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Many South Florida Homeowners are Finally Able to Sell their Homes – For a Profit

For sale signHome prices are on the rise in South Florida.  And this is comforting news for many South Florida homeowners that were hit hard during the Great Recession.

Today, many South Florida homeowners are finally able to sell their homes – for a profit.  With the housing market slowly making a comeback homeowners are seeing their property begin to produce equity again. Indeed, according to a recent report, South Florida saw an 11% increase in price gains from a year earlier.  That means that many home owners that are selling their property are even realizing a profit from the sale.  There are less short sales today, and more traditional sales where homeowners are in fact making money from the sale.

In today’s market, the “for sale” sign seems to be making a comeback.  If you take a drive through many South Florida neighborhoods you will notice an increase in “For Sale” signs.  That is the case because many homeowners are now in a position to sell their home and make a profit.

Part of the reason for this improved market is that supply and demand are starting to even out more than they have in the last year or so.  For instance, less foreclosures are also helping the real estate market.  So far this year, there have been 6,574 foreclosures filings in Miami-Dade County.   At the same time last year, there were 12,720 foreclosure filings.  So foreclosure activities in Miami-Dade County have decreased by close to 50%.

The decrease in the foreclosure rate is only helping the real estate market as a whole rebound.  Home prices are also rising faster than the rate of inflation.  And many homeowners are taking advantage of those prices to sell their homes for a profit.

But with more properties coming to the market, buyers now finally have more options.   But many of the homes coming to the market today are million dollar plus home listings.

If you are considering purchasing a property, and you are a first time buyer, then you should avoid making these mistakes even as the market continues to improve.  Moreover, and as you consider buying property, please make sure you understand that you could potentially save money in closing costs by following these tips.  Please do not hesitate to contact us should you wish to discuss your real estate transaction with our firm.

Five Mistakes All First Time Home Buyers Should Avoid Making

homestead exemptionBuying a home for the first time is exciting.  While home hunting it may be easy to get blinded by the size of the swimming pool, or the spacious open layout, or the amazing backsplash on the kitchen walls to go with those new granite and quartz counter tops and hard wood floors.  When one falls in love for such a property they will often make mistakes that will regret at a later date.

With that said, here are five mistakes all first time home buyers should avoid making.

  1. Overspending.  Know your budget.  Know your financial limits.  You should meet with a lender to determine what your financial limits will be and then secure a pre-approval for an amount that you can afford.  You should only start searching for a home once you know how much you can afford.  And you should try to stay within your financial parameters.
  2. Don’t Assume You Will Be Making More Money.  One of the lessons we all learned from the Great Recession is that many people, and lenders, believed that individuals would be making significantly more money in years to come.  Don’t make such assumptions.  During the Great Recession many individuals actually lost their jobs and then their homes because such assumptions were made.  So if you’re about to graduate from medical school, don’t assume that you will be making significantly more money in a few years even if your career path is a bright one.
  3. Failing to Account for your Closing Costs.  We recently discussed, in detail, seven tips that could save you money on your closing costs.  In sum, don’t underestimate the impact the closing costs may have on your transaction.  You may have to pay such items as homeowners insurance, property taxes, and depending on the size of your down payment, private mortgage insurance (PMI).  But that is not all.  You will also have to pay various third party vendors to perform necessary tasks to complete your transactions.  For instance, you will likely have to pay for a home inspection, survey, title insurance, attorney fees etc.  Therefore, make sure you have an understanding of what your closing cost obligations will be prior to completing your real estate transaction.  Feel free to contact us today to discuss closing costs associated with your transaction in greater detail.
  4. Failing to Protect Yourself.  Understand the fine print in the contract.  The sales contract is typically several pages for a reason.  Home inspections, for instance, could reveal some significant problems with the home.  But many first time home buyers don’t understand the significance associated with such clauses and may perform such inspections outside of the agreed upon time period set forth in the contract.  The same holds true with finance contingency clauses.  If a buyer fails to qualify for financing, but also failed to adhere to the strict terms of the financing contingency provision in the contract, then their deposit may be end up in jeopardy.  Don’t put your deposit in jeopardy.  Understand your contract and ensure that all timelines are complied with or ensure that you secure the appropriate extension on such deadlines.
  5. Failing to be Realistic.  Some first time home buyers are simply too optimistic and will purchase a property that has substantial problems because they love the color of the front door.  Many first time home buyers will purchase a home in the wrong part of town thinking they can fix the problems with the home, but forgetting that they can’t correct the problems in the neighborhood.  Yet other first time home buyers may simply be too difficult.  They may submit low ball offers and then get frustrated when ever such offer is rejected.  Make sure you’re realistic with your expectations.

Seven Tips to Save Money on Closing Costs

Real Estate TransactionThere are many costs associated with the purchase, or re-finance, of a property.  These are known as closing costs and closing costs includes such things like an application, loan origination, appraisal, home inspection, credit report, title insurance, attorney costs, appraisal, and survey.  These costs must be paid before the transaction is complete, and they are often paid at the closing table.  Typical closing costs will vary, and the biggest variable is the property price.  However, closing costs are typically between 3% to 6% of the property’s price.

In preparation for your closing, or re-finance, here are seven tips that could save you money on your closing costs:

  1. Compare Offers.  When doing a home purchase, or re-finance, the natural tendency is to shop for the best possible mortgage rate.  But don’t stop there.  Shop all third party vendors.  In an effort to save money in closing costs, make sure you get competing offers from companies that offer services like home inspections and surveys.  Indeed, feel free to contact our office today to learn about our title fee structure to see if we could save you money on title insurance during your real estate transaction.
  2. Look Out for Low Ball Offers (if it is too good to be true, it likely is).  When comparing closing cost estimates, be suspicious of figures that seem especially low.
  3. Recycle Lenders and Title Insurance.  Using the same title insurance or lender that performed your initial transaction could save you significant sums of money in your transaction.
  4. Ask Questions.  If something looks questionable then you should ask about it.  If you don’t understand why you are being charged a certain fee, ask why that fee is being charged.  A simple question inquiring as to why a certain line item cost is on your closing statement could save you some money.
  5. Negotiate with the Seller.  Again, mortgage rates should not be the only point you attempt to negotiate with your lender.  The payment of any and all closing costs should also be an important negotiation with your lender.
  6. Time the Closing Well.  If you close at the end of the month, you can avoid prepaid interest charges.  Whether substantial, or nominal, your closing costs can be reduced by simply planning ahead and scheduling your closing towards the end of the month.  Indeed, when reviewing your good faith estimate, and pre-HUD, pay particular attention to line 901.  Line 901 contains the first month’s interest that you pay in advance.  A lot of originators will account for only a few days of interest – so if you close at the start of the month that figure could increase dramatically.
  7. Walk Away.  It is important to review all the closing costs documents prior to closing.  At the closing table, if you notice that the fees have changed then you should inquire why they changed.  If the change in fees can’t be justified, then you should be prepared to walk away from the transaction.

What to do with that lis pendens?

lis pendensWhat to do with that lis pendens is a question we are often asked.  In Latin, the term “lis pendens” means “pending lawsuit.” Today, a notice of a pending lawsuit filed and properly recorded in the county real estate records is referred to as a “lis pendens.” The purpose of a lis pendens is to provide notice of a claim or controversy involving specific real estate to potential buyers and lenders as well as the general public.

A lis pendens can certainly create problems with any real estate transaction. We recently worked on a case that illustrates some of the issues often confronted in the face of a lis pendens.

In Garcia v. Nobe Bay Holdings, LLC, we represented the Defendant developer. The Defendant developer had purchased the uncompleted Miami Beach condo project after the entry of a foreclosure judgment against the original developer. The new developer had assumed many of the existing sales contracts. Mr. Garcia was one of those original contract purchasers at the Miami Beach condo project.

Mr. Garcia, however, had never recorded his sales contract. Mr. Garcia had also failed to tender the second deposit required of him pursuant to the sales contract. The subsequent developer finished the building and called all of its purchasers to closing. Over 95 contract purchasers were waiting to close.

But the closings for those 95 parties had to wait. They had to wait because a title examination revealed that Mr. Garcia had not only filed a lawsuit, but he also filed a lis pendens against the whole building. The lis pendens on the whole building effectively served to stop cold all potential closings in the building for all of the other 90 contract purchasers.

Fortunately we were able to convince Mr. Garcia immediately amend his lis pendens to limit its reach solely to the unit he contracted to purchase as opposed to the whole building. In so doing, we were able to get all of the other contract purchasers to close on their units.

Nonetheless, Mr. Garcia asserted a claim for specific performance, breach of contract and an equitable lien. Mr. Garcia later agreed to limit his claims to breach of contract and agreed to drop his claim for specific performance.

The trial court denied our request to dissolve the lis pendens. As a result, an appeal was not only taken, but a bond was posted to permit the closings to take place on Mr. Garcia’s unit to another purchaser. On appeal, the appellate court agreed with the position we took at the trial level and reversed the trial court’s ruling. The appellate court directed the trial court to discharge the lis pendens and discharge the bond. The appellate court also ordered the trial court to award attorney fees in favor of the new developer and against Mr. Garcia.

In so ruling, the appellate court reasoned that Mr. Garcia’s lis pendens was improper. It was improper because Mr. Garcia had failed to establish a fair nexus between the apparent legal or equitable ownership of the property and the dispute embodied in the lawsuit. The appellate court noted that the only existing document between the parties was the cancelled purchase agreement and that agreement did not establish the necessary fair nexus to sustain the lis pendens.

Furthermore, the appellate court noted that when Mr. Garcia dropped his claim for specific performance his lis pendens was further eroded. Indeed, when Mr. Garcia dropped his specific performance claim he destroyed any possible nexus between ownership of the property and the complaint.

Lastly, the appellate court not only noted that the contract affirms that Mr. Garcia had no direct claim against the subject property, but further noted that the new developer should not have had to post a bond. The appellate court’s ruling proved to be a true success for the developer.

In the final analysis, and as part of any real estate closing, it is critical to perform a thorough title examination prior to the purchase of a property, and even prior to placing an offer on a property. The lis pendens, and the underlying lawsuit that resulted in the filing of the lis pendens, could dramatically impact your rights to the property.

Appellate Court Reverses Foreclosure Dismissal

foreclosure 008The Third District Court of appeal seems to be trying to stop the legal shenanigans taking place with foreclosure cases in Miami where some Judges appear to not want to follow the law and rules of procedures that apply to all the other cases.  Indeed, the appellate court recently reversed a foreclosure dismissal.

We recently discussed how the Third District Court of Appeal vacated a final judgment entered in the bank’s favor because of the bank’s reliance on inadmissible hearsay testimony to prove their case.  Now, the Third District Court of Appeal has reversed a bank’s dismissal because of the Judge’s abuse of discretion.

In Ocean Bank v. Garcia-Villalte, the trial judge issued a trial order despite the fact that the case was not at issue and could not be set for trial in accordance with Florida’s Rules of Civil Procedure.  Nonetheless, and despite the fact that the case was simply not ready for a trial, the trial judge dismissed the case when it learned that the bank’s attorney had failed to timely send a copy of the Judge’s trial order to the homeowner.

On appeal the bank argued that the Judge had abused his discretion in dismissing the bank’s lawsuit, and the appellate court agreed.  In so doing, the appellate court highlighted all of the irregularities that went into the trial judge’s decision to dismiss the bank’s case.

What this case illustrates is that the Third District Court of Appeal is trying to take a  hard line stance for both borrowers and the banks, as well as the Judges, to ensure that due process is not abused and that all the litigants have their fair day in Court.  You should contact our office if you are struggling to save your home in order to assess your legal rights.

Indeed, while the bank won this case, in the bigger picture this is a victory for everyone that is trying to fight the good fight within the rules and laws of Florida.  Any deviation from that legal framework – be it by the borrower or bank – will be reigned in by Florida’s appellate courts.

Help for Struggling Homeowners Facing Foreclosure as JP Morgan Agrees to pay $13 Billion

re-finance 00zzJ.P. Morgan Chase & Co. agreed to a $13 billion settlement with the Justice Department for their role in the financial crisis. J.P. Morgan Chase & Co. was under the microscope as they had several investigations and lawsuits currently against them for soured mortgage bonds, which were issued before the financial crisis. This settlement is the biggest in U.S. history, which is good news for distressed homeowners as a significant portion of the settlement funds will be given to aid them.

J.P. Morgan Chase & Co. will be giving $4 billion of the $13 billion to aid homeowners in need of some support.  If you are a distressed home owner with an upside home, or facing foreclosure, you should contact our office today to discuss your options.  Indeed, this settlement may help many struggling homeowners with homes that are underwater as this settlement may pave the way to save your home.

J.P. Morgan Chase & Co. agreed to pay as much as $1.7 billion and as little as $1.5 billion to bring down the principal amounts on loans that J.P. Morgan has held and where borrowers owe more than the property is actually worth. This could be a big relief to homeowners, because this is often times a big reason for foreclosures throughout the United States.

Additionally, J.P. Morgan will be giving at least $300 million and as much as $500 million to restructure mortgages in an attempt to lower monthly payments, which is known as forbearance. The remaining $2 billion aimed at helping homeowners will be used in multiple ways, including absorbing the remaining principal owed on properties that have not yet been foreclosed but are currently vacated, and/or new mortgage origination for borrowers with low and moderate income.

J.P. Morgan is attempting to fix the damage caused by bond offerings that were much weaker then advertised. Although this is not the only claim against J.P. Morgan as they are in a wide array of investigations and lawsuits, this is a significant step in righting their wrongs and doing their part in helping struggling homeowners.

Arguing Standing In Foreclosure Defense Claims

DadecountycourthouseIn just about all foreclosure defense claims, one of the threshold issues that need to be addressed is whether or not the bank has standing to foreclose.  The general law in the state of Florida is that the plaintiff’s lack of standing at the inception of the case is a fatal defect that may not be cured by the acquisition of standing after the case is filed.

In Focht v. Wells Fargo Bank, the Second District Court of Appeal was presented with this standing question.  In that case, the borrower had asserted that the bank did not have standing to foreclose.  The trial judge did not address that defense and simply entered judgment in favor of the bank.  Judgment was entered in the bank’s favor despite long standing Florida law that the bank had the obligation to prove that it had standing to foreclose at the time the lawsuit was filed.

The Second District Court of Appeal actually reversed the lower court’s entry of final judgment.  In so doing, the Second DCA recognized that the bank had failed to adequately overcome the standing defense and prove that it did, in fact, have standing to bring the foreclosure action.

However, the Second DCA was clearly troubled by what it saw the inequities playing out in foreclosure cases across the state of Florida.  Indeed, the concurrence goes on to lament about homeowners who collect rent while the properly is in foreclosure.

As a result, the Second DCA presented the following question regarding the above mentioned standing issue, “can a plaintiff in a foreclosure action cure the inability to prove standing at the inception of suit by proof that the plaintiff has since acquired standing?”

While it would have been an interesting to see how the Florida Supreme Court would have ruled in that case, the appeal has since been withdrawn by the bank.

Nonetheless, bank attorneys in foreclosure disputes will no doubt point to this case as somehow supporting their position that the law should not be followed.  But to do ignores the actual result of the case.  And the actual result resulted in the reversal of the entry of a final judgment in the bank’s favor since the bank was unable to overcome the borrower’s standing defense.   (more…)

Foreclosure Judgment Vacated Because of Bank Irregularities and Technicalities

re-finance 00zzForeclosure Judgment Vacated Because of Bank Irregularities and Technicalities

Florida’s Third District Court of Appeal recently vacated a foreclosure foreclosure judgment because of bank irregularities and technicalities.  Specifically, the Third District Court of Appeal vacated a final judgment because the financial institution relied on inadmissible hearsay testimony to prove their case.  Hearsay is a legal term for testimony in a court proceeding where the witness does not have direct knowledge of the fact attested to while testifying.  In short, secondhand testimony is barred by the hearsay rule.

Kelsey v. Suntrust Mortgage, Inc. involved a mortgage foreclosure dispute.  Suntrust Mortgage Inc. prevailed at trial despite the fact that Suntrust’s only witness testified that she had no first hand knowledge of the loan or note.   That witness further testified that she had only seen the subject note once during the trial.  The mortgage file was first brought to the witness’s attention once litigation had already been filed. SunTrust used the witness’s testimony to try and authenticate the note relating to the mortgage, even though her knowledge had come from out-of-court documents that had not been made available for inspection prior to trial.

On appeal, the Third District Court concluded that such impermissible hearsay testimony could not serve as the basis for the entry of a judgment against the Plaintiff.  This appears to be the first result regarding robo-witnesses after the recent fall out from robo signors.

Moreover, the Third District Court of Appeal further determined that the foreclosure plaintiff must show an agreement, a default, an acceleration of debt to maturity, and the amount due.  The Plaintiff, in Kelsey, failed to show these documents.  Whatever documents were presented at the time of trial were not properly authenticated.  Additionally, Suntrust failed to have a witness testify whose testimony was not barred by Florida’s hearsay rules.

For the reasons mentioned above regarding the documents, the only testimony presented at trial was considered to be hearsay and an error in the eyes of the Court. In order for the bank to have properly authenticated the documents it must have been shown that the witness that did testify was a records custodian or had some personal knowledge on the documents.  Since she did not, her testimony was impermissible and the judgment was vacated since it was predicated on impermissible hearsay testimony.

If you are facing foreclosure or wish to assess your real estate related options, then please do not hesitate to contact us today.

Florida Supreme Court Ruling Clears Up Ambiguity in Disputes Involving Escrow Accounts and Hands Developers a Significant Victory in Pre-Construction Contract Disputes

Victory for Developers.jpgBack in September of 2011, we discussed the impact of the Third District Court of Appeal’s ruling mandating that developers must keep pre-construction deposits in separate escrow accounts.

However, the Florida Supreme Court has since reversed that ruling. In so doing, the Florida Supreme Court concluded that the deposits could be kept in one account so long as the accounting was done separately and the monies were not commingled with the developer’s own money.

The Florida Supreme Court’s ruling clears up an ambiguity regarding Fla. Stat. Sec. 718.202 and the requirements set forth in that statute governing the maintenance of pre-construction deposits. Simply put, the ruling is a significant victory for developers because developers are now free to keep money from condo buyers in one account so long as that account is not commingled with the developer’s money and proper accounting is kept.

This is a significant ruling that will no doubt have an impact on both ongoing development as well as many South Florida legal battles that continue to rage on in South Florida’s courts.

Since the real estate market went bust back in 2007, developers and pre-construction contract buyers of condominiums (many of which were never built) have flooded South Florida’s court system with lawsuits. Many of those lawsuits focus on the buyer’s effort to have their deposit returned. In most cases, those deposits were either 10 or 20 percent of the purchase price.

Florida Statute Sec. 718.202 protects condo buyers’ deposits of up to 10% of the purchase price and forbids developers from using that money during construction. Failure to adhere to the statute may result in 3rd a degree felony against the developer. However, the developer is permitted use funds in excess of 10% of the purchase price for construction purposes. But Fla. Stat. Sec. 718.202 imposes certain requirements on those funds too.

Thus, an ambiguity arose in the interpretation of that statute. The legal question became whether or not the monies that could be used for construction purposes were to be held in the same escrow account as the initial 10% deposit, or whether those funds needed to be placed in their own separate escrow account
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The Third District Court of Appeal’s ruling was favorable for buyers because the Third District Court of Appeal concluded that two separate accounts needed to be established, and that the funds could not be commingled in one account. Failure to establish the second account would result in voiding the contract and returning all monies deposited to the buyer. Such a ruling was no doubt a favorable ruling for buyers.

In 2010, Florida’s legislature attempted to clarify this ambiguity in the then existing law by revising the applicable statutes and stating that one account could be maintained, and also stating that if one account was to be used that separate accounting would be required. Despite that clarification, however, the Third District Court of Appeal in 2011 still ruled that two accounts were required. As such, an appeal was taken to the Florida Supreme Court to help further resolve these ambiguities.

The Florida Supreme Court’s analysis noted that the statute was, in fact, ambiguous in terms of whether or not two separate accounts were required to hold the escrow deposits. Given that ambiguity, the Florida Supreme Court next looked at the statute’s legislative history to help resolve the ambiguity. The Florida Supreme Court concluded that the legislative history was not helpful in resolving the ambiguity.

However, the Florida Supreme Court noted that the statute did carry criminal penalties in the event that developers failed to follow the escrow requirements set forth in Fla. Stat. Sec. 718.202. Given that criminal component, the Florida Supreme Court concluded that the statutory rule of lenity applied. The rule of lenity states that if a statute is subject to competing reasonable interpretations then the statute shall be construed most favorably to the accused.

Consequently, since the statute at issue herein was subject to competing, but reasonable, interpretations, the Florida Supreme Court applied the rule of lenity to resolve the matter. The rule of lenity mandated that the statute be interpreted most favorably to developers so as to prevent developers from being subject to criminal penalties.

Thus, developers are permitted to keep all pre-construction deposits in one escrow account so long as the funds are not commingled and separate accounting records are maintained.

Is Eminent Domain the Answer for Struggling Homeowners? NJ Town Considering Eminent Domain Plan

eminent domain.jpgIs eminent domain the answer for struggling homeowners? We recently discussed how many local governments are considering using their eminent domain powers to assist struggling homeowners.

Eminent domain is gaining steam nationwide as municipalities are trying to help out homeowners. Using eminent domain, municipalities would have the power to acquire loans from bondholders, bypass mortgage contracts, write them down and give them back. Essentially the municipalities will be using eminent domain to obtain ownership of the homes and then relinquish them back to the homeowners.

The use of eminent domain in this context is believed to only be used on mortgages not backed by the United States government. The proposed idea would only help homeowners who are employed and can pay back the mortgages. Essentially those who are backing such a strategy are trying to put people back in their homes through government action without costing taxpayers any money.

In the financial industry, however, they believe that this process will backfire and cause more problems than benefits. They believe that using eminent domain would cause investors to pull their money out of mortgage backed securities. Another belief is that it will penalize those who save and invest. Lastly, this could cause a chain reaction and there is no telling where they would stop after foreclosures. Many believe this would cause people to use such practices for things such as credit card debt as well.

Richmond, California was the first city to announce such a plan. Now, Irvington, NJ, may also be moving towards implementing a plan to use its eminent domain powers to purchase mortgages that are in foreclosure.
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