by Harvey S. Jacobs | Nov 14, 2014 | Articles, The Washington Post
By Harvey S. Jacobs November 14, 2014
If you live in Maryland and your real estate agent refuses to refer you to a mortgage lender, he isn’t being rude. Real estate agents making referrals to service providers in Maryland can now be fined up to $5,000 if they violate a new state Real Estate Commission regulation.
That regulation requires agents to make a referral in writing, to verify that the service provider has a current state license, to provide the date on which the agent last checked the state-licensing database and to provide an electronic link to the licensing record.
Making real estate agents the de facto license police under this unduly burdensome regulation will more than likely prevent licensed real estate agents from making any referrals when providing routine brokerage services.
Previously, experienced real estate agents, familiar with the good and bad service providers, were able to pass along, on an informal basis, the names of service providers they found to perform good work at reasonable prices. The public will no longer be able to readily take advantage of the valuable experience that licensed agents brought to the real estate buying process.
It is safe to assume that when faced with the risk of being fined and reprimanded or even losing their licenses, real estate agents will demur when a client asks for a referral.
This regulation interferes with the professional relationship between the agent and his client, censors the agent’s ability to give meaningful information to their clients, and turns the agent into an agent for the state, said Dennis Melby, former president of the Greater Capital Area Association of Realtors, district vice president of the Maryland Association of Realtors and a real estate agent in Bethesda.
This regulation’s broad scope includes, but is not limited to, referrals to mortgage lenders, mortgage brokers, real estate appraisers, home inspectors, home improvement contractors, plumbers, electricians, heating, ventilation and air-conditioning contractors, and all others who are required to be licensed. The regulation covers referrals provided in connection with the provision of real estate brokerage services.
The new regulation is intended to protect the public, said Kathie Connelly, executive director of the Real Estate Commission.
If the public uses a non-licensed contractor and is harmed, the consumer will not have access to the Maryland Home Improvement Commission’s Guaranty Fund, Connelly added. That fund can reimburse the aggrieved consumer up to $20,000 per claim. A consumer harmed by the unlicensed contractor can still resort to the courts for a remedy.
Insurance companies that provide errors and omissions insurance for Maryland real estate agents certainly see the potential for increased claims against agents. This regulation will add to the huge number of frivolous claims being filed against agents. As a result, insurance premiums may have to be reevaluated.
The District and Virginia maintain similar real estate transaction-guaranty and education funds to assist consumers who have been harmed by their licensees. Neither has or contemplates a similar regulation governing referrals. Nor are any other licensees in the region required to vouch for other licensees’ bona fides.
For example, a Maryland licensed plumber may freely refer a consumer to an electrician without having to check on that electrician’s license and without fear of jeopardizing his plumbing license.
It is a simple matter to verify licensing in Virginia by visiting the Virginia Department of Professional and Occupational Licensing site, www.dpor.virginia.gov/LicenseLookup. In the District, go to www.pearsonvue.com/dc/realestate for licensing data.
It took me three hours to locate a licensed inspector with the necessary credentials, said Anne Brown, a real estate agent with Prudential PenFed Realty in Olney, Md. She added, I am almost to the point of not making any more referrals.
The Maryland Division of Occupational and Professional Licensing is responsible for licensing and regulating the activities of more than 210,000 individuals, corporations and partnerships. There are 23 licensing boards, commissions and programs appointed by the governor regulating 24 different licensed occupations.
Most but not all of these licenses can be verified at www.dllr.state.md.us/pq . Mortgage lender, broker and originator licenses can be verified at www.dllr.state.md.us/finance/industry/licsearch.shtml.
Harvey S. Jacobs is a real estate lawyer with Jacobs & Associates Attorneys at Law in Rockville. He is an active real estate investor, developer, landlord, settlement attorney, lender and Realtor. This column is not legal advice and should not be acted upon without obtaining your own legal counsel. Contact Jacobs at (301) 417-4144, jacobs@jacobs-associates.com or ask@thehouselawyer.com.houselawyer.com.
by Harvey S. Jacobs | Sep 26, 2014 | Articles, The Washington Post
By Harvey S. Jacobs September 26, 2014
Homeowners who have been discharged in bankruptcy and who have lost their home to a foreclosure can now get back in the home-buying game in as little as two years, thanks to new Fannie Mae waiting period guidelines.
Before suffering through major derogatory credit events like bankruptcy, foreclosure, short sale or deed in lieu of foreclosure, you should know how long those events will adversely impact your ability to get back into the mortgage market. Fannie Mae and Freddie Mac have established waiting periods. For example, previous Fannie Mae and Freddie Mac guidelines required a borrower to wait four years after a Chapter 7 or 11 bankruptcy and seven years after a foreclosure to become eligible to borrow money on Fannie Mae/Freddie Mac conforming loan terms.
But problems arose with those guidelines, said William Rozek, a loan officer with Embrace Home Loans in Rockville, when a borrower had his loan debt discharged in bankruptcy but, nevertheless, also had his property foreclosed upon in a zombie foreclosure.
Zombie foreclosures occur when a lender goes through all the motions of foreclosing on a property, but fails to take the final step of recording the foreclosure trustee’s deed that transfers legal title from the borrower to the foreclosing lender. These zombie foreclosures severely disadvantage a borrower because his seven-year waiting period never starts.
The new guidelines allow a lender to apply the bankruptcy waiting period even when a zombie foreclosure exists. Borrowers can now get back in the home-buying game in as little as two years, Rozek said, so long as I can document their extenuating circumstances that their loan debt was discharged in the bankruptcy, that the bankruptcy and foreclosure are disclosed on their new loan application and appear on their credit report.
Current waiting periods without extenuating circumstances are as follows:
- Bankruptcy Chapter 7 or 11: four years.
- Bankruptcy Chapter 13: two years from discharge date or four years from last dismissal date.
- Multiple bankruptcy filings: five years if more than one filing in past seven years.
- Foreclosure: seven years.
- Deed in lieu, short sale, charge-off: four years.
The waiting periods also vary depending upon whether there are extenuating circumstances. Fannie Mae defines extenuating circumstances as nonrecurring events that are beyond the borrower’s control that result in a sudden, significant and prolonged reduction in income or a catastrophic increase in financial obligations.
Borrowers should be prepared to provide their loan officer with an extenuating circumstances letter explaining why they had no reasonable alternatives other than to default on their financial obligations. The letter should reference and attach supporting documentation. Examples of acceptable documentation include: divorce decrees, medical reports or bills, notice of job layoff, job severance papers, and documents that explain why the borrowers were unable to resolve their financial problems.
Current waiting periods with extenuating circumstances are as follows:
- Bankruptcy Chapter 7 or 11: two years.
- Bankruptcy Chapter 13: two years from discharge date or two years from last dismissal date.
- Multiple bankruptcy filings: three years from most recent dismissal.
- Foreclosure: three years.
- Deed in lieu, short sale, charge-off: two years.
But why would a lender not want to get title to the property as soon as possible? There are several reasons. Once a lender is in title, it becomes liable for taxes, insurance, utilities, condo and HOA fees, and assessments. It also can become legally responsible for any damages that arise from the vacant property.
The lender must also assume the obligations of an owner, such as snow removal, lawn cutting and keeping the property from becoming blighted or a neighborhood nuisance. Often lenders record their trustee’s deed only after they have procured a new buyer for the property and then they record their trustee’s deed immediately before deeding the property to the new buyer.
But that can take months or even years. This tawdry practice not only leaves the original owner in limbo (and personally responsible for mounting condo or HOA fees) but also causes the official land and court records to be less than accurate.
There is no legal requirement that the lender record its deeds after it has foreclosed. Local jurisdictions surcharge deeds that are not recorded within 30 days of the date they are notarized, but these minor charges are apparently not enough of a disincentive.
It would appear that legislative action requiring the prompt recordation of a trustee’s deed, after auction, within a reasonable period, would alleviate the uncertainty that these zombie foreclosures inject into an already shaky system.
Harvey S. Jacobs is a real estate lawyer with Jacobs & Associates Attorneys At Law, in Rockville. He is an active real estate investor, developer, landlord, settlement attorney, lender and Realtor. This column is not legal advice and should not be acted upon without obtaining your own legal counsel. Contact Harvey at (301) 417-4144 Jacobs@Jacobs-Associates.com or Ask@thehouselawyer.com.
by Harvey S. Jacobs | Aug 29, 2014 | Articles, The Washington Post
By Harvey S. Jacobs August 29, 2014
I recently read your column regarding title insurance and would like your perspective on a request recently made of me by the title insurance company that the buyer of my condo has selected.
I have a condo on the market that is under contract. Apparently, the title company has done a preliminary search and there are four judgments against someone with my name. The title insurance company has asked for my Social Security number. I do not like to give out my Social Security number, and as far as I know, there are no judgments against me. Should I give the title company my Social Security number? Is there a way for me to check on this without giving it to the title company?
I live in Maryland. The condo is an investment property in Alexandria.
I would appreciate your advice.
-M.J.
Thank you for reading my column. Unfortunately, with a common name like Jones, it is inevitable that there will be others with the same name who have judgments recorded against them. A judgment against a home buyer or home seller automatically attaches as a lien against their real property. The title insurance company will always run all buyers’ and sellers’ names through a judgment search to see if there are outstanding judgments against any party. If there are judgments, they will have priority over the buyer’s and buyer’s mortgage company’s interest. Those judgments will have to be paid off, or provided for, at settlement before the transaction can settle. This is why the title company is asking for your Social Security number to try to determine that the judgments that showed up in the records are not against you.
Even with your Social Security number, they may not be able to determine that the judgments are not against you. For example, many years ago it became illegal to list anyone’s Social Security number in a public record. Although this was a great boon to privacy, it made it much more difficult to dismiss a recorded judgment matching your name. In order to make certain that the judgment is not against you, the title company will attempt to contact the party holding the judgment to see if their Ms. Jones’s Social Security number is different from your Social Security number. Having at least the last four digits may allow there to be a positive hit meaning the judgment is against you. Or they can conclude it’s NOP not our party. Because so many banks and credit card companies have gone out of business over the years, it is frequently impossible to locate the judgment creditor.
As for privacy, title companies must adhere to the Dodd-Frank Act’s provisions. They are not allowed to publicly disclose confidential information, such as your Social Security number. Since you say you are selling your investment property, they will need to have your Social Security number anyway, as they are obligated to provide you with an IRS Form 1099 gross sales proceeds report.
If you want to conduct your own investigation, you can certainly ask the title company to provide you with the four judgments that showed up under your name. You can then examine them to see who the creditors are and look at the dates and circumstances to see if it’s possible they are against you. You can contact the creditors directly if you wish, to confirm that you are not their judgment debtor. If they are willing, ask them to confirm to you and your title company in writing that you are not the person they have a judgment against.
Finally, if you are unable to positively determine that the judgments are against someone else to the title company’s satisfaction, you will be asked to sign a judgment affidavit. This affidavit will require you to swear, under penalty of perjury, that you are not the party named on those four judgments (attach copies).
If you sign a judgment affidavit at settlement, you should keep a copy handy, because it’s probable that these judgments will come up again if you decide to buy other property or even apply for credit. Judgments generally last for 12 years and can be renewed by the creditor for additional 12 year periods until paid off, at which time a judgment satisfaction document should be recorded in the judgment records where the judgment exists.
Harvey S. Jacobs is a real estate lawyer with Jacobs & Associates in Rockville. He is an active real estate investor, developer, landlord, settlement attorney, lender and Realtor. This column is not legal advice and should not be acted upon without obtaining your own legal counsel. Contact Harvey at (301) 417-4144, jacobs@jacobs-associates.com or ask@thehouselawyer.com.
by Harvey S. Jacobs | Aug 15, 2014 | Articles, The Washington Post
By Harvey S. Jacobs August 15, 2014
I recently read an article in the Real Estate section about what buyers should know before closing. The article, however, did not deal with the question of title insurance for the buyer, as opposed to the lender. Does it make sense for the buyer to pay for owner’s title insurance even though the lender is requiring its own title policy?
-E.R.
The short answer is yes – buy title insurance. Perhaps the best way to illustrate why you need owner’s title insurance is to share a real-life situation involving a recent graduate who had just landed his first well-paying job and decided to buy his first home in the District. Because he had student loans, his cash available for closing was limited. Mr. Buyer learned that the title company was going to conduct a full 60-year search of the land records, the court records and the bankruptcy courts. So he figured he could save a few hundred dollars by not buying an owner’s policy. What he did not appreciate was that the lender’s policies only cover lenders, not owners.
At settlement, Mr. Buyer met the Sellers a nice, middle-aged couple who had bought the home 20 years earlier. About a month after the settlement, Mr. Buyer was surprised by a knock on his door. What are you doing in my home asked the woman on the doorstep. The woman produced her Nevada driver’s license, which identified her as Mrs. Seller. Unfortunately, this was not the Mrs. Seller who attended the settlement and signed the deed.
Twenty years ago, she said, she and Mr. Seller were newlyweds and bought that home as tenants by the entirety. Shortly after moving in, the marriage soured, and Mrs. Seller moved to Nevada to start her new life. She eventually filed for and obtained a Nevada divorce.
The Sellers agreed at that time that Mr. Seller would remain in the home and pay all expenses, including the mortgage. But in the event the home was to be sold, both parties would split the proceeds. When a marriage ends in divorce, a tenancy by the entirety is automatically converted into a tenancy in common. Nothing was ever recorded in the Recorder of Deeds Office in the District, and because the divorce was in Nevada, nothing showed up when the title company searched the D.C. court records.
The real Mrs. Seller discovered that her ex-husband had sold the home to Mr. Buyer when she received a copy of the certificate of satisfaction from the mortgage company. Some checking revealed that her ex-husband apparently had his girlfriend pose as his ex-wife when signing the listing agreement and again at settlement when forging the deed. She learned from the settlement agent that her ex had the net sales proceeds wired to an offshore bank account and had apparently moved out of the country and vanished. All forwarding addresses and contact information provided at settlement turned out to be false and dead ends.
So where does this leave Mr. Buyer, his lender and the real Mrs. Seller? Under D.C. law, a forged deed cannot convey good title to a purchaser. When Mr. Seller signed the deed, at best he conveyed his 50 percent tenant-in-common interest. When his girlfriend forged the real Mrs. Seller’s name to the deed, it conveyed nothing. Consequently, Mr. Buyer does not have good title to 100 percent of his home. The real Mrs. Seller, never having signed the deed, still owns her half of the home. Because the lender’s first lien position was granted by Mr. Buyer, who did not own the entire property, its first lien position in the entire property is also not valid. However, because it has a lender’s title insurance policy, the title insurance company might have to cover the lender’s losses up to the full loan amount as a result of this forgery.
When the dust settles, Mr. Buyer is legally the 50-percent tenant in common with the real Mrs. Seller. This is obviously an unsatisfactory situation. Had Mr. Buyer purchased owner’s title insurance, he could have simply filed a title claim, and the title insurance company would hire attorneys, at their expense, to sort out the mess. The title company probably would have bought the real Mrs. Seller’s interest for Mr. Buyer’s benefit.
However, without title insurance, Mr. Buyer must either deal directly with the real Mrs. Seller or hire attorneys at his own expense to try to track down Mr. Seller and the sales proceeds. This is an arduous and expensive undertaking. Protracted negotiations and/or litigation likely would ensue. All the while, Mr. Buyer’s quiet enjoyment of his new home is in jeopardy.
Harvey S. Jacobs is a real estate lawyer with Jacobs & Associates Attorneys at Law in Rockville. He is an active real estate investor, developer, landlord, settlement attorney, lender and Realtor. This column is not legal advice and should not be acted upon without obtaining your own legal counsel. Contact Jacobs at (301) 417-4144, jacobs@jacobs-associates.com or ask@thehouselawyer.com.
by Harvey S. Jacobs | Jul 25, 2014 | Articles, The Washington Post
By Harvey S. Jacobs July 25, 2014
Consider how often you will visit, and don’t forget about year-round maintenance costs
With the summer vacation season here, folks are spending halcyon days lounging at the beach or cooling off at a mountain cabin – dreams of buying in to that lifestyle are inevitable.
But before you succumb to that temptation, there are a few things you need to carefully examine. In many respects, buying a vacation home is different from buying your principal residence. Here are some issues to consider:
- Do not make the vacation-home purchase decision based simply on a one- or two-week vacation. Make several visits to that vacation spot at different points during the year. Do a reality check on the travel time and costs.
- If you live in the District and have your heart set on that lovely summer cottage in Maine, how often will you really be able to make the flight or drive to enjoy that home? If you believe that you are going to visit your vacation home only for a week or two during the season and that it will be vacant the rest of the time, you might be better off continuing to rent.
- Once you buy, you are paying expenses for a full year but perhaps enjoying the place for just a few weeks. These expenses might include taxes, condominium or homeowners’ association fees, recreation fees, ground leases and utility bills for water, sewerage, gas, electricity and cable for the whole year.
- Factor in the vacation home’s higher repair and maintenance costs when compared with your principal residence. For example, oceanfront homes are pummeled by salt, sand and wind year-round. You can expect to have to paint your oceanfront home’s exterior more often. Similarly, roofing, decking and replacement of windows are costs that you will incur more frequently with an oceanfront home. Even minor items such as storm-and-screen doors, hinges, locks, railings and other metal items that are exposed to salt air will require extra vigilance for maintenance, repair or replacement.
- Determine whether homeowner’s and flood insurance is available, and at what cost. If you are close to the water or in a flood plain, insurance companies might elect not to offer coverage. If they can be persuaded to do so, your insurance premiums will be far higher than they are for your inland principal residence. In tropical climates, hurricane insurance, hurricane shutters and hurricane-proof windows are additional mandatory costs.
- Inquire about whether your mortgage lender is qualified to lend money in the state where your vacation home is located, since not all lenders are able to make loans in every state. The good news is that lenders view vacation homes the same as principal residences for mortgage underwriting purposes, so long as they are not rented out, said Todd LaBorwit, president of Topaz Mortgage in Rockville. Lenders do not generally require larger down payments for vacation home purchases, he added. Vacation homes do need to qualify as second homes for lending purposes. To qualify as a second home, the property must be a certain distance from your primary residence, and/or in a resort or recreational area, LaBorwit said.
- Examine the legal and tax consequences if you intend to rent out your vacation home to cover some costs. Make sure that your condo or homeowners’ association covenants, conditions and restrictions permit such rentals. These legal documents might restrict how many times per year you can rent out your home.
There might be limits on the number of people and/or pets that can occupy your rental unit. Sometimes there are surcharges if renters use amenities such as the beach, pools, tennis courts, golf courses, boating equipment or parking spaces. Generally, if you rent your vacation home for more than 14 days a year, your rental income and certain deductible housing costs are to be reflected on your tax return.
- Use an attorney familiar with the area to handle your settlement. Vacation properties often have local rules, regulations, licensing and customs.
If you take the time to analyze the vacation home’s additional costs and the steps required when buying, you probably can prevent your dream vacation home from becoming a nightmare.
Harvey S. Jacobs is a real estate lawyer with Jacobs & Associates Attorneys at Law in Rockville. He is an active real estate investor, developer, landlord, settlement attorney, lender and Realtor. This column is not legal advice and should not be acted upon without obtaining your own legal counsel. Contact Jacobs at (301) 417-4144, jacobs@jacobs-associates.com or ask@thehouselawyer.com.
by Harvey S. Jacobs | May 30, 2014 | Articles, The Washington Post
By Harvey S. Jacobs May 30, 2014
Although universal design has been around since the 1960s, it is now gaining some much-needed attention as our society recognizes that all people should be able to live and function independently in their homes throughout their life regardless of their physical or mental ability.
Home builders, renovators, architects, designers and manufacturers increasingly are incorporating universal design principles into their plans and products.
What is universal design? The Center for Universal Design at North Carolina State University has formulated several principles:
- Equitable use, meaning the design is useful and marketable to people of diverse abilities.
- Flexibility in use, meaning the design accommodates a wide range of individual preferences.
- Simple and intuitive use, meaning the design is easy to understand, regardless of the user’s experience, knowledge, language skills or current concentration level.
Universal design is more relevant than ever for several reasons: As our population ages and homeownership becomes more expensive, multigenerational households are becoming more prevalent. These households present their own set of design problems that universal design seeks to address.
For example, in households containing elderly parents and small children, there is a design conundrum over how to accommodate someone who may have arthritis or flexibility issues when childproofing is necessary. A stove may contain knobs on the front that a parent would find easily accessible, but those knobs may pose unacceptable risks for toddlers. It is the designer who is tasked with reconciling the residents’ needs.
Medical advances allow a person with an injury or illness to live longer and with fewer impediments. For example, wounded veterans returning from service expect to fully integrate into society as productive members, with modest, if any, special accommodation. Universal design of homes and products seeks to provide that accommodation.
While the universal design principles have not been completely incorporated into any building codes, several of its objectives have been adopted. Montgomery County has created a program called Design for Life that provides property tax credits to builders and homeowners who include visit-ability and live-ability improvements in new or existing single-family attached and detached homes.
Visit-ability improvements, eligible for tax credits up to $3,000, mean that the home has at least one zero clearance access, meaning that doorway saddles are no higher than 1.5 inches above the surrounding floor, and a special powder room door opening that meets code requirements.
Live-ability improvements, eligible for tax credits up to $10,000, means the home also contains a bedroom and kitchen on the first floor. This program becomes effective July 1. At the state level, Maryland homeowners who improve their home for health or medical conditions may apply to have those improvements exempt from assessment for taxation purposes.
Industry has picked up on this need. The National Association of the Remodeling Industry ( www.nari.org ) certifies its members in universal design. Owners who want to remodel their homes using universal design elements should seek out a universal design certified professional.
David Merrick, president of Merrick Design and Build in Kensington, said that before embarking on a universal design project for a client requiring physical accommodation, I insist on speaking with that client’s physical therapist. Since these universal design principles are subject to interpretation, the best way to build for that client is to ask their medical professional exactly how the design should be implemented.
For example, although grab bars in bathrooms are one type of universal design, there is no consensus on whether they should be installed vertically, horizontally or somewhere in between, Merrick added. The client’s physical therapist can provide essential input on these types of decisions.
Universal design, as the name implies, is not directed specifically at persons with mental or physical disabilities, the elderly or those with special needs.
Its mission is inclusive design. In many cases, universal design is simply common sense.
Harvey S. Jacobs is a real estate lawyer with Jacobs & Associates Attorneys at Law in Rockville. He is an active real estate investor, developer, landlord, settlement attorney, lender and Realtor. This column is not legal advice and should not be acted upon without obtaining your own legal counsel. Contact Jacobs at (301) 417-4144, jacobs@jacobs-associates.com or ask@thehouselawyer.com.
