For those who own their own homes and land, one of the largest expenses is simply paying the property taxes. These may come due twice during the year, but they are sometimes just due once, or one payment will be significantly larger than the other. For those who are not paying a mortgage — the property taxes are usually rolled into escrow accounts in a mortgage — this could mean paying thousands out of pocket.
This is exactly what happened to one man, who owed right around $19,000 and had no way to pay that much himself. He then found a lender who would give him the money, and he thought his problems were solved. The lender paid the cost up front so that his real estate was safe.
The catch, though, was that the interest rate was huge, at 18 percent. If he just made the minimum payments for the next 10 years, as the loan was structured, it meant he’d pay around $25,000 in interest on top of the $19,000 that he owed. The interest was higher than the debt itself.
According to the Texas Consumer Credit Commissioner, these types of loans are becoming more and more common. In 2008, there were 12,078 of them, but 2013 saw a jump all the way up to 15,738.
For the lenders, there is little risk, as a foreclosure would mean they got their money back. The risk is all on the homeowners.
It’s very important to know what you have to pay for your real estate and to know all of the legal ramifications of taking out a loan to cover the costs.
Source: Houston Chronicle, “Sandberg: ‘Cooling off’ period would help loan customers — 10-day delay would allow consumers needing to pay property taxes a chance to seek alternatives,” Eric Sandberg, May. 13, 2015
It can be helpful to have a guide leading you through the process of a real estate transaction. In some cases, what might seem like a simple property transaction can become quite complex.
In Texas, title companies can handle closings. Some buyers and sellers have very simple home title transfers that a closing attorney handles well. In these transactions, there are clear titles and no financing issues to create stumbling blocks.
Real estate attorneys generally have experience handling more complex transactions and litigation involving land or financial disputes relating to real property. As noted on our real estate practice page, these can include boundary controversy, clouded title resolution, zoning issues, intricate purchase or sale agreements and landlord/tenant disputes. Commercial real estate transactions may involve multiple parties, each of whom brings to the negotiating table issues to be resolved.
Working ahead of the game to understand legal ramifications and plan for negotiation can minimize potential problems or contention among parties to the transaction. Common legalities that can arise during real estate transactions might include lien holder questions, tax issues, disputes regarding various property rights and creditor claims.
An important thing to remember when dealing with any real estate transaction — no matter how simple — is that a thorough understanding of anything you sign is critical. Real estate documents often contain complex language that can affect each party. Your signature might create a vulnerability in the future, particularly if you develop a legal concern with the property or intend to sell it later. By seeking a knowledgeable review of any contract, you can reduce the chances of problems in the future.
A short sale may allow you to purchase a home for less than you would pay on the traditional market. To do so, you simply offer to buy out the loan for less than that loan is still worth. This often happens when the alternative is a foreclosure.
For instance, someone may purchase a house for $300,000, but then he or she may find that the home is not really affordable for a variety of reasons, such as unemployment and the loss of a career. As a result, that person may stop paying entirely and be threatened by the bank with a foreclosure.
You can then step in and tell the bank that you’d like to buy the house, but you’re only willing to pay $230,000. Banks will not always accept this but if they do, you get the home for $70,000 less than the previous owner, meaning you’ve gotten a tremendous deal. Though the process can be long, people in Texas are sometimes willing to wait it out for such significant savings.
So, why will the bank accept less than is owed? Quite simply, the bank is going to lose money with a foreclosure anyway. That process can be even longer, and every month without a payment is money lost. The bank then has to invest even more time and money in trying to sell the home, after putting a lot of time and money into foreclosing on it. The short sale is not ideal, but it’s often easier and more attractive to the lender, and it ensures that the home is sold again very quickly.
As noted, short sales are long and complex, so be sure you know what you must do from a legal perspective.
Source: Foreclosure.com, “Real Estate Short Sales,” accessed April. 20, 2015
El Paso residents who are still struggling with a resolution to get out from under mortgage debt they cannot pay may still have a chance for debt forgiveness on a portion of their outstanding balance.
While we hear a lot about the economic recovery, there are many homeowners who are still struggling financially and are underwater in their home mortgages. Being behind in mortgage payments leaves homeowners with several options: loan modification where a portion of their debt is written off or the late balance tacked to the end of the loan, a short sale where the house is usually sold for less than it is worth or a deed in lieu of foreclosure. The problem is that when debt is written off by a lender, either through a short sale, loan modification or deed in lieu of foreclosure, the amount written off is treated as taxable income by the Internal Revenue Service.
The Mortgage Forgiveness Debt Relief Act, which was imposed by Congress during the economic downturn, allowed the IRS to exempt taxing the amounts forgiven; however, this Act expired at the end of 2014. It is no longer available to those still struggling and hoping for a debt forgiveness from their mortgage holder in 2015.
The good news is that there are a couple of senators who are fighting to have a bipartisan bill passed that will extend the Debt Relief Act until the end of 2016. Senator Dean Heller of Nevada and Debbie Stabenow, senator of Michigan, are both representatives of areas that have been hard hit in the real estate market over the last few years. Negative equity in homes is still a problem across the entire country. If this bill passes, it will be a relief to many individuals who are still struggling and financially distressed.
Source: Los Angeles Times, “Mortgage debt forgiveness still a taxing issue for many short sellers” Kenneth R. Harney, Mar. 15, 2015
A seller’s disclosure is simply a document that relates information about a property to potential buyers. This is done so that the buyer really knows what he or she is getting and so that there are no surprises. However, some things that you may think should be included are not actually required in Texas. It’s very important to know how this works.
For example, many buyers will want to know if someone died in the house. However, if that death was a suicide, an accident or just a death from natural causes, the seller is under no obligation to tell the buyer about it. However, if the accident only occurred because the property itself is unsafe in some fundamental way, a seller may have to disclose this so that the buyer knows what repairs and upgrades are needed.
Additionally, when an inspection is done and the home fails this inspection, making it so that a sale doesn’t take place, the seller is not obligated to give that inspection report to the next potential buyer. However, the seller does, as noted above, have to disclose defects and problems with the home that are already known. Therefore, if those things are in the report, it’s not a bad idea to give this inspection report to the next potential buyer, even though the law does not directly require such action.
Finally, if there is a sex offender living near the home, the seller does not have to lawfully disclose this fact to potentially buyers. It is up to those buyers to do their own research on the sex offenders registry and to learn about the offender on their own.
Source: Texas Association of Realtors, “12 things you should know about seller’s disclosure” accessed Feb. 20, 2015
When you are purchasing a home in El Paso, Texas, is it really necessary to have a home inspection?
Yes, it is. A home is an important purchase. You need to know of any potential problems that could cost you a lot of money down the road. A home inspection is transparency when buying a home. If the roof leaks or the house has termites, you need to know. The home inspection will also tell you many things about the house, such as how old the roof is and when it will need replaced. It will tell you how old the central heating and air conditioning system is and many other important factors.
What if the house fails the inspection? A house never really “fails” the inspection because it is meant as an examination to tell you what condition the house is in. There are no regulations that it has to pass and the house will not be appraised by the home inspector. The reason for the inspection is to not only let you know the problems, but it can also be a source of negotiation if you still plan to buy the home. You might be able to request that the current owner take care of any major problems or at least deduct them from the cost of the house.
Do I need to call a home inspector when purchasing a home? If you have a real estate attorney who is assisting you with your purchase, he or she will probably handle this for you. A real estate attorney can actually handle every aspect of purchasing your home from start to finish. They can check any zoning laws, do title searches, review any contracts for loopholes that could leave you vulnerable and even draft agreements and contracts for you.
Source: American Society of Home Inspectors, “Frequently Asked Questions on Home Inspections” accessed Jan. 21, 2015
Despite careful planning and attention to detail, a number of unexpected issues can at least temporarily stop real estate transactions in their tracks. Title issues are one such example of these costly delays. Problems clearing titles crop up frequently for those trying to close on real estate deals.
Some of these issues include: A separate party claiming ownership; one or more liens on the title; fraudulent title transfers; judgments against the property including creditor judgments and divorce decree judgments; titles involved in foreclosure proceedings; titles naming the wrong person as owner; and many others. Any one of these can create time and money-sucking legal issues, effectively derailing real estate transactions.
For developers and entrepreneurs who are not familiar with real estate law, title issues can even result in losing the property altogether, often without recovering any initial investments already made. While a good way of preventing these delays is executing careful due diligence into the property before signing anything or spending any funds, investors cannot always anticipate title issues. This is where a real estate attorney can save the day.
Attorneys understand local geography, the types of legal issues that may arise and successful legal techniques to help avoid disaster. Even better, they can quickly and easily perform preliminary tasks like titles searches and looking into the title’s history. In short, getting legal representation ahead of time enables real estate transactions to proceed smoothly, quickly and in a hassle-free manner.
If you are an investor, develop or in some other way involved in real estate, our informative web pages on the legal issues of making Texas real property deals can help you determine what, if any, legal representation you may need.
Not every real estate transaction is a positive experience, especially for individuals who are dealing with things such as disputes, short sales or foreclosures. There are some easy things Texas residents can do to improve the quality of a real estate transaction, including increasing the value of an offer or finding better alternatives to foreclosure.
One way to seek more positive real estate transactions is through strong communication. Use all communication tools at your disposal to speak with lenders, buyers, sellers, agents or attorneys involved in the process. Depending on the situation, appropriate communication may include phone calls, face-to-face conversations, emails and mailed letters. In some situations, such as foreclosures, you may want to talk to any third-party representative helping with the issue before communicating.
Staying organized helps with home purchases, sales or possible foreclosures. Understand any deadlines for paperwork and payments, especially with regard to foreclosures. Lenders may send letters detailing when they will take action; by taking action yourself before those dates, you could change the outcome of the foreclosure to your favor.
Seek education. Real estate agents and attorneys can offer valuable information that helps you make a more informed decision about any real estate process. From knowing which forms are required to understanding the legal language in a contract, educating yourself about the process helps you protect your future and avoid common mistakes in real estate transactions. A third-party advocate also helps you cut through any emotional ties to property or stress about the situation to make better decisions for your family. Considerations during real estate transactions should include personal finances, family stability and goals for the future.
Source: Green Bay Press Gazette, “Ten tips toward a quality offer on a home” Nov. 07, 2014
It’s no secret that El Paso is a growing city in Texas. But, for a city to grow, land development must take place. This might mean new homes, businesses and neighborhoods are being built where there once was nothing but undeveloped land.
However, to build these new structures, you need water. Water lines and waste areas must be planned and put in place. Electricity is also a necessity for new development. There are costs involved with this part of the land development also.
The El Paso Water Utilities has a plan already drawn up for the expansion of a water treatment plant that should be able to handle growth for five years in the northeast and eastside of El Paso. A proposal to implement an impact fee to cover these costs has been initiated, which according to the EPWU can offset the costs without raising rates for existing customers.
Opposition to the impact fee, as expected, is coming from those who will be affected by it: the Capital Improvements Advisory Committee, developers and homebuilders. This means they would have to pay an impact fee for every new home built in the area.
According to the vice-president of the El Paso Association of Builders, this may cause builders to buy land and build in other locations outside the city limits. He also alleges that the costs will be pushed down to the homebuyers making it harder for Texans to qualify for mortgages.
Implementation of this impact fee may end up being a negotiation between real estate brokers and the homebuilders. Homebuilders may chose to tack on the cost of the impact fee to the price of a new structure or negotiate with the borrower’s real estate broker to add it to the purchasing fees.
Source:El Paso Inc., “Impact fees spur debate over who should pay for new growth” Alberto Tomas Halpern, Feb. 28, 2014
The housing market has been fraught with financial woes in the last few years. Many homeowners have faced the plummeting values of their homes, as well as being upside down with their mortgages. Foreclosures and short sales do not have to spell disaster for the typical homeowner. There is life after a short sale.
As the market appears to show some nascent sign of life, many homeowners are wondering what their chances are of qualifying for a mortgage after a short sale. Recommended are determination, above-average credit and not losing sight of the dream of ownership. According to some real estate experts, it is a common belief that those who walked away from their home with a short sale, may find it easier than expected to qualify for a loan further down the line.
After going through a short sale, the average waiting time to requalify could be from two to seven years and contingent upon the amount one can put down. Variables include the type of loan one seeks, as well as whether or not the loan is for a U.S. Veteran. Qualifying for a federal loan seems to be the most expeditious route to go, but the buyer should be ready to answer questions about the reasons for a short sale. Less-risky choices for a lender point towards non-financial variables such as job transfers above walking away from an upside-down mortgage.
Having a second chance involves paying off debt and saving money for a down payment. Efforts can pay off with a low interest rate and reasonable loan-length. One expert cautions that errors on credit reports must be corrected so the borrower is not saddled with the stigma of a short sale. Incorrect information on a credit report will add waiting time to the process. Recommendations are to keep meticulous records and documents and watch the calendar. Seven years can go by all too quickly. Your second chance at owning a home in Texas might be just around the corner.
Source:chron.com, “It’s possible to get a mortgage after a short sale” Polyana da Costa, Dec. 05, 2013