real estate Archives - Page 95 of 97 - Real Estate News and Commentary

March 25, 2008September 9, 2018

Have you unknowingly perpetrated Mortgage Fraud?

You’ve probably read a few recent articles featuring victims of the mortgage crisis. Many of these home owners claimed to have been duped into obtaining loans that they could not afford. One recent article described how the home owner went along with a plan to obtain a mortgage that involved using someone else’s credit as well as artificially inflating their bank account to qualify. Is the home owner guilty of mortgage fraud if she knowingly follows the scheme of their real estate agent and/or mortgage broker to deceive the lender to qualify for a mortgage?

Among the many crime reports published by the Federal Bureau of Investigation (FBI) is the Mortgage Fraud Report. According to the 2006 Mortgage Fraud Report (https://www.fbi.gov/stats-services/publications/mortgage-fraud-2006) mortgage fraud is defined as “the intentional misstatement, misrepresentation, or omission by an applicant or other interested parties, relied on by a lender or underwriter to provide funding for, to purchase, or to insure a mortgage loan.” As the Maryland and Virginia areas are described as being significantly affected by mortgage fraud, the FBI cited recent increases of mortgage fraud are due to many perpetrators of fraud who have taken advantage of recent lenient credit standards.

The FBI divides mortgage fraud into two categories, fraud-for-profit and fraud-for-property. Fraud-for-profit typically involves schemes or scams for financial gain. According to the FBI, fraud-for-profit schemes (also referred to as “industry insider fraud”) often involves artificially inflating property values, obtaining loans on non-existent properties, or “revolve equity.” Illegal flipping schemes that commonly use straw buyers and fraudulent appraisals are examples of fraud-for-profit.

Fraud-for-property, however, is the misrepresentation by a borrower so as to obtain a loan to purchase a home. Fraud-for-housing increased in recent years due to the rise of home prices; applicants would provide misleading or false employment, income, and asset information to the lender to qualify for the loan. Although the intent of the borrower is to repay the loan, this activity is still illegal and can lead to Federal prosecution.

To avoid becoming involved in a mortgage fraud scheme, the FBI provides these tips: If it sounds too good to be true, it probably is; Get referral for real estate and mortgage professionals and check the licenses with regulatory agencies; Be wary of strangers and unsolicited contacts, as well as high-pressure sales techniques; Look at written information to verify the value of the property; Understand what you are signing and agreeing to – If you do not understand, seek assistance from an attorney; Make sure the name on your application matches the name on your identification; Review the title history to determine if the property has been “flipped” and the value falsely inflated; Know and understand the terms of your mortgage (Check your information against the information in the loan documents to ensure they are accurate and complete); Never sign any loan documents that contain blanks as this leaves you vulnerable to fraud.

Mortgage fraud is not a victimless crime. Besides foreclosed upon borrowers and mortgage entities, other victims include legitimate borrowers and those living in neighborhoods affected by mortgage fraud.

Original published at https://dankrell.com/blog/2008/03/25/have-you-unknowingly-perpetrated-mortgage-fraud/

By Dan Krell

March 13, 2008November 23, 2021

Buying "as-is" means as-is; or does it?

by Dan Krell
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The home seller, unless exempt, is obligated to provide a property disclosure or disclaimer to the home buyer. Sometimes a home seller will disclose the home’s condition by answering all the questions on the form; other times the home seller will provide disclaimer statement that you are buying the home “as-is.”

There really isn’t one answer why a home seller would provide a property disclaimer, although there are many situations where providing a property disclaimer is appropriate.

The disclaimer statement practically states that the home seller makes no representations or warranties as to the property condition. Additionally, you, as the purchaser, agree to accept the property “as is” with all defects, including latent defects- except as otherwise stated in the real estate contract of sale. The statement says it all, you basically take the home “as-is.”

This is all well and good, except that the contract has a condition of property/equipment, maintenance and condition clause (depending on the contract your Realtor is using) as well as a termite inspection clause. The condition of property/equipment, maintenance and condition clause states that the home will be delivered in essentially the same condition as at time of contract acceptance and that mechanical items (such as HVAC, electric, etc.) will be in good working order at time of settlement.

The termite inspection clause essentially says that seller is responsible for remediating any termite or wood destroying insect infestation and damage. However, the Maryland Association of Realtors Residential Contract gives the home seller the option to void the contract if the cost of treatment and repair exceeds 2% of the sale price and the home buyer does not want to pay the excess.

Additionally, a home seller is required to disclose all known latent defects. A latent defect is described as being a defect that a home buyer would not know of even through a careful inspection, and could pose a threat to their health or safety (as described in the Maryland Residential Property Disclosure and Disclaimer Statement).

In addition to the property disclaimer, there is an “as-is” clause in the Addendum of Clauses. This “as-is” clause states that all clauses pertaining to the property condition and termites are considered deleted from the contract. This “as-is” clause still requires the home seller to deliver the property free and clear of debris and trash.

A true story about “as-is” and latent defects: A family purchases a home with a pool in “as-is” condition. The home buyers attempt to open the pool for the summer, however the pool company they contact explains that the pool cannot be opened unless it is repaired. The pool had major cracks and leaked when filled. When contacted, the home seller stated that he had no knowledge about the defect. The home seller could no longer deny knowledge of the defect and eventually came clean when he was confronted by a long list of witnesses (including the pool company) who would testify that he knew of the pool problems. In the end the home seller paid for the pool repair.

Because “as-is” can have different meanings in a real estate contract, it is always a good idea to consult an attorney on your obligations when entering into an “as-is” transaction.

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 March 3, 2008. Copyright © 2008 Dan Krell.

January 15, 2008November 23, 2021

Single Family Home vs. Townhome?

by Dan Krell
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As list prices of many single family homes have been reduced, many home buyers find themselves weighing the option of purchasing a townhome versus purchasing a single family home. The numerous options create a dilemma for home buyers, requiring them to think twice about their home requirements, lifestyle and long term goals. When faced with such a decision, home buyers often need to clarify their beliefs and misconceptions between townhomes and single family homes.

Given the selection between a single family detached home versus a townhome, what would you choose? The answer may not be as easy as you may think. There are reasons why a single family home may be competing with a townhome. Often times, the single family homes may be in fair to poor condition, needing obvious repairs or requiring immediate attention from the home buyer. Sometimes the homes may be a pre-foreclosure or short sale requiring third party approval, which has its own subset of considerations (dealing with a third party and trying to keep your interest rate lock through the lengthy wait). However, some single family homes may be well cared for but have prices reduced because of an atypical floor plan or style that does not fit the typical home buyer’s lifestyle.

Is it about the size? One misconception that home buyers have is that townhomes are inherently smaller than single family homes. However, many townhomes have living areas that are comparable or superior to that of single family homes; many townhomes are built with over 2,000sf gross living area and have a 1 or 2 car garage! Of course, depending on your lifestyle, the size may be secondary to the floor plan or layout of the rooms and amenities. Although townhome living has been described as vertical living, larger townhome interiors have high ceilings and open floor plans making it feel like a single family home.

Another misconception that home buyers have is that single family homes are not bound by a Home Owners Association (HOA). Although the chances are very good that the townhome you are considering is governed by the rules, restrictions, and covenants of a Home Owners Association (HOA); however, many single family homes are also under the authority of a HOA. Additionally, there may be restrictions even if there is no HOA. A home that is located within a protection area, which is imposed by the county or locality, has land use restrictions that may prohibit building, additions and/or tree removal. If you would like to research land usage for a specific home, you can visit the Maryland-National Capital Park and Planning Commission in Silver Spring (the staff is friendly, helpful and knowledgeable).

A common belief is that maintenance costs are higher for singe family homes than townhomes; when comparing homes, it is important to examine costs for upgrades as well as monthly operation costs. Repairs and maintenance vary on the home’s materials and systems. Additional maintenance considerations include painting, roof replacement, landscaping as well as daily expenses that include heating and cooling.

Home buyers will be surprised this spring as homes come to market; they will be surprised by their home buying options as well as prices.

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.

October 19, 2007November 23, 2021

Considerations in choosing a real estate agent

by Dan Krell
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So you’re thinking of moving. If you are going to buy and/or sell a home you may be thinking of hiring a real estate agent to assist you. If you have bought or sold a home in the past, you know that there are thousands of real estate agents to choose from.

Choosing a real estate agent should be an objective as well as subjective process. You want an agent with experience and expertise, but you also want to make sure they listen to your needs and are patient with you. Additionally, you want to feel comfortable enough to trust them.

Choosing the right real estate agent is important because the agent that is chosen to represent you will have a fiduciary responsibility to you. As many home buyers and sellers don’t know, a fiduciary is someone who acts as a custodian for your rights and/or assets. The fiduciary has a responsibility to act with honesty and integrity, as well as act in your best interest and not exert influence on you or pressure you for their own or others interests. So, if the agent seems impatient, pushy or desperate you may need to look elsewhere.

Some people advise that your first step in choosing a quality real estate agent is to choose a broker or real estate firm first. However, the quality if an agent is not dependant on the firm. The quality of real estate agents varies from agent to agent; real estate firms have very good agents as well as agents that are less than perfect.

Whether you are interviewing an agent that was recommended or one you found in the paper, you should ask many questions about their knowledge, experience and expertise. You should also ask them if and how long they have been licensed.

Ask where the agent is licensed; not all agents are licensed in all jurisdictions. If your intention is to look at homes in Maryland, Virginia, and DC, make sure the agent is licensed in all three jurisdictions. If you are only looking in Maryland then they only need to be licensed in Maryland.

Once you have determined where the real estate agent is licensed, you can get an idea of their experience by asking how long they have been licensed. Someone who just received their license may not be as experienced in negotiating as someone who has been licensed five or ten years. If you are considering a novice agent, make sure they have some type of mentor that is training them. If the agent does have mentor, meet and interview them as well.

Additionally, you may want to consider working with a real estate agent who is a Realtor®. A Realtor® is a member of the National Association of Realtors® (NAR) and follows the NAR code of ethics. It has been said that the NAR code of ethics exceeds the ethics requirements of many state laws.

Finding the right agent is a process much like home buying. Through interviewing real estate agents you can find out the agent’s professionalism, training, and knowledge base. Additionally, you can find out if the agent’s personality clicks with yours, as you will spend time together selling or buying your home.