What Impact Will a PACE Loan Have on Your Real Estate Closing

Many property owners today are exploring options to help strengthen their property to prevent damage during next year’s hurricane season now that the 2017 hurricane season is behind us as well as to improve the energy efficiency of their home.  However, such improvements are often cost prohibitive.  But back in 2010 our legislators authorized Property Assessed Clean Energy (PACE) programs to help homeowners finance the cost of those home improvements.

PACE programs assist both residential and commercial property owners to finance certain energy efficient and wind resistant improvements to their property.  These loans are secured by financial agreements and paid by a non-ad valorem assessment through the property owner’s real property tax bill.  In other words, the loan is added to your tax bill and becomes part of your property tax obligation and the loan terms are spread out over time.

Even though PACE programs were authorized by the Florida legislature back in 2010, there were numerous legal challenges both in state and federal court which slowed down its implementation.  However, the appellate courts finally resolved the legal challenges to the PACE program in late 2015.  Shortly thereafter the program began to grow in popularity.  Indeed, there are billboards advertising these programs all over South Florida today.

The advantage of these loans is that the money is fairly easy to secure and accessible pretty quickly too with very reasonable re-payment terms.  The PACE program often works with pre-qualified contractors and payment is not made until the job is complete and all permits have been closed.  The disadvantage is that the loan will be added to your tax bill thereby increasing your property tax obligation.  You will also have to pay some interest on that loan too over the length of the loan.

But the question that is popping up more and more at the closing table is – what do we do with that PACE loan?  While there is no uniform answer to that question here are some options:

  • Some lenders will agree to take an exception to the PACE financed home improvement program.
  • However, other lenders may require that the lien be satisfied at the time of the closing.
  • Buyers may also agree to assume the lien if it is not paid off at the time of closing.

The issue of what to do with the PACE loan at the time of the closing will increase in frequency with the anticipated increase in popularity of these PACE loans.  It is probably in the best interest of both the buyer and seller to address this issue at the time the contract is signed and not at the closing table.

Steps a Home Buyer Should Take After They Have Purchased Their Home

Completing a home purchase is an exciting moment for everyone that worked on that real estate transaction.  The seller has sold a property and perhaps made a nice profit from the sale.  The real estate agents that worked hard on the transaction for several months are finally going to get paid for their services.  The closing agent gets to share the joy of the buyer’s purchase of their new home at the time of closing.  And the buyer is undoubtedly excited about moving into a new home.  So we will address some steps that a new home owner should take after they have purchased their home.

We recently discussed when the buyer gets the keys to the property after the closing is completed.  But there are still other action items buyers should take after their real estate purchase is complete.

Here are some of those action items buyers should consider doing after they have completed their home purchase:

  • It is typically a good idea to have the home professionally cleaned before the move in date.
  • Make arrangements to have the utilities either turned on or transferred from the prior owner.
  • Make arrangements with the post office to change the mailing address.
  • Timely apply for the homestead exemption.

Speaking of the homestead exemption, one added benefit of being a homeowner is that you may be able to qualify for the homestead exemption.  If you qualify, the homestead exemption could significantly lower your property taxes.  Florida’s homestead exemption is explained in greater detail here.

If you purchased a property that is located within a community governed by a homeowner’s association then it is also a good idea to get as much information regarding the community as possible.  You should start by contacting the management office to get information regarding association meetings and other regularly conducted business associated with the running of your community.  You should get involved in your community affairs and attend all regularly scheduled board meetings.

Lastly, buyers should not forget to celebrate their home purchase.  Buyers should invite everyone over that played a role in their real estate transaction .  Everyone that helped the buyer with that purchase will want to share in the joy of completing that transaction.

When does the buyer get the keys after closing on a house?

When does the buyer get the keys after closing on a house?

Our firm once handled a closing scheduled for 6 pm on the Friday before a long holiday weekend.  The buyer explained that he had been living in his RV for the past two weeks as he was re-locating from the Midwest.  He was excited to complete his closing so he could get his keys and move into his new house over the long holiday weekend. 

He was shocked and upset to learn that he could not get his keys even though he had just signed hundreds of papers to complete his home purchase.  But even though he had signed the papers, including the deed, the late hour prevented anyone from going to the courthouse to have the deed and mortgage recorded.  Just as important, the seller had not yet received the proceeds from the sale since the bank handling the financing was closed for the night.

The buyer was upset.  The prospect of spending the long holiday weekend in his RV was something he was not prepared to do.

One of the most overlooked components of a real estate transaction is what happens when the ink dries on the stack of papers everyone signed during the closing.

Buyers typically think they get keys right away. But before they can get the keys to the property they just purchased the monies need to exchange hands and certain documents may need to be recorded to. In this day and age funds can often be wired to financial institutions very quickly. But if a closing happens at 6 o’clock on a Friday the possibility of the seller getting paid, and documents getting recorded, that same day is slim to none. Which means the buyer isn’t getting his keys until after the long weekend. 

As we have discussed in the past, the closing process can be a nightmare with all the paperwork involved and tasks to work through.  However, closing and finalizing your real estate transaction does not have to be a nightmare.  Our firm is happy to provide you with ample communication and convenience to help you have a smooth real estate transaction.

What to Look for When Buying or Selling Tenant Occupied Real Estate

We want to alert you of what to look for when buying or selling tenant occupied real estate.  If you are selling real estate and your property is currently occupied by a tenant, you need to find a buyer that is happy with a tenant occupied property and a buyer that is willing to buy that property subject to the tenant’s rights.

The buyer inherits all of the seller’s obligations and duties under the terms of any lease agreement in place at the time of the sale whether the buyer likes the terms or not.  For instance, let’s say the seller entered into a lease agreement with its tenant in January for twelve months.  The seller then decides to sell the property in February.  The buyer purchases the property in March.  The buyer is obligated to honor the terms of the lease through the end of the year.

Of course, the buyer can always attempt to re-negotiate the terms of the lease agreement with the tenant after he purchases the property.  The buyer can also get into some kind of agreement with the tenant prior to buying the property, whereby the tenant will either agree to leave the property after the sale or agree to pay more money. But absent such an arrangement, the buyer has to be agreeable with taking the property subject to the tenant’s rights.

In connection with that, there is a very important document that is often missed. It is called a Tenant Estoppel Letter. That is just a fancy way of saying that it is a formal document that basically lays out what the tenant pays, what the landlord is holding in a security deposit, whether or not there are any claims pending against the landlord or any other issues that the buyer wants to be aware of, and it also notifies the tenant that once that transaction closes, the old owner is no longer their landlord and that they have a new landlord.

As a buyer of tenant occupied real estate you also want to make sure that you inherit and receive all of the security deposits.  Moreover, you also want to make sure that the tenant has adequate insurance in place to protect the landlord in the event of an incident of some kind.

These are just part of the things that you need to make sure when you are buying or selling tenant occupied real estate in order to ensure that you have a smooth real transaction and that you know what you are getting into.

So if you have any questions regarding tenant occupied real estate or any other real estate issues, feel free to give us a call, we are here to help.

ABOUT THE AUTHOR.  Hugo V. Alvarez is a shareholder at the law firm of Becker & Poliakoff.  He is the 2017 Dade County Bar Association’s Legal Luminary Award winner.  He was also named to the Best Lawyers in America in Real Estate related litigation.

Make Sure You Understand What You Are Signing During a Real Estate Transaction

Moreno v. First International Title, Inc., is a case that illustrates the importance of making sure you understand what you are signing during a real estate transaction.  Because if you do not know what you are signing when buying property it could end up costing you thousands of dollars like it did to Victoria Moreno and causing you unneeded stress and aggravation.

In that case, Victoria Moreno (“Moreno”) purchased property encumbered with liens and code violations.  Prior to closing, she was given several documents explicitly disclosing each of the code violations and liens, and indicating the amount necessary to cure the violations, which was approximately $64,000.00.  She also signed a Hold Harmless document, which had also attached the list disclosing all of the code violations and lien information.  The closing occurred a few days after she signed all of those documents.

Months later, Miami-Dade County assessed Moreno for the outstanding violations.  As a result of being hit with a hefty fine Moreno sued First International Title, Inc. (“FIT”), the closing agent for the sale, claiming that FIT breached its fiduciary duty to clearly communicate the allegedly “latent defects” of the additions built without proper permits that affected the value of the house.  When Moreno was deposed she admitted that she signed all of the documents associated with the closing including the Hold Harmless document and the document detailing the code and lien violations.  She also admitted that she signed those documents even though she does not speak or read English.  She also admitted that she made no attempt to have anyone explain the documents to her.  Given that testimony FIT then moved for summary judgement and the trial court granted the motion.  The Third District Court of Appeal affirmed the trial court’s granting of that summary judgment.

The Third District Court of Appeal observed that the record did not reflect any facts that indicated that Moreno was fraudulently induced to sign the documents.  Nor was she purposely or negligently misinformed.  The record further reflected that Moreno was in no way prevented from reading or inquiring about the documents.   The documents clearly set forth the violations and Moreno had every opportunity to read through them.  The Third District Court of Appeal supported its decision by citing a series of cases that that all stand for the proposition that failure to read or understand a contract is not a defense where the person, such as Moreno here, was not prevented from reading them and was given a full opportunity to read them.

ABOUT THE AUTHOR.  Hugo V. Alvarez is a shareholder at the law firm of Becker & Poliakoff.  He is the 2017 Dade County Bar Association’s Legal Luminary Award winner.  He was also named to the Best Lawyers in America in Real Estate related litigation.

Four Questions Potential Buyers Should Consider Before Purchasing An Investment Property

Here are four questions potential buyers should consider before purchasing an investment property.

  1. What are your financial goals? You should create rules to help stay focused. For instance, are you looking to make money by way of monthly rent checks, or is this a long-term appreciation investment where you look to cash out upon the sale of the property in a few years? These rules should be tailored to the buyer’s short and long term goals.  You should also set clear objectives as it relates to the amount of time and money you are willing to invest to improve the property.  These issues should be clarified and formulated into an individual road map that will help you evaluate your objectives before you enter the market place.  And you should not deviate from your criteria for deal-breakers in any investment property you are considering.  Stick with your plan and do not deviate from it once you enter the market place.
  1. Can you afford the extra expenses? You should create a reserve fund in anticipation of purchasing a new property. Buyers are reminded that there are normally many expenses including taxes, association dues, management, maintenance, and repairs.  Furthermore, for tax purposes, buyers should keep their personal and investment accounts separate.  Moreover, as with the purchase of any property, there is always the prospect of hidden expenses that the buyer did not anticipate at the time of purchase.  So make sure you have funds on hand to address these issues as they are incurred.
  1. Which real estate market is right for you? Although some experts recommend buying in up-and-coming locations, others believe a “good deal” leads to a better return. The buyer should look beyond their own zip code and research all their options, from foreclosures to pre-construction, to find the property that will produce the best income as defined by the buyer’s financial goals set forth in number 1 above.
  1. Are your finances and credit in good shape? Most rental mortgages require a larger down payment than the purchase of a primary home. Buyers should look to see if they qualify for an FHA loan and if not, start reviewing their financial information in order to secure a standard mortgage loan.

ABOUT THE AUTHOR.  Hugo V. Alvarez is a shareholder at the law firm of Becker & Poliakoff.  He is the 2017 Dade County Bar Association’s Legal Luminary Award winner.  He was also named to the Best Lawyers in America in Real Estate related litigation.

How to handle open permits is often a common question associated with real estate transactions

How to handle open permits is often a common question associated with real estate transactions.

When a property owner wants to perform certain work to their property they typically have to secure a permit from the governing municipality.  The governing municipality then performs an inspection of the work once the work is completed.  If the work passes inspection the permit is then closed.

But there are times when a permit is not closed.  For instance, even if the work permit was secured the owner may have failed to either start or complete the work.  Perhaps the work was completed but someone neglected to secure an extension to close the permit.  Or perhaps an inspection of the completed work revealed deficiencies and the owner failed to remedy those deficiencies.  And then there is the situation where perhaps the permit simply expired and the owner failed to follow up to either have the permit closed or re-issued.

Failing to properly close a permit could end up costing the owner lots of money.  That is because such a situation may result in the issuance of a building code violation which can result in the imposition of a monetary fine.

As a result, many lenders and purchasers will require that a permit search be conducted before the completion of the transaction.  The permit search is being done to determine if there are any permitting related issues that need to be addressed before the completion of the transaction.

This is important because open permits are not covered by title insurance. Open permits are considered matters of zoning and therefore are excluded from title insurance coverage. If you are a buyer of real estate it is imperative that you order a permit search to learn of any potential issues lurking.  Indeed, if you are a real estate agent representing a buyer you may even wish to include some language in the sales contract confirming the seller’s obligation to close any open and expired permits.  If you are a seller, then you may wish to perform your own permit search prior to any sale.

ABOUT THE AUTHOR.  Hugo V. Alvarez is a shareholder at the law firm of Becker & Poliakoff.  He is the 2017 Dade County Bar Association’s Legal Luminary Award winner.  He was also named to the Best Lawyers in America in Real Estate related litigation.

What is Title Insurance and Do You Need It?

You have been home shopping for months.  You have performed thousands of internet searches hunting for your dream home.  You have looked at hundreds of homes in person.  You even submitted several offers to purchase some homes.  But you have finally settled in on the purchase of your dream home.  Now you are staring at your closings costs.  And one of the costs you have to pay is for title insurance.  Which begs the following questions – what is title insurance and do you really need it?

What is Title Insurance

Title insurance has the unique distinction of being the only form of insurance that was actually originated and created right here in the United States.  Title to a piece of property is the evidence that the owner is in lawful possession of that property.  Title insurance insures against financial loss from defects in title to that real property.

For instance, title insurance protects against claims from title defects such as another person claiming an ownership interest in the property, fraud, improperly recorded instruments, encroachments, and other related issues associated with the property.

Why You Need Title Insurance

As we detailed in this prior blog post, during the Great Recession we saw a rise in fraudulent deeds.  Additionally, and as we discussed previously, we also saw the rise of squatters attempting to adversely possess properties that had been abandoned.

Without title insurance the owners of those properties may have lost the property due to the pervasive fraud that was occurring at the time.  And that loss would have had significant financial ramifications.

Moreover, if you are taking out a mortgage to purchase your home then title insurance will almost always be required by the lender.  Your lender will require title insurance because the loan is being secured by the property and title insurance will provide both the lender and borrower/buyer with peace of mind in the event an alleged title defect pops up at a later date.

ABOUT THE AUTHOR.  Hugo V. Alvarez is a shareholder at the law firm of Becker & Poliakoff.  He is the 2017 Dade County Bar Association’s Legal Luminary Award winner.  He was also named to the Best Lawyers in America in Real Estate related litigation.

Florida Estoppel Reform is Finally a Reality

After a three year run through the Capitol halls in our state’s capital, Florida estoppel reform is finally a reality.

The estoppel certificate is a letter required in just about every real estate transaction involving a condominium or homeowner’s association.  The certificate is intended to provide pertinent information to the buyer.  The buyer will need that estoppel certificate to confirm the current status of the pending assessments and violations with the property the buyer is purchasing.  The issuance of the estoppel certificate is also a common condition in the Florida Realtors/Florida Bar Contract.  Most title companies will also request an estoppel certificate to ensure that the buyer is aware of any pending financial concerns with the property.

There were two issues that created the need to institute estoppel reform.  First, the lack of uniformity as it relates to the charges associated with the issuance of estoppel certificates.  Some homeowner’s associations charged exorbitant amounts of money to generate additional fees.  The second was the lack of uniformity as it relates to the content contained within the estoppel certificate itself.  So some associations were not only charging excessive fees they were also failing to provide the necessary information required by the estoppel.

The HOA/COA estoppel certificate reform, signed into law by Governor Scott, brings uniformity and clarity to those two issues.  The law now provides for a cap in the fees an association may charge for the estoppel certificate.  The fee cap is $250 for owners who are current on their assessments.  An expedited fee of up to $100 can be charged if the estoppel request asks for delivery within three (3) days.  An additional charge of up to $150 can be charged if the owner/seller is delinquent on the assessments.

The law not only provides for uniformity as it relates to the charges associated with the issuance of an estoppel, but it also provides for a standardized form related to the issuance of the estoppels.  Thanks to the hard work by our Florida legislators, the days of diverging information as it relates to the issuance of estoppels are over.

This reform package is a win for Floridians and closing agents.  It brings about much needed clarity to the issuance of estoppels.

ABOUT THE AUTHOR.  Hugo V. Alvarez is a shareholder at the law firm of Becker & Poliakoff.  He is the 2017 Dade County Bar Association’s Legal Luminary Award winner.  He was also named to the Best Lawyers in America in Real Estate related litigation.

The Use of a Power of Attorney During a Real Estate Transaction

We get a lot of questions regarding the use of a power of attorney during a real estate transaction. We often get a phone call saying, “Hey, I’m not going to be in town that day, can somebody else sign the documents for me to sell my house?”  The answer, like a lot of answers in our business, is yes and no.

Very technically, you could provide a power of attorney to another individual that you trust to sign documents to effectuate your transaction. Now, that may not make people on the other side of the transaction or other parties in the transaction happy.

For example, title insurance underwriters typically do not like the seller to delegate the authority to sign the deed to a non-party. They typically say, “Well if the seller has to sign four documents, we are ok with the power of the attorney signing documents 1,2, and 3; but we would rather have the seller sign the deed.”  Now, that’s not a requirement or a strict obligation.  But sometimes the underwriter will give the title agent or the closer a little bit of a hard time.

So our advice on closing transactions via power of attorney is:

  1. Be very careful that you trust the person you are going to give the authority to.
  1. Make that decision or ask the questions about that with enough time to allow your Lawyer or Realtor, or your closing professional, with sufficient time to react to that request, prepare the appropriate documents, and get all the required approvals, so that is not an impediment to a smooth closing.

The bottom line is one may be able to use a power of attorney during a real estate closing.  However, the power of attorney should be prepared carefully and with ample time.

If you need any help with your real estate transaction, please give us a call as we are happy to help.