Plan on Buying, Selling or Working in Real Estate: A must read on the changes from TRID as of OCT 3

This post is for anyone who plans to buy, sell, or work in Real Estate for the state of AZ as of Oct 3rd 2015.  It is based on new national legislation.  It effects everyone!  TRID (Truth in Lending, Real Estate Settlement and Procedures Intergrated Disclosure) has made changes to lending practices and thus AZ Real Estate Contract and forms have changed.

In this article you will quickly learn how the changes effect buyers, sellers, agents and brokers for the foreseeable future.

Buyers, great news for you!  These changes are aimed at protecting you and giving you better information.  With that, however, you have a couple additional requirements, and some things to make sure you do to avoid breech of contract situations.

First let's take a look at the sample form posted below of the AZ Prequalification (PQ) Form.   Any agent worth their time will tell you that you need a pre-qualification prior to showing you properties. Lenders in AZ will be well versed in this form, and will have it on file for you when you schedule a visit with them.  If your lender is out of state, ask them if they have the form, or would be willing to use it.  If so, make sure to get them a copy.  (hint, most agents will do this for you, just send them your lender's contact info- they will need it!)  Second hint for buyers, make sure to research your lender. Consider checking to see if they have had disciplinary actions filed against them.  The CFPB publishes articles and a simple google search will yield this information.

Now, for the changes.
Lines 3-5  This is all new.  If you do not have a PQ you will fill this section out.  To submit an offer on a property you will have to have this completed document with-in 3 days of your offer.  As a real estate agent, I would advise my client to refrain from accepting any offer without this form completed, unless it was a cash sale.
Line 6, refers to lines 36-37 of the lender information section.
Lines 36-37 have changed in that they now include the license numbers of your lender.  I speculate that this is to help CFPB (Consumer Finance Protection Bureau) investigate any lenders for misconduct.
Line 23 has changed in that is specifies the loan features.
Line 31, informs the buyer and lender of their new responsibilities.  For a buyer, you will have 10 days to shop, select and instruct your lender that they have been chosen.  The buyer will need to provide their lender with the necessary documents to proceed with the loan they have chosen,  and make sure their lender sends their real estate agent a Loan Status Update(LSU) form.  Agents, both buyer and seller agents, need to make sure they are receiving the updated LSU forms from the lender involved.  Seller agents, if you haven't seen a form, I would be contacting the buyers agent!

The Residential Purchase contract has changed as well.  For the purpose of time, I have only included the related changes and not the entire Residential Purchase Contract.  The first change occurs on page 2.

Line 2a, specifies that the contract is submitted with the AAR Pre-Qualification Form.  There is no longer a check box.   It is a requirement. 

Line 2b, specifies changes in closing documentation time frames.  3 days (days are defined as "substantial work days") buyers will need to sign all loan documents, and sign that they received closing disclosures. Real estate agents and brokers, a working relationship with the lender for your buyer will need to be established in order to make sure a.) the lender has the appropriate AZ contract forms b.) you know their work schedule to determine substantial work days c.) you can keep them abreast and vice versa for the new timelines and document delivery.   In the event that the loan was not successfully obtained, the buyer will need to deliver to seller or escrow company notice that the loan was not obtained.  If there are issues with closing documents or loan documents and corrections need to be made, then the three day time period will need to be restarted.  Please note that the time frame of three days starts at delivery of the documents.  Some lenders may chose e-mail, but if the buyer does not review and acknowledge those documents within 24 hours, they may choose to send the documents via the mail.  If documents are sent via the mail, it will add to the time frame, an additional 3 days.  These time frames are a portion of what will be extending Close of Escrow time frames, hopefully temporarily until the new system runs smoothly.  

Line 2 c, the LSU must be delivered by the buyer with in 10 days of contract acceptance.  In this case 10 days are calendar days since we are referencing the AZ contract.  Just a side note, buyers must also instruct their lender to provide loan status updates to broker and seller upon request.

Line 2 f, outlines a change in lending as well.  Buyers will need to provide their lender, with in 3 days of contract acceptance ("substantial work days"), 6 pieces of information as included in the lines referenced.  

Line 2 g, informs the buyer that with in 10 days receiving the Loan Estimate the buyer will inform the lender they intend to proceed with the loan, provide the lender all requested documents, and will work to obtaining the loan promptly.  This 10 day window ("substantial work day") is to allow buyers to compare loan estimated from different lenders, allowing them to shop the best rates or packages that work for them.  Since the loan estimate forms have changes this process will be much easier for the buyer.  

Line 2 l, specifies that if the buyer should chose to use a different lender, during the escrow process, they must first provide prior written approval from the seller.  If this consent is not granted the buyer proceeds to change the loan, this would be cause for breech of contract.  

Sellers, why should you care?  Well mainly because these changes effect your timeline for closing. The Arizona Association of Realtors is recommending agents create contracts with a 45 day Close of Escrow until the "kinks" are worked out and the timeline can be reduced.  

The last page of the Residential purchase contract has been changed as well

This page is a change that effects real estate agents and brokers.  The most noticeable change to the form is the inclusion of license numbers.  Again, I speculate this will help the CFPB keep track of any investigations they may wish to pursue against agents who fail to follow TILA and RESPA disclosure practices.  

The last two documents I am including below are really the prize for consumers.  Buyers will now be able to easily compare Loan Estimates from a variety of lenders, and will be able to easily compare their Closing Disclosure to make sure that the numbers match up.  These new forms are easy to read, and should help buyers know exactly what they have "signed their life away" for.  Please see sample copies below.  I personally think that these documents are awesome and look forward to being able to use them in my personal real estate purchases.  

In summation, these are important changes in real estate and especially will be helpful for the buyer, but effect everyone in the process.  Of course if you have any questions please call!  We'd be happy to help.