Regular Maintenance can Possibly Keep you Comfortable during Severe Weather

by Dan Krell © 2010

Talking to a neighbor about how lucky I felt to have power during the blizzard over the weekend, he lamented that he did not have heat. Listening to him talk about how he tried to fix his furnace, it became increasingly clear that he had no idea what type of heating system was in his home. Putting aside my neighbor’s assessments of his situation, I reluctantly asked when he last serviced his furnace; his response did not provide confidence that the furnace was serviced any time recently.

My neighbor’s recent experience demonstrates that poorly maintained home systems can cause problems when we rely on them the most. Enduring severe weather events remind us of past due maintenance that unfortunately we soon forget as we get on with our busy lives.

Having a heating professional conduct a furnace check every fall can ensure that your furnace is clean and operating safely and efficiently – especially when we depend on the system to operate properly. To many, the furnace may seem like a magic box that keeps the house warm during cold months. However, like many mechanical objects, the furnace is prone to breakdowns unless regularly serviced.

To ensure optimal operation of your furnace, a licensed HVAC professional is should conduct annual maintenance that examines such items as (depending on your heating system): the burner and pilot; the heat exchanger; the thermocouple; the filter; the vents; the gas piping; the electronic ignition; the fan; the burner; the limit switch; the manifold pressure; the temperature rise; the heat anticipator; the belt; and the draft diverter.

Although your HVAC professional probably checks for carbon monoxide (if your furnace is a combustible fuel system), carbon monoxide can build up any time. Severe weather can cause heavy amounts of snow and other debris to possibly block exhaust vents and chimneys. Installing and ensuring its peak operation, a carbon monoxide detector can save your life.

Another cause for concern during extreme weather is water penetration into your home. Regular maintenance of your roof system and sump pump can minimize damage caused by severe weather. First, ice dams occurring from melting and freezing snow can lift shingles and separate siding allowing water to make its way into your home. Water from ice dams can damage ceilings, walls and window casings. Left unrepaired, mold and possibly structural problems may develop.

Second, blocked downspouts can cause water penetration into your basement by forcing melting snow from your roof to drain and drip down directly to your home’s foundation. Remembering to dig out your downspouts when shoveling the walks and driveway may prevent this type of penetration by providing a route for melting water to drain away from your home’s foundation.

Third, a non functioning sump pump is a sure way for rising water to penetrate your home. The sump pump drains water that collects in the sump pit away from your home. As large amounts of snow melts, the grounds around your home become saturated, and the sump pit may fill quickly. If your sump pump is not operating properly (or the pump drain is blocked), the water can penetrate your home until properly drained.

If you’re one of the “lucky” ones whose home endured the recent severe weather, don’t take your home for granted. Regular maintenance can ensure years of enjoyment – and comfort in severe weather events.

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 February 8, 2010. Using this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell

"Snowmageddon" is over, now waiting for "Snowzilla" to arrive

by Dan Krell © 2010

The good news is that the historic blizzard of 2010 (A.K.A. “Snowmageddon”) is now officially over. The unfortunate news is that the weather service issued additional snow amounts of 12″ to 24″ due to begin tomorrow evening. Forget the recession, this years snow has probably affected more home buyers than anything else. Since open houses and home showings are postponed for better weather, enjoy these photos from a blizzard of many names.
Snowing…
Early morning about 6am, another eight to ten hours to go!

Still snowing…
Here comes “Mr. Plow”… but still snowingSnow eventially stops leaving this…

Your future home

The “Jetson’s” lived in a futuristic home that combined science fiction with a hedonistic vision of immediate gratification. Even futuristic home exhibits featured at past World’s Fairs seemed like sci-fi movie sets. Although some interesting devices were featured in those futuristic homes (such as the Jetson’s Rosie the robot or their Food-a-Rac-a-Cycle), some have actually made their way into our homes; wall mounted wide screen televisions and microwave cooking are but a couple of the conveniences that evolved from “futuristic” technological advances.

Although futuristic devices are always welcome to make life easier and more fun, the evolution of the home will not occur because of the conveniences that are contained within. Rather, the future home will evolve from changes in living space and lifestyle; location, home size and interior space will be the focus of future home architecture and development.

Location has always been a main consideration when buying a home. The recent real estate market decline confirmed the higher demand for homes located in or in close proximity to major population and employment centers than homes located in “suburbia.” One of the many reasons you may buy a home closer to your job is to decrease your commute. The National Association of Realtors 2009 Profile of Home Buyers and Sellers (Realtor.org) indicated that commuting costs are a factor when choosing a neighborhood. Since the cost of commuting is becoming more expensive (in terms of money and time), home buyers as well as home builders will look to the convenience of living “close in,” or at least close to the conveyances (such as metro) that will take you to work.

Your next home may be smaller than you think. The NAR 2009 Profile of Home Buyers and Sellers indicated that size matters when it comes to a home; the average size of a home purchased in 2009 was about 1,800 sf. Although the average home size has almost doubled since 1950 (to about 2,300 sf), the trend towards increasing home size has most likely plateaued due to factors that balance the home’s cost, affordability, and the desire to be in a “close in” neighborhood.

Your lifestyle has most likely changed in the last twenty years, just as the average American’s lifestyle has changed – and will continue to change. Changing lifestyles have altered many things in our lives, including how we use our homes. One example is how we entertain; long gone are the “formal” tea parties in the sitting or living room, present-day home owners plan informal gatherings instead (usually ending in the kitchen). Homes that will offer open “flexible” spaces, which are multi-purpose and can be modified by our personal lifestyles, will provide a feeling of being in a much larger home. Additionally, kitchen spaces will blend in with these multipurpose spaces adding to the flexibility and creating the feel of having a large kitchen space. The rooms can be used for entertainment and work centers, while allowing for informal dining and impromptu entertaining.

Your home of tomorrow may not be the futuristic vision that you dreamed about watching Saturday morning cartoons. However, much like current home owners who are transforming their older, “close-in” homes into contemporary “open” spaces, it will be a blend of utilitarianism and style that will be convenient to your office.

By Dan Krell
Copyright © 2010

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.

Are you selling a home or a contract?

In a recent home showing, the listing agent remarked that the seller is the “contract seller.” As it turned out, the seller of the home was not on title, but rather had a contract on the home and wanted to sell the contract. The listing agent, trying to explain the situation as best as he could, stated that the seller’s contract gave hime equity in title which allows him to sell the home.

I had to wonder where this agent received his real estate license because, as a title attorney confirmed, equity in title does not permit one to sell a home they do not yet own. Never mind the fact that our local MLS (Metropolitan Regional Information Systems, Inc.; MRIS.com) requires listed properties to be listed by the legal owner of the property. So what are these guys trying to do?

The number of home flipping transactions are increasing as the market recovers. Home flipping received a lot of bad press in the 1990’s when fraud was prevalent in such transactions. Flipping a home per se is not illegal, it is fraud and other irregularities that raise eye brows and get the attention of local (and sometimes national) authorities.

Not all property flips involve fraud and deception. During the heyday of the sellers’ market earlier this decade, real estate investors capitalized on the frenzy of home buyers eager to own a home in the seemingly never ending appreciating market by quickly flipping properties. Of course, many real estate speculators lost a lot of money as the market receded.

A flipping technique that has been thought to be dubious by some and now making a comeback is the simultaneous closing (or double closing); a similar term/technique is selling the contract. Rather than take ownership of a property and obtain the title to a home, investors most likely resort to the double close or contract sale to save on transfer, property, and other taxes.

A local attorney (requesting not to be named) trying to close such a deal was contacted by the buyer’s lender Fraud Investigation Department. Although he felt there was nothing wrong with the deal and he was not withholding any information, the deal was denied by the buyer’s lender. Although the buyer qualified for the loan, the lender’s Fraud Investigation Department nixed the deal. Growing concerns of stolen homes where homes are sold without the knowledge of the legal owner are raising additional red flags.

To avoid such deals, FHA (among many conventional lenders) require that the title to be “seasoned” (the owner must be on title for a required period of time) before they will lend on the property. Finding a lender to finance a simultaneous closing or contract sale is often difficult.

Although the “contract seller” of the home I showed was most likely legitimate, it reminded me that even seasoned agents need to be on their toes. Buying a home is an investment of time and money, so don’t be afraid to exercise due diligence; asking who the seller is and why they are selling the home is often a good place to start.

By Dan Krell
Copyright © 2010

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.

Transfer tax controversy brews in Maryland Counties


by Dan Krell © 2010
DanKrell.com

Most real estate issues usually do not grab people’s attention – unless they are the ones affected. Eminent domain is a prime example; those affected usually become embroiled in the controversy. One current issue that you may have heard (although you may not have become fully aware) of is the transfer tax controversy that’s brewing in Montgomery and Anne Arundel Counties. The anticipated opinion on the controversy from the Maryland Attorney General may have lasting and widespread consequences on how transfer tax is calculated in this state.

The controversy surrounds the decision from Montgomery and Anne Arundel Counties to collect transfer tax on the “forgiven” mortgage amounts in a short sale. At face value, the policy of collecting transfer tax on the unpaid portion of a short sale appears to be a way for the counties to compensate for their declining tax base; however the fundamental method of calculating state and county transfer tax may be more the issue. On January 12th, however, Montgomery County put “a hold” on the collection of transfer tax of the “forgiven” mortgage amount until the Maryland Attorney General issues his opinion.

The “forgiven” mortgage amount is the amount that the seller’s lender agrees to not collect at the settlement of a short sale. However, this amount is not literally forgiven as the lender typically either considers it income and issues a 1099 to the seller or pursues payment through a deficiency judgment against the seller. Since part of the requirement for a short sale is usually to provide evidence of a hardship, some critics have argued that the collection of transfer tax on “forgiven” mortgage amounts to be punitive.

The collection of transfer tax on forgiven mortgage amounts should not be confused with “nominal consideration” rules that are used in some jurisdictions around the country (including Washington, DC). “Nominal consideration” rules typically calculate additional transfer tax when the sales price is less than the assessed value. In Washington, DC, a transaction is considered to be of “nominal consideration” when the sales price is less than 30% of the assessed value.

Title 13 of the Tax-Property section of the Code of Maryland (COMAR) discusses the collection of transfer tax by the State and counties, as well as tax rates and possible exemptions. COMAR discusses various ways in which transfer taxes are calculated and collected; for example tax is calculated on the “consideration payable for the instrument of writing”; and the tax is “imposed on the instrument of writing.”

Some may have mistakenly thought that consideration is only the sales price and the instrument in writing is only the deed; however, others have argued that consideration also includes additional amounts involved in a transaction (such as assumed loans) and instruments in writing to also include deeds of trust. I am not an attorney and I am not attempting to practice or interpret law, but it appears that clarification from the Attorney General has become necessary in interpreting “consideration” and “instruments of writing” when calculating transfer tax in today’s market.

You might consider the collection of forgiven mortgage amounts another sign of a depreciated real estate market. However, the future of transfer tax calculation and collection (at least locally) is sure to be affected by the highly anticipated opinion of Attorney General Gansler.

This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell

**Update—HB 590/SB 657 – Taxation of Forgiven Debt in Short Sales
STATUS: PASSED – Effective May 20, 2010.
This law clarifies that recordation and transfer taxes MAY NOT be imposed on the forgiven debt in short sale transactions.