Today's Top Real Estate News
Provided by Inman News Features
Thursday July 29, 04:39:00 PM
How to cancel exclusive buyer-broker agreement
REThink Real Estate
Tara-Nicholle Nelson
Inman News
Q: If I sign a "Buyer Representation Agreement -- Exclusive" (form), can I cancel it at a later date? --Igor, California A: That depends. Every year, more and more buyer's brokers require their clients to sign an exclusive buyer representation agreement before they invest lots of time and gas money into the enterprise of helping them house hunt. Sometimes this is because the agent has been burned by disloyal clients seeing a home with them, but then writing the offer with their cousin the agent, or with the listing agent, in an effort to get a rebate. Other times, it's because the broker's office requires it, or because the agreement (like the California form you reference, the "Buyer Representation Agreement -- Exclusive" form) very clearly specifies the things an agent does and doesn't do, and allows the buyer and broker to agree in advance to forms of alternative dispute resolution, like mediation and arbitration. In other cases, agents simply use these forms as a convenient, logical entree to the discussion of how agents get paid, why it's important for the agent to actually write the offer, and other details of the buyer-broker relationship, so that the buyer is clear on exactly how it all works (and many homebuyers are not clear on this at the outset!). On my very first transaction, the buyers (friends of mine) decided to go window shopping at open houses one Sunday when I was going out of town. I offered them a stack of my business cards, but they said, "No, no, we're just looking. We're not serious yet." They went out and -- pursuant to Murphy's Law -- found the home of their dreams. Despite their expression that they had an agent, the listing agent wrote up an offer on their behalf. Immediately, they left and ran to call me in their excitement! They were thrilled, and knew I would be, too -- they didn't have the faintest clue that, by writing the offer with the listing agent, they had essentially decided they would no longer be working with me. They were flabbergasted, dismayed and apologetic when I explained what had happened to them. They didn't get the house, so it ended up being a non-issue. But forever after, I informed my clients up front how real estate relationships and compensation worked. Perhaps the best feature of the form you're considering whether to sign is its flexibility. In the first paragraph, it allows you and your agent to enter start and end dates for the contract. I'd encourage you to start out with a very short-term agreement, especially if you have doubts as to whether this agent is "your" agent. To satisfy your agent's (realistic) concern about being used to show houses, and then you buying a house with another agent, why don't you sign the first agreement with a very short term -- a weekend, say, or even a couple of weeks. That way, you can have a clear conversation that this is really a trial, relationship-building period for you both. Then, when you feel a bit more comfortable, you can sign one for a longer period of time. Most agents I know who use these agreements agree that they would never want to work with a client who decided not to work with them, and they have a professional policy of releasing clients upon request. However, I'd encourage you to negotiate and sign an addendum that gives both you and the broker a 48-hour exit clause. If either one of you feels like breaking up with the other, you give a notice. That would provide 48 hours for the disgruntled party to cool off and make an effort to work it out, but would not bind either of you unreasonably to someone you don't want to work with. Happy house hunting! Tara-Nicholle Nelson is author of "The Savvy Woman's Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com. Copyright 2010 RealEstateCoach.com Roofing shakedown
Homeowner weighs repair options
Bill and Kevin Burnett
Inman News
Q: We are trying to decide how to proceed on a possible roof repair. Our shake roof is a little more than 20 years old, and one roofer said he thought it would last five more years. A few years ago we had a handyman replace a row of ridge caps that were missing or broken. We noticed recently that some more ridge cap shakes were split or damaged, and we contacted a licensed roofing contractor to replace these. He only replaced a few ridge caps in each area instead of the whole row. He also nailed down some of the older caps that were split next to the shingles he replaced. We spoke to another roofer who said that it is not good to replace individual ridge cap shingles. He said the whole row should have been replaced. This contractor is going to take a look and give us a bid on replacing all the ridge caps. Which of these approaches is correct? How do we know when we need a new roof and what kind of repairs are needed to prolong the life of our shake roof? A: You'll know you need a new roof when it starts to leak. Take a trip into the attic each year after the first good rain and look for signs of water stains on the sheeting (the wood that is attached to the rafters). If you see signs of water, the roof is about dead. You'll probably be able to have the problem area patched, but that will be only a short-term fix -- a new roof is in your near future. Although both are almost always cut from Western red cedar, the terms shake and shingle are not interchangeable. Shingles are thinner than shakes and are smooth-sawn. Shakes are thicker and may be smooth-sawn for a more formal look or hand-split for a more rustic look. In a roofing application, shakes will last at least 50 percent longer than shingles. We agree with the roofer who suggested replacement of the entire ridge cap. Here's why: The ridge cap -- the point where two flat sections join -- is the weak link in an otherwise properly installed shake roof. Kevin has a taper-sawn shake roof on his house. It's a gable roof on both the garage and the main building. The roof is 15 years old and mostly in great shape. But the ridge cap needs some help. When a cedar shake roof is brand-spanking new, the wood has high moisture content. As the roof ages, the shakes acclimatize and lose moisture. They expand and contract with the weather. In the rainy season the wood swells; in the hot summer sun the shakes shrink (say that 10 times fast). Eventually, the movement causes cracks in the shakes. In addition, exposing the surface of the shakes to the ultraviolet rays of the sun causes decomposition and the shakes lose some surface over time. The average useful life of a cedar shake roof is 25 to 30 years, depending on the climate, although we've seen some last as long as 50 years. This longevity is due to the natural decay resistance of cedar and the roof application process. Cedar naturally contains tannins that resist fungus and insects. As to the application process, when properly done, each course of shakes is interwoven with roofing felt, which creates a three-ply wood roof with tarpaper between each ply. On gable, gambrel or hip roofs, the point where two flat sections of roof meet is the ridge. While the rest of the roof consists of layers of flat shakes, the ridge is made of two shakes stapled together and overlapped to cover the point where the two sections of roof meet. The joint where those shakes are stapled together is the weak spot. Over the years, with the inevitable expansion and contraction, the ends of the shingles crack and the staples fail. When this happens, there's a fair to middlin' chance the roof will leak at the ridge. When ridge cap pieces become so deteriorated they need replacement, we think the best practice is to replace the entire run. Replacing ridge shakes piecemeal will most likely require revisiting the project many times, which invites damaging material that is in good shape. It's better to do the job once and right than to continue to replace material that was going to fail anyway. Copyright 2010 Bill and Kevin Burnett Reduced fees for reverse mortgages
Wall Street warms to 'once-orphaned' loan type
Tom Kelly
Inman News
The checkered beginnings of reverse mortgages made them a difficult sales proposition to seniors. In the early years, some programs gave the lender a bigger share in the home than the homeowner, the amount of available money that could be tapped was too low, and the fees were too high. Toss in the fact that seniors are wary by nature, often have little to risk, and view paying off the roof over their head as the ultimate measure of success and pride. Now, many of the chuckholes on the road to reverse mortgage acceptability have been filled. If you doubt that, simply check with the investors on Wall Street, who are more than willing to pay a premium to buy these assets, creating a secondary mortgage market for the once-orphaned loans. A reverse mortgage historically has enabled senior homeowners to convert part of the equity in their homes into tax-free funds without having to sell the home, give up title, or take on a new monthly mortgage payment. Reverse mortgages are available to individuals 62 and up who own their home. Funds obtained from the reverse mortgage are tax-free. The biggest lift to reverse-mortgage credibility came in 1989, when the Federal Housing Administration agreed to insure the Home Equity Conversion Mortgage (HECM), which not only allowed owners over 62 to stay in their homes for as long as they wished but also protected the owner in the event the lender went out of business. HECMs now account for nearly every reverse mortgage written today. Other private reverse-mortgage "jumbo" funds have virtually evaporated given the present credit crisis. More than 130,000 HECMs were originated last year. AARP reported that approximately 93 percent of applicants were satisfied with the process. The next boost for reverse mortgages toward acceptance was a single national loan limit (presently $625,500) and then onset of fixed-rate products (presently about 5.5 percent). However, not every homeowner qualifies for the maximum. A borrower's age, along with prevailing interest rates, determine the actual amount of the HECM. Older borrowers qualify for the greatest amounts. The Housing and Economic Recovery Act of 2008 approved the HECM for purchase program. The move allows older homeowners to make a large downpayment on a new home and then utilize the reverse mortgage as permanent financing. The same law reduced the maximum loan fee on reverse mortgages to 2 percent on the initial $200,000 of the home's value and 1 percent on the balance thereafter, with a cap of $6,000. Previously, HECM fees were capped at 2 percent of the home's value or the county lending limit, whichever was lower. However, given investors' appetite for reverse mortgage securities, many of those fees have been eliminated or significantly reduced. Why did this happen and what does it mean for consumers? In a nutshell, Wall Street sees reverse mortgages as a more predictable asset class, and the mortgages have finally reached a supply threshold that allows for group discounts to lenders -- many of whom pass the savings on to consumers. For example, national lender Seattle Mortgage offers several new products on the fixed-rated HECM: - No servicing fee (approx $3,000 in additional cash available).
- Reduced upfront mortgage insurance premium (can be up to 2 percent of claim amount).
- No origination fee/no servicing fee (equal to up to $6,000 in origination fee, and $3,000 in servicing fee savings).
The savings to a borrower vary depending upon home value, but all options result in greater loan proceeds to the borrower. Sunwest Mortgage Company is among a variety of lenders to announce reductions in fees for servicing, origination, mortgage insurance premium (MIP), and title insurance fees. "The reduced fee options aren't necessarily going to be available for long," said Sarah Hulbert, senior vice president and reverse-mortgage manager at Seattle Mortgage. "It's a great time for seniors contemplating a reverse mortgage to begin the process. It's all a function of how the secondary markets value reverse mortgages. If they begin paying less for the fixed-rate HECM, we very well may see some of the fees return." If you are senior in the market for a reverse mortgage, or an adult child doing the research for Mom or Dad, the good news is that fees have come down dramatically. The puzzling news (not to be confused with "bad") is that there could well be some costs in today's advertised "no-cost reverse mortgages." Make sure you understand the up-front costs and those incurred down the road. Reverse mortgages have hit the mainstream. With that comes a variety of combinations and sliding scales. Tom Kelly's book "Cashing In on a Second Home in Mexico: How to Buy, Rent and Profit from Property South of the Border" was written with Mitch Creekmore, senior vice president of Stewart International. The book is available in retail stores, on Amazon.com and on tomkelly.com. Home at stake in bankruptcy case
Law of the Land
Tara-Nicholle Nelson
Inman News
In May 2009, Candace Booth filed a Chapter 7 bankruptcy petition. Her outstanding debts were mortgages against a home she was in the process of trying to rent or sell, credit cards and an auto loan. Booth had paid cash outright for her personal residence in March, 2009 by liquidating her retirement and brokerage accounts and obtaining a small amount of money from her daughter, according to court records. In her bankruptcy petition, Booth listed her personal residence as being protected as a fully exempt homestead property under Florida Constitution Article X, Section 4(a)(1) and Florida Statute Sections 222.01 and 222.02. Prior to the recession, Booth had been in business as a natural health consultant and also received some income via social security. Her business reportedly dried up during the recession, and by the time she filed for bankruptcy relief, she was earning $8 an hour working part-time in her daughter's business, and had a negative net monthly income, according to court records.
After the evidentiary hearing in the bankruptcy court, the bankruptcy trustee filed an objection to Booth's bid for homestead protection of her residence. The trustee argued that Booth had purchased the property using non-exempt assets with the intent to "hinder, delay, or defraud" her creditors, as barred by 11 U.S. Code Section 522(o). The federal bankruptcy court for the Middle District of Florida overruled the trustee's objection and found that Booth's personal home did in fact have homestead protection and could not be liquidated to pay her creditors. First, the court explained that to defeat Florida's homestead protection, the Trustee would have to show one or more "badges," or indicators, of fraud and extrinsic evidence of Booth's intention to defraud her creditors at the time she purchased the home. The court rejected the trustee's argument that the following actions of Booth provided sufficient indicia of her intent to "hinder, delay or defraud her creditors," so as to invalidate homestead protection on her personal residence. Recounting the unraveling of Booth's financial stability fact-by-fact, the court determined that the sequence of events showed Booth's innocent intent. Booth had obtained the home equity line of credit for her daughter's use in financing her business; and her daughter had committed to making the monthly credit line payments, the court found. Only when the economic downturn impacted her daughter's business and prevented her from continuing to make the payments did Booth realized that the indebtedness on the line of credit had risen to $39,000, the court also found. Booth quickly realized that she could not make the payments on the mortgage and the line of credit on her then-home and still cover her living expenses. She consulted a mortgage broker and was advised that she could not refinance the home due to its drop in value; a real estate broker she talked with advised her to sell or rent that home, and instructed her to move out of the property to maximize the chances of it selling. He also reportedly advised her to purchase the second home to ensure herself a place to live. She was never advised by either professional that the option of a short sale existed, according to court documents. Booth charged some living expenses and expenses of preparing the home for sale to her credit cards, but the court found that she did so with the full intention of repaying them. When her own business deteriorated in April and May of 2009, she became unable to pay her bills. Booth, a 64-year-old woman, testified that she was panicked about having a place to live and didn't think the matter through properly when she decided to buy a new home rather than simply pay off her mortgages with the funds from her liquidated retirement and brokerage accounts. Because the court found Booth's testimony to be credible, it refused to find that she had the intent to defraud her creditors when she purchased her personal residence. Accordingly, the trustee's objection to Booth's home's protection from her creditors under the Florida homestead statute was overruled. Copyright 2010 Tara-Nicholle Nelson Home at stake in bankruptcy case
Law of the Land
Tara-Nicholle Nelson
Inman News
In May 2009, Candace Booth filed a Chapter 7 bankruptcy petition. Her outstanding debts were mortgages against a home she was in the process of trying to rent or sell, credit cards and an auto loan. Booth had paid cash outright for her personal residence in March, 2009 by liquidating her retirement and brokerage accounts and obtaining a small amount of money from her daughter, according to court records. In her bankruptcy petition, Booth listed her personal residence as being protected as a fully exempt homestead property under Florida Constitution Article X, Section 4(a)(1) and Florida Statute Sections 222.01 and 222.02. Prior to the recession, Booth had been in business as a natural health consultant and also received some income via social security. Her business reportedly dried up during the recession, and by the time she filed for bankruptcy relief, she was earning $8 an hour working part-time in her daughter's business, and had a negative net monthly income, according to court records.
After the evidentiary hearing in the bankruptcy court, the bankruptcy trustee filed an objection to Booth's bid for homestead protection of her residence. The trustee argued that Booth had purchased the property using non-exempt assets with the intent to "hinder, delay, or defraud" her creditors, as barred by 11 U.S. Code Section 522(o). The federal bankruptcy court for the Middle District of Florida overruled the trustee's objection and found that Booth's personal home did in fact have homestead protection and could not be liquidated to pay her creditors. First, the court explained that to defeat Florida's homestead protection, the Trustee would have to show one or more "badges," or indicators, of fraud and extrinsic evidence of Booth's intention to defraud her creditors at the time she purchased the home. The court rejected the trustee's argument that the following actions of Booth provided sufficient indicia of her intent to "hinder, delay or defraud her creditors," so as to invalidate homestead protection on her personal residence. Recounting the unraveling of Booth's financial stability fact-by-fact, the court determined that the sequence of events showed Booth's innocent intent. Booth had obtained the home equity line of credit for her daughter's use in financing her business; and her daughter had committed to making the monthly credit line payments, the court found. Only when the economic downturn impacted her daughter's business and prevented her from continuing to make the payments did Booth realized that the indebtedness on the line of credit had risen to $39,000, the court also found. Booth quickly realized that she could not make the payments on the mortgage and the line of credit on her then-home and still cover her living expenses. She consulted a mortgage broker and was advised that she could not refinance the home due to its drop in value; a real estate broker she talked with advised her to sell or rent that home, and instructed her to move out of the property to maximize the chances of it selling. He also reportedly advised her to purchase the second home to ensure herself a place to live. She was never advised by either professional that the option of a short sale existed, according to court documents. Booth charged some living expenses and expenses of preparing the home for sale to her credit cards, but the court found that she did so with the full intention of repaying them. When her own business deteriorated in April and May of 2009, she became unable to pay her bills. Booth, a 64-year-old woman, testified that she was panicked about having a place to live and didn't think the matter through properly when she decided to buy a new home rather than simply pay off her mortgages with the funds from her liquidated retirement and brokerage accounts.In May 2009, Candace Booth filed a Chapter 7 bankruptcy petition. Her outstanding debts were mortgages against a home she was in the process of trying to rent or sell, credit cards and an auto loan. Booth had paid cash outright for her personal residence in March, 2009 by liquidating her retirement and brokerage accounts and obtaining a small amount of money from her daughter, according to court records. In her bankruptcy petition, Booth listed her personal residence as being protected as a fully exempt homestead property under Florida Constitution Article X, Section 4(a)(1) and Florida Statute Sections 222.01 and 222.02. Prior to the recession, Booth had been in business as a natural health consultant and also received some income via social security. Her business reportedly dried up during the recession, and by the time she filed for bankruptcy relief, she was earning $8 an hour working part-time in her daughter's business, and had a negative net monthly income, according to court records.
After the evidentiary hearing in the bankruptcy court, the bankruptcy trustee filed an objection to Booth's bid for homestead protection of her residence. The trustee argued that Booth had purchased the property using non-exempt assets with the intent to "hinder, delay, or defraud" her creditors, as barred by 11 U.S. Code Section 522(o). The federal bankruptcy court for the Middle District of Florida overruled the trustee's objection and found that Booth's personal home did in fact have homestead protection and could not be liquidated to pay her creditors. First, the court explained that to defeat Florida's homestead protection, the Trustee would have to show one or more "badges," or indicators, of fraud and extrinsic evidence of Booth's intention to defraud her creditors at the time she purchased the home. The court rejected the trustee's argument that the following actions of Booth provided sufficient indicia of her intent to "hinder, delay or defraud her creditors," so as to invalidate homestead protection on her personal residence. Recounting the unraveling of Booth's financial stability fact-by-fact, the court determined that the sequence of events showed Booth's innocent intent. Booth had obtained the home equity line of credit for her daughter's use in financing her business; and her daughter had committed to making the monthly credit line payments, the court found. Only when the economic downturn impacted her daughter's business and prevented her from continuing to make the payments did Booth realized that the indebtedness on the line of credit had risen to $39,000, the court also found. Booth quickly realized that she could not make the payments on the mortgage and the line of credit on her then-home and still cover her living expenses. She consulted a mortgage broker and was advised that she could not refinance the home due to its drop in value; a real estate broker she talked with advised her to sell or rent that home, and instructed her to move out of the property to maximize the chances of it selling. He also reportedly advised her to purchase the second home to ensure herself a place to live. She was never advised by either professional that the option of a short sale existed, according to court documents. Booth charged some living expenses and expenses of preparing the home for sale to her credit cards, but the court found that she did so with the full intention of repaying them. When her own business deteriorated in April and May of 2009, she became unable to pay her bills. Booth, a 64-year-old woman, testified that she was panicked about having a place to live and didn't think the matter through properly when she decided to buy a new home rather than simply pay off her mortgages with the funds from her liquidated retirement and brokerage accounts. Because the court found Booth's testimony to be credible, it refused to find that she had the intent to defraud her creditors when she purchased her personal residence. Accordingly, the trustee's objection to Booth's home's protection from her creditors under the Florida homestead statute was overruled. Because the court found Booth's testimony to be credible, it refused to find that she had the intent to defraud her creditors when she purchased her personal residence. Accordingly, the trustee's objection to Booth's home's protection from her creditors under the Florida homestead statute was overruled. Copyright 2010 Tara-Nicholle Nelson |
margaret@mclift.com
