC or other non-person entity. the government is serious about collecting more taxes. This is a way for them to collect more without raising rates. .Anyone who does not file the affidavit will be paying more to compensate for lower property values and tighter government budgets.

In addition to the cost associated with the removal of the class 3 status the owners may be subject to scrutiny from the local jurisdictions for not having a business license or paying rental sales taxes.

The Arizona Association of REALTORS is currently lobbying the legislature to remove the affidavit requirement and suggests that using the ownership records and utility bills alone could have the same result of disclosing the violators without the requirement of the affidavit filing. Unless the legislature acts before March, the affidavits will go out with the tax valuation notices this spring. You will then have 60 dys to file it or your status will change to non-owner occuied. The result could cost you hundreds per year.

As real estate practitioners we have an obligation to inform our clients of these changes. This is especially true of non-owner occupied purchases. Your investor/buyer could look to you for a failure to meet the standard of practice for not informing them. The repercussions could go deep.

Jerry Germansen,  Associate Broker

Warren Buffett is the worlds most successful investor and when he speaks people listen. His reasoning for this advice is that you are protected by your loan from values falling and there are more people than homes available now. The ratio of homes to people will continue to grow developing a need for an additional million homes per year.

So what are you waiting for. Buy one of these for you family or as a rental.With the interest rates at all time lows and the prices in half you should jump on it.

Call Jerry to get yourself invested where Warren Buffett suggests at 928 632 3906.  The rebound just hit.

• The supply of existing homes on the market is at the second lowest level in 11 years.  New listings have dropped by 30,000 units from 2010
• The median price is lower than 2010.
• The number of units sold is the second highest in 11 years and second lowest in price.  Supply and demand are becoming more in balance.
• The average days on the market for homes dropped 13% in 2011.
• Foreclosures have slowed dramatically because the lenders are looking at short sales to resolve underwater properties.
• The most underwater owners have largely been through sale or foreclosure already.

All this, coupled with higher numbers of jobs creation, is signaling the bottom may have been reached. Arizona was 3^rd nationally in jobs creation for 2011. Many were hi-tech jobs.

Homes have become more affordable and the cost of homeownership is lower for every household after the market adjustment of the past 5 years. Costs have come more in line with income.

The Phoenix MLS reflects mainly Maricopa County. However, as Maricopa County goes, so goes the State of Arizona. Sales in the Valley will allow those sellers to relocate to the secondary markets in the state. Jobs will follow in those areas.

Another factor that is beginning to take effect is that homeowners who had to short sell, goes through foreclosure, or file bankruptcy during the Great Recession are beginning to have their credit healed by the passage of time. They will become a wave of buyers.

As we see a turn strengthen it is likely that interest rates will start to climb. Those who have been on the sidelines may decide to buy now rather than risk the market and interest rates rising out of their reach.  Now is the time to buy and lock in a low rate of interest.

A Short Sale occurs when the seller owes more to the bank than they will receive from the sale of the property. The Seller will not receive any funds from the sale. The bank that is the current mortgage holder must approve the sale and on THEIR terms. Our Short Sale Purchase Contract will be discarded if they accept your offer. It will be replaced with their contract and addendums that only protect the bank. That banks will choose the title policy they offer and the escrow office that will handle the sale. We see sales in Arizona closing escrow in Texas. Can you imagine that?

In order for a short sale to be accepted by the bank, the Seller must have a real hardship such as a job loss, death in the family, or divorce. They must fill out financial documents more extensive then if they were buying a home and taking out a loan. They must have no assets to use to pay the bank for the shortage. They may be required to liquidate any assets of value and pay the proceeds to the bank. They may also be required to sign a promissory note to pay back some or all of the shortage. Under these conditions many Sellers find it difficult to deal with all the paperwork that is required and they either don’t send it in or are just not able to complete it. They stop caring for their home and hold off making any repairs and doing any maintenance. We have seen landscape die because of lack of watering, dishwashers inoperable at close, ruined carpeting, even missing appliances and cabinets.

If you are a Buyer you must be prepared for a long wait to even get an answer from the Sellers. And when the Seller accepts your offer it is subject to their bank’s approval of the sale at the price offered and with a substantial loss. You must be prepared for the bank to reject your offer or come back with a price even higher than the asking price. This could be 4 or more months after your offer was accepted by the Sellers. You must be prepared to have your dreams stolen from you. You must be prepared to close the sale if and when the bank says you will. The banks will not respond to our inquiries. They totally disregard your wishes, and in many cases they disregard the law and common decency. Often the person we were dealing with is no longer at the bank or transferred to a different department during all this negotiation.

As soon as ALL of the paperwork required from the Seller is gathered it will be submitted to lender immediately — they will typically acknowledge receipt in 4-6 weeks. If the paperwork is incomplete or they forgot to send you a form, it starts all over again. In another 4-6 weeks after that they’ll order an appraisal — they will typically acknowledge receipt of the appraisal in another 4-6 weeks after that. The appraisal may be totally off from the amount they priced the home at. The initial price is set by the bank paying a minuscule amount to a real estate agent to give them their opinion of value. That agent could be from over 100 miles away and not familiar with the local market. Within 4-6 weeks of acknowledging the appraisal they will begin negotiating — they will typically come to the table with their final offer in 4-6 weeks after that. Once we have the final offer, the closing will take place in 4-6 weeks:

        4-6

        4-6

        4-6

        4-6

        4-6

    +  4-6

    = 24-36 weeks (6-9 months) at best

There is a possibility that even with an approval in 6-9 months they will reject the sale at the last minute. They often LOSE the paperwork repeatedly. This often occurs because of the high percentage of turnarounds of employees at the lender’s short sale department.

If the bank asks for additional documentation from you/your wife, or the Sellers, you will need to respond and provide the documentation– the quicker you can get it to them the better.

Typically the collections department has no clue that the negotiations are in process with the short sale department and they may continue to call the seller weekly. When the Sellers tell them that a short sale is being negotiated they will say that they have no record of a short sale negotiation and the Seller should send them the paperwork. They will be telling you the truth — the collections department will have no clue that a short sale negotiation is in process and no matter how many times you tell them they will not put it into their system and they will continue to act as if nothing is in process — the bank departments rarely talk to each other. This is typical. The departments are likely in different states. They do not have a clue what another department is doing.

Do not expect to hear anything for 2-3 months at a time because there will be absolutely nothing to report for 2-3 months at a time — the banks are that slow.

Basically, sit back, and in 6-9 months from now or more we’ll know if the bank is willing to do the short sale. Sickening, maddening, and crazy I know, but that’s the way these banks operate. I’m prepared to close on these deals in 2-weeks, but the banks keep the process to a crawl. For your own sanity, just put it out of your mind and rest assured we’re working on it. If anything important happens we’ll let you know. Nothing important will happen for months.

Most of all your need to be prepared for your offer to fail. Even if the bank accepts your offer, there is a high probability that the Seller will have stopped making payments and the bank will foreclose before the short sale is completed. The process then starts all over with a new price, a new listing when the bank decides to release the property for sale, a property that has been neglected or purposely damaged by the Seller, and a new asset manager for the property.

One of the main reasons that the banks will reject your offer is that in a Short Sale the bank VOLUNTARILY accepts the loss. If they wait and foreclose their loss is INVOLUNTARY. In an involuntary loss they then can go to the government and receive the loss difference because of the government loan guarantee.

Short Sales lead to heartbreak. They are not for the average buyer. You may have a difficult time obtaining your own loan. The seller’s bank will not accept a sale contingent upon you selling your home. So, sell before you buy. You will need a plan “B” in case the close is delayed by the Seller’s lender reviewing the file one last time.

Unless you are willing to go through all this and still have your home purchase fall apart at the last minute, you should be looking at homes that are traditional sales or have already been foreclosed. They are the best homes with the sellers motivated and in control of the sale.

Jerry.Germansen@SearchonPrescott.com

Oh Yeh!