Thursday, August 30, 2007

New Home Sales Up Nationally (but down in the Midwest)

After a 4 percent drop in June, sales of new homes rose 2.8 percent in July to a seasonally adjusted annual rate of 870,000 units, according to the U.S. Department of Commerce.

Sales increased 22.4 percent in the West and 0.6 percent in the South during July. However, sales dropped 24.3 percent in the Northeast and 0.9 percent in the Midwest.

The median price of a new home in July was $239,500, up 0.6 percent from last year. The average home price, however, dropped to $300,800 in July, down 3.4 percent from last year.

Wednesday, August 29, 2007

Objectivity and mortgage counseling in real estate...

The whole subprime mess has gotten me to thinking:

A. Should I (and real estate lawyers in general) be more actively involved in lets call it "mortgage counseling" during residential real estate transactions?

In a typical residential real estate transaction I'd say I'm somewhat "hands off" regarding the mortgage process. We'll actively be involved in timing stuff like a buyer's lender getting an unconditional approval to close. And at the closing we'll look through the mortgage and note closely. Once in a while we'll hold lenders' feet-to-the-fire a bit on their "processing" fees too. But the fact of the matter is by the time you're at the closing table it's usually too late to do much other than knock off a few fees. I think at a minimum during our initial client contract review I'm going to start asking about mortgage terms/rates. Perhaps always ask for the initial lender Good Faith Estimate too.

B. Should lawyers ever be involved in mortgage/funding origination?

I don't think so. I used to work at a firm where some of the lawyers were loan originators with Capital Funding that is part of Attorneys Title Guaranty Fund. But doesn't this begin to diminish your objectivity? I don't know I just see sooo many people in the real estate transactions whose motives are not 100% to the client/customer. Isn't there a certain honor in just being committed to your client and to flat-out objectivity??

Another resource...

The Neighborhood Assistance Corp. of America claims to have refinanced 30,000 owners out of a special $1 billion fund.

Neighborhood Housing Services of Chicago

I've heard some good recent testimonies about the above...various City of Chicago housing programs and counselors for those in financial difficulty:

Monday, August 27, 2007

End of closing; end of representation

This post relates to a difficult closing recently and it spurs two questions in my mind:

When is a real estate transaction closed/done & when is my representation as lawyer over?

This really happened, all documents are signed (buyer's mortgage stuff & seller's transfer docs) and the only thing we're waiting on is one of the buyer's mortgage wires to hit at the title company. Seller is very frustrated with the delay and as we're waiting she says she wants to get out of the deal. Can she? I honestly don't know the answer. In our real life situation the wire came eventually and the deal closed, but I'm just wondering.

Second question? My concern here was a difficult transaction we had lately and to be frank any and all problems were our clients fault. He was totally unreasonable and failed to honor various dates, ect. Well, he didn't provide a couple of minor things at the closing...condo assessment coupons and a set of keys. I don't want to deal with our client any more. Buyer's lawyer has contacted me about items or paying for them. Other than forwarding documents to client, I consider our representation completed. It's not court where you're attorney of record for 30 days after the final hearing. That's my view.

Back-to-back buy/sell closings

We had one of our most unpleasant real estate closings recently and it all boiled down to our client's unwillingness to "rent back" her home for one day because she didn't want to pay her buyer. There were some unique personalities involved in this situation to be sure. But at our client's sale the buyer's wire was slow to hit so our client's waiting around and getting frustrated and her movers were planning on charging her more, ect. And this is SOOOO foreseeable.

And monetarily it's a wash...$50 or whatever for a one day possession escrow is likely going to be about equal to one days mortgage interest on a follow-up buy.

Wednesday, August 22, 2007

Foreclosure first then I.R.S. troubles

Saw an article in the Times about the large tax bills that foreclosure victims receive after the foreclosure is done...ostensibly for debt forgiveness.

The 1099 shortfall, as it is called, stems from an Internal Revenue Service policy that treats forgiven debt of all types as income even if the taxpayer has nothing tangible to show for it, unless the debt is canceled through bankruptcy.

Interesting, I wasn't aware of this potential. I've had these 1099s in divorce cases personally where we'll try to negotiate down some debts and then the party would receive a 1099 for the debt that was forgiven. But other than the situation where the mortgagor owes more than the value of the house, why should the foreclosed party be getting a 1099 for debt forgiveness?

The article makes is sound like the lenders can really manipulate this based on the appraised value of the real estate.

Fewer real estate agents predicted:

Saw this prediction from NAR about a predicted 7% drop in number of real estate agents. No surprise...probably smaller than I would have guessed.

Saturday, August 18, 2007

How to play the current mortgage environment?

From what I see:

1. Use a large, full-service bank rather than the small mortgage only players.

2. Lock in your interest rate if you're closing within 60 days.

Title Indemnities at Chicago Title

Just an FYI, CT is requiring three times the first installment tax bill to be held as a title indemnity for Chicago closings as we get near property tax time. The explanation we were given was that since our friends down in Springfield have not renewed the 7% tax cap that they're expecting big tax increases for Chicago on the next bill. This can be a decent chunk of change for clients to produce pre-closing.

Learn from me, warn your clients of this right up front about this. Granted, it's just an escrow deposit really, but people get freaked out. I had a closing yesterday where I should have prepared the clients up front on this and didn't and they were a little freaked when they needed another $2,000 for the closing.

Wednesday, August 15, 2007

The Titanic is not sinking...

Saw this piece here from the Trib. yesterday regarding an IL Association of Realtors report about housing sales. Here's its press release.

While home sales in Chicago dropped 19 percent from last year's second quarter, prices increased a modest 2.6 percent to a median average of $256,400, according to a Illinois Realtors report released today.

Total home sales statewide (which include single-family homes and condominiums) totaled 43,080, down 16.1 percent from 51,332 home sales in the second quarter of 2006.

A quote from IAR:

"Most counties reporting saw home sale prices stabilize or uptick year-over-year during this period, which is a good indicator that the housing market is healthy in Illinois," said Robert Zoretich, president of the Illinois Association of Realtors."

A 16.1% drop as GOOD NEWS, hmmm...a) how does this misinformation help consumers? b) why do reputable news organizations put out this fluff without at least an alternate/unbiased perspective?

Monday, August 13, 2007

International home buyers...

Another nugget from NAR:

Nearly one in five Realtors has sold a home to an international client in the past year, according to new research by the National Association of Realtors (NAR). Among the other findings reported in the 2007 NAR Profile of International Home Buying Activity.

Home features survey

People may be paying more at the gas pumps these days, but, according to a recent survey by the National Association of Realtors (NAR), that has not kept oversized garages from being a high priority among homebuyers.

Since the last survey in 2004, oversized garages saw the biggest growth in terms of what buyers consider "very important," increasing 16 percentage points to 57 percent. Among buyers who purchased homes without this feature, 56 percent said they would have paid more for an oversized garage, compared with only 6 percent in the 2004 survey.

Also considered "very important" by homebuyers were:

**air conditioning (75 percent),
**a walk-in closet in the master bedroom (53 percent),
**hardwood floors (28 percent),
**granite countertops (23 percent),
**cable/satellite TV-ready (46 percent) and
energy efficiency (65 percent among new-home buyers, 39 percent among buyers of existing homes).

For more information on these and other findings, read the NAR’s summary of its "2007 Profile of Buyers’ Home Feature Preferences."

Realtor survey results...

Data sharing, security and consolidation of Multiple Listing Services (MLS) are top concerns for Realtors and MLS executives, according to the 2007 REALTOR® MLS Technology Survey.

Respondents to the fifth annual survey, which describes MLS trends and technology practices, showed strong interest in expanding MLS service territories.

--Nearly one-third of respondents favored a statewide MLS, up from 19 percent last year.

--Twenty-seven percent said a market area or Metropolitan Statistical Area (MSA) would be ideal, while 21 percent preferred a larger market region within the state.

--Nearly one-third of respondents have reciprocal data-sharing agreements with other MLSs, and another 23 percent have considered data sharing.

--Nearly two-thirds said their MLSs make use of a RETS interface, allowing brokers, third-party software vendors, Realtor associations and MLSs to share real-time data, regardless of the type of software they use. This is up nearly 47 percent from 2005.

--Three-fourths of respondents believe their MLSs have taken security issues more seriously this year than in the past, but only 42 percent said their organization has a written security policy.

--Twenty-seven percent of MLS respondents said they are currently using two-factor authentications, such as a key FOB or USB device, which are more secure methods for users to access MLS systems than the traditional user ID and password combination.

MLS service regions commonly expand through consolidations, which the survey also shows are on the rise. Thirty percent of those surveyed said their MLSs had already consolidated with one or more MLSs, up from 15 percent last year, and another 38 percent are considering consolidation.

The most popular places for MLS to place listings are, their local public MLS site and the local Realtor association website. The most commonly shared property information that MLSs send to third parties are photos, amenities, address and tax information.

Free MLS listing

Anyone used this site: Iggys House? It claims to be a free service that puts your home on the MLS.

Friday, August 10, 2007

Another intersting attorney approval clause case:

Jennings v. Baron, No. 2-06-0826 (July 26, 2007) Trial court erred when it granted summary judgment to plaintiffs, prospective sellers, for breach of contract allegedly committed when defendants refused to purchase their home. Buyers' attorney successfully invoked provision in attorney approval clause allowing him to declare contract null and void after parties failed to come to successful resolution of his request, to add provision conditioning buyers' obligation on mortgage company's appraisal setting value at no less than contract price.

Post-divorce, judgment enforcement & real estate closings...

A somewhat humerous but instructive experience we had this week involving all of the above. Fortunately it played out in the best way for my client but it should be instructive.

The background is that my client was held in contempt of court for failing to follow a court's order regarding some provisions of a divorce judgment...mediation/visitation refusals, ect. Plain and simple after a hearing she was proven wrong and in this instance the court then has the authority to require the violating party to pay the other parties attorneys fees. Court orders our client to reimburse the other party for a few thousand dollars in attorneys fees and a judgment is entered against our client. Here's where things get interesting and where the interaction with real estate comes into play.

Meanwhile my client (wife) is in the process of selling a home and leaving the Chicago area. And one of the easiest methods of judment enforcement is filing a lien against real estate (which the husband attempts to do here). But the husband doesn't know how to properly file a lien...he first files a bogus lien for more than the proper amount before the judgment was entered and then he attempts to correct it and again files an invalid lien. Well, the bogus lien comes up on a title company search and we rush into domestic relations court on an emergency motion to Release the Lien. The court ends up releasing both the bogus lien (which was not real and the amount was wrong) and the husband's second & faulty lien recording. Husband's lawyer then does file a proper lien against wife's property, fortunately he does this the day AFTER wife's real estate closing. Ah...poetic justice! Real estate closing happens and my client is gone.

Teaching points/questions:

--Personally I think as lawyer, if you're getting a judgment you should be locking up real estate with liens...not leaving it too clients; it's quick & simple if you know what you're doing.

--In Illinois, a judgment is converted into a lien on real estate by (1) recording a transcript, certified copy, or memorandum of judgment; or (2) recording a certificate of levy. 735 ILCS 5/12-101...just getting a judgment in court does NOT create the lien.

--My question, what would have transpired for my client, judgment holder and the buyer of the real estate IF judgment lien would have been perfected before the closing date but too late for the title company to see it? Post-closing a later date title search would be conducted and then it would be found but then what's the result? I honestly don't know...anyone??

Capital One changes credit scoring

Capital One Financial Corp. says it will report cardholders' credit limits to the three national credit bureaus -- a step that could boost the FICO scores of some of its 50 million card customers by 40 to 80 points or more in a few months. Here's an article on the move.

As many of you know, this failure to report credit limits often artificially depresses credit scores by lowering a persons "utilization of available credit" i.e. how much cap room do you have on your credit cards.

I think a fair generalization to remember is that when you're dealing with credit card companies and insurance companies, unfortunately, you must treat these relationships as extremely adversarial and CYA. From things like "credit limits" that really aren't limits to misrepresentations about COBRA deadlines...these are areas that I must be the "asshole" lawyer even in my non-professional life. I recall a good quote from a seminar, "those insurance companies don't build the huge and stunning buildings by paying out claims."

Friday, August 03, 2007

Unlisted property inspection defects...

Another sort of interesting question that came up lately in a real estate transaction. Client/buyer does typical property inspection pursuant to Professional Inspection and licensed inspector returns his report. However, there's a problem that inspector does NOT include in the report. Is this something that we can use to kill the deal under the Professional Inspection contingency?

I think it is. The contingency covers major components that are defective. Inspector SHOULD include everything in his written report. We resolved the situation by having another repair person review and give an estimate on the "unwritten" defect and then Seller gave us a nice credit. But something to think about...

Jumbo reverse mortgages

Some of these new "jumbo" reverse mortgages might be worth a look. The popular Home Equity Conversion Mortgage by FHA is capped at $363,000. Here's Bank of America's program. Allows 62+ folks to payoff a firt mortgage and get some cash out.

Mortgage class action suit

Click here if you took a mortgage from Town & Country Credit Corp., Ameriquest Mortgage Co. or AMC Mortgage Services. The IL attorney general has sent letters to 22,000 IL consumers who took a loan between 1/99 and 12/31/05 regarding a possible class action lawsuit.

Will the earnest money ever get released?

So we were involved in a real estate transaction where we cancelled the contract during the attorney review period. For whatever reason (bitterness?), Seller's listing agent doesn't refund earnest money. The home sells within the week for larger amount than our contract. So I surely don't see any possible claim that Seller was damaged...even if we/Buyer was wrong in handling the contract.

Question: Ethically, can listing real estate agent ever release the money w/o written approval by both parties? We're considering using the Chicago Board of Realtors arbitration system...not enough money to sue but just a funny question...will the money just sit in the real estate brokerages account forever?