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| Article 1 ($0 Down Mortgage Loans)
Article 2 (Maximize Investment Opportunities with Improvement Exchanges) Article 3 (The Bottom-line on Contract Negotiations) Article 4 (Training Program Gives Homeowners More Lead Removal Options) Article 5 (Q&A with Michael Merrill) Article 6 (Using the Internet to Help You With Your Real Estate Needs) Article 7 (CONDO/CO-OP MARKET IS HOT, HOT, HOT) |
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$0 Down Mortgage Loans By Eric Erickson First time homebuyers wonder if there are mortgage programs available to them because they are first time homebuyers. Do lenders create special low rate programs just for first time buyers? The answer is yes and no. There are some programs available to low/moderate income borrowers that feature low down payments and lower interest rates. These programs are generally offered through local banks and government subsidy programs. Although these programs are designed for first time homebuyers, many of today?s first time homebuyers in the greater Boston area are not eligible because they earn too much income. This fact has lead to the confusion surrounding first time buyer mortgage programs. Just simply being a first time homebuyer doesn?t open a lender?s checkbook giving you access to mortgage money. So where does this leave the young professionals, the long-term renters, and the stable income earners? Lenders realize the difficulty of saving enough money for a down payment even when you earn higher than the median income for a given area. Between the high rental cost in the Boston area, the normal monthly bills and the ever-increasing sale price for houses, how can you buy a home? The answer may be zero money down loan programs. In the last few years several kinds of $0 money down mortgage programs have been created. The increased use of credit scoring and acceptance of these loans by the secondary market is causing more of these programs to be created each month. All of these programs have one thing in common - verification of income. As you would expect, any lender that will provide 100% financing for a borrower will also require you to provide documented income to repay the loan. The majority of these programs target borrowers who are purchasing a single family home or approved condominiums. The qualifying factors are straightforward - you need to have great credit and have at least two months mortgage payments in the bank plus money to cover your pre-paid escrows to close. The term of the mortgage will be either a 30-year fixed or an intermediate ARM (e.g. 5 or 7 year fixed rate loan). Anticipate that the interest rate will be at least 2 points higher than comparable 5% down payment programs. One thing you will want to watch for is whether if the lender is requiring private mortgage insurance (PMI) in addition to the higher interest rate. If there is no PMI and no pre-payment penalty then the loan is a good deal. What can you do if your credit isn?t great or you want to buy a multi-unit property? Again there are many programs available that may suit your needs. An exciting program that was recently announced is allowing a borrower to purchase a one-to-four unit building with a down payment of 3%. This 3% down payment can be paid by the seller, a gift from a family member or borrowed from a credit card. Additionally, your credit doesn?t have to be perfect - it can actually be what some lenders consider ?poor?. Another avenue is to get mortgage funding through what are known as the ?sub-prime lenders.? These lenders are also offering zero money programs that cover most of the other niche (problem credit) borrower groups. To sum it all up - even if you don?t have a ton of money today the chances are that you can buy instead of renting. |
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Maximize Investment Opportunities with Improvement Exchanges By Robert HB Buckner, New England Division Manager for Asset Preservation, Inc., a Qualified Intermediary for IRC Section 1031 tax deferred exchanges and a subsidiary of Stewart Title Company. Questions regarding exchanges can be directed to him at 877-845-1031 (toll-free). The Problem: We are often asked: Can I exchange into property of lesser value and spend the extra exchange funds on improvements or repairs? Unfortunately, the standard delayed exchange is not a solution since once the replacement property is deeded to the Exchanger, the exchange is complete. Any additional improvements or repairs would be considered an exchange of "real estate" for "services" and would not qualify as like-kind property for tax deferral treatment. The Solution: The Improvement Exchange uses a Qualified Intermediary to first acquire the replacement property with some of the exchange proceeds (from the sale). During the 180-day period, the Qualified Intermediary pays for the improvements and/or repairs, and then deeds the improved property to the Exchanger to complete the exchange. The Opportunity: In a hot real estate market, such as we're experiencing in the Boston area, good replacement properties are difficult to find. Properties are bought up as soon as they hit the market and are sometimes even bargained for more than their asking price. The ability to repair a run-down property, or build a new structure on bare land, may provide the ideal solution for the Exchanger who must locate suitable replacement property meeting their specific investment requirements. The Procedure: The Exchanger and Qualified Intermediary enter into a Property Acquisition Agreement, which enables the Qualified Intermediary to purchase the replacement property by assigning the Purchase and Sales agreement. In addition, a construction management Agreement, which allows the Exchanger to manage the construction project during the exchange period is also signed. [Note: Often an Environmental Report and additional fire and casualty insurance may be required by the Qualified Intermediary] Upon the completion of the improvements or the 180th day from the sale closing, whichever comes first, the replacement property is deeded from the Qualified Intermediary to the Exchanger. The Challenges: An obstacle to this type of 1031 exchange can occur when the transaction requires outside financing. Because the Qualified Intermediary is holding title to the property throughout the improvement process, lenders may require the Exchanger to cross-collateralize their loan with another property for additional security. Any investor desiring the benefits of an improvement exchange should use a Qualified Intermediary with improvement transaction experience. It is helpful to consider these questions: (1) Do you create a separate LLC for each Exchanger who wants to perform an improvement or reverse exchange? If not, are you aware that a lien or problem with another Exchanger's transaction can affect my property as well? (2) How do you handle the management of the property during the exchange period? Are you aware that a triple net lease is a better method of delineating the responsibilities of the respective parties? (3) What type of assurance or guarantee will you provide me in writing regarding the security of my proceeds and property while they are in the possession of the Intermediary during the exchange period? Is this assurance backed by an established and nationally recognized parent company? (4) Do you have a specialized staff, including in-house attorneys, specifically dedicated to handling these complicated exchanges? If yes, how many successful exchanges have they handled? |
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The Bottom-line on Contract Negotiations By Jay McHugh The natural focal point of a real estate purchase contract is the selling price of the home, but the price isn't the only factor that determines the net bottom line for both the buyer and the seller. Is a bargain for the buyer really a bargain if he or she is paying all the transaction costs? Is a top price for the seller really a top price if the buyer wants all the furniture to be included in the purchase price? Or if the buyer can't come up with the downpayment or qualify for a mortgage? Before you decide to go ahead with a great price, here are five other bottom-line points to consider: 1. What are the estimated transaction costs and who will pay for what? Typical costs include the brokers' commission, a home inspection, a termite inspection, escrow or attorney's fees, a title search, an owner's title insurance policy, transfer taxes and recording fees. The price tags on these items vary greatly around the country. Who pays for what is a matter of both local custom and negotiation. 2 How much money is the buyer putting into escrow and how soon? A big deposit -- called "earnest money" -- and a substantial downpayment are generally seen as a sign that the buyer is serious about completing the transaction. From the seller's point of view, the more money the buyer places in escrow and the sooner the money is transferred, the better. 3. Is there a mortgage financing contingency and how specific is it? The mortgage escape clause is a must for buyers, unless they're paying all cash for the home. Without this contingency, buyers can be legally obligated to purchase the home even if they can't obtain financing. Further, an open-ended statement that says the buyer will obtain a loan "at the prevailing rate of interest" leaves the buyer completely exposed to interest rate fluctuations. A statement that says the loan must be at an interest rate "not to exceed xx percent" and on specified terms is preferable. 4. What furniture, fixtures and appliances, if any, are being sold with the property? Technically, anything that's permanently affixed to or installed in the home is real property. Everything else is the seller's personal property. This distinction is a narrow one and it naturally leads to a fair amount of confusion. Are built-in appliances real property or personal property? What about a shelving system? A chandelier? Window coverings? Potted plants in the backyard? Sellers who intend to remove anything that's attached to the home should have that spelled out in the contract. And the same goes for buyers who expect to acquire any of the furniture or other movables. 5. What will happen if either side breaches the contract? Unless an unmet contingency triggers the abandonment of the contract, it's a binding legal document. Buyers who fail to perform can lose their deposit money. Sellers who try to back out can be sued for "specific performance," which forces the sale of the home to the buyer. Many contracts also specify that disputes must be brought in small-claims court or presented for arbitration or mediation. Tip: Ask your real estate agent to go over the standard contract with you before you receive or make a purchase offer. That way, you'll know what to expect and be prepared to negotiate the best deal you can get. |
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Training Program Gives Homeowners More Lead Removal Options By John MacIsaac John MacIsaac is a certified Lead Inspector and a lifelong resident of Boston. His firm, ASAP Lead Paint Inspections, Inc., has performed more than 10,000 inspections in Massachusetts and has 20 years of experience. Call ASAP at 1-800-349-7999 or visit ASAP on the Web at www.asapleadpaint.com A new training program authorized by new state regulations will teach home owners and renovators how to safely remove and replace woodwork and windows that contain hazardous lead paint. Before the regulations took effect Feb. 4, the work, considered "moderate risk," could only be performed by a licensed deleading firm. The new regulations will result in a cost savings for property owners. Renovators and home owners who enroll in the course and pass an exam will be authorized to do moderate risk lead abatement, which includes the removal of windows and woodwork found to have a lead paint hazard, as well as making intact, or repairing limited areas of deteriorated lead paint. The training program, however, is not designed to teach carpentry or renovation skills. Its main focus will be on safety and how to eliminate the risk of lead poisoning during and after the work is performed. Proper preparation and clean-up techniques will be discussed in detail. Although today's interior and exterior paints are no longer manufactured with lead, in older homes, deteriorating lead paint poses a significant health risk to children under the age of six. Understanding the Lead Law Course participants will be taught about the Massachusetts Lead Law and how to comply with it. This portion of the training program is an excellent opportunity to correct misconceptions about the law. Many property owners mistakenly believe a lead inspection triggers the lead law and results in state monitoring of a particular property's compliance. This unfortunately discourages home owners from having an inspection and protecting their families by getting the facts about the possible existence of a lead hazard in their home. An inspection by a licensed lead inspector is the best way to find out if your home has a lead hazard. It doesn't automatically make your home or property subject to the state's lead law. The law applies only if your home or property was built before 1978 and a child under the age of six is present. And remember, not having an inspection doesn't exclude you from the responsibility to comply with the law. If your property was built prior to 1978, you are responsible for compliance. It's always better to have an inspection. That way, you'll be fully informed of your situation. Lead removal options Many choices exist for removing a lead hazard from your home, and the course will help participants select the option that's right for each situation, including which surfaces are eligible for applying protective coverings instead of "high risk" lead removal. High risk lead abatement can only be performed by a licensed deleader. Course participants will be taught how to properly prepare the home before beginning moderate risk abatement, including removing objects, covering floors and large appliances, and isolating the work area. The course will also review requirements that occupants be given advanced notification of the work and be housed elsewhere until the work is complete. A re-inspection by a licensed lead inspector will be required before the occupants can return. The inspector will take dust wipes and send them out for analysis to ensure there's no remaining lead dust hazard. Re-inspection standards have recently been increased. The new acceptable lead dust limit is 50 micrograms per square foot. The previous standard was 200. The state is in the process of compiling an approved list of training providers. Courses are expected to begin by the end of March or start of April. Course fees will be set by the individual providers. All course participants will be required to take a self-administered exam and mail it to the state before receiving authorization to perform moderate-risk lead abatement. For information about the course and where to find training in your area, call the Childhood Lead Poisoning Prevention Program at 1-800-532-9571. |
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Q&A with Michael Merrill of Merrill & McGeary, a real estate attorney.
Q: I decided to purchase a Condominium unit when my lease expires. I?ve narrowed down the area I want to live in and I am fairly certain of the style of building I like. Now I want to make sure there are no surprises from the Condominium after I move in. What things would you recommend I check out prior to signing a purchase and sale agreement? A: You should read the Condominium documents carefully - that is, the Master Deed, Declaration of Trust, By-Laws and Rules and Regulations. If you have particular questions about restrictions on the unit (for example, pets, leasing, and/or business use) you should ask your attorney to review the Condominium documents with these issues in mind. You should also investigate the financial status of the Condominium and in so doing look at the past few budgets as well as the current budget. You should know the amount of funds in the Condominium?s operating and reserve account. Ask a Condominium Trustee or the property manager whether or not there are any major repair projects planned which might require a special assessment of all of the unit owners. Find out if the common charges are to be substantially increased within the next twelve months. Finally, make sure the Condominium is not engaged in potentially expensive litigation as a defendant, and if so, has the Condominium?s insurance carrier provided coverage as well as defense. If not, as a unit owner you will pay your share of these costs. Knowing this information about the Condominium in advance of your purchase will allow you to make an informed decision. Q: I found a great house to buy. I love it. It is perfect for me. I think I got it below market price. I intend to have a home inspection, but I am willing to let minor things go without comment. However, major structural or mechanical problems I may want to negotiate with the Seller. However, I think the Seller could sell the property to another Buyer at a much higher price and therefore the Seller may not negotiate with me. He will just tell me to go buy somewhere else. Can I force the Seller to negotiate with me? A: This is a good question, but don?t be so negative. Perhaps the inspection will not reveal any structural or mechanical problems and you will have nothing to negotiate. But your question points out a situation Buyers are faced with in this Seller?s market. Buyers have little leverage because there are many more Buyers than Sellers and few good properties. My advice is to accept responsibility for minor repairs and not to negotiate unimportant provisions in the purchase and sale agreement. Don?t think you have to get a concession from the Seller in order to make the house an even better deal. Nonetheless, if there is an unexpectedly costly repair you should bring it up. Most Sellers will negotiate in good faith and discount the sale price to some degree to resolve major unforeseen issues. Move forward with your inspection as quickly as possible and rely upon the advice of the inspector, the real estate broker, and your real estate attorney to get this house under agreement. Don?t let a good property get away. Michael W. Merrill |
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Using the Internet to Help You With Your Real Estate Needs By Sara Rosenfeld, Sr. Vice President, Co-Manager of Hunneman & Coldwell Banker Whether you are a first time buyer or have gone through a purchase in the past, you need to investigate another way of ?looking? for your new home. Have you tried the internet? You may be in for a very big surprise if you haven?t surfed the numerous real estate web sites available for your review 24 hours a day. You no longer have to wait for the Sunday newspaper to hit the street in order to get recent and up-to-date real estate information either for your neighborhood or for any part of the United States. Each web site offers different information and you need to take the time to fully investigate each site to determine which one is best for you. Once you have completed your investigation, you will probably want to bookmark the web site address so you can easily access future visits. For those who are experienced web surfers, you know this saves you precious time and gets you the information you desire much easier. I encourage everyone to carefully search all of the relevant web sites for your needs and then regularly visit them. As we all know, the real estate market changes every day and that is why you need to keep yourself up-to-date for your chosen market. The only real way to keep up-to-date with your target market and make sure you get all of the important new news about potential homes is to be working with a real estate professional who specializes in the area you want to live. The internet is a wonderful tool to help you become a better-educated consumer. If you are considering selling a property, you want to work with a real estate professional who has a frequently-used and known web site. This is one more way of getting your property exposed to a very wide market and available to be viewed 24 hours a day. Many recent studies indicate that many consumers, especially those under 40 years old, are not reading print media (newspapers, magazines, etc.) but are relying on the internet for their method of getting the information they need. Shopping through the internet continues to become more and more popular and now you can even shop for your new home! What can a web site offer? The National Association of Realtors? web site is www.realtor.com and offers information for the entire country. Most real estate companies have their own web site. If you don?t see their web site advertised, you can call the company for their web site address. If you visit my company?s web site at www.hunneman.com, you will have access to all of our company?s listings as they appear in the multiple listing service. Our main menu offers you eight choices to enhance your search information. The choices include: the homes we have for sale, the towns we service, mortgage information, relocation services, luxury properties, and commercial real estate. There is also information about our company and careers in real estate. Our company consists of over 80 offices and all of our Multiple Listing Service listings in Massachusetts and New Hampshire are placed on our web site. We are one of the few companies that lists the property address, the name and phone number of the listing agent, and the full information that you would find on the listing sheets, including an exterior photo of the property. You can complete your own real estate search by entering in the town and price range you are interested in. You will be given a complete list of properties and then you can select which properties you want to get further information on either by getting the listing agent?s name and phone number or e-mailing us directly to request the information. If you have not become a web surfer yet, don?t worry – we will still be marketing and selling real estate the traditional way for a long time to come by using fine publications such as Just Property! Or you can always just call us! |
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CONDO/CO-OP MARKET IS HOT, HOT, HOT By Shari Marquis, President of the Residential Association of Realtors. Unlike the renovated apartments or garden walk ups of yesterday, today's condo living features an array of exteriors and spacious new interior designs, according to the Residential Association of Realtors, a Division of the Greater Boston Real Estate Board. In many cases, high-rise buildings house more than just residents and offer a wide variety of amenities from underground parking to in-house security, dry cleaners, grocers and hair salons. Today's condo market also is hot -- in fact, it is one of the strongest segments of the housing market. According to the National Association of Realtors, the total number of condo and co-op resales was 677,000 units in 1999, the highest since NAR started tracking this segment of the housing market in 1981 . In fact, the 1999 sales pace for this segment of the resale market was 12.1 percent higher than previous record of 604,000 units recorded in 1998. The surge in sales of condominiums and cooperatives experienced earlier in 1999 clearly helped boost this segment of the market to another record level for the year. Despite a year of rising interest rates, many positive economic factors have remained in the market to entice both first-time buyers and people trading-down to simpler lifestyles. Rising income levels and moderate increases in prices of condos and co-ops, for example, are two of the top factors that contributed to continued healthy affordability conditions. The national median price of existing condominiums and cooperatives was $107,700, in 1999, an increase of 7.0 percent from 1998. In the Northeast, which includes the Greater Boston metropolitan area, resale activity rose 12.5 percent to 117,000 units in 1999, compared to 1998. The median price in the Northeast was $113,400 in 1999, up nearly 10.00 percent from a year ago. This is the strongest I have ever seen the condominium market in our area. Most resale condominium prices have surpassed the high of the eighties. In the Boston area, condominiums are a viable alternative to the single-family house for many first time homebuyers. According to the National Association of Realtors, the driving force behind this healthy activity is a combination of factors, including affordable mortgage interest rates, an excellent job market and consumer confidence in the economy. Another major factor: an exceptionally strong demand by more affluent, first-time buyers who want to move from renting to owning, and retirees and empty nesters trading down from a large single-family home to a well-appointed condo. As a result of the high demand, many builders are designing new products with more options and choices to reflect the desires of today's condo buyer. For example, many builders are now offering condominiums that are built in a townhouse style. This model appeals to buyers across the board: from young professional couples, singles and people moving down. These builders are finding that buyers want them to break the mold of the condo mentality. "Many of the styles and floor plans we see now provide interiors and exteriors that feel more like single-family homes. A growing number of builders also are offering condominium projects that include garages, and a long list of options and amenities including pre-wiring for the technologically savvy purchasers, fireplaces, and built-in entertainment centers. Many times, today's condominium buyers feel they are instead purchasing a custom, single-family home. Consumers who opt for condominium living do for a variety of reasons. Younger buyers, for example, usually just want to get their foot in the door of homeownership, while the more affluent, career-oriented buyer usually wants to avoid having more maintenance responsibilities than necessary. Both the profiles of the condo buyer and the product itself have changed quite a bit over the past several years. There are more older, affluent buyers in the market now. They want a large home, but they don't want the maintenance and this is reflected in today's designs. Just five years ago, the majority of units being built were garden-style walk ups, she explains. In essence, these were glorified apartments. Now, we are seeing more and more products that are suited to an older move-down buyer, such as elevator buildings, higher standards of luxuries and amenities, and locations within walking distance to shops and entertainment. Today's buyers aren't just buying a place to live. They're buying a lifestyle. |
