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Buyer Beware: How Home Buyers Can Avoid Buying a Liability

 

Home hunting is often very frustrating.  This true horror story of home buyers suing their real estate agent for $2 million after discovering that their home was infested with snakes is a cautionary reminder that all home buyers should take the necessary precautions to ensure that they too are not buying a home infested with snakes, or worse.  So buyer beware.  This blog post is intended to educate home buyers and help home buyers avoid buying a liability.

  1. Know Your Contract. Too often a property is listed for sale “as is.” You should understand exactly what is meant by the “as is” nature of the transaction.  As will be discussed below, if you are buying an “as is” property, then it is important to conduct the necessary due diligence at the property to ensure that it is structurally sound and safe before you actually buy it.
  1. Know Your Lender’s Requirements. Some lenders are very strict. They won’t lend you money to buy the property if the property has problems.  For instance, if the property has a leaky roof, or radon gas, then your lender may require you to correct those issues before you can buy the property.
  1. Know Your Property and Seller. In this day and age just about everything is on line. So use the internet to find out as much information about both your seller and the property itself.  For instance, if the property recently had an 800-foot addition added, then check the county records on line to confirm that the addition was built with the appropriate permits.
  1. Know the Seller’s Disclosures. The seller’s disclosures are intended to inform the buyers of known defects with the property. This is often known as a “latent defect.”  But what happens if a defect was either not known to the seller or the seller failed to disclose a known defect to the buyer?  The answer to this question is often buried in the fine print of your real estate sales contract.  And the answer to this important question is something the buyer should find out prior to completing the real estate purchase.
  1. Get a Home Inspection. A home inspection is a lot like driving a car, only better. A home inspection should reveal every issue/problem that may exist with the property, if any.  Home inspections can cost several hundreds of dollars.  But that is money well spent as the home inspection may reveal a serious issue that will need to be addressed at a later date.  Issues revealed during a home inspection may also be serious enough that a home buyer may actually need to walk away from the transaction.

Several Facts You Should Know About Homeowners’ Associations

Are you in interested in purchasing property located within a homeowner’s association?  Well, you should start by understanding as much about the homeowner’s association as possible.  Here are several facts you should know about homeowners’ associations before you purchase a property located within a homeowners’ association.

(1) The Costs.  Living in a homeowners’ association can be expensive.  You will be expected to pay fees to maintain the common elements.  Those fees can be increased every year.  Moreover, you may also be required to pay for periodic special assessments for emergencies.  Therefore, you should study the homeowners’ association’s finances in great detail before you purchase a property located within a homeowners’ association.  When looking through the financials you should determine how often and by how much the association has raised their dues and passed special assessments to determine if said increases are reasonable or not.

(2) Restrictions.  One of the main obligations of a homeowners’ association is to maintain the common areas.  This means you may be restricted from painting your unit certain colors.  You may also be restricted in selling and/or renting your unit.  There may also be pet restrictions and landscaping restrictions.  It is therefore imperative that you understand the exact nature of the restrictions in place before you purchase your unit.

(3) Foreclosure.  In Florida, our legislators have armed homeowners’ association with a lot of powers to ensure compliance with the homeowners’ association’s rules and regulations.  This includes initiating foreclosure proceedings against you for your lack of payment of dues owed even if you are current on your mortgage.  Under this scenario you would ultimately lose your property to the homeowners’ association in a foreclosure should the homeowners’ association file suit against you.  Therefore, you should not engage in any activity that would trigger a default and result in a foreclosure.

The solution?

Research the homeowners’ association thoroughly before you complete your purchase.  Make sure you understand exactly what you’re getting into before you make that purchase.  You should engage in all of the necessary due diligence to understand the strengths and weaknesses of the homeowners’ association.

Rare Display of Congressional Bipartisanship Results in the Unanimous Passing of the Housing Opportunity Through Modernization Act Making it Easier to Buy and Sell Condominiums in South Florida

New Rules

New Rules

Congress’s approval ratings are currently at all-time lows.  The bickering between the political parties on Capital Hill is at an all-time high.  A majority of Americans are greatly unsatisfied with the choices their respective political parties have given them for President.

Yet in this toxic political climate it gives us all hope to see our elected officials work together to bring about some much needed help in our real estate market.  Indeed, the rare display of congressional bipartisanship resulted in the Unanimous Passage of the Housing Opportunity Through Modernization Act making it easier to buy and sell condominiums in South Florida.

The legislation was backed by several realtor groups.  They supported the legislation because the Housing Opportunity Through Modernization Act seeks to streamline and improve three specific areas of federal housing policy.

Those three areas include the following:

First, the U.S. Department of Housing & Urban Development’s (HUD) rental assistance and public housing programs.

Second, the Federal Housing Administration’s (FHA) requirements for condominium mortgage insurance.

Third, the Department of Agriculture’s single-family housing guaranteed loan program.

The Obama Administration has not publicly commented on whether the President would sign or veto the legislation.  But given the overwhelming bipartisan support in unanimously passing this legislation it would be surprising if President Obama vetoed this act.

Of significance to the local South Florida real estate market are changes in the act that will help with the sale of condominiums.  South Florida has a high inventory of condominiums.  Condominiums often represent an affordable housing option that makes sense for many first-time and low-to-moderate income homebuyers in South Florida.

But the sale of those condominiums are often bogged down due to some unnecessary and burdensome rules and regulations imposed on condominiums.   This legislation addresses those restrictions head on, putting the dream of homeownership back in reach for more first time home buyers and low to moderate income homebuyers in South Florida.

Among other things, the Housing Opportunity Through Modernization Act seeks to make the sale of condominiums less burdensome.

For instance, the legislation includes revisions to make FHA’s recertification process substantially less burdensome.  It does so by lowering FHA’s current owner-occupancy requirement from 50% to 35%. The legislation also mandates that the FHA replace existing policy on transfer fees with the less-restrictive model already in place at the Federal Housing Finance Agency.

How to Calculate the Statute of Limitations in a Mortgage Foreclosure

HourglassLawyers are often accused of complicating simple topics. One such question that we get asked about often by both lenders and debtors is when does the statute of limitations run on a mortgage foreclosure in Florida.  This simple question has actually generated national headlines.  So we will devote this post on how to calculate the statute of limitations in a mortgage foreclosure.

A statute of limitations is best described as a statute prescribing a period of limitation for the bringing of certain kinds of legal action. For example, in Florida, if you were involved in a car accident, you have four years from the date of that accident to file a lawsuit. If you wait four years and a day, then your claim is barred.

In Florida, actions based on a contract have a five year statute of limitations. So presumably, if one fails to pay their mortgage and the lender waits five years and a day, then the lender’s claim is barred by Florida’s five year statute of limitations.

But what happens when a lender, or the court, dismisses an otherwise timely lawsuit for mortgage foreclosure, and the lender then re-files that lawsuit five years and a day after the initial default?

To answer that simple question turns on many different factors. This issue, however, is actually going to be decided, and resolved, by the Florida Supreme Court.

But today there exists a conflict in the different courts of appeal, in Florida, and that existing conflict is what the Florida Supreme Court is going to resolve.

For instance, some appellate courts in Florida adhere to the “continuing default” theory. The Fourth and Fifth District Court of Appeal have each concluded that after a foreclosure was dismissed that the lender could re-file based on the new default that occurred after the dismissal of the suit. That was the case even if the original default, the one that served as the basis for the original suit, had occurred more than five years go.

Under that “continuing default” theory, the dismissal negates the acceleration of the loan such that mortgage payments would continue to be due and owing each month after the lawsuit’s dismissal. Therefore, this permits the lender to reaccelerate the loan following a new default.

As the Fourth DCA noted in Evergrene Partners v. Citibank, when “the claims of acceleration and subsequent acts of default have never been adjudicated on their merits in this case, … any acts of default still within the statute of limitations may be raised in a subsequent suit.”

However, the Third District Court of Appeal, the appellate court governing Miami, in Deutsche Bank v. Beauvais, has expressly disagreed with the Fourth and Fifth District Court of Appeal and has rejected the “continuing default” theory.

In Beauvais, the Third DCA noted that the dismissal “did not by itself negate, invalidate or otherwise decelerate the lender’s acceleration of the debt in the initial action.” Since the lender took no affirmative action to reinstate the loan following the dismissal, the second foreclosure action filed more than five years after the original default was deemed untimely and barred by the statute of limitations.

But as it stands today, the best course of action for lenders is to ensure that their actions are filed within five years of the original default even if the case has already been dismissed one time. For debtors, if more than five years have passed, you will need to check to see if the lender ever attempted to “deaccelerate” and then “reaccelerate” the loan after the dismissal. If they did, then the five year statute of limitations may have been extended. With that said, do not hesitate to contact us should you wish to discuss your legal rights as they relate to the calculation of the statute of limitations for a mortgage foreclosure.

New Rules for Closing Residential Transactions

re closingNew Rules for Closing Residential Transactions

If a buyer of a residential listing applies for a mortgage loan on or after August 1, 2015, new federal regulations will apply to the loan transaction. Generally, these new regulations will apply to all transactions involving a new residential mortgage loan. Cash and commercial transactions, even if a residence is involved, are not affected.

 

New Forms Replace GFE and HUD-1 Settlement Statement

After August 1, 2015 buyers applying for a mortgage loan will receive a Loan Estimate from the lender instead of the current Good Faith Estimate (GFE). Buyers will generally receive the Loan Estimate three days after applying for their loan.

The other new form, the Closing Disclosure, will include all of the information currently found on the HUD-1 settlement statement (HUD-1); it will also include an additional three pages of financial disclosures currently found on other forms. The traditional HUD-1 information will be found on pages two and three of the new five-page Closing Disclosure. However, the Closing Disclosure does not use the same familiar categories found on the HUD-1 and some costs are in a different area. For example, your real estate commission and any related charges for your services will be located in Section H labeled “Other” at the bottom of page two of the new form.

Lender Will Prepare Closing Disclosure

While the new rule allows a lender to authorize a settlement agent to prepare the new form, for a variety of reasons you should expect that the lender will prepare this new five-page form. This is a brand new challenge for lenders because most of the information currently found on the HUD-1 is gathered by the settlement agent. For example, your commission, association assessments, home warranties, inspection fees, etc.

Settlement agents will continue to be responsible for gathering this information and providing it to the lender. They will need to provide exact information about services and charges to the lender in a timely fashion. Therefore, you will need to communicate your information to the settlement agent much, much earlier than day of closing, perhaps two weeks before the scheduled closing date! Why? Read on. (more…)

Are You Entitled to a Disbursement of Surplus Proceeds from a Foreclosure Sale?

auctionThe real estate market is improving.  Just about all objective data points to an ever improving real estate market.  For instance, the number for foreclosure filings have decreased.  The real estate inventory hitting the market has increased.  And for the first time in years, many lawyers are starting to see a surplus from sales conducted at the courthouse steps.  And that has many borrowers asking, are they entitled to a disbursement of surplus proceeds from a foreclosure sale?

A surplus is found when a property sells for more than the judgment amount at the courthouse during the auction.  The excess between the amount of the money realized at the courthouse auction and the foreclosure judgment is called a “surplus.”

Specifically, it typically works this way.  A borrower defaults on his mortgage.  The lender then files a foreclosure against the borrower.  The lender then secures a final judgment against the borrower, and a sale of the property is scheduled.  The clerk of court then sells the property at auction at the courthouse steps to the highest bidder.  From the proceeds of the sale, the clerk of the court satisfies the lender that secured the foreclosure judgment.  All junior lienholders are then satisfied in accordance with their priority of liens on the property.

If there is still money left over after all the lienholders have been satisfied, then the borrower would be entitled to that surplus.

For the past several years, it was incredibly rare to see a surplus realized from a judicial sale.  The primary reason for that is that most properties that were being sold at the courthouse were “under water” or “upside down.”  Therefore, many borrowers were leaving the courthouse with a deficiency after the sale and it was often up to the lenders to decide whether or not they wished to pursue that deficiency against the property owner.

Recent changes in the law has made it more difficult to pursue deficiency judgments following the sale of the property.  Specifically, lenders now have one year to pursue deficiency judgments as opposed to five years.  This puts added pressure on the lenders to commence legal action against the borrowers fairly quickly after the sale has been completed.

But today, we are seeing more sales where surpluses are realized.  And if you are one of the many borrowers who have benefited from the rising tide of equities in properties, then you may be entitled to the surplus realized at the judicial sale.  If so, you may be entitled to the return of that surplus if you have timely satisfied all of the obligations to ensure the issuance of that surplus.

Miami Foreclosures are Reversed by Appellate Court

foreclosureThe Third District Court of Appeal has reversed two foreclosures recently.  Each case represented a unique fact pattern.  But taken together, these cases represent a continued effort by the Third District Court of Appeal to ensure that homeowners have their fair day in court.  The Third District Court of Appeal is attempting to ensure that all the procedures that are followed in just about every other case are also followed in foreclosure matters too.

In Rocketrider Pictures v. Bank United, 138 So.2d 1223 (Fla. 3d DCA 2014), the appellate court was confronted with the issue as to whether or not the judicial sale of property after the entry of a foreclosure judgment was proper given that the judgment entered was only against the wife, and not the husband, despite the fact that the property was owned by both the husband and wife as tenants by the entireties.   It is a fundamental concept that where tenants by the entireties are involved, one title holder cannot be divested of title without the other because both tenants own the entire property together; equally and completely. As a result, “[p]roperty held as an estate by the entireties is not subject to the hen of a judgment against one tenant alone.”   Teardo v. Teardo, 461 So.2d 276 (Fla. 5th DCA 1985).

Nevertheless, in the Rocetrider case, the defendant was erroneously foreclosed on and the jointly held property sold at the judicial sale despite there being no interest to transfer.  Therefore, the appellate court reversed the sale and held that an “estate by the entireties is not capable of being the object of satisfaction for the debt of one of the tenants alone.  Thus, the interest of the judgment debtor alone could not pass by the sale.”

In Morlock v. Nationstar, No. 3D14-1247 (Fla. 3d DCA 2014), a homeowner won a wrongful foreclosure dispute with its bank.  In that case, the appellate court concluded that the trial court had abused its discretion when it wrongfully entered a final judgment against the homeowner.  The final judgment was entered because the homeowner was defaulted.  However, the default should never have been entered given that the homeowner had properly and timely filed extensions and had also filed its answer to the complaint and asserted affirmative defenses as well.

Don’t hesitate to contact us to discuss these cases further, or if our firm could be of additional assistance to you and your real estate needs.

Zombie Foreclosures are Creating Mishaps for Real Estate Purchasers throughout South Florida

zombie foreclosuresZombie foreclosures are creating mishaps for real estate purchasers throughout South Florida.  Ground zero for the residential real estate collapse was right here in South Florida.  So it should come as no surprise that problems continue to persist with foreclosures of so many of those homes.

What is a zombie foreclosure?  As the name implies, a zombie foreclosure involves vacant property.  It involves property that is being foreclosed where the homeowner vacated the property.  But for various different reasons, the foreclosure just continues and never ends despite the fact that the property is vacant.

Abandoned by the homeowner, the home often falls into a state of disrepair.  Appliances in the property are often stolen, the landscaping unattended, and the property otherwise becomes unsightly.

Such properties are often ripe for fraud.  The fraud could come in the form of squatters unlawfully residing on the property, or efforts made by fraudsters to illegally convey the property that they don’t even own.

But what happens when the homeowner leaves the property in light of the foreclosure but the foreclosure is never completed?  This is a new and growing problem that many real estate owners and purchasers are facing today.

In such a situation, and to repeat, the home often falls into a state of disrepair.  The grass may be too high, the fence may need repair, or the property taxes may need to get paid.  The municipality where the property is located will often cite the homeowners for those violations or impose a tax lien on the property.

Those liens will often need to be satisfied before the home can be sold.  And the homeowner may not even be aware of the fact that he may still be responsible for those liens since he “abandoned” the property.

This situation also creates issues for individuals wishing to purchase properties involved in zombie foreclosures.  In one recent case, here in South Florida, a real estate purchaser was found to be liable for the liens incurred on the property even though the liens were recorded after the entry of the final judgment, but before the judicial sale.

That court found that liens “recorded between final judgment of foreclosure and judicial sale are valid and enforceable.”

One of the best ways to avoid this situation is to perform a lien search and title search on the property.  This will allow you to perform the necessary investigation, and due diligence, on the property prior to your closing.  With that said, if you need assistance securing a lien or title search, or other assistance with your real estate purchasing needs, then please do not hesitate to contact us to discuss your situation further.

Accidental Landlords Take Advantage of HARP 2.0 to Re-Finance Their Investment Properties and Save Thousands of Dollars

re financeAs we previously discussed, the Harp 2.0 program is a government sponsored program intended to help many struggling homeowners re-finance their homes.  An often overlooked aspect of Harp 2.0 is that it is also intended to help accidental landlords re-finance their investment properties and help them save thousands of dollars.

An “accidental landlord” is someone who purchased a new primary residence, but was unable to sell their prior primary residence.

Under this scenario, the initial primary residence is converted into an investment property.  In other words, after you purchased your new home you could not sell your old home.  As a result, you started renting the old home and became an “accidental landlord.”

The question that is often asked is under this scenario would the “investment” home/property be eligible to re-finance under Harp 2.0?

If the homeowner can qualify to re-finance under Harp 2.0, then there is a good chance that the converted investment property may also qualify.  And if it qualifies, then that could potentially save the accidental landlord thousands of dollars over the life of the loan.

There are no doubt obstacles that need to be overcome in order for an accidental landlord to qualify to re-finance under Harp 2.0.  But generally speaking, in order to qualify the homeowner must be current on their mortgage, with no late payments exceeding 30 days in the last six months and no more than one late payment in the last year.  Under the initial Harp guidelines, loan to value limits were capped at 125%, but Harp was modified (Harp 2.0) to remove those caps and now there are no “underwater” limits.  On the other hand, however, the current loan to value ratio must be greater than 80%.

But if you want to take advantage of this program you better hurry.  The program is currently set to expire on December 31, 2015.

If you do qualify, the potential savings could be significant.  Of course, if you do qualify, and decide that re-financing under Harp 2.0 will save you thousands of dollars, then make sure you follow these seven tips to save money on closing costs.  And, of course, don’t hesitate to contact our office to discuss your options further.

Four Tips to Intelligently Make an Offer on a Home

a real estate closingDeciding to purchase a home is one of the biggest financial decisions we will make in our lifetime.  We recently discussed five mistakes that all first time home time home buyers should avoid making.  But in this post, we will provide four tips to intelligently make an offer on a home.

So when you find a home that you love, and that is within your budget, you want to make sure that your offer is both realistic and good enough to beat other potential buyers trying to buy the same property while also ensuring that you don’t over pay for the property.

Here are five tips that could help you accomplish that objective:

  1. Research.  Before you submit an offer on that property you should conduct as much research as possible about the subject property.  You should try and find out how long the property has been on the market.  Learn about the current market dynamics in that neighborhood in terms of supply and demand for other properties.  You should also check the physical condition of the property.  In sum, the more information you can obtain about the property and area the better position you will be in to negotiate the sales contract.
  2. Initial Offer.  Once you are ready to submit an offer, you should quickly and thoroughly prepare a proposed contract with all of your proposed terms and conditions.  It is not enough to simply agree on a sales price, but you should also consider when you want to close as well as ensuring that you will be receiving clear title at the time the transaction is complete.
  3. Negotiate.  Remember, your initial offer is just that – a starting point.  Therefore, be prepared to receive a counter-offer from the seller.  The counter-offer may include many non-financial terms as well as a new proposed sales price.  Be prepared to go over both the proposed sales price, and other proposed terms.  Also be prepared for these negotiations to go several rounds with the seller.
  4. Home Inspection.  It is imperative that before you purchase the home that you schedule a thorough home inspection.  An inspection should focus on unsafe conditions or expensive repairs like structural integrity, plumbing, roof condition, electrical maintenance, termites, pests, and more.  Moreover, if you have any additional concerns, be sure to discuss them with your inspector so your inspector can inspect same.  Once the inspection is complete, your inspector will prepare a report and that report may serve as the basis to re-open negotiations with the seller.

Once you have completed this process, it will be time to complete your transaction and become a home owner.  Here are seven tips to save you money on closing costs.

Nonetheless, if you follow the above process you will no doubt help yourself get the best possible deal on your home purchase.