About Dan Krell

November 8, 2019November 8, 2019

Ask About Closing Fees

To help home buyers understand the costs of buying a home, the Consumer Financial Protection Bureau (consumerfinance.gov) rolled out the Know Before You Owe initiative in 2015. The intention was to help home buyers understand and ask about closing fees. The project actually has deeper roots in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Dodd-Frank created the CFPB and mandated that the Bureau “shall publish a single, integrated disclosure for mortgage loan transactions” in a “readily understandable language” so borrowers can understand the financial aspects of their loan.

Prior to Know Before You Owe the home buyer would receive a Good Faith Estimate from the lender and a proposed settlement statement (which was on the HUD-1 form) from the title company. The pre-HUD, gave a fairly close estimate of the amount they needed at closing but could change depending on final lender charges. If the amount was a little short, the buyer would write a check to cover the difference. Sometimes the buyer would get money back at closing because the amount they needed was less than the amount the title company actually collected. Regulations dictated when the buyer received a lender’s Good Faith Estimate and settlement costs. If the HUD-1 was delayed, home buyers didn’t have much time to ask about closing fees.

But in the aftermath of the financial and foreclosure crises, there was concern that home buyers didn’t get accurate and fair closing costs disclosure. Know Before You Owe changed the process of disclosing closing cost estimates to provide more accurate closing cost figures. A new Closing Disclosure (CD) was devised to be consumer friendly. The process of closing cost disclosure changed such that the lender is now responsible for providing the buyer the CD (in lieu of title company’s HUD-1). However, the role of the title company (or closing agent) is still to conduct the settlement. The standardization of the closing form allowed time to ask about closing fees.

Unfortunately, title insurance and other title related fees (such as water escrows and the property survey) are still often misunderstood and disputed. Although the CD does a good job breaking down closing costs to help you understand what you’re getting, it falls short in explaining title fees and options. For example, in Maryland, the cost for title insurance that is disclosed on the CD is the more expensive enhanced policy. And it’s not just happenstance, Maryland Realtor purchase contracts require that the lender disclose an enhanced title insurance policy on the CD so you know how much the most expensive title insurance will cost. But unless you know to ask, you may by default be purchasing the more expensive enhanced policy. The survey is another title charge that may be charged by default. Although many feel it’s not worth the expense, it may be relevant to your title policy.

Fortunately, your loan officer will review and help you understand your lender fees. On the other hand, the title company will be communicating with you throughout the home buying process. Make sure you read and understand all emails, as they will likely describe your title charges and options.

Life is hectic and it seems as if time is at a premium. And although buying a home can be exciting, it can significantly add to your daily stressors. But if you want to avoid surprises down the line, take the time to understand the process. Ask as many questions as it takes to know what to expect at closing. Have your real estate agent explain to you your purchase contract. And, don’t wait until settlement to communicate with the title company, or ask about your CD.

Original article is published at https://dankrell.com/blog/2019/11/08/ask-about-closing-fees/

By Dan Krell
Copyright© 2019

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

November 5, 2019October 20, 2020

Real Estate Riches Promises

House flipping has been around as long as people have lived in houses. Flipping houses got a bad rap in the 1990’s, when scammers engaged in widespread fraud using mortgages, appraisals, and straw buyers. In some cases, some “renovated” houses were uninhabitable and sold to unsuspecting home buyers. But house flipping has regained its legitimacy because of its significant contribution in revitalizing the country’s housing stock after the Great Recession. As a result, many investors found their fortunes. Of course, reality TV glamorized house flipping and the prospect of real estate riches. And as more people wanted in, flipping instruction courses multiplied.

Many embarking in house flipping courses believe it’s their road to real estate riches . Unfortunately, what’s not understood by many consumers is that flipping houses is an incredibly risky business. For most, it’s a full-time job that offers a modest living. And, many real estate flippers lose money.

Last week, the Federal Trade Commission (FTC.gov) entered a temporary restraining order against a real estate investment seminar promoter. You may have seen ads for these seminars, as they were promoted with reality TV star endorsements. The FTC alleges that the seminars are misleading and make “deceptive promises of big profits to lure consumers into real estate seminars costing thousands of dollars.” According to the October 4^th FTC press release, the promoter claims to offer consumers coaching and training on how to make large sums of money by flipping houses.

But it’s not so much about real estate riches through flipping houses. The FTC complaint alleged that seminar ads attracted consumers to free event that claimed they would learn how to make large profits “using other people’s money.” It is alleged that the free event was a sales presentation for a three-day workshop that cost $1,997, and was promoted as teaching everything needed to know “to make substantial income from real estate.” The three-day workshop was sometimes described as a “beginner’s course,” and attendees were “upsold” products and services that cost as much as $41,297.

The FTC action just didn’t pop up overnight. It resulted from years of investigation. An eye opening 2013 report highlighted complaints about these seminars (Some Buyers Call Classes By ‘Flip Or Flop’ Stars Misleading; Investors Business Daily; 10/28/2016, p43-43). The reality TV star who was supposed to be at the seminar, instead appeared in a video stating they were busy filming their show. An attendee who paid $1,997 for the three-day course, $1,000 for real estate software, and “thousands more” for additional classes, stated, “They weren’t really teaching at all.”

Real estate investing and flipping courses have been around for decades. However, not all advocate house flipping as the vehicle to make riches. There are many avenues to invest in real estate; some teach buy and hold strategies, others teach auction strategies, etc. Before spending any money on a real estate investment course, do your due diligence. Check with the Better Business Bureau and FTC for complaints.

Andrew Smith, director of the FTC’s Bureau of Consumer Protection stated, “From start to finish, these defendants used the promise of easy money and in-depth information to lure consumers down a path that could cost them thousands of dollars and put them in serious debt. When a company tells consumers they have the secret to get rich with little work, we encourage consumers to take a hard look at what’s really being offered.”

Original article is published at https://dankrell.com/blog/2019/11/05/real-estate-riches-promises/

By Dan Krell
Copyright© 2019

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October 28, 2019October 28, 2019

Protecting Home Buyers

Of the handful of new Maryland real estate related laws that go into effect this week, two are highly important for you to know. These are passed for the purpose of protecting home buyers and sellers. One protects your confidential information, and the other concerns your earnest money deposit on a Maryland home sale.

Protecting home buyers and sellers’ confidentiality is HB1228/SB807, which was effective October 1^st. Besides cleaning up the definition of a brokerage relationship, the bill addresses client confidentiality. Unless a client consents in writing, Maryland licensed real estate brokers and agents may not disclose confidential information received from or about a client to any other party and/or their representative (including their real estate agent). The non-disclosure of confidential information protects past and present clients, and now is extended to potential clients as well.

Confidential information is defined as: a seller/landlord willing to accept less than the listing price; a buyer/tenant willing to pay more than their offer; motivation of a client; the need or urgency to buy, sell, or rent; any facts that led the client to sell, buy, or rent; and also relates to the client’s negotiating strategy. However, the duty to maintain confidentiality doesn’t apply to the disclosure of material facts about a property (which a home seller is also required to disclose).

Protecting home buyers deposits is effective October 1^st. HB222 requires a written agreement between the buyer, seller and the escrow agent holding the earnest money deposit (EMD). The EMD is described as “consideration” for a seller to accept an offer. An escrow agent is the entity who accepts and holds the earnest money. The EMD is credited to the buyer at the time of settlement. However, if sale does not settle, the disbursement of the EMD can become contentious. Under certain circumstances, the contract of sale is clear about when the buyer may receive their EMD. However, real estate is not always black and white, and there are occasions when a dispute arises about whom is entitled to receive the EMD.

It used to be common practice for a real estate broker to accept and hold the EMD. Real estate brokers are bound by law as to how to handle and care for the EMD. However, brokers are increasingly reluctant in accepting EMDs for a number of reasons. Instead, brokers are directing their agents to have title companies to hold these deposits. But home buyers (and sometimes their agents) don’t realize that a title company is regulated differently than a real estate broker, and the EMD may not be handled as expected.

HB222 is important because it fills the gap for escrow agents who do not already have specific guidelines for handling EMDs. (HB222 doesn’t apply to Maryland real estate brokers and agents, and Maryland registered home builders selling new homes, as they are already regulated). The bill provides transparency so both the buyer and seller understand the terms for holding the EMD.

The bill requires an escrow agent to enter into a written agreement with the buyer and seller when the escrow agent agrees to hold an EMD for a Maryland home sale. The written agreement must contain the amount of the EMD; the date the EMD was given to the escrow agent; the responsibility of the escrow agent to notify the buyer and seller if the EMD funds are “dishonored” (e.g., bounced check); the conditions under which the escrow agent may release the EMD; and the process to address disputes over the release of the EMD.

Original article is published at https://dankrell.com/blog/2019/10/28/protecting-home-buyers/

By Dan Krell
Copyright© 2019

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October 25, 2019October 25, 2019

Fall Home Maintenance

If you feel that your always doing maintenance on your home, you’re not alone. But the truth is that homes require regular maintenance. Fall is here and time to get to work. Fall home maintenance can help your home keep you comfortable, dry and healthy. Because of the temperature changes and potential for severe weather, the fall is an opportune time to check your roof, gutters, furnace, and chimney.

Most don’t realize that hurricane season goes on through the end of November, which means we could experience sever weather events beyond Thanksgiving. Don’t wait until a storm arrives, check your roof to make sure you stay dry this season. Although today’s commonly used roofing materials are meant to last twenty-five to fifty years, it doesn’t mean that it is maintenance free. Even if your roof was replaced recently, it’s a good idea to have a licensed roofer inspect it for lifting, broken, or missing shingles. The roofer should also inspect for loose or missing flashing and damaged ridge vents. To prolong the roof’s life, any damage should be repaired immediately.

The trees shed their leaves during the fall, and lots of leaves end up in the gutters and downspouts. Gutters and downspouts are designed to carry water away from your home to prevent water penetration in your basement. If the gutters and downspouts are clogged, the system becomes inefficient or doesn’t work at all. Many home owners clean the gutters without checking the downspouts. A clogged downspout will essentially make a clean gutter ineffective. Additionally, gutters can become loose over time and won’t function as intended. Clogged and/or damaged gutters and downspouts should also be repaired immediately.

Because temperatures tend to get colder during the fall, it’s recommended to have your furnace inspected and cleaned by a licensed HVAC technician. The purpose of the fall inspection is to ensure the furnace is operating safely and efficiently. A well-maintained furnace can help it last beyond the average life expectancy. Cleaning and testing the furnace components (such as the blower, ignition, and electronics) as well as replacing filters will help increase the system’s efficiency. Furnaces are becoming increasingly complex machines that require specialized training to inspect and repair. Even furnace air filters can be difficult to replace in newer models (some filters are only available from the manufacturer). If your furnace uses a combustible fuel (such as natural gas, oil, propane, etc), test your home’s carbon monoxide detectors. CO detectors have a limited life span and must be replaced if not working properly.

If your home has a fireplace, schedule a chimney inspection before the evening temperatures get colder. Because proper fireplace and chimney operation is a health and safety matter, don’t put it off. Regardless if your fireplace is wood or gas burning, regular maintenance requires an inspection and cleaning. Any repairs should be completed prior to usage. The chimney should also be inspected, cleaned and repaired as necessary by a qualified licensed contractor. A well-maintained fireplace and chimney will help properly vent CO out of the home, and can prevent a chimney fire.

Many home owners put off fall home maintenance because it’s tedious. To save time, many home owners are hiring a “Home Service Company” that manages seasonal home maintenance. Some maintenance programs are essentially “bundled” handyman services. However, before hiring a home service company for your fall maintenance, check that they have properly licensed service techs.

Original article is published at https://dankrell.com/blog/2019/10/25/fall-home-maintenance/

By Dan Krell
Copyright© 2019

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October 15, 2019October 15, 2019

How to Market a Home Sale

Some homes seem to sell themselves while others need help. If your home needs help, understand that effective use of marketing tools can increase your home’s appeal, as well as communicate your home’s value to sell it faster and for more money. Home sale marketing tools have been used ever since real estate brokerage began. Although marketing tools come and go, some have stood the test of time. So you might be wondering how to market a home sale…

How to market a home sale according to a Realtor

If you ask your Realtor how to market a home sale, they may tell you about open houses, print ads, and the internet.

Probably one of the most effective marketing tools an agent has is the open house. Unfortunately, the open house is under-used, as well as often misused for the agent’s personal gain. Although the open house routine has changed, brokers have been holding open houses for over one-hundred years. The open house is the ideal time to communicate directly with home buyers and their agents about your home’s appeal and value. Try to avoid the use of open house gimmicks (such as cook-outs and carnivals) because they detract from the home sale message. Furthermore, make sure your agent is focused on selling your home during the open house, instead of focusing on signing-up new clients.

Although not as prevalent today, print advertising was a home marketing staple for over a century. Today, the majority of home buyers search for homes online, so it’s not likely that a print ad will have a wide audience. However, agents will uses post cards and door hangers to announce their new listing. Nonetheless, print advertising is still used to market niche homes and agent self-promotion.

You might be wondering how to market a home sale online? Internet and digital marketing is the most widely used form of advertising today. Internet marketing is easy because the MLS syndicates your home listing across numerous websites automatically! Although the syndication is automatic, your agent still needs to check how the listing appears. If the listing has incorrect information, it needs to be fixed or can hamper results.

There are a variety of other internet advertising opportunities, including a dedicated webpage, pay-per-click, and video. However, results, if any, may be limited if not used effectively.

One of the most important marketing tools to relay your home’s appeal and value is the camera. Technological advances in MLS feeds and digital photography now allow home buyers to see many pictures of your home and its surroundings in crystal clear clarity. However, don’t solely rely on new photo technologies for virtual tours, as the viewing ability may be limited.

Virtual reality (VR) is a cutting-edge tech being touted for virtual tours. Let alone that most home buyers don’t own a VR device, many buyers are likely to search homes when wearing a VR device is not appropriate, such as at work or on the metro. Even though VR marketing sounds cool, it’s reach is still very limited.

Although VR is yet to be an effective tool, augmented reality such as 3D virtual tours are coming of age. Although there are still limitations, updated internet browsers, broadband, and new 5G allow home buyers to view your home as a 3D model.

The basics.

Regardless of what real estate agents will tell you, the best marketing tools for your home are the list price, your home’s condition, and its location. However, a high list price, poor condition and/or location can be helped by your agent’s marketing tools. Effective marketing tools can also help increase your home’s appeal and communicate the home’s value. But ultimately, the nitty-gritty of selling your home depends on your agent’s savvy, ability to facilitate an offer, and negotiate a price.

Original article is published at https://dankrell.com/blog/2019/10/15/how-to-market-a-home-sale/

By Dan Krell
Copyright© 2019

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