Podcast Transcript – ‘We Fixed Real Estate’ Disclosures w/ Breanna Part 2

SPEAKERS

Misty, Breanna, Fred

Misty  

Welcome to ‘We Fixed Real Estate’. It’s another podcast brought to you by a Arrivva.com. I’m here with Fred Glick Say hi, Fred. Hi, Fred. And I’m here with Brianna Rutherford Say hi, Brianna. Hello. This is our second week with Brianna she knocked it out of the park with our first podcast on Disclosures. And so now we are going to have an update disclosures part two, what are we going to talk today, Fred? 

Fred  

Well, we’re going to talk about other stuff that may or may not be important in your situation. So this isn’t one of those things that required you’re gonna have to listen to for sure. But now one of the big things is when you buy a property that’s not a straight on fee, simple single family house, we’re talking about anything that has any kind of association. And there’s only two kinds people and let’s get this all straight, and we’re going to get the lingo correct. And this is how you have to understand the property can either be fee simple, or it can be just we’re talking residential, it’s really only three but I won’t go into cops and stuff like that. be simple. It is a condominium. Or it is what’s called a p UD planned unit development. Those are the only three could be so people are now saying to themselves, so what about a townhouse? Okay, townhouse is a physical structure. So the townhouse is a piece of real estate that’s attached to another piece of real estate on the sides of it, not above or below. That’s a simple explanation. That that’s it. Now that could be part of a condominium or it could be part of a PUD. So it’s important and people call PUDs, just a homeowner’s association is another way it’s built on. But that’s really a homeowner’s association can involve a condo Co Op, or a PUD. And then there’s de minimis pods. But that’s even a longer story. And we’re not going to go into that mostly on the East Coast, California. But you’ll hear these expressions, the CC and Rs. So if there is some kind of association on your property on the title, insurance, title report, we’ll say CC and Rs. So now I’m going to let Brianna explain what a CC and R means.

Breanna  

Yes, thank you. So well, just to circle back to that you could actually have a single family home be part of an HOA?

Fred  

Absolutely. I should have mentioned that.

Breanna  

Yes. So that condo or a PUD could be exactly, exactly not to confuse everyone even further. But yes. So yes, an HOA is a homeowner’s association. And in either a planned community or condominium complex, they usually not always, but they usually adhere to a set of rules and governing laws within their own little entity. And so that’s when you get what is commonly known as Hoa docs, basically. And so the HOA docs are all the information that has to do with the complex that you’re going to be moving into. You have bylaws, so the bylaws that come in an HOA package. So what’s going to happen is you get your disclosures and part of the disclosures are going to have what they call an HOA package. And the HOA package is going to have bylaws. bylaws are the governing documents for the association Association. Yeah,

Fred  

I mean, and they’re all recorded property recorded against the property. So every property will have the same documents.

Breanna  

Exactly.

Fred  

And same rules.

Breanna  

Yeah, exactly. So and then you have the CC and RS which are the covenants and the restrictions. And that goes into more what the rules of the actual complex are. For example, I live in a townhome slash condominium. And one of the rules here is that is included in the CCN. Ours is either you have to own the home for two years the to be your primary residence, the owner has to live there before you can rent it out. So that is an example of what you would see in the CC and Rs. Also, we would see in the CC and R As you know, the rules for the common areas that there’s any rules for the common areas, just all the info that you want to know about a particular complex.

Fred  

Yeah, and they’re all pretty standard things. But there are the little things about pets and about you know, when you can move in, and in some buildings are crazy, you can only move in Monday to Friday 10 to 12, you have to reserve the elevator, it’s got to be two weeks in advance. There’s some really goofy stuff in there. But usually, the listing agent will provide you with the goofy stuff and try to you know, because you want to ask the current owner, Hey, dude, what’s, How weird is get here or even call the association. So when we have a deal like that, we try to find out everything as much as possible up front. Sometimes you’ll get agreements where they don’t give you any of this until after the agreement is signed. And then each agreement, depending on the state has a number of days, they have to provide it to you by I think it’s seven, California. Yeah. Yeah. Right, after acceptance of the agreement, so then you get it. And then you have a certain number of days to back out of the deal because of it. So why wouldn’t you give it up front? drives me crazy. Yeah,

Breanna  

I’ve never understood that that usually comes like day six. For other places for us with with a repo, when we do our listings, we provide all of that upfront. Everything.

Fred  

Yeah, nothing gets listed by us unless we have app. So literally everything. We make it so that if someone wanted to buy tomorrow, they could buy tomorrow, everything’s exactly

Misty  

would be honestly.

Fred  

Yeah. So let’s talk about a little bit about mortgage companies. There’s a standard Fannie Mae, Freddie Mac type of normal, the approval form that goes into like, three years, some questions that each Association and or their management company should know how to fill out. But these companies take forever, and they don’t care. So again, you know, if you know you’re getting a mortgage, you got to get on it like that second, in once you’re under contract, first thing you do is get the package from these clowns, because most of them are terrible. Most property management companies that do homeowners association stuff are terrible. Yeah, I was gonna say if anybody wants to object to that, and tell me how great they are fine, you get them on the podcast, because we don’t know of any. Because we just have problems all the time. Brianna goes crazy.

Breanna  

Yeah, I don’t I don’t know of any. And there’s nothing to say that an HOA a homeowner’s association has to deal with a property management company. And so there are quite a few HOA dues that are just homegrown home run. And so what that means is you’re relying on a homeowner, a random homeowner, that’s part of you know, usually this four to five person committee to get you all the pertinent information that you need. One of the most important things is proof of insurance for homeowners association. That’s something that’s needed by every lender. And uh, so, yeah, I would definitely ask if it’s not already provided, like I said, a Reba, I don’t you know, we always provide the HOA package before it even becomes, you know, listed, we get everything. But if you didn’t have that opportunity. Yeah, I would try to, you know, make sure that responsive.

Fred  

I’m kind of thinking out loud here. One thing we don’t get Brianna is the mortgage companies form filled out. Right, you get this week, we could try and get the standard Fannie Mae form filled up, but there’s going to be some lenders are going to want it on their own thing, even though that’s the same exact questions, but at least I start, but usually the problem is, is lenders need their these questions answered. Especially if you’re going nuts over 90% loan to value on a Fannie Mae loan, then it’s a full review once you get 19. Under its limited review for easier, but these jumbo lenders don’t know you from Adam, they may you know, first time in a building they need to approve the whole building. So you need to talk to your lender ahead of time find out what are your requirements for contents because I need to know

Breanna  

Yeah, you’re doing FHA then the condo has to be vetted and they have to approve the association, a whole associan

Fred  

there they they were talking about spot approvals again, but it’s so arduous. If you got FHA, VA if you’re going for FHA, VA USDA condo, just go to a place that’s already approved. Exactly.

Breanna  

absolutely. And so yeah, you also want to make sure that, you know, the homeowners association is not a total hot mess in those situations. But yeah, so you’re going to have the covenants and restrictions, then you’re going to have the bylaws, and then you’ll have a another thing, which is just their, basically their title as an HOA and a community. So that will also come with it. A lot of times, you know, their plot maps will come with it as in, you know, where they are, and how many units are in the plans, community, etc. And so that will be part of the HOA package as well.

Fred  

Okay, so let’s talk a little bit about the package what to get it what you’re looking at, yeah, there’s all the stupid rules and regulations, but start looking at the budget, the budget, that’s the important thing.

Breanna  

So now, the next part, yep, the budget is something that you’re also going to get they have to, by law provide that to you.

Fred  

If you in the current year, if you see negatives around the net income, run, okay, don’t buy in a condo. Also, here’s another thing. There’s condos that are mostly self run that people have hardly any reserves, and they’re all trying to keep let’s keep it kind of below because I didn’t want to pain You did? Well, you’re an idiot. Because first of all, you have to basically have 10% of your gross monthly gross yearly income as reserves. Yeah, operating operating costs. So you’ve got to put money in reserves, what happens if every roof blows off and the insurance company won’t pay? Well, guess what your condominium you got to put all the roofs back on, you better have the money. There are ways to figure out how much to save there are people who do reports just come out and tell you here’s what you’re going to need. You can Google them and find them. But you know, make sure you’re buying in the right condo, it might sound like a great deal. But it’s because they don’t have reserves. And guess what, you’re not going to get a mortgage or you need to go to a non qm mortgage and pay five and a half or 6%. Because the building doesn’t qualify for standard financing.

Breanna  

So and you know when it comes to Hoa is they can make or break. Also, to a certain extent, obviously, the market will always persevere, but the value of the home. So this is a small example where I live, my Hoa is runned run by some frugal gentlemen. And he wants the HOA to always stay at $135 a month. So if you’re familiar at all with the California real estate market, and with the Bay Area, real estate market, saying that I have associated with these $35 a month is insane. Usually, you know, if you go to like San Francisco, if you’re anywhere in LA, you’re going to have association fees that are like at least $600 or more a month. So mine are $135 a month. And he keeps them artificially low by doing all the work himself. And so what ends up happening is our complexes. home values are actually stunted because of that, because the the community is not well taken care of. So yes, people come here and they go oh my gosh, dues are $135 a month. That’s amazing. There’s a complex next to us a couple streets down and their HOA dues are $350 a month. But they have like amazing grounds and they have you know exactly. And also what the HOA Doc’s are going to tell you is what your Hoa covers versus what you’re responsible for. Every Hoa is different. So that’s something I find. I would give the advice to buyers is read those Hoa documents, don’t just initial them because I’m when I send them to you. They’re going to have somewhere between 305 100 pages. And something I love is Fred

Fred  

giving a speed reading course with this.

Breanna  

No No but Fred, always what I love is he always slacks our clients and says sit down tonight happy reading, you know get a glass of wine and get ready to get into the aways because they are so important. And you know, you want to know if you’re moving into a place? Do my HOA dues cover the roof? Or am I responsible for the roof?

Misty  

Or am I supposed to make a sound after 10pm? Or can my kids use the pool?

Breanna  

Absolutely, or. Right and my Hoa, you know, they’re responsible for the outside of the fence. I’m responsible for the inside of the fence. I don’t know how that yeah,

Fred  

it’s very odd, like,

Breanna  

yes, but I’m also responsible for the actual gate. They’re not responsible for it. So just things like that. So when you’re going to be part of a homeowners association, read those disclosures there for if you really don’t want to read them, you hit Command F, and you type in words like pets, children, yeah, important things like pool, you know? Yeah. And then look at the budget. So yeah, pool jackal. So, so you’re gonna have the articles incorporation, which is when they became a homeowner’s association, you know, with the county, etc, then you’re gonna have your CC and ours, then you’re gonna have your bylaws, then you’re gonna have all your financials. So you’re going to have a yearly budget, you’re going to have financial view, over the last three to five years, you’re going to have your minutes so you can get a little glimpse into the HOA meetings. And you’re going to have proof of insurance. So

Misty  

quick question, is it easy for laymen to discover whether it is a property management person doing the HOA? Or whether it’s just that group of selected?

Fred  

Depends on what they give us? I guess? Well, no, we contact it. But if it’s coming from a listing agent, we can ask.

Breanna  

Yeah, a lot of times in the listing, it will say property management company Hoa, or each way. And what I usually understand is if I look at a listing, and it has a property management name, like, you know, a Riba property management, and obviously, that’s pretty, you know, cut and dry. No, we’re not, we’re not getting into the property management game yet. But no, it just has like someone’s name and phone number, I’ll understand that. It’s not run by a property management company. And property management companies have little to extreme involvement in HR ways. So property management companies can just literally be facilitating sending out flyers or they can be super involved.

Fred  

Right? Sometimes I’ve actually found Hoa is run by real people who know what they’re doing, actually. But yes, one thing I would suggest to everyone is never, never, under any circumstances run the boards of of a condo or homeowners association. You have no idea. Just trust me on that you have more to do with your life.

Misty  

Unless you are writing a sitcom. And you need some fodder material.

Fred  

Oh, no, no, no, you’re you’re writing one of these deeply depressing things about people you have no control over that are more morons and have no clue about

Misty  

reality. Stephen King novel,

Breanna  

I attempted, I attempted to run for my Hoa board. And I did that because I wanted to affect change in my complex. It had been a low for many years, young families had grown up and moved out. And so there were quite a few older single empty nesters. And now this influx of families were all coming in. And we are dealing with a lot of old rules that don’t really make sense anymore, old broken down playgrounds, etc. And so my wanted, we wanted the board to reflect the actual homeowners and what we looked like. I lost because homeowners associations are not all of them. But a lot of them are very hard to break into. And they like things the way they like them that they’ve been run for a number of years. So absolutely. It’s a little political system for sure. So but yeah, that’s the biggest thing I would say is read those Hoa docs do not just get them through DocuSign and go Yeah, yeah, I’ll read this later. You definitely want to go through and read them.

Fred  

I think we’ve pretty much covered this. And I think let’s just leave it at look at these things. Ask us about it. Ask your lender about it. Get Everybody prepared because the most important thing you do in this market is be ridiculously prepared to buy. What does that mean? It means Everything your lawyer would say to do, you can’t do meaning, there are contracts, you might sign that you’re not going to be able to do any inspections, you’re not going to be able to have it subject to the loan approval, the appraisal, anything like that. That’s kind of what’s happening right now. So as long as you’re mentally prepared, and there’s other ways, and we can give you details about what to do, but you got to be ready for the loan. And the problem is most of our clients are pretty much I don’t know, make up a price a million and a half 20% down, no problem, we can put a little more data like 30% have big whatever, they still have to get the mortgage, and the mortgage companies still have to send out an appraiser. The appraisers are so behind. It’s ridiculous. So when you sign an agreement, saying that you’re not subject to anything, you’ve put up 3% of the sale price, that money is at risk if you don’t show up the money closing. So we have come up with a little twist to get around the mortgage issue. How about if I tell you we’re working on a program, and I’m teasing this, where there’s no appraisal required, you can get up to it looks like 75% loan to value, as long as you’re pre approved for a regular mortgage, which ends up being refi after closing, and your credit scores good and everything else, which it probably is because you already pre approved. And we have found a company working out the details again, who that’ll get the money to buy the house like a cash buyer, and you will own the house. Big difference. All these other programs that are out there will buy the house for you and then sell it back to you. You know what? The fees on that get ridiculous. So I found a mortgage lender who will lend you temporarily this money, just so you get the property. There’s some other little twists and turns it does have costs. But we do have rebates. And from what I’m figuring out it, probably the rebate covers the cost, and then you get the tax deduction for the upfront points. So I’ll be able to explain this in another video we’re going to make when we get programmed out science, but just pay attention and we’ll we’ll get that out soon. Anyway, that’s my teaser for the day.

Breanna  

Now will be a game changer.

Misty  

We set ourselves apart constantly at Arriva.com make sure you go there today and see how much your rebate can be for buyers for sellers for mortgage we covered all in you benefit. So any parting words, Fred?

Fred  

Well check out the blog and the podcast when you get to the site. Because really. And let’s not forget our Tick Tock because Misty is rocking it on tick.

Misty  

Yes! Go check out that Tik Tok.

Fred  

Yeah. And also follow me on Twitter or Arrivva.com Arrivva dot com, because it’s me. And even though it’s a corporation, we stand for shit. Sorry, you know, we care. So yeah,

Breanna  

I follow you on Twitter. And a lot of times I find that Arrivva.com Twitter handle usually lets me know what’s happening with real estate market two to three days before other people do. We and I, you’re just on it. So I usually get all the information. And it’s funny, my little group of neighbors here. No, they think that I have like some inside track. And I’m like, No, I just was super experienced broker and someone that’s got their pulse on what’s actually happening in the market. So that’s the thing. I think there’s unfortunately a lot of agents and people that in real estate that don’t really know or are sort of in it or sort of not in it, which is fine for you know, certain situations, but especially right now in California real estate, it’s very reminiscent of like 2014, where we’re doing multiple offers no contingency, all cash. So it feels counterintuitive, but the market is going absolutely insane again. And so you really have to have somebody at the helm that’s going to help you that actually knows what they’re doing what’s happening, like, and that’s what’s also great is we’re sort of regarding the feet in both worlds, basically, because you know, the whole lending side as well. So that’s just such an insight that a lot of people don’t have. Yeah,

Fred  

we try it. You know, I know that certain things are going to be a problem upfront, most agents don’t. But there’s one thing that came up today that was interesting, there’s a I don’t know if it’s a bill or what it is in California, which basically is going to Eliminate the tax thing for real estate agents being on 1099, everybody’s going to have to go on w two, which means you got to pay for full time employees, you got to pay them at least minimum wage per hour, which out here is 15 bucks an hour. So it’s gonna change the entire industry, because all these part timers disappear. Gone. Gone. So there’s only gonna be certain people left we by the way we pay people on a W two we don’t do 1099 anymore. But I figured this out because this way, yeah, you got to deduct things, and that’s why they wanted to do it. So you could deduct all this crap, they were selling you and you pay taxes or nothing? Well, it’s time for the real estate industry start paying taxes on their gross incomes. You know, and you’re going to be able to do that and offer benefits offer retirement funds. So that’s the whole thing and but so another thing to completely change the industry. It’s going to be fantastic. I love it.

Breanna  

Absolutely.

Misty  

Great job everyone. Thank you so much for tuning in to another podcast. Have we fixed real estate and as you can tell from this one, we really truly have so calm com Twitter or even com Instagram arriva.com Tick Tock we’re working on arriva.com I think I have a riva.com one right the second So yeah, I

Fred  

think that’s what it is.

Misty  

Yeah. All right. Thank you so much. Thank you so much Brianna, fabulous guest and we will talk to you all soon.