Squatters and real estate – a reality in today’s economy

Although some squatters move into vacant homes to live rent free, others do so to take advantage of adverse possession laws. The squatter movement has grown, not just in the U.S. but significantly in Europe as a means of social change. Activists advocate squatting as a response to Europe’s high unemployment, austerity, decreased public housing and declining living standards. Currently touted as “alternative housing,” squatting in the U.S. increased during the time when foreclosures and vacant homes skyrocketed after the financial crisis.

A recent story, about squatters taking over the Florida home of an active duty soldier who is stationed in Hawaii, highlights a recent trend. According to Florida’s WFLA Channel 8, the home owner claimed people broke into his home and changed the locks; however, the squatters who moved into the soldier’s home claimed to have a verbal agreement with the home’s caretaker to live in the home while making repairs. When the Afghanistan veteran planned to moved back to Florida, he was caught off guard when he was told removing the squatter was a civil matter and had to go through the eviction process to rid the home of the invaders. As the story gained national attention, veteran groups hired an attorney to begin eviction. However, it appears that the combined pressure has facilitated the squatters’ departure; but not without making a statement of their own by leaving the home in disarray and their dogs to roam freely.

Two local cases of squatting were reported last year, where defendants claimed “sovereign rights.” A vacant, bank owned Waldorf home was reported to be occupied by seven individuals who claimed to have the right to occupy the home because they are “sovereign citizens.”

A March 18, 2013 Washington Post article (‘Moorish American national’ charged with trying to take mansion) highlighted the other case, where an individual also claiming sovereign rights moved into a vacant $6 million Bethesda home listed for sale. The squatter allegedly attempted to change the tax records to indicate he was the owner by appearing at the Montgomery County court house and presenting “historical” documents and maps. But the county clerk turned him away saying that a “proper deed” was needed for such a change. The squatter reportedly went as far as emailing the listing agent cryptically claiming ownership. According to news reports, the squatters in both local cases were charged by police.

The Bethesda case emphasizes that bank owned foreclosures are not the only homes occupied by squatters, vacant homes listed for sale are also targets. Nationwide reports about squatters in upper bracket luxury homes increased last year, as well as the attention to “squatter’s rights” and adverse possession laws.

Last July, Sheree R. Curry of AOL Real Estate (Squatters Beware: States Are Revising Adverse Possession Laws) highlighted the case of a squatter who moved into a Boca Raton, FL mansion listed for sale. The squatter was eventually “locked out” of the home, but the events moved the community in an effort to change Florida’s Adverse Possession laws. And although adverse possession laws vary throughout the country, Curry reported that some states are revising these laws to protect home owners. New York and Washington had already changed adverse possession laws when Florida changed theirs to prohibit “acquiring title to real property by possession”; which went effect July 1^st 2013.

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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.

July 25, 2012July 25, 2012

Debunking myths about foreclosures, timing the housing market, and hiring the “big name” agent

by Dan Krell ©2012
DanKrell.com

Debunking common real estate myths.

As a real estate agent, I often encounter people who talk about common and persistent real estate myths. In recent years, these few seem to be among the top myths:

Myth #1: “If you wait until the market bottoms out, you’ll get the best deal”
Counter point: “People trying to time the market may find in hindsight that they will have reacted either too soon or too late.”

Anderson & Harris, in their reveling study Timing the market: You don’t have to be perfect (Real Estate Issues 35, (3) (10): 42-42-50) indicated that you don’t have to be perfect when timing your purchase and sale of a home. They suggested that you could do just as well to aim your sale during market peaks and your purchase during market lows; however, they conceded that you would most likely know in hindsight when the market is at a peak or low.

Their results demonstrated that the typical “buy and hold strategy” over a thirty year period results in an annualized return of 8.18%; however, buying when a recession has ended with a predetermined sale period yields a wide range of return that ranged from 13.38% to 1.42% annualized total return.

Myth #2: “Buying a distressed home will result in a good purchase.”
Counter point: “There is inherent risk when purchasing distressed homes.”

There is inherent risk when purchasing distressed homes, regardless if they are foreclosures, bank owned homes, or even short sales. Although short sales are often occupied, foreclosures and bank owned homes are often vacant for many months; these homes are often sold “as-is; where is” meaning you are purchasing the home regardless of the condition of the home.

Besides the purchase and anticipated fix up costs, unanticipated repairs and expenses are often encountered. However without risk, there is no reward; due diligence, conducting inspections, and hiring the proper representation may reduce the risk and make your purchase a positive experience.

Myth #3: “The ‘big name’ agent with the most home buyers will sell my home quickest and for top dollar.”
Counter point: “Home buyers typically search for homes by characteristics and location, rather than searching for homes sold by individual agents or brokers.”

I have never had a home buyer tell me they want to see (or buy) a home because it is listed by a particular agent or broker. Rather, home buyers typically search homes by price, physical characteristics, amenities, and/or location. Home buyers will view your home if it matches their search criteria, regardless of who listed your home.

When interviewing listing agents, look beyond the sales pitch to list your home, and ask for real data and sources to back up claims. Agents will often not discuss the homes they could not sell; asking about the homes that did not sell as well as the reasons behind the non-sale may be more revealing than flatly accepting claims made by the agent. Asking for references of satisfied clients of homes that sold as well as homes that did not sell is useful to not only get a recommendation, but also understand how the agent conducts business. Ultimately, your home purchase or sale falls upon the experience and skill of the agent you hire.

More news and articles on “the Blog”
This article 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 23 , 2012. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.

May 14, 2009October 5, 2019

Prepare for repairs when purchasing distressed properties

by Dan Krell (c) 2009.
www.dankrell.com

So you decided to buy a foreclosure! You’re excited and made arrangements for renovations to begin the day after settlement. But wait; there is an unexpected glitch- your lender is requiring the mold in the basement to be remediated before closing. Home buyers’ lenders requiring repairs to be made prior to settlement is a common scenario of buying a foreclosure or short sale.

Besides imposing qualifications for borrowers, lenders also impose minimal property standards for the homes being financed! Among the many types of items that lenders may require you to repair prior to closing include (but not limited to): mold, termite damage, faulty plumbing, or roofing issues. For FHA mortgages, the minimal property guidelines were notoriously strict in the past; the seller could almost expect a laundry list of seemingly nitpicky repairs from the FHA appraiser. However, recent changes to FHA allow more discernment from the appraiser.

It seems to be somewhat of a paradoxical situation: you’re buying the home as-is, but your lender is requiring you to make repairs to the home prior to settlement. If the home is a short sale you could ask the seller to make the repairs, but then again many home owners selling their home by a short sale don’t have the funds to make their mortgage payment let alone the resources to make any repairs. If the home is a foreclosure, the rule of thumb is that banks do not make repairs to their foreclosed homes. Even though the seller won’t make repairs, you still have a couple of options to save your transaction.

Since you decided that the home you are purchasing is such a bargain, you figure that you might do the repairs yourself. However, not all home sellers will allow you to make repairs prior to settlement because of their liability (such as in a foreclosure transaction where repairs are typically not allowed prior to settlement).

If the repairs are beyond your capabilities, funds are limited, or the seller will not allow you to make repairs, you might think that your deal is dead. However, one of the little known secrets to purchasing distressed properties is the FHA 203k mortgage (HUD.gov). The FHA 203k is similar to a typical FHA mortgage, but the difference is that the loan will finance the repairs and renovations to the home.

The FHA 203k mortgage is not provided by all FHA lenders. Since the FHA 203k has requirements that are above and beyond a typical mortgage, it is highly recommended that you seek assistance from a qualified FHA 203k lender. You can find local FHA 203k lenders at HUD.gov.

Another option that was common in the past is to escrow repair funds. If the buyer’s lender allows, the buyer can place the repair funds in escrow at settlement with the intention to make repairs after closing. However, as underwriting guidelines and practices have become more stringent most lenders will no longer allow for escrowed repair funds.

Buying a distressed property is a great way to get a bargain, but the transaction does not always follow the “typical” home buying process. If you are buying a distressed home, it is a good idea to plan for all contingencies including unexpected repairs by consulting with qualified professionals.

This article 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 April 20, 2009. Copyright © 2009 Dan Krell

October 2, 2008September 27, 2018

Buyer beware when purchasing distressed property

Buying a bank owned home might be a great way to get a great deal on your first home or the home of your dreams. However, you will find that buying a distressed home from a corporate owner is slightly different than purchasing a non-distressed home from an owner-occupant.

When you are purchasing a bank owned home, the bank requires you to sign addenda that favor the bank in many ways. Foreclosed homes that are sold by banks are exempt from many disclosures, including the Maryland Residential Property Disclosure And Disclaimer Statement (which discloses the home condition as well as any latent defects). Additionally, banks selling foreclosures (and their real estate agents) will sometimes want to take control of the entire transaction by coercing you to use their vendors, including their title company.

First and foremost, the bank is selling the foreclosure in as-is condition. This means that “what you see is what you get.” Often, what you don’t see is what you get as well. The bank addenda will warn of possible mold and other hazards that may be in the home. Even the best of homes can develop issues due to having utilities disconnected as well as being vacant for many months. A thorough home inspection, that may include testing for environmental hazards, is highly recommended to determine the condition of the home.

Another consideration in purchasing a foreclosure is that the bank will only offer you a Special (or limited) Warranty Deed. In a typical residential transaction, the seller will provide to you a warranty deed that guarantees that the seller has the ability to sell the home, and all debts held against the home are paid. However, buying a foreclosure is a bit different in that the bank will only provide a deed that covers the period the bank has had ownership of the home. Owner’s coverage title insurance will usually protect you from title defects not corrected by the bank; however, as policies vary, you should read the fine print.

Lastly, your deposit will become non-refundable after a short period of time. The bank will give you a short period for due diligence (obtain financing, conduct home inspection, etc); be prepared to act quickly!

So, is it a good idea to purchase a foreclosed home? Buying a foreclosure could be a real coup for you- but you must do your due diligence. Before you write an offer on a foreclosure, line up your vendors (such as home inspector, title attorney, contractors) so you can act quickly by having your team determine the home’s condition and legal status.

Unfortunately, the proliferation of distressed properties has some real estate professionals believe that consumer protection laws do not apply (such as RESPA and Maryland’s Wet Settlement Act). Make sure you are well represented! As a home buyer, you have the legal right to choose your vendors (including home inspector, title attorney, lender, etc.).

If you are planning to purchase a bank owned home, it is highly recommended that you review these special addenda carefully as well as consulting an attorney if you do not understand what these addenda require of you. Remember, “caveat emptor” applies when buying a bank owned home.

Original published at https://dankrell.com/blog/2008/10/02/buyer-beware-purchasing-a-bank-owned-home/

By Dan Krell

by Dan Krell ©2012 DanKrell.com

Debunking common real estate myths.

As a real estate agent, I often encounter people who talk about common and persistent real estate myths. In recent years, these few seem to be among the top myths:

by Dan Krell ©2012
DanKrell.com