Montgomery County MD Archives - Page 3 of 3 - Real Estate News and Commentary

October 19, 2007November 23, 2021

Before you buy- First time home buyer fundamentals

by Dan Krell © 2007
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Don’t let your first time home buying experience be overwhelming. Before you plan your Sunday trip to open houses, it’s important to review the fundamentals and make sure you are going into your home purchase fully aware of the responsibility you are about to take on, as well as prepare you for the process and pitfalls that may come your way.

The first item on the list is to determine how much you can afford. Affordability is determined by your financial state and interest rates. Your financial state includes factors such as your income, debt, savings, and expenses. Interest rates impact on your ability to purchase a home because your monthly payment is based on the rate you lock into; the higher the rate, the higher your payment.

Once you know how much you can afford, make a housing budget. Making a housing budget can help you understand your expenses, which included utilities, maintenance, and other expenses such as cable and internet. Additionally, take into account any interest rate adjustment (if you have an adjustable rate mortgage) and increasing real estate taxes. Many first time home buyers get into trouble because they underestimate their monthly housing expenses, as well as not accounting for rising mortgage payments and real estate taxes.

As a first time homebuyer, you will want to be aware of any special programs that are available to you. There are many local home buyer programs that offer special financing and/or closing assistance through the county, the Housing Opportunities Commission, as well as through banks and organizations.

Talking to a lender can help you understand your credit and how much you can afford. You should compare lenders for interest rates and fees. Lender fees vary significantly and by choosing the right lender, you can possibly save several thousand dollars at settlement.

Knowing your rights as a home buyer can help you prevent problems that may occur. As a homebuyer, you are affected by federal and local fair housing laws, RESPA (Real Estate Settlement Procedures Act), Equal Credit Opportunity Act, Fair Credit Reporting Act, and the Truth in Lending Act. Your real estate agent should be aware of these laws and can help you understand them. You can get more information about these laws at the HUD website, HUD.gov.

As a first time home buyer it is important to know that you have the right to choose your service providers, such as real estate agent, lender, title company, insurance company, etc. Additionally, you have rights specific to obtaining a loan and credit, such as the right to a good faith estimate of settlement charges and interest rate and other disclosures. A list of these rights can be found at the HUD website (www.hud.gov/offices/hsg/sfh/res/resborwr.cfm).

Your next step will be to choose a real estate agent. It is recommended to interview several agents before choosing as your agent will be your trusted guide through the home buying process. A good real estate agent will know and protect your rights, as well as know what home buyer programs are available to you.

Finally, HUD recommends that first time home buyers attend housing counseling to assist in learning these and other fundamentals. It is clear that doing your homework and choosing the right professionals to assist you can make the difference in your home buying experience.

This column is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of July 9, 2007. Copyright © 2007 Dan Krell.

June 6, 2007October 5, 2019

Fair Housing Month 2007

by Dan Krell

April is finally here, which means spring is around the corner and we celebrate another Fair Housing Month. When you think of Fair Housing Month, thoughts of celebrating equality among the diverse come to mind. This year, however, people are talking about the recent sub-prime mortgage meltdown as an indicator of how we are doing in promoting equality and fairness in real estate.

At first you might find it difficult to fathom how lending practices and fair housing go hand in hand. After all, isn’t mortgage lending a highly regulated industry? Aren’t lenders using exacting rules to qualify home buyers for mortgages?

The mortgage industry is vigilant in maintaining strict quality control standards as well as cracking down on abuses such as fraud. However, the saying “where there is a will, there is a way” holds true. There are unscrupulous people who continually scheme to make their fortune through blatant mortgage fraud and other dishonest practices.

Although there are new schemes that pop up every year, most schemes involve the use of straw buyers (fraudulent using another person’s information to obtain a mortgage), giving false information, and/or providing manufactured financial documents to obtain mortgage funding. Fortunately these folks get caught and end up in jail.

Another problem that contributes to issues in the mortgage industry is the forcing of clients to use a specific lender for a kickback (violating federal law). When this happens, it is common for the consumer to pay excessive fees, points, as well as having a higher than average interest rate.

Mortgage schemes like these are just a sample of lending abuses that occur. In addition to other predatory lending practices, all lending abuse preys on an uninformed consumer. Perusing the Mortgage Fraud Blog (mortgagefraudblog.com) you overwhelmingly get an idea of the extent of the problem.

Why talk about mortgage lending practices, predatory lending, and mortgage fraud during Fair Housing Month? The reason is that many of the abuses that occur in the lending industry are due to the targeting of certain classes or sub-classes of home buyers.

The problem does not lie with the mortgage industry per se. The problem extends from the lending industry to other professionals involved in the real estate transaction. If the settlement agent or Realtor is not already aware of the abuse, they may turn a blind eye when they become aware at settlement when they review the closing documents. If the home buyer catches on to the high fees and interest rate, they are sometimes guaranteed a refinance in a couple months by their Realtor or settlement agent (which is a common predatory lending practice).

Like many things in life, it’s not the tool; however, it is the tool’s abuse by the ill intentioned or uncaring that produces disrepute. It needs to be said that Sub-prime and interest only mortgages are needed and can be useful tools in the purchase of real estate. However these tools need to be used responsibly. A guide to mortgages and other consumer information can be found on the National Association of Realtors website (www.realtor.org/housopp.nsf).

This Fair Housing Month, let’s just not commit to practice fair housing, rather let’s assist others to practice fair housing by not turning a blind eye to their lapses.

June 6, 2007November 23, 2021

Sorting Through the Paperwork

by Dan Krell
Google+

Have you read your purchase contract or listing agreement? Many people won’t read the documents thoroughly, if they read them at all, and rely on their Realtor’s explanation to help them understand the legal and binding contract to which they are entering. Unfortunately, there is a chance that your Realtor may not understand the documents either and may have given you misleading information.

What was once a simple two page purchase contract is now an often confusing and seemingly endless forty to fifty pages of clauses and addendums. The contract of yesteryear may have been easier to read, however it was not very specific and was written in favor of the home seller. Today’s real estate contract is very specific to many aspects of the transaction, discussing the terms of the agreement as well as contingencies, notices and disclosures.

To make matters more confusing, there are two contracts in use in our area. The MAR contract is provided by the Maryland Association of Realtors and the Regional Contract is offered by the Greater Capital Association of realtors. Up until recently, there were major differences between the two contracts. Attempts for parity have been helpful, however differences continue. You should consult with your Realtor to determine which contract would benefit your situation.

As hard as it may be to read through the contract and understand its terminology, can you depend on your Realtor to explain it to you correctly? Both contracts along with addendums undergo constant change requiring Realtors to re-familiarize themselves with the documents. Because of this, it is common for even a seasoned Realtor to get tripped up.

When presented with a listing agreement and/or a purchase contract, your Realtor should explicitly explain the meaning of each clause so as you understand it. It is a good idea to even consult an attorney.

Today’s real estate contract specifies the rights and responsibilities of each party. Additionally, the contract defines default, discusses recourse and hiring an attorney. The MAR contract requires you to attempt meditation prior to going to court.

Additionally, you may find that there are many additional disclosures that are part of the contract. Contrary to belief, these addenda are not filler paper; many of these disclosures ensure you understand your rights as a home buyer or home seller.

For example, many home buyers don’t know that they have the right to review condo and HOA docs. You have seven days to review condo docs and five days to review HOA docs. If you find that there is anything in the docs that is not acceptable, you can declare the contract null and void.

Why should you understand the contract? Believe it or not the real estate contract survives even after settlement. This is an important concept as it is mistakenly thought that once settlement occurs there is no recourse. Disputes can arise after settlement if the home seller decides to take items they were supposed to leave in the home, or if there were misrepresentations in property condition.

A real estate contract is not to be taken lightly as there are consequences to any breach of this contract. Make sure you understand your rights and any responsibilities, and if in doubt-consult an attorney.

May 16, 2007October 5, 2019

How to Make Your Property Tax Appealing

Many homeowners received their new tax assessments this past year. As they opened the official envelopes with much trepidation, many were in disbelief in the increase in property tax. As home values skyrocketed the last few years, so did tax bills. If you have recently received or are anticipating receiving a new assessment this year, you have the opportunity to exercise your rights by appealing the new assessment.

When you appeal your property tax assessment, you are challenging the value that is placed on your home by the State.

How does the government determine how much your home is worth? According to the Maryland Department of Assessments and Taxation (DAT) web site (www.dat.state.md.us), they oversee over two million property accounts. The state employs trained appraisers to evaluate and appraise every property. These appraisers use standard appraisal techniques to determine the value of your home.

Every property is re-evaluated every three years. If there is a change of value, there is three year phase in period for the value to be used as a tax base. To see how the assessor determined your home’s value, you can obtain a copy of the assessor’s worksheet at the local assessment office, which is located at 51 Monroe Street (4th Floor) Rockville, MD.

The appeal process begins by first receiving your new tax assessment. If you are satisfied with the value place on your home, there is nothing for you to do except pay the bill. However, if you are dissatisfied with the assessment, you have forty-five days to file an appeal.

The appeal is first heard at the Supervisor’s level, which allows you to discuss the assessment with an assessor. At this time, it is wise to obtain the assessment worksheet from the local assessment office (indicated above). You can obtain the worksheet for your home at no cost, and for a fee you can obtain the worksheets for the comparables used by the assessor. There will be an informal hearing to review all the information. After the hearing, a “final notice” is issued.

If you remained dissatisfied with the “final notice”, you have thirty days to appeal to the Property Tax Assessment Appeal Board (PTAAB). The board is not a part of the DAT; the board is comprised of local residents who have been appointed by the Governor. The PTAAB conducts an informal hearing to review all the relevant information. The board will issue a notice of decision to all parties involved.

If your dissatisfaction continues, you have thirty days to appeal to the Maryland Tax Court (MTC). In MTC, you are given the opportunity to present your case. The MTC will issue a decision based on the information presented.

Although MTC is the last administrative step in the appeal process, you can appeal the MTC decision to the Circuit Court. The Circuit Court reviews the case to determine if there were any legal errors in the process.

Hopefully, by following the process you will at least have the satisfaction of exercising your rights, and possibly being successful in appealing your property tax assessment. For more information about the appeal process, and to view the Property Owner’s Bill of Rights, visit the DAT website (www.dat.state.md.us/sdatweb/hog.html).