Real Estate Snippets

Buying Real Estate During a Divorce

I first published this post in October, 2006, but it's a topic that needs repeating!

Divorce is a tough topic for most people.  It's hard enough acknowledging that the relationship is not working, but then everything has to be split up and what happens to the kids has to be sorted out as well.  Occasionally a client has come to me that is separated from their spouse, but not yet divorced.  The client wants to buy a house so they can move on with his/her life.  In Minnesota one person in the relationship can legally buy alone, but when it comes time to sell, if the buyer has been married during the ownership of the house, both spouses have to sign off on the deed to transfer ownership.

Buying a home in Minnesota when you are in the process of a divorce is not a wise choice without consulting legal counsel.  Minnesota has laws which automatically give the absent spouse a legal right to the newly purchased house if it is purchased before the divorce is final.  That would mean the non-resident spouse would need to issue a quit claim deed or some other form of deed before the resident spouse could sell the property. 

One of my first buyer clients had a scenario like this one.  She had lived in and inherited the St. Paul family home.  When she moved to the east coast, she rented the family home in her absence.  While on the coast, she met and married a gentleman and started a family.  The marriage collapsed and she returned to the cities with her children sans husband.  In order to sell the family home and buy a suburban home, the ex-husband had to sign a quit claim deed to release his legal interest in the home.  He had never seen the house, never visited the house, had no emotional ties to the house.  She owned it before and after the marriage.  He stubbornly refused to sign away his rights without compensation!  She ended up paying him 8% of the sale price to obtain his signature on the deed! 

The moral of the story is don't buy a house until your divorce is final OR get legal council to protect your interest in the property and eliminate the "ex's" interest.  Otherwise, a future sale could be a costly endeavor.

Relocation Companies and Referral Fees

Relocation companies and referral fees are a bit of a mystery to me.  I don't mind paying a referral fee when the company legitimately calls me and is the first point of contact for a St. Paul home seller or home buyer.  What confuses me is when a prospective home seller finds me as a result of my website or blog and then I get a call from a relocation company saying they will be charging me a referral fee for working with Mr. and Mrs. I'm Outta Here.  It was MY website or blog that drew the St. Paul seller to me.  It was not the relocation company's referral.  The relocation company referred a different agent to the St. Paul sellers, but they didn't choose her.  Now the relocation company wants 35% of MY part of the commission? 

This St. Paul seller wants to use the relocation company because the company will pay their closing costs.  The irony is that those closing costs will be paid with the 35% of my commission that the relocation company claims as their "referral" fee!  I don't even get a thanks for contributing to the sellers' closing costs and yet it's my money that will make the payment.

This is another one of those things that make me go "hmmmm".

Two Houses

Since I deal with houses everyday, It's a good thing that architecture fascinates me.  In middle school, there was a class in Greek and Roman architecture which I loved.  I spent hours drawing and redrawing the different styles of columns.  The idea of an arch being held up by a carefully crafted stone amazed me. 

Even today the little details make a difference to me in a house.  These two St. Paul houses are a perfect example.  The roof lines are similar but what a difference the arches make in the home on the left.  Even the second floor windows are arched.  The home on the right may have started as an open porch supported by the columns and windows were added later, but the squared openings are extremely common in this style home.  The builder, architect, or original owner of the home on the left may have wanted to add a little pizzazz to their home.  With the one small change, their home stood out as unique creating that little extra in the curb appeal today.

New Form of Marketing

My St. Paul buyers gave permission to the listing agent to stick this sign in the snowy front yard of their St. Paul house after the closing.  It was a nice gesture to let the neighborhood know the home was sold and to market which companies did the work.  The sign was the end of a whirlwind transaction that miraculously closed in 12 days! 

The amazing part of the transaction was that the sale was a short sale.  Short sales are notorious for taking weeks to months to get a response from the lender who is being "shorted".  The listing agent and I communicated daily making sure all the bases were covered.  At the closing, both closers commented on how quickly this deal had come together.  The mortgage officer agreed.

What was the difference between this transaction and others that stall?  EVERYBODY including the buyers and sellers, the short sale lender, the agents (including me!), closers, and new lender had their act together.  There was no whining, stall tactics, posturing, dramatics, etc.  We provided what was asked immediately without questioning why.  None of the professionals had to be coddled to get the job done.  Even though the listing agent was west of St. Cloud, she performed faster than many that are local. 

Electronic transmission of doc's expedited the process.  A well disclosure was obtained and sent to all parties via e-mail.  The title work was done and sent to all parties via e-mail.  The appraisal was ordered and sent to all parties via e-mail.  Addendums were signed and sent to all parties via e-mail. 

The listing agent was professional and forthright.  So, kudos to you, Roni, for a job well done!  I hope you didn't burn yourself with that torch when you removed the iced in yard sign!

Where Does All the Money Go?

Lots and lots of money gets exchanged when a St. Paul house is sold, but most of the time, the buyers and sellers never see it!   It's all accounted for on the settlement statement or "HUD".  The settlement statement is one of the documents most frequently causing confusion for home buyers and sellers.  The "deer in the headlights" look is a sure sign that the figures on that legal size paper have not registered.

The buying/selling process is only done a few times in a person's life so it's often intimidating to understand.  When presented with the settlement statement,  some clients will nod their heads as if they understand and after the closing ask me about the figures.  Some nod their heads and just trust that all is right with the world.  Others question every single line until it is clear.

One of the common questions relates to how the seller's mortgage gets paid.  The seller doesn't get the money from the buyer and pay it him/herself, so what happens to that money?   

In St. Paul, the buyer's closer combines the funds from the buyers' new mortgage with any cash the buyer or seller bring to the closing. The closer then writes checks using those funds to pay off the sellers' mortgage, any old liens against the property, any judgments that have to be cleared, any unpaid  taxes, the real estate company's commission, and the fees associated with the closing.  All of those bills must be paid off before the title will be clear to transfer to the buyer.  Since the buyer's closer acts as agent for the title company who guarantees clear title, it is important that their representative be the one to pay the bills.  That way, if they make a mistake, they have to make it right.

For the same reason, the buyers' closer has to get written pay-off figures from the respective lien holders as well.  The seller cannot provide a pay-off amount for their mortgage.  That figure has to be requested by the closer from the lender.  Again, the closer has to guarantee that the figures are right, and therefore, has to obtain the figures directly. 

Because the closer has to account for how all the funds are used, the settlement statement is detailed and sometimes overwhelming for the buyers and sellers.   It's okay to ask questions.  Afterall, there's a lot of money (at least that's what the paper says!) exchanging hands and it's not a bad idea to understand where it's all going!

Hope Now Program

The Hope Now program was announced this week with "hope" that it will help some sub-prime mortgagors dig out of their hole.  One of my readers asked for real numbers in how this program will help out the mortgagors in different price ranges.  Although each person's scenario will be different, here are some examples of how the program will impact monthly payments.

If the mortgage balance is $100,000 with a current interest rate of 7.5% (remember the rate is based on sub-prime lending and is, therefore, higher), the current principle and interest payment only is $699.21 each month.  To this amount would be added an amount for property taxes and home owner's insurance making the total payment much higher.  The new interest rate on the loan is going to be 10% making the next principal and interest payment $877.57 per month.  That is an increase of $178.36 each month.  The Hope Now program will freeze the payments at 7.5% for an additional 5 years causing a savings of $10,701.60 for the homeowner and a loss of the same amount to the investor who is collecting the payments from that loan.

For a mortgage balance of $150,000 with a current interest rate of 7.5%, the principle and interest payment is $1,048.82.  The new interest rate of 10% would make a new payment of $1,317.36.  The five year freeze on the interest rate would save this homeowner $16,052.40 and create a loss to the investor of the same amount.

The $200,000 loan with the same interest rates has a current payment of $1,398.43 and a new payment of $1,755.14.  The savings for the homeowner is $21,402.60 with an equal loss to the investor.

Whereas these figures are considerable, St. Paul houses going into foreclosure are creating equally large losses for mortgage investors.  As a result, investors can see the wisdom of participating in the Hope Now program with the hope that less homes go into foreclosure and more homes will be refinanced or sold.

If you currently have a sub-prime mortgage that originated between January 1, 2005, and July 31, 2007, are owner occupying your St. Paul home, have not missed any payments, your interest rate will reset in the next two years, and the new payments will not be affordable, click here for additional information and to contact a HUD approved credit counselor to see if the program applies to you.

Verbal Purchase Agreements

A verbal offer was given to the listing agent on a St. Paul home for sale.  The offer was a little bit complicated so the buyer's agent wanted to know if the basic terms would be acceptable to the seller before writing the documents.  The seller agreed verbally as well, but nothing has been submitted in writing.  Imagine the listing agent's surprise when an e-mail request for an appraisal comes!  There really is not a legal binding offer yet, but the buyer's agent has ordered an appraisal?  This is confusing.

Several possibilities exist.

• The buyer's agent doesn't realize an offer has to be in writing, accepted and signed by all parties, and delivered to all parties!
• The buyer's agent assumes all parties will act according to their verbal promises.
• The buyer wants to make sure no contingencies will prevent the closing BEFORE putting the offer in writing.
• The buyer's agent wrote the offer and faxed it to the listing agent's office without calling the listing agent to find the preferred fax number.  The office is not open during the weekend so the purchase agreement may be  sitting in the office fax machine.
• The buyer's agent is eager to get things scheduled and figures the offer will be signed before the appraisal is done!

There are probably other reasons but these are what comes to mind right now.  So, tomorrow the listing agent will call the buyer's agent to find out where the purchase agreement is and begin, or finish, the process of getting the offer in writing so it's binding!  Otherwise, this buyer could walk at any time with no legal recourse!

Mortgage Reprieve

The money balloon may be getting a little boost according to "rumors" from Associated Press reports today.  Along with the earlier FHA secure initiative program which helped homeowners who were delinquent in their payments, the new program to be announced Thursday will help a small segment of homeowners who are NOT delinquent on their subprime adjustable rate mortgages.

The new plan will freeze the participating company ARM's from resetting for 5 years.  Only subprime mortgages that are current in their payments and originated between January 1, 2005, and July 31 of this year with reset dates of January 1, 2008, through July 31, 2010, will be eligible.  Since many of these mortgages started out with a 7-8% interest rate and would reset to between 9-11% interest, this freeze can make a significant difference for those already struggling to make their payments.  The hope is that 5 years will buy time for the homeowners to refinance to a fixed rate mortgage or to sell their home without losing money.

If It's In Writing, It Has to Be True

Studies have been done on the impact of the written word.  Repeatedly the research has supported that something stated in writing has more validity in the reader's mind than something spoken.  A good example is the public's perception that tax records are accurate.  Any professional that works with tax records regularly realizes that tax records are as prone to error as any other record in which humans are involved.

The perfect example of this is a recent lot split done by a St. Paul client.  The original Ramsey County tax records stated the lot was 130 feet wide.  One hundred thirty feet included 2.5 lots.  When the parcel was split into two properties, the two parcels show 75 feet and 50 feet which totals 125 feet.  What happened to the other 5 feet?  Did it get lost in the split or was the original tax record showing a 130 foot width a typo? 

Until the owner checks it out on the survey and on the abstract itself, that missing five feet will be a question mark.  Can the property be listed without disclosing the missing 5 feet?  Not by this agent.  There has to be an explanation for the missing land measuring 5 feet wide by 125 long!

Sticks and Stones

Remember how whispered words used to hurt when we were young?  Those secret words uttered among friends combined with furtive looks our way hurt more than the actual words themselves might have.  Later years found tales told around the water cooler.  The worst nightmare of all would be public proclamation of a mistake or defect in our personality in the yearbook, school paper, or public media.

As adults we think we're beyond the power of those secret gossips, but most of us are unaware how the written word forms us on a daily basis.  Not only does a tale become more valid when written but it gains even more credibility when it's published.  Somewhere in our psyche, we have been taught that "if it's written, it's truth"!

I'm among the first to proclaim that's not necessarily so!  A recent article by Bernice Ross in Inman News supports the same premise.  Bernice thinks the media spin has hurt the real estate market.  I tend to agree.  The doom and gloom figures of foreclosure, a bubble bursting market, and upside down subprime lending lead the media headlines. 

A perfect example of this is the media's choice of what to quote from a speech by Doug Duncan, chief economist for the National Mortgage Bankers Association.  Negative stats about foreclosures and the market are pulled from Duncan's speech without the balance of his positive stats.  Here's what was left out:

• 35% of US homes are mortgage free!
• 94.88 % of existing mortgages are current and NOT delinquent!
• Foreclosures are concentrated in 7 states.
• 4 of those 7 states are manufacturing states with significant job losses.  Those job losses would probably have created market problems in those states even if the rest of the nation had a strong real estate market.
• 3 of the 7 states experienced significant overbuilding where investors were speculating on a quick profit in real estate.
• In the other 43 states 2007 foreclosure rates have fallen below those of 2006.
• Only 25% of all mortgages are subprime and 3/4 of those are current!  That factors out to about 6% of all mortgages being delinquent!

Balancing the doom and gloom stats with the information listed above paints an entirely different picture.  The doom and gloom creates sales for the media, but it also scares consumers out of buying real estate! 

I know personally the market is tight.  My own husband has been laid off for several months.  There is a conservatism creeping into our economy.  But . . . if I had reasonably good credit, and if I was in the market for buying a new home, I'd be out looking for one right now!  What a time to get a deal.  Because I'm in the business I know this information.  The consumer, on the other hand, is stuck with what the media publishes and the media isn't always presenting a balanced picture! 

Maybe I should shout it to the world:  "In St. Paul, now is the time to buy!"