TEMPORARY LEASE BACK FOR THE SELLER OR BUYER

TEMPORARY LEASE BACK FOR THE SELLER OR BUYER

​A Sellers Temporary Lease Back is when the seller wishes to continue living in the home after closing for a negotiated, short period of time – usually a few days (although we have seen it as long as 90 days). When I represent sellers, I usually request a temporary lease because it allows the sellers to move out of the home only after they know their money from the closing is in the bank. Too many times, I’ve seen sellers move out and the buyers’ financing delayed or just falls apart. The seller is then stuck having to start over again and go through the entire process of trying to sell the house. In the meantime, the sellers may have committed to another property. Now, they are faced with the cost of paying two mortgages, or losing their earnest money and other cash outlays associated with buying the other home. They had thought everything was going to work out, despite not actually receiving the funds from the sale of their home yet. At this point, you, as the buyer, may also have lost your earnest money and all the cash outlays associated with getting to this point. Because of this potential for disaster, don’t be surprised if the seller’s agent asks you to agree to a Seller’s Temporary Residential Lease, although it is not required to sell a home. It is a short, two page document, and is not meant to replace the full-length lease contract, which is used for leases longer than 90 days. It is also not uncommon for sellers to request a lease when they need a short while longer to get enough cash to actually move. The opposite counterpart to the temporary lease is a document known as the Buyer’s Temporary Residential Lease. In this case, the sellers become the landlord and the buyers become the tenants. This form is used when buyers wish to occupy the property prior to closing, perhaps because their existing lease is expiring and they anticipated being able to close on a certain date – which didn’t happen. It’s likely the agent representing the seller will advise the seller not to lease the property to you as the buyer, simply because the risk is high that something could go wrong, such as buyer’s remorse, or, worse yet, a further delay in a closing that may never happen. Imagine how complicated this would make the seller’s ability to market and sell the property!Both of these temporary residential lease agreements must contain the following items:Clearly identify the landlord and the tenantState the property addressExplain the lease’s term, including a start date and a termination dateEstablish a per diem rate. It is customary and usually fairly easy to get the seller’s agreement to cover the costs of PITI, including any HOA fees, on a per diem basis. To calculate the per diem rate, simply divide your mortgage cost by the number of days in the given month Be sure to include a security deposit amount, which the tenant pays the landlord to cover damages to the property and/or to satisfy the tenant’s obligations under the lease (As the buyer, I would encourage you to insist on a security deposit, paid on the day of closing, by the seller. It would incent the seller to leave the property in good move-in condition when they move out.)List the cost of the utilities, whether they are included or excludedInclude information about pets, whether they are allowed or notDescribe property alterations which are not allowed, such as nail holesDetail the current property conditions and mention how to address repairsList who handles and pays for repairs and/or maintenance expensesMake sure at least one party maintains insurance, although usually both parties will. As a tenant, be sure your contents are covered.Include an indemnification of the landlord from claims made against you by a third partyPossession of the property by the buyer as a tenant may change insurance policy coverageUse language which addresses what happens in the event either party defaultsEstablish reasons for termination of the leaseDescribe any holding over, which are fees as damages for failing to terminate the contractOne last thought on temporary leasebacks and temporary residential leases: As a buyer, be sure to consult your insurance agent about changes of ownership and possession for limited purposes.  

Thinking of Refinancing? Here are 3 questions you need answers to

Thinking of Refinancing? Here are 3 questions you need answers to

Here are questions you need answers to before you commit to refinancing your home:

Is there a prepayment penalty involved with your existing loan? A prepayment penalty may make cost-prohibitive. Look at your Notes Payable document to see if one exists and, if so, how much the penalty is. Then decide if adding the penalty amount to the balance owed is worth it.

1.  What is your current interest rate?

It is usually stated that a difference of 1% may warrant refinancing. However, the loan amount you’re refinancing and the length of the term should also contribute to your decision. Replacing an ARM with a fixed-rate product is another good reason to refinance, but you still have to qualify for the loan. Knowing your rate will stay fixed for the long haul is certainly more comforting than the unknown of an adjustable-rate product, so some people choose to refinance away from an ARM even if they’re not saving a lot of money with a lower interest rate.

2.  What do you currently owe on the property and what is the current market value of your property?

There are certain areas in which home values are rapidly deteriorating and you will find it almost impossible to get your home refinanced. In order for a home to be refinanced the lender must see that the new appraised value meets or exceeds the new loan amount, which is the current loan amount plus closing costs. Lenders often conduct reviews of all appraisals. They’ll have an independent third party go over the appraisal to make sure the property’s market value is accurate.

​3.  How much longer do you expect to continue owning the property?

Obviously, the longer you plan to stay in the property, the better. It would not make too much sense to go through the expense of refinancing if you plan to stay in the home for only another year or two. You should calculate the payback period for all out-of-pocket costs by dividing the monthly mortgage payment savings into the total cost of refinancing. For example, if your new loan reduced your payments by $100 per month and the total cost to refinance was $4,800, the payback period would be 48 months, or four years. There are tons of mortgage calculators on the internet that can help you with this decision from a financial standpoint.​

Most of us get caught up in chasing the lowest rate. But remember, just because there’s a lower rate, it doesn’t mean you qualify for it. The market has changed recently and it may not be as easy to refinance as it was in the past. The good news is that rates have dropped, but the bad news is many homeowners can’t meet the new lender guidelines for refinancing.For more information check out www.MakeNoMistakes.com

Pro’s and Con’s of a Fixer Upper or Foreclosure

​Pro’s and Con’s of a Fixer Upper or Foreclosure

​Foreclosures are properties that are owned by the lender, who is holding the mortgage note because the homeowner couldn’t pay it. The lender then tries to sell the home and earn back the amount still owing on the mortgage. There’s usually a lot of paperwork involved, and sometimes a loss for the bank. A bank is in the business of selling money, not houses. Their goal is to get their money as quickly as possible from the highest bidder on the house, so they can start the process again by loaning out their money and earning interest on the loan.

These types of properties are always an option and always available. Just decide if you have the temperament to deal with what comes with a fixer upper or a foreclosure. If you aren’t handy around your home or apartment, be very careful with fixer uppers. Also, if a house went into foreclosure, it was probably because the owners didn’t have the money to properly care and maintain it. Perhaps the utilities were turned off, causing damage, such as mold. In addition, the chances of you getting a sellers’ disclosure that tells you all that is wrong and right with the house is slim. The key is to not get caught up with wanting to purchase a home simply because it’s a foreclosure and you’ve heard that foreclosures are bargains.

Mistake # 35: Underestimating the cost of repairs

When you’re inspecting these types of homes, be sure to have a sense of how much it will take to fix the property. Our experience with contractors has always been that you’ll get a quote, but by the time they finish the job it’s always over budget. This is especially true if you don’t know what you don’t know, or rather, if you lack knowledge. Also, contractors and tradesmen can be unreliable. They commit to the job and then don’t show up, often because of scheduling changes on their end. Ask your real estate agent to assist you with finding reputable contractors or subcontractors.

Again, it is important to do your research before you bid on a foreclosure. Don’t think just because it’s a foreclosure it’s a good deal. That’s a myth. Don’t fall for it. Do your homework and look at the comparatives that are similar to the foreclosure property. More importantly, determine how much of your cash you’ll need to improve the property so it meets your expectations.

The Importance of a Realtor

​Importance of a Realtor

Everybody has an opinion on how to purchase real estate and, once they know you’re considering this big purchase, they’ll all offer advice. You’ll be inundated with tips, referrals and a surplus of information. While many people have good intentions, the reality of it is – everyone has enough knowledge about real estate to be dangerous!

The first things you should do as you start your quest for your ideal piece of real estate: Put together the right team of people. These professionals will use their experience to advise you throughout the process, helping you to save time and energy, and decreasing your chances of a costly mistake.The first person to choose as part of your team is a coach. Coaches use their expertise earned over many years to help you through the process. CEOs, presidents, executives and world-class athletes have coaches, and there’s no reason you can’t too. This does not mean you give up control. You’re the boss. It’s not hard to find a good coach if you know what to ask and what signs to look for when interviewing your candidates.

So, just who is this coach? Well, a good real estate agent would make an ideal coach. Not just any real estate agent, but a good one. The beauty of using a top-notch real estate agent as your coach is there’s NO cost to you for this person’s expert time and services. Your coach/real estate agent gets paid by the seller when you purchase the property! You may think we want to push the use of a real estate agent because that’s our profession, but let us explain. We’ll illustrate our point with a story:

Years ago I contracted to have work done on my patio. I was very unhappy with the work and the craftsmanship. Unfortunately, I put down a substantial deposit. After several discussions with the contractor, I realized my only recourse for restitution was to go to small claims court. Eventually, months later, we went before the small claims court mediator.

I was well-prepared when it was my turn to present my side of the story. I had contacted and received advice from several law firms. I spoke with friends who were attorneys and believed I had enough ammunition to go into the courtroom and win this battle. Several attorneys were willing to represent me that day, but I thought their fee of 40% was much too steep for what I perceived they had to do: simply show up.

During my presentation to the mediator, he asked if I had a certain piece of evidence in my possession, which I did not. Suddenly, I remembered one of the attorneys asking me the same question. I chose not to get the evidence when the attorney first brought it up because, in my mind, it was inconsequential. So within minutes, and after I had prepared for months and lived with an ugly patio, the mediator rendered his decision. I lost $5,000.

I thought I could do this process on my own and save the $2,000 attorney’s fee. Hindsight, of course, says if I had not tried to be such a know-it-all, and if I had valued the experience of an attorney, I could have walked away with $3,000; instead I got nothing. Except an ugly patio and of course, a lot of wasted time and energy.

The moral of this story: Use a professional! If I am not someone who is in the courtroom dealing with civil litigations on a daily basis, why would I attempt it on my own, without a professional? A coach, in this case, would not only have represented me and spoken the language of the legal system, but he would have advised me. Most importantly, the coach would have anticipated various scenarios and requests from the defendant and mediator.

The same applies to real estate! If you are not dealing with real estate on a daily basis, why would you chance it on your own? My excuse was I didn’t want to share with the attorney any of the $5,000 I expected to win. But in real estate, the buyer doesn’t have to spend a penny to get the skilled, experienced services of a good real estate agent.

Some of you might still say this has nothing to do with real estate. Maybe not, but it has everything to do with the importance of teaming up with a professional. Throughout this reference guide you will read many stories which show real estate buyers choosing to do it their own way — and losing thousands of dollars. A few may win, but many more will lose. And loss can come in many forms, including financial issues, legal problems, wasted time and emotional stress. As much as you think you know, there will probably be a point during the transaction when there is something you won’t know – and it could cost you greatly!

TEACH YOUR CHILDREN ABOUT REAL ESTATE

TEACH YOUR CHILDREN ABOUT REAL ESTATE

My vision is to increase homeownership and revitalize America’s communities for future generations through real estate literacy and by creating a grassroots movement. Real prosperity is multigenerational. Our beliefs about money and wealth are often passed down from our parents to us at a very young age, and then influenced by our experiences, friendships and media.

In my business, I encounter many people of all races and financial backgrounds. I also notice one thing common to everyone. When our clients bring their children with them while searching for real estate, the children all take an interest! From the 4-year-old who insists on finding his or her new room to the 14-year-old who has a comment about the offer price. All children know what they like and whether or not that home makes sense for their family.

Yet so many parents leave their children at home because they view it as adult business and the kids will only slow down the process. When, in fact, one of the most important gifts parents can give their children is teaching them the process of buying real estate and what it takes to own a home.  

Ask children to point out homes they would love to live in and they all will answer with enthusiasm. Would this not be a great time to discuss what this dream home would cost and what they would have to do in life to get it? As parents, we want to teach responsibility to our children and how to become self sufficient in life. However, as parents, many of us are limited to the knowledge and experiences our parents passed on to us.  

Almost everywhere you turn, you can find books, articles, lectures, blogs, workshops and courses on real estate.  Never before have we had such a variety of resources available to us in real estate.  But at the same time, many parents have neglected to “Pass the Knowledge On” to their children.  The question is, why?  

They think the kids will not understand it.

They believe its adults’ business, not kids’.

They don’t know how to communicate it to their kids.

They don’t remember what they learned about real estate so they can’t share it.

Let’s give them the knowledge that will help prevent future real estate mistakes. Start the process with just allowing them to follow your purchasing process and learn from your positive experience. Trust us when we tell you they’ll ask questions and want to learn about it.

Even if you are not in the market right now to purchase a home, ask your child to go online to MLS and find a house for sale that he or she would want to live in one day. Then, make an appointment to visit the house during an open house. See what types of questions your children ask and encourage them. Use your reference guide located at www.MakeNoMistakes.com to answer any questions and, more importantly, let them know it’s possible!  

The Importance Of A Will And The Right Questions To Ask

The Importance of a Will and the Right Questions to Ask

WHY YOU NEED A WILL OR LIVING TRUST

It’s inevitable that one day we’ll all die. Yet, more than 60% of Americans will not bother to draft wills, which often leaves a legacy of financial hardship and family feuding for their loved ones. When real estate is involved, the situation can be even worse.

Keep in mind, if you die without a will, which is referred to as intestate, the state in which you lived would determine who receives your assets (those left solely in the decedent’s name). In other words, the state court system – not you or your family – will determine who gets what! Thus, complete strangers will make decisions having a huge impact on your family members’ lives.

In this chapter we encourage you to talk with an attorney about the benefits of a will and/or a living trust now that you own real estate.

The purpose of a will is to provide you with a way to distribute your property at the time of your death in any manner you choose. This document is filed as a public record after death for anyone who is interested in seeing it. It’s one of the most important steps in protecting your loved ones and ensuring your wishes are followed after your death.

There are specific rules, however, about how the real estate you own can be willed. It depends on the form of ownership you listed when you purchased the real estate. If you are a homeowner, the title of your property does not automatically go to your family, unless you are a surviving spouse. This type of ownership is defined as joint tenancy. Or, if you own this property with another person as joint tenants with right of survivorship, the property will pass directly to the remaining person or entity upon your death, avoiding the probate process, which we describe below. With joint tenants with right of survivorship, it doesn’t matter if the other owner is your spouse – the remaining survivor will receive ownership of the property.

If you die intestate, your assets will need to go through probate. Having a will or living trust means your family can likely avoid the time, expense and hassle of going through probate. But as we said earlier, 60% of Americans don’t have wills. Let’s look more closely at what happens in this situation.

Real property valued over $20,000 is subject to probate. The probate process is a court procedure during which the state court:

• Inventories the deceased person’s assets 
• Gathers information about claims made against the estate from creditors
• Investigates all claims for their validity 
• Pays off any outstanding debts, including taxes 
• Decides, based on state law, who gets what

If there’s a will, the executor is the appointed individual  who carries out the instructions and wishes of the deceased. If there was no will, then the court appoints an administrator. The executor and administrator functions are the same and can be almost anyone, but are usually a lawyer, accountant or family member who is of legal age and has no prior felony convictions. The probate process can take months or years, and become extremely expensive depending on how complex and large the estate was. For example, a home valued at $300,000 could easily incur over $25,000 in fees before the deceased person’s heirs inherit the net proceeds from the sale of the property. Not to mention the family squabbling between family members.

There are other assets that can avoid the probate process. These assets are most life insurance policies, annuities, and retirement accounts that name beneficiaries in the event of death, known as payable on death accounts, or POD. At your death, your beneficiary simply needs to go to the bank, show your death certificate and his or her identification, and collect whatever funds are in the account. The probate court is never involved, and it doesn’t matter how large the sum is. If any of these accounts were jointly owned, however, the beneficiary would not be able to take possession until the other spouse died.

Problems can occur when there is no will and no surviving spouse and it was the intent of the deceased to leave the property to children, other family members, a friend or charity.

There is, however, a tool to use to avoid probate, called a “living trust.” The living trust can take many forms. The most common are revocable and irrevocable trust.

A revocable living trust is a document stating who controls your assets while you’re still alive; normally, that’s you. You decide what you want to happen to those assets once you’re gone. The reason it’s revocable is because you can revoke it at any time while you are living. You create and fund it while you are alive. The biggest mistake people make is that they don’t take the time to fill out the necessary paperwork to fund the trust.

The objective of a revocable living trust is to allow assets to transfer without going through probate. Your estate proceedings remain private, unlike a will, which is public. As a result, a will can be challenged, mainly because the deceased’s heirs believe they know what their loved one intended for them to have. These opinions often conflict. You’ve probably heard this act as “contesting” the will. This is why wills do not go into effect immediately and the deceased’s wishes are not administered until they are court ordered.

The difference between a revocable and an irrevocable trust is the irrevocable living trust cannot be changed once it has been created. Whatever assets are placed in that trust cannot be withdrawn by the Grantor – the person who made the trust and to whom the items belong – at any time, no matter what.

In Summary, don’t be one of the 60% of Americans who don’t have a will or a living trust. You’re condemning your heirs to the hassles of probate if you don’t get organized on this. There are many details regarding wills and living trusts that we didn’t cover here. Ask a tax advisor, attorney, or estate planning professional if some kind of living trust is best for you. Be sure to select an attorney with experience in estate planning, specifically in establishing living trusts, if that’s the route you want to go. Vow to leave a legacy your family can build on and use to get ahead!