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July 1, 2009November 23, 2021

What Cap and Trade (HR 2454) will require of home owners

by Dan Krell © 2009
www.DanKrell.com

A National Building Code

Get the facts, read the bill. View HR 2454 here:
http://www.govtrack.us/congress/billtext.xpd?bill=h111-2454

If you have heard of H.R. 2454 you may not have thought much about it. Yes, this is the famous (or infamous) American Clean Energy and Security Act of 2009 also known as “cap and trade.” What many home owners may not realize is that H.R. 2454 is not only directed toward commercial uses, it is aimed toward home owners as well.

Title II Energy Efficiency, Subtitle-A: Building Energy Efficiency Programs establishes that effective on the date of enactment, new buildings must meet a national building code to meet a thirty percent reduction of energy use relative to a baseline code. By January 1, 2014 new residential buildings must meet a fifty percent reduction in energy use; energy use reduction in residential buildings will be required to increase five percent every three years thereafter.

This legislation establishes National Energy Efficiency Building Codes for commercial and residential buildings “to meet each of the national building code energy efficiency targets.” The Secretary of Energy is given the duty to create and amend the National Energy Building Codes by determining the percentage of energy improvements that would be achieved by proposed improvements and to propose the improvements necessary to meet or exceed the target (Title II, subtitle A, section 304(a)).

Once the National Energy Efficiency Building Codes are established, state and local jurisdictions have one year to adopt the national code. If after the one year, a state and/or local jurisdiction fail to adopt the national building code, “the national code shall become the applicable energy efficiency building code for such jurisdiction” (Title II, subtitle A, section 304(d)”APPLICATION OF NATIONAL CODE TO STATE AND LOCAL JURISDICTIONS”).

If a building is out of compliance with the national code, a violation may be determined by state, local, and/or federal authorities. Enforcement of the national building code will be enforced by the state (if law is adopted) through random inspections of buildings. (Title II, subtitle A, section 304(e)”STATE ENFORCEMENT OF ENERGY EFFICIENCY BUILDING CODES”).

If a state does not adopt the national building code, then enforcement falls to the Federal level, where the Secretary of Energy will create rules for building code violations and penalties. The Secretary will create “an energy efficiency building code enforcement capability” (which will conduct building inspections). Fees will be collected to “cover costs” of the enforcement procedures (Title II, subtitle A, section 304(f) “FEDERAL ENFORCEMENT AND TRAINING”).

The legislation also creates the Retrofit for Energy and Environmental Performance (REEP) program. The goal of the program is to “facilitate the retrofitting of existing buildings across the United States to achieve maximum cost-effective energy efficiency improvements and significant improvements in water use and other environmental attributes.”

Additionally, the Act creates the Building Energy Performance Labeling Program to provide the public the necessary efficiency information of a building. The information would be made accessible to “owners, lenders, tenants, occupants, or other relevant parties who can utilize it.” Buildings will be labeled at the time of sale, when retrofitted, or by inspection.

Although the Act is well intentioned, specifics are lacking that leave many rules and procedures (including inspections, violations, and penalties) to be decided at a later time at the discretion of the Secretary of Energy and/or state and local officials. Unfortunately, you may not hear much more about how “cap and trade” affects home owners; however, unclear legislation may have unintended consequences to home ownership and the real estate market.

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 June 29, 2009. Copyright © 2009 Dan Krell.

March 17, 2009September 16, 2018

Verify all contractor licenses

If your real estate agent says, “I have a guy to do the work…,” you might want to check if those contractors or handymen are licensed by the Maryland Home Improvement Commission (MHIC). The Maryland Real Estate Commission warns consumers that it is illegal for unlicensed contractors and handymen to do home improvements for a fee.

The Montgomery County Office of Consumer Protection website states that anyone who repairs, maintains, restores, or improves real property (homes) is required to be licensed by the MHIC. The MHIC regulates home improvement contractors, subcontractors and salespersons. If a handyman is altering, remodeling, or making repairs to your home- then the handyman is required to have a license too.

The MHIC issues licenses to contractors who have least two years trade experience; provide proof of financial solvency; and pass a test on the home improvement law and general business competency. Additionally, licensed contractors are also screened for serious criminal convictions and are required to make regular contributions to the Maryland Home Improvement guarantee fund.

If you selling your home, make sure that any completed repairs are performed by a contractor or handyman that is licensed by the MHIC. The Maryland Real Estate Commission and the Montgomery County Office of Consumer Protection (OCP) recommend that you ask contractors and handymen for their MHIC license number to verify their license status and complaint history before they begin working on your home. You can verify MHIC licenses by either calling the MHIC or through their website (www.dllr.state.md.us/license/occprof/homeim.html). Additionally, it is recommended that you check with the OCP (240-777-3636) and the Better Business Bureau (202-393-8000) for any filed complaints against the contractors.

Additionally, verifying that your contractor or handyman is actively licensed prior to any home improvement will ensure that the contractor can obtain the proper permits (if required) as well as protect you from shoddy or incomplete work. The Maryland Department of Labor, Licensing & Regulation (DLLR) has made an effort to have permitting offices require all contractors present their licenses when applying for permits. Additionally, the MHIC investigates all consumer complaints (some complaints result in an award for monetary damages from their guarantee fund); the MHIC will also pursue and aid in the prosecution of violators of the Maryland home improvement law.

Two specific MHIC investigations of consumer complaints last year resulted in a revoked license, a fine and jail time. The first investigation (as reported by WBAL TV in Baltimore on October 21, 2008; wbaltv.com) resulted in a revoked license from a contractor who had numerous consumer complaints of shoddy work (one home owner complained that after he paid the contractor for an addition, the addition was ordered to be torn down for being unsafe). The second investigation (as reported by the DLLR on December 16, 2008) was of the deeds of an unlicensed contractor, which resulted in a $65,000 fine and thirty days in jail.

Even though you trust your real estate agent, the fact that a real estate broker was fined by the Maryland Real Estate Commission last year for allowing the use of an unlicensed contractor (to perform repairs that were listed in a contract addendum) should be motivation enough to check out any contractor before they begin to work on your home.

Original published at https://dankrell.com/blog/2009/03/17/verify-all-contractor-licenses-its-the-law/

By Dan Krell

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
Google+

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
Google+

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.