Ask Realty Times

Written by Posted On Thursday, 08 November 2007 16:00

Question: I have a piece of land that I bought two years ago, and the developer recently dumped his remaining lots at about 40 percent of the price I paid. Can he do this? If I want to refinance to get better terms for my loan, will a lender use my purchase price or will the current comps? I won't be able to refinance on the basis of the property's current value.

Answer: Bad news all around.

First, unless there's an agreement to the contrary the developer has every right to sell his remaining lots at market value -- whether that value is more than you paid, or less.

Second, if you refinance now a lender will consider your loan application on the basis of the property's current value, not what you paid several years ago.

Question: I have a home equity loan which I used to buy a foreclosure; now, after two months, I would like to convert it into a 30-year mortgage. Can I do it?

Answer: There are several questions which you and a lender would need to answer: First, how much equity is in the property? Second, how are your income, debts and credit? Third, does the lender have any "seasoning" requirement that you must have the loan in place for a given period before you can refinance? Fourth, by any chance did you get a home equity loan which required little or no money from you at closing? If yes, are you responsible for a prepayment penalty on the home equity loan if you now pay it off by refinancing? If so, how much?

Question: Are there any seller contribution limitations in a commercial contract for sale. As I understand it, residential contract sales are guided by RESPA, where contributions towards buyer expenses have about a 6 percent limit in Florida. Are you aware of any limitations for seller contributions in a commercial property sale?

Answer: This is not a RESPA issue. RESPA -- the Real Estate Settlement and Protection Act -- applies to all transactions nationwide, not just those in Florida.

What is an issue, however, are lender guidelines. Some residential loan programs allow as much as a 3 percent "seller contribution," others such as FHA allow up to a 6-percent seller contribution and I have heard that some programs even allow as much as 9 percent.

Thus, before going further, speak with lenders to see what's allowed under the programs available to you.

Question: Is this the time to buy an investment property? If so, What is the future (two to five years from now) of housing market?

Answer: No one knows. The trends which may suggest buying or not buying in your market may not be true in someone else's market in general or in a specific neighborhood.

Real estate is a localized commodity with a value that's influenced by many different factors. One of the best ways to determine local prospects is to read your local newspaper to track area trends such as the construction of new roads, job growth or contraction, new schools, government deficits or surpluses, etc. Also, speak with experienced real estate brokers in your community. They study the market daily, know how local deals are constructed (not just recorded sale prices) and may have a property that fits your specific needs.

Question: My mother bought a cottage on leased land together with a friend. Now he wants her to sign a paper that he put more equity into the property than she. But he has not, we know it and my mother paid off the loan including interest. Does the interest count as equity too? There are two cottages, one belongs to him, one belongs to her and all the rest belongs to them together, each 50 percent (garage, dock, parking lot ... ). There is a paper from a lawyer to confirm this.

Why is it so important for him that my mother should sign this thing with the equity? This is in Canada by the way and I'm from Germany. Maybe I just don't know what the law says about equity.

Answer: Your Mom should not sign anything.

You have to ask the question: What will the new paperwork change? What is your Mom giving up? How is she being compensated if she is giving up something?

Tell the "friend" he's a wonderful person, but Mom can't sign anything until she shows the paperwork to an experienced real estate attorney in the area where the property is located.

Question: Recently, my husband and I have become aware of a very nice large four-bedroom home in an upscale neighborhood. We would love to be able to purchase the new home, but we probably can't qualify for a mortgage right now. Because the seller/builder is an individual as opposed to a large company, she has given us some indications that she's a very flexible seller especially since we are in a buyer's market right now. She has already reduced the price of the home.

We are thinking about asking the seller if she would consider a lease with an option to purchase within one year. We would pay her an option deposit, negotiate a rent we could afford, and a portion of the rent would go towards the purchase price of the home at her present asking price. We would also need to sell our present home to proceed with the transaction, which might take some time. In addition, since she's a real estate broker, we thought we might offer our listing.

Do you think we should just stay put in our present home and wait until I get a job or attempt to proceed with the lease option to purchase if the seller is willing to go for it? We just feel that we might be missing out on a wonderful opportunity, which won't be available months or even a year from now. Thanks.

Answer: I have no information regarding your local market and therefore cannot suggest staying put or moving. What I can say is this: You have an interesting idea.

Lease purchases tend to be tricky and seem to fail with frequency. Therefore you might want to consider an alternative approach which assures the sale of your current home and locks-in the purchase of the replacement property.

Get a job now -- this is a wonderful real estate opportunity, the chance of a lifetime, right? Then perhaps offer to buy the house you like under the condition that your current home sells and settles and that you can obtain financing with an interest rate that does not exceed x percent. The owner/seller can list the property as your broker. Because the seller/broker is a licensed professional you're not an equal in the marketplace. Sign nothing without having an experienced real estate attorney first look at the paperwork.

Why require both the sale AND settlement of your property? Because you could get a contract to purchase your property and thus have a sale. However the sale could fall through before closing -- meaning you would be obligated to replace the replacement property but would have no money to complete the transaction.

Question: We went to contract two weeks ago on a house, and made a large down payment into the seller's attorney's escrow account. One request on the contract was for the sales price to be increased to cover our closing costs, to which the seller agreed by signing the rider to the contract. However, my husband and I signed the contract and rider, the seller only signed the rider. It was pointed out to our attorney by us that the seller never signed the actual sales contract, and he contacted the seller's attorney. We were told, not to worry, we are in contract for the purchase.

Since then, we had the cost of a home inspection, a cesspool inspection, the mortgage application, an appraisal fee and our attorney has ordered a title search, and we should receive the commitment letter from our bank today or tomorrow latest. Additionally, we began packing and renting a storage unit to show our current house for rental. There are no contingencies regarding our current home.

The seller's broker called today to let us know that the seller is not going through with the sale of the house and that we were never had a contract anyway since the seller did not sign it. We have laid out a large sum of money to purchase this home, as well as the partial down payment. Now we are told that there's nothing we can do. I expect our down payment back, however, do we have the right to get the other fees returned to us, since we would have never incurred them unless we were serious about the home? If a buyer breaks a contract likes this, he looses his down payment. What are our rights in this weird situation?

Answer: Who cares what the seller says? What are verbal assurances worth? Zilch. Here's the proof -- you're not buying the house.

Why did you not demand a signed contract before depositing a dime in any account? That's when you had leverage -- after all, how could the seller enforce and agreement they had not signed?

You might be able to sue to recover your expenses, but what would it cost to engage in such litigation -- and what if you lost? Would it make any sense to go to a small claims court?

That said, why did the seller agree to increase the sale price? Do you mean the seller was to give you a credit at closing, and that the credit would then be off-set by an artificial increase in the sale price? What if the appraisal came in below the new and higher contract value?

Forget this deal. Chalk up your costs to education, move on and get yourself an experienced buyer broker the next time you want to buy real estate.


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