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August 4, 2010June 28, 2019

New laws affecting homeowners and homebuyers

Are you curious about new laws that may affect you as a home owner or home buyer? Now that the State legislative session is over, we can pour over the many bills affecting real estate. Some of the bills, such as a state home buyer tax credit, did not pass; however, there were many that did pass. Of the many that passed, here are the highlights:

Earlier this year, a transfer tax controversy stirred surrounding the decision by several local Maryland counties to collect transfer taxes on the forgiven mortgage amounts in short sales. In response to the controversy, Attorney General Gansler provided an opinion that temporarily deferred the contentious transfer tax collection. HB590 clarified the issue when it was signed into law on May 10th 2010, indicating that transfer taxes may not be collected on forgiven mortgage amounts in a short sale.

Low income residents who depend on the Maryland Homeowners’ Property Tax Credit program will find that the assessment limit will be raised from $300,000 to $450,000 (for tax years beginning after June 30, 2010). The tax credit program that has been around since 1975 limits the property tax paid depending on applicants’ income levels.

Federal employees who are stationed abroad get a break through an extension of the Maryland homestead credit. Normally, a home owner must reside in the home to receive the credit; however, HB 199 extends the Maryland homestead credit for federal employees who are stationed outside of Maryland. Effective for the tax year beginning after June 30th, 2010, the time limit to claim the homestead credit while outside of Maryland is six years.

Beginning October 1st, 2010, real estate sales contracts will be required to inform home buyers they have the opportunity to appeal the tax assessment on their new home. To appeal, the home purchase must be between January 1st and July 1st and must be made within the first sixty days of ownership.

Home owners in foreclosure are provided additional assistance through the new foreclosure mediation law (HB 472). The law that became effective July 1st, 2010 is supposed to give homeowners additional time and support to seek foreclosure relief by allowing a mediator assist the process. When lenders notify home owners of default, lenders are required to provide home owners foreclosure alternatives (such as lender and government mortgage modification programs). Before foreclosing, lenders are required to file affidavits describing foreclosure alternatives provided to the home owner as well as an opportunity for the home owner to “opt in” for foreclosure mediation.

Tenants residing in foreclosed homes are now extended additional protection under Maryland law. In addition to the notice that is required to be provided, HB 711 allows the tenant living in a foreclosed home an additional ninety day lease extension beyond the foreclosure sale. The law became effective June 1st.

Home owners filing bankruptcy later this year will have an increased homestead exemption, thanks to the passing of HB 456. Effective October 1st, the Maryland homestead exemption will now be equal to the federal exemption. The exemption can only be used for owner occupied properties and cannot be claimed by both husband and wife in the same proceedings.

Other new laws affecting real estate (ownership, transactions, etc) can be viewed on the “Legislative Wrap Up” of the Maryland Legislature.

This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws.

July 22, 2010October 5, 2019

Hiring family to sell your home: A relative experience

by Dan Krell © 2010

The thought of hiring a real estate agent can be unnerving, let alone the fact that you might have to consider hiring a family member to act as your listing agent. For some, familial pressure to hire a relative could be intense and may be a potential source of conflict; while for others, no one but “Cousin Jerry” would be considered to list their home.

Some people are ambivalent about hiring relatives for any service, let alone for a real estate transaction; they believe that mixing business with family matters is not a good idea. Besides asserting discretion over their business and financial dealings, these folks know that family ties and relationships could be at stake if the sale doesn’t go as expected. They do not want family matters or guilt to interfere with business decisions, especially if they feel a need to fire their real estate agent or even seek recourse.

Still many people do not have a second thought about hiring their “Cousin Jerry” as their listing agent. Besides feeling an expectation to do so, some people cite a comfort level and trust that exists from their long time relationship (which can be hard to come by when working with a stranger).

Many experts agree that it is not a good idea to hire a relative who is inexperienced and/or has a record of poor performance. So if you plan to hire a relative to list your home, consider that practicing real estate can sometimes be difficult even for a seasoned professional, let alone someone who is new to the field and/or is a part-time practitioner.

Believe it or not, the issue of commission is typically secondary when it comes to hiring a relative to list a home. Don’t expect to pay the least amount of commission if you plan to hire “Cousin Jerry” to list your home; he may be directed by his broker on commission negotiation. The fact is that most real estate agents are negotiable when it comes to commissions and you might find a better deal from someone else.

If you’re intent on “keeping it in the family” consider interviewing “Cousin Jerry” as you would any other real estate agent; become familiar with “Cousin Jerry’s” license and experience. Although “Cousin Jerry” may have a real estate license, it may not be in the jurisdiction where your home is located. However, if his license is within the proper jurisdiction- he may not be experienced in the local market.

“Cousin Jerry’s” lack of local market experience could jeopardize your sale by not providing the proper disclosures and understanding the various contracts of sale. Seller disclosures requirements may vary depending which county/city your home is located; even full time agents have a difficult time staying on top of county differences in seller disclosures. Additionally, “Cousin Jerry” should be careful to pay attention local agent etiquette, as potential buyers could be turned away.

If you want to work with “Cousin Jerry” but want to mitigate family interference, a couple of alternatives you might consider include: having “Cousin Jerry” refer you to an experienced local agent for a referral fee (so he is indirectly involved); or, have “Cousin Jerry” work in tandem with an experienced local agent so a professional can act as a buffer from family matters.

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 19, 2010. Using this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell.

July 6, 2010October 5, 2019

Who’s looking out for your interests?

When people buy and sell real estate, they entrust professionals they hire with some of their most sensitive information, at times when they are most vulnerable, with the expectation that the professional act in their best interest. The Maryland Real Estate Commission’s form, “Understanding Whom Real Estate Agents Represent,” reminds consumers that the ultimate responsibility of protecting their interests falls on their shoulders. Although the form itself is used to assist consumers in understanding the duties and loyalties of real estate agents in various forms of agency relationships (e.g., a listing agent’s “duty of loyalty” is to the home seller, a buyer’s agent is expected to negotiate “in the best interests of the [home] buyer,” etc.); the paragraph on page two gives consumers the reminder that to protect their interests, they should read all documents carefully and to seek legal advice from an attorney and financial advice from an accountant.

The consumer reminder might be taken as somewhat of a warning that real estate can sometimes be a dirty business. It is true that most real estate practitioners operate within the law and ethical guidelines, however some do not. It is reasonable to think that recent economic conditions purged the industry of bad elements, think again. Some actions are egregious and are clearly intended to defraud the public; while other actions may appear to be innocuous, but could be construed as deceitful business practices.

Blatant scams are devised every day to appear to be legitimate but have the intention of exploiting the public; recent examples include the rise of foreclosure relief scams across the country. Unfortunately, some of these cons are not always obvious until law enforcement catches up to the perpetrators. Take for example the recent indictment of a Towson, MD title company president who allegedly did not send payoffs to existing mortgage and lien holders and allegedly transferred the funds for his personal use (www.justice.gov/usao/md/Public-Affairs/press_releases/press10a.htm).

Even business tactics that seem harmless, but can have detrimental effects, are sometimes used by real estate agents. One example is overvaluing a home by estate agents just to get a listing. This occurs with the intention to later “convince” the seller to lower the price (the effects of purposefully over pricing a home in a downward market can cost the home seller money). Another example is akin to a “bait and switch:” this agent advertises a fictitious home at such a low price it gets home buyers to call him. When I called on behalf of my client to view the advertised home, the agent told me that the advertisement is for informational purposes only.

Before you hire a real estate professional (including real estate agents) it is always a good idea to check out their licensing credentials, as you can sometimes run across someone who is not licensed; Maryland licensing agencies allow consumers to check a professional’s license status online. Many consumer advocates recommend that before you hire a professional you should interview several and ask for recent client references.

Who are you trusting with your real estate transaction and what are they telling you? The old saying that “if it sounds too good to be true, it probably is” may be true, but it is ultimately up to you to decide. Remember that the ultimate responsibility to protect your interests falls on your shoulders.

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 5, 2010. Using this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell.

May 7, 2010October 5, 2019

With all due respect, Mr. Trump…

Dear Mr. Trump,

I enjoy watching your interviews and often listen intently to what you have to say. And although, you’ll have to forgive me because I do not follow your hit TV show, “The Apprentice,” I always find your appearances entertaining and sometimes educational. I even caught your recent interview by Joan Rivers (on her TV Land show, “How’d You Get So Rich?”); I’m always intrigued about real estate.

Of course, I can appreciate the point you made during the interview (which is the point you have been making for some time now) – it is a great time to buy real estate.

Mr. Trump, you do have a magic touch, there’s no doubt. So, naturally you caught my attention when you disclosed on national TV that your company purchased land along the Potomac River (mentioning a golf course). So of course, I wondered if the project was in MD, DC, or VA.

Lo and behold- I found that the public records indeed indicated that there was a purchase by your company. What a beautiful piece of land. There is a golf club, of course, and it is right on the on the Potomac River… in Sterling, VA!?

…Really?

With all due respect, Mr. Trump, if you want the opportunity to buy some great real estate and make some deals- why not here in Maryland? After all, there are plenty of deals and development opportunities– some even along the Potomac River, just minutes from DC!

So, Mr. Trump…I’m waiting for your call to see if we can do business (my contact information is on my website: www.dankrell.com). However, if it turns out we can’t- it’s all good! I’ll just catch your next interview.

All the best…

January 5, 2010June 30, 2019

Coping with the stress of the real estate transaction

Unless you are under the care of a psychiatrist prescribing you Valium, “stress free” is not something that comes to mind when describing real estate. According to the American Institute of Stress (stress.org), stress is subjective and can originate from negative and positive experiences.

On the “Holmes-Rahe Social Readjustment Rating Scale” otherwise known as the Holmes and Rahe Stress Scale (Holmes & Rahe 1967), having a mortgage over $10,000 rates 31 (just above being foreclosed upon) and moving is rated as 20. This commonly used stress scale (which rates life events to determine risk of illness) is cumulative, so the rating for buying a home is at least 51. Your stress level obviously increases when you add in other life stressors such as (but not limited to): getting divorced (73); getting married (50); having a baby (39); changing careers (36).

The reason why buying a home may rate so high on the Stress Scale is that, unlike other transactions, buying (and selling) a home is a large emotional investment! Gordon Gekko, from Oliver Stone’s Wall Street, was on to something when he said, “don’t get emotional [over stock], it clouds your judgment.” Emotions often become amplified when stress increases and can interfere with judgment.

Although most real estate agents don’t understand stress (what it is or how it’s reduced), it does not stop them from lecturing and blogging about “reducing stress” during the home buying or selling process. Being prepared and dividing the buying/selling process into segments is common advice and makes sense. This guidance often helps buyers and sellers feel a sense of “control” by understanding what to expect. However, the wonderful thing about real estate is that every transaction presents a new set of personalities, conditions, and (sometimes) problems. Reactions among buyers and sellers, as well as real estate agents, vary depending on their personalities and life circumstances. So no matter how much you plan, prepare, and visualize what it may be like, stress can be produced just by going through the process (created by both positive and negative feelings).

For some, being prepared is enough to help them anticipate and deal with most circumstances that may arise; while for others, the act of preparation may actually increase stress. Emotional factors, often based on needs and fears, can play a key role in your stress levels. Sometimes your needs are beyond your control and can increase your stress level, such as the need to stick to stringent timelines. And sometimes your needs can adapt and change which can mitigates your stress, such as finding the “perfect home.”

Fears about the outcome of the transaction can increase your stress, especially if you’re a first time home buyer. Common buyer fears include mortgage approvals and rising interest rates; sometimes buyers fear that the home inspection may reveal problems with the home. Common home seller fears include the home buyer’s qualifications and the ability to consummate the sale.

Good real estate agents know how to address the needs and fears of the real estate transaction to keep stress levels in check. Regardless, some people may turn to self help, “pop” or common stress reduction techniques (such as meditation); and if the stress is overwhelming, it wouldn’t hurt consulting with your physician or a qualified mental health professional – especially if you’re already stressed by your job, family and other life stress.

This article is not intended to provide nor should it be relied upon for legal and financial advice. Permission to use this article is by written consent only.