As of February 1, the AAR (Arizona Association of Realtors®) implemented a substantial number of changes to the forms involved in most Arizona residential real estate transactions. One of the changes to the Purchase Contract -Feb2017 was rather fundamental. Pursuant to section 5a, the Premises are now being sold “… in its present physical condition as of the date of contract acceptance.” i.e., in “As-IS” condition. The buyer can still do an inspection and request repairs, same as before, but the seller does not now “warrant” the functionality or condition of any part of the property. The As-Is Addendum doesn’t even exist any more, and the section in the Buyers Inspection Notice and Sellers Response – BINSR -Feb2017 relating to “warranted items” has been eliminated … this is just a two-page form now.
Water Heater … Boring! Right? Well, not so fast! … especially if you are considering the purchase of a new to-be-built home, but also if you are considering some significant remodeling.
Long pipe-runs from the water heater to the kitchen and/or bath rooms will add significantly to energy costs unless the system is designed to minimize, or eliminate, the heat loss. Plus, letting the water run for a shower until the hot water arrives can waste a lot of water over time. And a tank too small for the size of the family/group simultaneously needing to use hot water for showers, baths, laundry and/or dish washing can cause great irritation when some of those showers must be delayed while the water heater is refilled and reheated.
So what are the design issues?
- Family/group size and size of bath tubs – what is the likely hot water demand to be?
- Gas or electric? Gas is more energy efficient for heating water, but some homes are all-electric. Most varieties of water heater can be either electric or gas fueled.
- Tank size – 50 gallon is most typical and sufficient in most cases, but are available in various sizes up to 98 gallons at retailers.
- Tankless – installed at the point-of-use. Most energy efficient and water efficient, but costly to install to the point of being not feasible for a retro-fit.
- Recirculating – for instant hot water from a central source. To minimize energy loss, the pipes must be very well insulated. Deserves serious consideration for a new home.
- Multiple Tanks – nearly mandatory for very large homes, while not feasible for small homes.
- Heat-pump – same technology as use for AC units. A small heat-pump sits right on top of the electric water heater pulling heat out of the surrounding air … VERY efficient during the summer when the water heater is located in the garage, especially in southern Arizona.
- Solar panel electric energy source – work great, but rebates and incentives have diminished.
What about maintenance? With the rather “hard” water in the metro-Phoenix area, the typical life span for a water heater is about six years for electric and ten for gas. The scale buildup on the heating element is commonly the reason for failure. Two maintenance procedures can significantly extend the life of a water heater:
- Semi-annual partial draining of the tank – just hook up a water hose to the water tank drain faucet and drain out three-to-five gallons. With that water will go the sediment that’s collected in the bottom of the tank.
- For an electric water heater, on four-year intervals, replace the anode rod, the heating element. These get heavily corroded by the minerals in the hard water. The parts are available at Home Depot and elsewhere.
As defined in the Purchase Contract -Feb2017, an Arizona home sale closing is a very specific and precise event. “Closing” is the moment of the recording of transaction documents at the County Recorder office where the property is located.
An Arizona home sale transaction closing does NOT occur when the seller and/or buyer sign their respective documents. Docs signing and “closing” are totally disconnected events that could be separated in time by days.
Typically the seller signs the docs for that side of the transaction several days, possibly weeks, prior to closing. This is possible because all of the seller costs factors are known fairly early in the process, as well as the seller documents.
Where there is financing involved in the purchase, typically the buyer signs the docs for that side of the transaction just a day or two prior to closing. Lenders prefer this to be sure that information is absolutely current for the property, the buyer’s credit, and most all other details of the transaction.
Let’s review what “escrow” is, and does. Escrow is a service provided by a neutral third
party, called an escrow officer, to manage “settlement” … completion of the transaction that the buyer and seller have agreed to in the form of the Purchase Contract. The process consists of:
- collecting and creating transaction documents
- acquiring and certifying signatures on those documents
- securing a title insurance policy
- prorating insurance, property tax and HOA accounts
- receiving and disbursing monies
- delivering the completed documents to the buyer and seller
- electronically delivering documents to the county Recorder
… all on behalf of the buyer and seller according to the Purchase Contract terms and conditions, as well as instructions from the buyer’s lender if financing is involved.
Buyer and seller can move forward separately but simultaneously in providing inspections, reports, loan commitments and funds, deeds and many other items, using the escrow officer as the central depositing point. When the Purchase Contract has been properly crafted, as normal for a Realtor®, the escrow officer can take many actions on their behalf without further consultation, saving time and facilitating the successful completion of the transaction … which occurs when transaction documents are electronically sent and recorded at the County Recorder’s office.
Metro-Phoenix Housing Market June 2015 to June 2016 appreciation range by by Zip Code
… 22% to -4% (yes, that’s a minus sign)
- 22% – 85006 … very near downtown Phoenix, northeast
- -4% – Gold Canyon … 40+ miles east of downtown Phoenix
Perhaps the extreme nature of the current market is best illustrated by the graphic below. The bar for each price category is the number of homes listed for sale July 1 divided by the number of sales in June. The answer/quotient is the number of months it would take to sell every listed home at that rate of sales. Under two months is a very tight market heavily favoring sellers. Over four months is favorable to buyers. The under $125,000 categories are abnormal because of universal, extremely poor condition and/or location issues.
A nice home in a decent area reasonably close to employment centers that’s listed for under $200,000 is going to have multiple offers within a couple of days. Upwards from $600,000, even an exceptional offering is likely to take some time to get the attention of a committed buyer.
What payment histories are considered in determining a credit rating? How many of the following do you think are included … Rent payments? Utility payments? Cell phone network payments?
Consider this situation … we’ll use “Kelly” as the name of a hypothetical young man or woman who graduates college, having been able to do so without any outside financial help and without acquiring debt because Kelly had a good part-time job. Kelly lived close to school and reliably paid the modest rent; walked to school and otherwise used public transportation, so never owned a car, nor had a car loan; paid the utilities for the apartment; and had a cell phone and paid for that service.
Immediately after graduation, the part-time job became full-time with a good pay raise. Within six months, Kelly had saved enough money for the down payment required for a FHA loan typical for the homes in the areas near work.
So Kelly contacted a Realtor to start looking for a home to buy. Being very knowledgeable and experienced, the agent gave Kelly the name of a lender who had successfully helped many first-time buyers, and advised Kelly to get pre-qualified for the purchase-money loan to (1) establish the home price limit and (2) to have the Pre-Qual form that would be required to submit with any purchase offer.
Kelly was shocked to learn that buying a home was not feasible at that point … because … no credit rating.
Even if someone has years of on-time payments for utilities, rent, or other expenses, the credit scoring models of Fannie Mae, Freddie Mac and HUD, among others, still rely on credit scoring models last updated about 1995 that fail to take into account many such ongoing repetitive living expenses.
The US Congress is considering several pieces of legislation to change that, and they were sent several letters signed by thirteen real estate industry organizations, including the National Association of Realtors and the Mortgage Bankers Association encouraging them to get something done.
As the NAR wrote, “All of the legislative proposals … are not a ‘loosening or ‘weakening’ of lending standards; it is an acknowledgment that not all people come from the same backgrounds or practice the same financial activities. Insufficient or non-existent credit histories are holding back buyers who have the means to responsibly purchase a home … and who have demonstrated substantial financial responsibility over time.”
Mr/Ms. Renter … You are likely paying more to rent than you would pay monthly to buy the equivalent home or condo! In Maricopa County, i.e., metro-Phoenix, rents have increased that much, interest rates are still that low, and home prices are still reasonable.
While low rates is good news, there’s even better news! You may qualify for a “grant” … you can substitute the word “gift” there … of 4% of the purchase price that can be applied toward the down payment and closing costs for a 97% loan. Thus, your out-of-pocket cash to buy a home could be near zero.
A truly great program exists for reasonably creditworthy renters who can afford to make the loan payment but don’t have the up-front cash for the purchase. The Arizona Housing Finance Authority (AzHFA) HOME PLUS Home Loan Program consists of an attractive 30-year fixed-rate mortgage plus a down payment assistance (DPA) grant that can be used toward the down payment and/or closing costs.
The DPA is NOT REPAID … it’s truly free money.
HIGHLIGHTS … some details below are specific to Maricopa County
- Loan must be for the purchase of an Owner occupied, Primary Residence only
- Being a first-time buyer is NOT required … you may have owned a home previously
- Borrower(s) Income not to exceed $89,088
- Purchase Price limit not to exceed $356,352
- Each borrower must complete a homebuyer education course before closing, which can be done on the Internet
- The homebuyer works through a AzHFA participating lender for application and loan processing
- Homebuyer debt-to-income ratio must be 45% or less
- For DPA = 4% and LTV = 95.1 to 97% … 680+ FICO score required
- For DPA = 5% and LTV = 95% or less … 640+ FICO score required
Qualified U.S. Military Personnel may receive an additional 1% DPA than listed above.
More info … https://housing.az.gov/finance-authority/home-plus
Contact … Program Administrator, Dirk Swift 602-771-1091 … firstname.lastname@example.org