Real Estate News and Commentary

December 17, 2008October 5, 2019

Smile, your home is on candid camera!

Have you seen people in your neighborhood drive up to a home, pull out a camera and take some pictures? You might wonder if they’re casing your neighbor’s home, or if they’re terrorists. Certainly, it may seem disconcerting to have strange people take photos of homes in your quiet neighborhood. Who are these people and why are they taking pictures?

Most likely, these nosey folks are just your neighborhood real estate agents preparing a broker price opinion (bpo). A broker price opinion is a report that a lender will ask for to determine the marketability of a home in which they are the mortgagee (the lender). The report is used to assist the lender to understand market conditions by having the real estate agent provide recent sale and listing comparables for the home. Additionally, the lender asks for photos to note the condition of the home and the neighborhood.

A bpo is not an appraisal and should not be confused with one. An appraisal is provided by a licensed appraiser to ascertain a home’s value. A bpo, on the other hand, is provided by a real estate agent or broker with the intention of assisting buyers or sellers or prospective buyers or sellers in deciding the listing, offering, or sale price of the real property. (There is a controversy within the industry over the use of bpo’s.)

The lender uses the bpo for a number of reasons which include selling mortgages, eliminating private mortgage insurance, and loss mitigation. Although we now have a bad taste for the bundling and selling of mortgages on Wall Street, nevertheless this is how a majority of mortgages are sold. The broker price opinion is often used by investors to place a current market value on the mortgage asset by interpreting the bpo.

If you have asked your lender to reduce or eliminate your private mortgage insurance, there is a good chance your lender used a bpo in their decision process. A lender will look at current market conditions and recent sales to decide if a home has the potential of falling below the 80% loan to value threshold.

In the current market environment, loss mitigation is a more common reason for a bpo. Every lender has a loss mitigation department to determine how much they may lose if the home goes to foreclosure. Believe it or not, your lender may order a bpo if your payment is one week late!

Additionally, the loss mitigation department is the office you would communicate with in order to ask for a short sale on your home. So if you are asking for a short sale, you may see these surreptitious agents driving by and snapping photos. Sometimes, the lender may ask for an interior bpo, and you will have to invite the agent in your home.

So, if you see these folks poking around your neighborhood taking pictures, it is likely to be your local real estate agent; however, to be sure you should ask for their card. In taking their photos and inspecting properties, they should be law abiding (which means they do not peek into windows nor should they trespass). However, the police should be called if you have doubt about their identity, or you feel unsafe.

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 December 1, 2008. Copyright © 2008 Dan Krell.

December 10, 2008October 5, 2019

Charity begins with a home; donating real estate

You may be aware that charities accept cash and even automobile donations, but did you know many charities will accept your real estate donation too? As market conditions continue to confound home sellers, many are looking for alternate ways of disposing of their homes. Donating your real estate can be a way for you to free yourself of a property you no longer have use for, help a charity, and possibly receive tax benefits in return.

Donating real property is not a new phenomenon. People have been donating real estate to reduce their taxes liabilities for many years. Depending on how your donation is structured, you could receive tax benefits now or possibly in the future (to reduce estate taxes). In a sluggish and unresponsive market, donating homes may become a more popular solution for frustrated home owners and cash strapped charities.

Although most real estate donations come in the form of non-owner occupant homes (such as vacation home, second home, or investment property), some charities will accept farms, vacant lots, “double wides” and even commercial property. Although you may have to own the home outright for an immediate donation, some charities have mechanisms to accept real estate donations through wills and living trusts.

Of course, the tax and financial implications of such a donation would require you to consult with your accountant, CPA, and/or attorney to determine if this is a viable option. The IRS has specific guidelines on real property donations; the tax law describes what types of donations qualify for tax deductions as well as describing what charitable entities are eligible to provide tax deductions for your property donation. Maryland and local tax laws will also impact your donation decision; Maryland has specific laws guiding charities and contributions, while local and State transfer taxes can have an influence on your donation.

Once you determine this is a practical option for you, consider consulting with the Maryland Office of the Attorney General (www.oag.state.md.us/nonprofits/index.htm) and the Maryland Office of the Secretary Of State Charitable Organization Division (www.sos.state.md.us/Charity/Givewise.htm) for information on charities and charitable giving. The respective offices (and websites) provide information about requirements for charities as well as consumer information including donor’s rights and “how to spot deceptive practices.”

Although not all charities accept real estate donations, many do. Giving charity is a personal endeavor, as you would likely support organizations which represent your ideals and morals. You can verify and receive information about specific charities and non-profit organizations from the Maryland State Charitable Organization Division (listed above).

What does the charity do with your property after they receive your gift? It depends on the type of property; however, some charities seek to convert homes into group homes for the disabled or the less fortunate and homeless, while other charities anticipate liquidating real estate gifts to obtain cash to support their organizations.

In this season of giving, real estate donations can be a way to give back to the community as well as the organizations that have impacted your life. However, before you decide to give, please consult with your accountant and attorney to determine if this is appropriate for you and to verify that your charity meets the requirements to accept such gifts as well as providing tax deductions.

December 3, 2008November 23, 2021

Home Energy Audit: facilitate your sale and save money on utility bills

by Dan Krell
Google+

If you are planning to sell your home, you may want to begin to search for your last twelve months of utility (gas, electric, and/or oil) bills. As of January 1, 2008, the county will require a home seller to provide home energy efficiency information, which includes utility costs and any efficiency improvements or opportunities for energy efficiency improvements.

According to Montgomery County Bill 31-07, enacted into Montgomery County Code Real Property 40-13b earlier this year, a home seller must provide potential home buyers the last twelve months of utility bills and information approved by the Montgomery County Department of Environmental Protection (DEP) about home efficiency improvements including the “benefit of conducting a home energy audit” before entering into a sales contract. If you have a rental property, however, you must provide the information only if you have lived in the home anytime during those twelve months.

The law was actually scaled down from an additional requirement of conducting a home energy audit as part of a home inspection. Although the home energy audit is not required, it may be a good idea for a home owner to have one anyway. Information about conducting a home energy audit can be obtained form the Montgomery County Department of Environmental Protection (montgomerycountymd.gov) and The Residential Energy Services Network (RESNET; natresnet.org).

According to the DEP, a home energy audit will help identify inefficient energy consumption by appliances and systems as well as drains on heating and air systems created by holes and leaks. Addressing home energy efficiency issues can help you reduce utility costs, create a more comfortable home environment and help the environment.

According to the DEP, a home energy audit can be conducted by a professional or on your own. A professional energy audit can vary in scope and depth as well as price (estimated between $300 and $700). Programs offering certified energy auditors include the Maryland Home performance program with Energy Star (mdhomeperformance.org) and RESNET (resnet.us).

The Maryland Home Performance program is sponsored by the Maryland Energy Administration (MEA) and is part of Governor O’Malley’s EmPOWER Maryland initiative, which has a goal to reduce Maryland’s electricity consumption by 2015. The program offers MEA trained contractors to perform energy audits, as well as inspections on any improvements completed by the contractors.

The RESNET program is a non-profit organization that has created national standards for energy efficiency ratings. The program is recognized by the Federal Government, the mortgage industry, and states where there is minimum code compliance. RESNET certified auditors subscribe to RESNET’s code of ethics, standards of practice, financial interest disclosure, and complaint resolution process.

Although a professional energy audit may be more detailed, you can conduct your own energy audit as described by the US Department of Energy’s “A Consumer’s Guide to Energy Efficiency and Renewable Energy” (apps1.eere.energy.gov/consumer). The guide describes how you can identify and locate air leaks, check your home’s insulation, and discusses how to reduce your utility bills.

As States and local communities are moving towards requiring energy audits to increase home energy efficiency, why not start today and find out how your home rates? Who knows, you may end up with a more comfortable home and save money in the process.

November 23, 2008November 23, 2021

Maryland Foreclosure Resources: Help with mortgage problems

by Dan Krell
Google+

Daily reports of increasing unemployment, shrinking GNP, and increasing government deficits leave many worried about the economy. But it’s not just the economy; people are concerned about their jobs and finances as well. Needless to say, many are worried about losing their home.

The initial foreclosure wave we endured was mostly due to those home owners who had exotic and questionable mortgages. However, the next foreclosure wave, which has already started, will also see an increased number of home owners who are casualties of a deteriorating economy.

The Federal Government has taken steps to create programs and initiatives to assist those who can no longer afford their mortgage or are already in foreclosure. Among the initiatives taken by the Bush Administration and congress include refinancing options for those in foreclosure through FHA (HUD.gov) and the creation of the Hope Now program (hopenow.com), which is a collaboration of HUD and mortgage lenders to provide foreclosure prevention assistance and loan modifications.

Local officials have also been busy to address the foreclosure problem. Local initiatives include partnerships with federal programs, such as the Maryland Hope Now program. Additionally, collaboration with non-profit organizations includes the Homeownership Preservation Foundation (995hope.org). These programs offer home ownership counseling and assist in dialoguing with your lender to facilitate a solution (such as a loan modification or short sale).

Additional state resources include the Lifeline Refinance Program offered through the Maryland Department of Housing and Community Development (mdhousing.org/Lifeline). The refinance loan program is described as assisting those who may be facing “unfavorable” mortgage situations. The program requires good credit and a mortgage in good standing, so if you are already delinquent they may recommend seeking other solutions.

In Montgomery County, County Executive Isiah Leggett and the county counsel have made funds available for additional housing counseling through the Latino Economic Development Corporation and Home Free USA (both non-profit organizations). Another local program is the Bridge to Hope program, which is a short term loan (up to $15,000) to assist home owners who need a financial “bridge” during an uncertain time. More information can be obtained from the Montgomery County government (montgomerycountymd.gov).

Recent additions to local foreclosure relief efforts include Governor O’Malley’s new initiative (announced November 7th) with mortgage lenders and servicers. The program reportedly includes such companies as HSBC, Ocwen, GMAC, ResCap, Litton Loan Servicing, AmeriNational Community Services and Citi Mortgage. The plan is highlighted in five points that includes: adhering to timelines for loss mitigation (which may include short sales); designating a network of employees for Maryland residents, called “Team Maryland;” participation of collection and reporting of data to facilitate the loss mitigation process; creating loan modification guidelines; and participation in community outreach.
Even though government foreclosure relief programs exist, many home owners are unaware of these resources. Additionally, the emotional toll of facing foreclosure can leave home owners feeling helpless and without hope (especially when their lenders have turned them away). If you know you may be nearing financial challenges that may affect your ability to pay your mortgage, contact one of these resources as soon as possible; if you know someone who may be facing foreclosure, please help them by providing the foreclosure relief information. Be proactive by contacting your lender as well as contacting one of the local approved foreclosure relief programs.

November 5, 2008November 23, 2021

Identity Theft can lead to a stolen home

by Dan Krell
Google+

Identity theft and mortgage fraud continue to plague the nation; both crimes are an ongoing concern for law enforcement. Earlier this year, the Federal Bureau of Investigation (FBI.gov) reported that these types of crimes were increasing, as well as a new disturbing trend in real estate related crimes called “house stealing.”

You may have heard of identity theft; but maybe you did not know that once a perpetrator steals your identity, they can defraud others in many ways. The Federal Trade Commission (FTC.gov) states that besides unauthorized use of your credit cards, perpetrators can use your information to get jobs, healthcare services, social services, and open new accounts (including mortgages, utilities and credit cards).

In January, the FBI reported that there were over 1,200 open cases of mortgage fraud. Most of these cases were “fraud for profit,” where a scheme was used to flip homes to get cash and allow the home to go into foreclosure. Other cases involve corporate schemes and possible insider trading.

So what is house stealing? The FBI reported earlier this year that house stealing is a hybrid crime that is a combination of identity theft and mortgage fraud. There are several forms of house stealing, but essentially the perpetrator will fraudulently take title to your home or steal your identity to ultimately sell your home and disappear with the cash. This can even occur while you are occupying your home!

Perpetrators of house stealing will obtain your personal information much like other identity thieves, and use the information to sell your home. Although the end result is to take the cash from selling your home, the crime can occur by the perpetrator fraudulently taking title to your home and then selling it “for sale by owner” (usually providing little or no information to prospects), or the perpetrator can act as if they are you and list your home with a real estate agent (sometimes the agent may be in cahoots with the perpetrator).

The FBI only recently publicized this new trend as they prosecuted a woman in California who pleaded guilty to devising a scheme to defraud over 100 homeowners and $12 million from lenders (www.fbi.gov/page2/march08/housestealing_032508.html).

In their report, the FBI concedes that there is not much you can do to prevent a house stealing crime other than being vigilant; this may be due to the fact that most people do not go to the county court house on a regular basis to check the deed to their home. However, the FBI recommends that you check documents and signatures filed in the court house “from time to time.” Any discrepancies should be looked into (and reported to authorities) immediately.

Fortunately, there is more you can do to protect your identity. The NAR, in conjunction with the Federal Trade Commission (FTC.gov), has published a brochure called, “AvoID Theft: Deter, Detect, Defend.” The FTC attempts to educate consumers about identity theft; it is recommended that that you become aware of how these crimes occur so you can defend yourself from perpetrators, monitor your information regularly to spot any irregularities, and be prepared with a plan if you are a victim of identity theft. More information about protecting yourself from identity theft can be obtained from the FTC and FBI (and their corresponding websites).