AAR Forms Changes Ahead!

When I approached the Arizona Association Realtors' (AAR) Risk Manangement Committee with proposed changes to the LSR and purchase contract to address the massive amounts of legislative and regulatory changes that had occurred in the past few years, I knew it would be a daunting task.

Entering their meeting was the equivalent of walking into a Real Estate All-Star Game. You had some of the most highly-respected and accomplished real estate minds from across the state gathered to determine the "winning plays" for this challenging market. Even though I felt like I was the third string bench warmer trying to suggest a new play in this huddle of pros, their team welcomed the insight and addressed the need to adapt to the new environment in which we all play.

Last week the new "playbook" made its rounds throughout the committees and related industry groups for final review and acceptance before the proposed release date which is expected sometime in October or November.

I wanted to address some of the key changes and edits that have been made and to give some background to the new forms.

If I Hear "the LSR is Not Worth the Paper it's Written on One More Time..."

Then why am I killing myself every Saturday rushing to finish the grocery shopping, or leaving the pool with the kids early so I can get home to call a proposed client who didn't seem to have the foresight enough to think..."Hey I have scheduled an appointment to look at real estate this weekend and since every media outlet on the planet is talking about how tough the mortgage industry is right now, maybe I should contact someone to see if I can get a loan."

Why am I spending another couple of hours explaining to clients that "yes it is really important that we don't guess how many hours you work per week" or "yes, even though you will rent your current house, we will still have to qualify you with both house payments."

If the Lender, the borrower or even the real estate agent does not understand that accuracy is important in the qualification department...then your right, the LSR is worthless. If speed is all that is important, there already is a place for the borrower to write in that THEY think they are qualified! You don't need me! And that was the beginnings behind the initial form changes.

Pre-Qualification Form...This Year's New LSR

RESPA changes made this year interesting for everyone, including AAR's management team. After numerous phone calls and emails, regarding the issue of what is on the LSR, it has been determined that changes would need to be made. The biggest change is the introduction of a new Pre-Qualification form, at this point, creatively penned the Pre-Qualification Form. I personally wanted to name it the Buyer Financing Form, but no one seemed to think having to request a "BFF" was as entertaining as I did!


The Pre-Qual creates a shift from what the industry has become adapted. It no longer bases any information off a particular property address and looks more to what the borrower qualifies for in monthly payment. This switch is to focus awareness on how certain property characteristics, such as taxes, HOA or flood insurance may affect a borrower's ability to qualify.

The "Pre-Qual" is not just to be based on what the borrower tells us, the lender, that they qualify for, but will inform all parties how the lender determined it. It will also specifically identify what documentation the lender had available to make the determination.

Pursuant to Section 2d of the Contract...

As RESPA requires buyers to have the opportunity to "shop" for their loan, the new requirement will give the buyer a certain number of days to finalize who their lender will be and will require them to identify that lender in the contract. If the identified Lender is not the one who completed the Pre-Qual form, a new Pre-Qual completed by the new lender will be required.

A big change will be that the Loan Status Update is now incorporated into the new LSR. This will be a change for many that have never used the old LSU form. Since I sat on the committee over 5 years ago that created the Loan Status Update, I know that its primary purpose was to educate all parties as to what steps had to occur before the buyers could get the keys to their new home. That purpose has not changed. Added regulations and legislation as well as current market conditions have created the need to reeducate our clients and ourselves as to the new logistics of financing.

There were also several changes made to the financing section of the contract as well as other minor amendments throughout. It will be interesting to see who will embrace these changes and who will not.

I thought W. Edward Deming put it best when he said, "It is not necessary to change. Survival is not mandatory."

Once the forms have been approved by the Risk Management Committee and the Executive Committee of AAR, they will be released. Keep your eyes out for that announcement.

Ha Ha Ha!
There was this guy and he had a girlfriend named Lorraine. One day he went to work and found that a new girl had started working there. Her name was Clearly and she was absolutely gorgeous.


He became quite smitten with Clearly and after while it became obvious that she was interested in him too. But this guy was a loyal man and he wouldn't do anything with Clearly while he was still going out with Lorraine.

He decided that there was nothing left to do but to break up with her. He planned several times to tell Lorraine but he couldn't bring himself to do it. Then one day they went for a walk along the riverbank when suddenly Lorraine slipped and fell into the river. The current carried her off to never be heard from again.

The guy stopped for a moment and then ran off smiling and singing........

"I can see Clearly now. Lorraine has gone."

I firmly believe that it is important to be constantly involved in the changes in our industry. For your clients best interest it is important to be represented by someone whose experience speaks for itself. Please let me know if I can be of assistance to your next customer.
Amy