Massachusetts Homeowner Oil Heating System Upgrade and Insurance Law(click for Fact Sheet)
By September 30, 2011, you must upgrade your home heating system equipment to prevent leaks from tanks and pipes that connect to your furnace. By making a relatively small expenditure now, you can prevent a much greater expense in the future.
The new rules:
Residential property owners of 1-4 units who heat with oil must:
Enclose fuel lines that lead to and from the tank in a continuous non-metallic sleeve, or
Install a safety valve (or other Board approved release prevention method) at the tank-end of the supply line.
Get the work done by a licensed oil burner technician, whether an independent or one employed by your oil supplier.
The law applies to both above and underground tanks and to any fuel supply or return lines in direct contact with concrete, earth, or other floor surface.
Are you exempt from the new law?
You’re exempt if:
Your oil burner is above the storage tank and the entire supply line is connected to, and is above, the top of the tank, or
A safety valve or supply line with protective sleeve was installed on or after January 1, 1990, as long as those changes comply with oil burning regulations (proved by an oil burner permit from the local fire department, or a certificate from a licensed technician).
The law does not allow for grandfathering.
Why take required preventive measures?
It makes financial and environmental sense because:
You’ll avoid the disruption and expense that can be caused by leaks.
You and your family will not be exposed to petroleum vapors in your home.
The soil or groundwater beneath your house will not be contaminated.
You won’t face a costly cleanup to restore your property—and possibly nearby property and drinking water supplies—to state environmental standards.
Cleanup costs for a “simple” leak can be as much as $15,000, but if the leak affects the groundwater, or is more extensive, costs can reach $250,000 or more.
You can be covered!
Your insurance company must now offer you oil spill coverage if you’re already in compliance with the new law or you make the modifications needed to achieve compliance. Many companies already provide coverage; others will add it for an additional premium.
Please contact Nadine Heaps at 508-881-6680 for assistance.
Mortgage Guy Brian Cav has been riding the Massachusetts mortgage rate roller coaster this week! Seems like the Fed’s new Quantitative Easing II policy has got the market jumping all over the place. Well, here’s the lowdown from BC:
Brian Cav
Wow, I am at a lack of words for what has happened over the past week with Mortgage Rates. Rates have changed up to 5 times per day since last Wednesday. We are just now starting to see some stabilization after a week of bad mortgage market losses.
Most Lenders are offering 4.25% with 1 point of origination for a 30 year fixed with standard costs. The same can be said at 3.75% for a 15 year fixed. You must have a 740 FICO credit score or better and enough equity in your home to refinance or standard down payment requirements on a purchase. Jumbo 30 year and 15 year fixed along with 5/1 ARMs are very near all-time lows as of today. Jumbo Mortgage financing requires a 80% loan to value or a 20% down payment on purchases.
Inquire within for current MortgageRates or guidelines at [email protected] 617.771.5021
Economic Data
Wednesday’s bond market has opened in positive territory following the release of favorable economic data and a relatively flat open in stocks. The stock markets don’t appear ready to rebound from yesterday’s selling with the Dow up and the Nasdaq up. The bond market is currently up 5/32, which with yesterday’s afternoon strength should improve this morning’s mortgage rates by approximately .25 of a discount point over yesterday’s morning pricing.
There were two reports posted this morning. The first was October’s Consumer Price Index (CPI) that showed weaker than expected inflation readings. The Labor Department said that the overall CPI reading rose 0.2% and that the core data was unchanged from September’s level. Both of these readings were just shy of forecasts, meaning inflationary pressures were not as strong at the consumer level of the economy as many had thought. That is good news for the bond market and mortgage rates, but did not come as too much of a surprise after yesterday’s PPI numbers.
The Commerce Department gave us today’s second piece of data. They announced that construction starts of new homes fell 11.7% last month, falling to their lowest level in the past year and a half. This is favorable data for the bond market and mortgage rates since it indicates housing sector weakness. Unfortunately, the data is not considered to be highly important, preventing it from influencing this morning’s mortgage rates by much.
The final monthly report of the week will come from the Conference Board late tomorrow morning when they release their Leading Economic Indicators (LEI) for October. This is a moderately important report that attempts to predict economic activity over the next three to six months. It is expected to show a 0.6% increase, meaning economic activity will rise fairly rapidly over the next couple of months. Generally speaking, this would be bad news for bonds. However, since this data is considered only moderately important, its results need to vary by a wide margin from forecasts for it to affect mortgage rates.
Also tomorrow, the Labor Department will give us last week’s unemployment figures. They are expected to announce that 442,000 new claims for unemployment benefits were filed last week. This would be an increase from the previous week and considered good news for the bond market. However, since this is only a week’s worth of new claims data, its impact on tomorrow’s mortgage rates will likely be minimal. The larger the number of new claims filed, the better the news for the bond market and rates.
FLOAT or LOCK
If I was closing on a Home Mortgage in the next 0 to 15 Days – FLOAT
If I was closing on a Home Mortgage in the next 15 to 30 Days – FLOAT
If I was closing on a Home Mortgage in the next 30 to 60 Days – FLOAT
If I was closing on a Home Mortgage in the next 60+ FLOAT
This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.
Are you a possible Massachusetts First Time Home Buyer?
Do you have a Real Estate client inquiring about current Mortgage Rates?
Do you have any Refinancing questions?
Should you be thinking about Refinancing out of your ARM (Adjustable Rate Mortgage)?
OK folks, you want to know what your house is worth? Stop obsessing over your town assessment and online estimates. At the end of the day, your house is worth what someone is willing to pay for it.
But while you follow the sale prices of your neighbor’s house and e-mail me to ask what your house is worth (sight unseen), I’ll explain to you that it is neither an exact science, a mathematical equation, or a guesstimate. So many factors go into the value of your house. In this case, perception is, for the most part – reality. The location, the condition, the square footage, the updates, the amenities, the lot, the neighborhood, the neighbors, proximity to school, the floorplan – and so much more. Size matters, but it’s not the only thing.
It’s so easy to want to use the two words interchangeably, but please know that an assessment and an appraisal are totally different things.
ASSESSMENTS: (Think – measurement rhymes with assessment) Assessments are based upon the town’s opinion of value of the land and the value of your house, based on the measured square footage and condition (excellent, very good, good, fair and poor). The square footage includes everything in the house – closets, hallways, two-story foyers, stairways, etc. So, although you may add up the square footage from each room, it’s not the same. The taxes you pay are based on your assessment. Years ago, houses were priced close to, or above, their assessed value. If a house were priced below the assessment, it was featured as a fabulous thing. Priced WAY BELOW assessment, translated, meant: “Don’t forget your checkbook as you’re running like a madman to the open house.”
These days, assessments may be in the general vicinity of the asking price. Not a lot of weight is placed on the assessed value as it compares to the true market value. Most are priced around the assessed value, especially if they sold in the past 10 years. The assessor’s office does not take into account all of the items within a house that a buyer perceives as valuable (age of systems, paint vs. 1970s wallpaper, neighborhood full of kids the same age, master bathroom rivaling the one at the Four Seasons in Nevis, etc.) Just the square footage, value of the land and the town’s rating of the neighborhood.
APPRAISALS: An appraisal is a valuation made mathematically by a real estate appraiser for the purposes of providing security to the lending institution. The bank wants to be sure that the money it is loaning – for a refinance, home equity loan, line of credit or a purchase – can be recouped in today’s market if the owner defaults on the loan. Essentially, they need to know that they would not have a problem selling the house for the amount borrowed.
The appraiser formulates his/her appraisal based on the sale prices of the houses nearby that would be comparable for the square footage, the amenities, and the condition. In some towns, it’s not necessarily apples to apples, because a house down the street may have been foreclosed upon, thus skewing the value of the subject property.
Appraisals used to be more of a formality, and now they are extremely strict. As a result of the mortgage debacle, banks have cracked down and the rules have changed. Banks used to be able to communicate with the appraisers – now they have been prohibited from having direct communication. If you have recently refinanced and your appraisal came in at one price, it doesn’t necessarily mean that that price is what you would get from a buyer if your house went on the market.
ZESTIMATES: I think Zillow is an entertaining and somewhat informative website. It is a great site to search for homes and to take advantage of all of the interactive features. The “Zestimate” is Zillow.com’s term for “estimate of the value of your house.” For houses in Middlesex County, Zillow states that its accuracy is 99 % of the homes in Middlesex County that are on Zillow. Ninety-nine percent of homes in Sudbury are on Zillow. Ninety-nine percent of those have “Zestimates.” Of that 99%, only 32% sold within 5% of their Zestimate. Fifty-eight percent sold within 10% of its Zestimate and 82% sold within 20% of its Zestimate. Median error is 8.3%.
Dizzy? This means that if your Zestimate is $800,000, your sale price may be closer to $640,000 or $960,000. It’s a pretty big spread! So, fun site – yes. Accurate – not really. Why? The information pulled by Zillow is information that is available online – and if one piece of data is incorrect (it happens all the time) then everything is skewed.
Zillow does not know what streets are busy, what houses have just updated their kitchen and bathrooms, furnaces, roofs, etc. Zillow also does not know the motivation of sellers. So, if your neighbors won the lottery and just wanted to sell the house so they could sail around the world and sold for about $50K less than they could have – according to Zillow, your house just went down $50K, also.
Unless he or she has a really good sense of humor, please don’t tell your real estate agent that you disagree with his/her extensive analysis because your “Zestimate” states “X.” It would be like telling Todd English that you know how to make his signature dish because you just Googled the recipe. So, enjoy the site, have fun searching, reading the real estate news, etc., but don’t get excited or freak out because of your Zestimate. It will likely change the next time you log on.
COMPARATIVE MARKET ANALYSIS: This is the best, and most accurate, way to know the value of your house. A comparative market analysis is written by a real estate agent. It would best completed by an agent who knows the market, knows each house that your’s would be compared to, and has his/her hand on the pulse of the buyers. A real estate agent preparing the market analysis should take into account everything about your house – the square footage, the condition, the style, the location, the demographic of the potential buyers, the market conditions, the intangibles, and the perceived value within the town.
We then analyze the house in comparison with the houses that are on the market, have accepted offers, are under agreement and have sold (closed). A market analysis conducted today would not include sales from the spring as it was a different market. It’s also very important to have a sense of what comparables appraisers will use when appraising the house for the buyer’s mortgage company.
So, assessments (pain in the assessment = taxes), appraisals (think = approximate), Zestimates (Zillow.com), market analysis (call me/real estate agent).
David Gaffin of Greenpark Mortgage, www.massmortgageblog.com, is here with a superb summary of what’s now going on with Massachusetts (and national) residential mortgage market.
The National and Massachusetts Mortgage Lending Picture
Lot’s has been happening in the Mortgage World lately. Refinance business is very good. Purchase business is fair, heading into the all important year end buying season.
I will let this post be a little more free-form than my taking a particular topic and expounding on it (or beating it to death) depending on your perspective.
FHA has changed guidelines… Again.
USDA is still not guaranteeing loans.
Fannie and Freddie need another $200 billion of taxpayer money.
Foreclosures stopped and started again. What could that mean to you and me?
The Fed is meeting on Nov 3 to either lay the hammer down on Quantitative Easing II or will do nothing and really mess up interest rates.
Refinance Now!
1. So you want to refinance? My suggestions: A. Get started now! Loan pipelines continue to be backed up. Remember the bad old days when rates were an exorbitant 4.75% for a 30 year fixed rate and everyone re-fied? When was that again? Oh, right. JUNE. Well many of those same people are now re-fiing again in the low 4′s, possibly high 3′s. And people who were late to the party are adding on. So don’t expect your file to be closed in less than 60 days. Many lenders are at 120 days for refinances. If you have a current home equity line of credit that you plan to keep open, add another 30 days or so.
It is not all doom and gloom. I know of many files that were closed in less than 45 days. Purchases always get priority and about 30-35 days is the requirement. If you lender can’t get it done in that time, well my contact info is below.
Don’t be cranky with your loan officer or processor when they request enough paper work to rebuild a forest. The secondary market has really toughened its verification guidelines, cause no one wants to be left holding the bag on a loan that goes bad. Everyone wants to ensure that the underwriting, appraisal and income verification has been double and triple checked.
Good news for Realtors
End of year buying season has begun and the clients that want to be in their new homes by year end must make some decisions soon. We should see a boost in P & S activity over the next 30 days. If that doesn’t come to fruition, it could be a long dark winter for many of my realty friends. But rates are great! If you bought the same priced home 2 years ago, you would have paid 5-20% more than current prices and your interest rates could have been more than 2.00% higher. Now is a GREAT time to buy. I know that is self-serving, but I am a numbers and value guy. I don’t like seeing the value drop in my house either, but if I were buying I would be psyched!
FHA has changed it guidelines again as of Oct 4
FHA needs money to keep guaranteeing its loans against default. Every borrower pays a fee to get into the program and to ensure its continuation. So the fees got changed. FHA lowered the UPMIP (up-front mortgage insurance premium) from 2.25% to 1.00%. Sounds good right? With one hand they giveth and the other taketh away. The monthly mortgage insurance will virtually all FHA borrowers pay has moved from .55% of the base loan amount to .84% monthly. On a $200,000 loan the old cost over 7 years was $12,200 and the monthly MI was $91.67. Now the projected expense is $13,760 and the monthly MI is $140.00. Most investors have now raised the minimum credit score requirement from 620 to 640. FHA is still the best choice for borrower’s with credit scores under 660 and who may have little equity or down payment or who need higher tolerance levels for debt to income ratios.
USDA Loans
The USDA which offers a great program, or at least did, can’t seem to get its funding in order and therefore cannot issue any conditional guarantees for loans. USDA offers several advantages over conventional and FHA loans but they are proving very hard to get. If you would like more information on the availability of these loans, send me an email.
Freddie and Fannie are in more trouble with losses.
Do we shut them off and let the private sector take over? We can but rates would rise dramatically and put an even further damper on the housing market. Given that TARP actually turned a profit, I think any additional funds to rescue the GSE’s should have an opportunity for the taxpayer to make a return on the re-sold properties even if it takes years to divest the shadow inventory that they own.
Foreclosure Mess
Speaking of shadow inventory… Foreclosures are on again/off again/on again. For legal thoughts on this check out the Mass Real Estate Law Blog by Rich Vetstein and Marc Canner.
My thoughts are that although there will be a delay to ensure that the legal work has been properly done, people will unfortunately continue to lose their homes. Many will lose them due to the economic downturn or medical reasons. Others will have lost them to predatory lenders or poor decision making on their parts. I don’t really want to get started on “It was all the lender’s fault.” Needless to say, a reason the paperwork requirements exist today, is reliant upon the the lack of paperwork requirements and shoddy underwriting in the past.
I could write several scrolls on this whole mess, but I don’t wish to bore. It may already be too late.
Big Federal Reserve Meeting
Possibly the greatest short to mid-term driver for interest rates will be what the Fed decides or doesn’t decide to do at it’s next meeting. The market has baked in that the FED will ease monetary policy further. If they don’t come through in a big way the stock market most likely will drop and interest rates will rise. But how much will rates rise? Probably enough that any one who re-fied this summer won’t be able to do so again, or at least until some other economic driver comes to bear. So get off the fence and talk to your loan officer NOW.
We here at the Blog, through our new company, HubConnected, are proud to be a sponsor of the Inman News Agent Reboot Conference coming to Boston, Hynes Convention Center on October 13th! We’ll be there with a slew of social media savvy realtors from around Greater Boston, some of whom are already part of the growing HubConnected network!
Click here to find out more information about the Agent Reboot Conference–Boston. If you are interested in attending, let us know, and we’ll reserve you a space! It’s only $99.
Here is the agenda:
Must-Have Tools for the Agent with Mobile Mojo (Part 1)Get the lowdown on 10 leading cutting-edge technologies that will help you “reboot” the way you do business.
Presented by: Chris Smith, Co-Creator, Tech Savvy Agents, @techsavvyagent
From Clicks to Closings: Turning Your Online Marketing Strategy into a Lead Machine. Video, virtual tours, single property websites – there are dozens of options for marketing properties online. Not all methods are created equal though. Find out which ones will keep your pipeline of prospects full, while saving you time and money.
Panelists:
Kerm Foltz, VP of Sales, Market Leader, @market_leader
Mastering Social Media to Expand Your Reach Online. Learn how to develop a comprehensive social networking strategy to grow your sphere of influence. Agent Reboot’s experts will help you sharpen your online marketing skills with proven best practices for using Facebook, Twitter and other online services. Win friends, influence people, and increase sales!
Panelists:
David Black, CVO, SocialMadeSimple, @socialmadesimpl
Andrea Geller, Hot Property Chicago – Sudler Sotheby’s International Realty, @andrearealtor
Lifestyle Branding: Why it Matters. The traditional branding strategies used by the real estate profession no longer work. Connecting with today’s consumer is a whole new adventure. The last 8 years have changed the expectations of home buyers and sellers. Learn why life style branding is critical to your success moving forward.
Presented by:Sherry Chris, CEO, Better Homes & Gardens Real Estate @BHGRE_Sherry
Case Study: Managing Reputation and Content on the Web. Two experts will walk you through their journey towards a progressive Web strategy using social media. They’ll share lessons learned, offer tips, and show you the results of their efforts. Learn how to do it from people who have done it.
Presented by: Todd Carpenter, Social Media Manager, National Association of REALTORS®, @tcar
Grow Your Online Presence Presented by Zillow.com
Presented by: Michael Botefuhr, Manager, Partner Relations, Zillow.com, @MVBotefuhr
3 Secrets For Turning Internet Leads Into Transactions
Presented by:Daniel Rothamel, Founder of RealEstateZebra.com, @realestatezebra
Maximum Exposure: Publicizing Your ListingsMake sure your listings appear everywhere potential buyers are looking. Discover easy methods for syndicating listings across the Web to spread the word about your properties, and get simple tips for tracking results.
Panelists:
Charlie Engel, Vice President of Sales – Real Estate, Oodle, Inc, @oodle_RE
Chris Smith, Co-Creator, Tech Savvy Agents, @techsavvyagent
Must-Have Tools for the Agent with Mobile Mojo (Part 2). Get the lowdown on 20 MORE leading edge technologies that will help you “reboot” the way you do business.
Presented by: Chris Smith, Co-Creator, Tech Savvy Agents, @techsavvyagent
5 Rockin’ Reasons to Scrap Your Static Website and Go WordPress!
Presented by:Daniel Rothamel, Founder of RealEstateZebra.com, @realestatezebra
Going Local: What Does It Take to Win in Boston Real Estate?It’s no secret that the industry has had its share of ups and downs in the last year. So, what lies ahead? Hear from leading real estate professionals who are navigating the changing landscape, and find out what steps you should be taking to ensure success in the future.
Panelists:
John D’Ambrogio, VP Director of Strategic Development, Baird & Warner
Matt Dollinger, VP Company Solutions, @properties, @mattdollinger
Andrea Geller, Hot Property Chicago – Sudler Sotheby’s International Realty, @andrearealtor
In Massachusetts, the standard form Greater Boston Real Estate Board or Mass. Association of Realtors Standard Form Purchase and Sale Agreement (“P&S”) is almost always the governing contract between the Buyer and the Seller regarding the proposed property to purchase. Most Buyers submit an initial Offer to Purchase to a Seller, which spells out the terms of the contract. The P&S supersedes the offer, and can be thought of as the “long form” contract.
At first blush, the purchase and sale agreement, like most legal documents, can be difficult to read and comprehend. The best way to understand it is to divide the document into several sections.
Deal Terms
First, like all contracts, the purchase and sale agreement sets out the terms of the deal. These terms primarily are taken from the offer. This includes the names of the parties, the legal description of the property (taken from the current deed), the purchase price, the mortgage commitment date, the closing date, any Seller credits, and any agreed upon fixtures that will remain with the property or be taken by the Seller.
Second, the purchase and sale agreement deals with the title to the property and the deed. It lays out the framework for a conveyance (a real estate transfer) in Massachusetts. The agreement spells out that the Seller conveys the deed to the Buyer in return for consideration, then the deed is recorded and the Buyer becomes the owner of the property. However, in Massachusetts, once the deed is recorded at the proper Registry of Deeds, then any title issues “run with the land.” Thus, the new owner becomes responsible for any outstanding encumbrances or liens that were not properly discharged. In order to protect the Buyer, the purchase and sale agreement provides that the Seller must convey “good, clear and marketable” title. Acting as the buyer’s or lender’s counsel, or both, TitleHub attorneys will review the title exam and work with the Seller’s attorney to clear any title issues, so that the buyer will receive a certification of title and an owner’s title insurance policy.
Seller Responsibilities
Third, the purchase and sale agreement lays out the responsibilities of the Seller. This includes maintaining insurance and upkeep on the property until closing, obtaining a smoke and carbon monoxide certificate at closing, paying the broker’s commission, obtaining a 6(d) certificate for a condominium, and requiring that the taxes be paid by Seller up until the closing date (through an adjustment to the HUD Settlement Statement). The agreement also provides that the Seller’s agent (either the realtor or the attorney) holds the buyer’s deposit in an escrow account.
Anything But “Standard”
There is a note of caution about the standard form Massachusetts purchase and sale agreement. We like to say that it is anything but “standard.” The standard form provides several hidden advantages to a Seller. Thus, buyers must have an experienced attorney revise the agreement and flag those built in deficiencies. For example, if a Buyer were to default prior to closing, the standard form document provides no cap on the damages; a skilled attorney will know to cap the damages at the deposit. The same is true if a buyer loses his rate lock if there is a delay of the closing; a skilled attorney would use langauge to protect the buyer in this situation.
An experienced attorney will produce a Rider to the purchase and sale agreement that will have language that protects a Buyer’s deposit and provides an aggressive layer of due diligence. For example, if the Buyer is purchasing a condominium, the Rider should have the Seller make representations that the association is not contemplating any special assessments, there are no pending lawsuits against the association, and the budget is in good order. Other issues include seller repairs, septic system/Title V compliance, radon gas, UFFI insulation, lead paint, and buyers’ access to the property while it is under agreement.
If you have any questions on the purchase and sale agreement or your transaction in general, please contact Attorney Richard Vetstein at [email protected] or 508-620-5352.
The Massachusetts Homestead Law: $500,000 In Asset Protection
Buying a home, for most, is the single biggest investment homeowners will make in their lifetime. But what happens if you are involved in a car accident or run into serious financial trouble, and creditors are knocking on your door, threatening to place a lien on your home? A Massachusetts Homestead Act declaration can protect your single biggest asset in these situations. A Massachusetts Homestead Declaration enables all Massachusetts homeowners to protect up to $500,000 in equity from certain claims of creditors. It is one of the most overlooked and cost-effective asset protection devices in Massachusetts.
As part of every transaction we handle, we offer borrowers the option to record a Declaration of Homestead on their property. We charge a nominal fee for this service.
Highlights
While typically declared by the family member with the most income, an estate of homestead benefits the entire family.
The Massachusetts Homestead applies only to the principal residence. Investment properties or vacation homes are not covered.
The Massachusetts Homestead does not shield borrowers from mortgage debt used to purchase property, first mortgage refinances, federal and state taxes and liens, alimony and child support. A new homestead should be recorded after each refinance.
The Massachusetts Legislature is presently considering overhauling the homestead law in Massachusetts, including automatic coverage for all home owners. Please read our article on the changes.
A short sale is special type of real estate transaction between a homeowner, his mortgage holder, and a third party buyer. In a short sale, the homeowner’s mortgage company agrees to take less than what is owed on the outstanding mortgage, thereby being left “short.” In some but not all cases, the lender will agree to wipe out the entire debt. Many people believe that short sales offer bargain basement prices, but lenders will do their best to get as close to fair market value as possible so as to minimize their loss.
Short sales are a unique type of transaction and far different from the typical transaction between parties of equal bargaining power. Likewise, the legal aspects of a short sale are unique. We are well equipped to handle all types of short sale transactions.
Short Sale Approval Required
The most important legal issue in a Massachusetts short sale is to recognize the very nature of the transaction: there is no short sale without the consent of the mortgage lender. Thus, albeit obvious, the offer and purchase and sale agreement must reflect that the buyer’s obligation to close is contingent upon the lender’s approval of the short sale.
The Waiting Game
Another significant issue is timing. The typical time-line on a short sale can vary greatly from 45 days to 6 months or more from accepted offer to closing. The approval of a short sale and the negotiation for the reduction in the mortgage balance can be a time-consuming process. There is a long, but manageable, list of documents that must be submitted by the seller/homeowner before a lender will approve a short sale.
Thus, in a short sale, the trigger date, which starts the clock for the typical deadlines, is the short sale approval. The closing, inspection, and mortgage contingency deadlines dates in the offer and purchase and sale agreement should start “x” days from the short sale approval. There should also be a end date for obtaining short sale approval and protection for the buyer’s rate lock so the agreement is not left completely open-ended and delays won’t adversely affect the buyer’s financing.
Buyers Bring Your Tools
Also, cash strapped sellers are usually unwilling to do any repairs in a short sale situation. Inspections may be performed and “outs” may be negotiated for significant repairs, but most buyers must ultimately accept the property “as is.”
Short Sale Addendum/Rider
The deal agreements must be tailored quite specifically to a short sale transaction. We use a customized, current short sale addendum on every transaction.
Today, mortgage options are virtually endless, and often, confusing. We do business with a select group of highly knowledgeable and qualified mortgage professionals who can guide you through the mortgage maze. Please contact us if you need a referral to a great mortgage lender.
We have put together a summary of the most popular mortgage programs below.
30 Year Fixed-Rate Mortgage
This was once the gold standard of mortgages, paid off in 30 years. There’s a clear advantage to knowing what your payments will be and you can usually refinance if rates drop significantly. This is a long-term prospect; if intend to stay in your home for over 10 years, it’s a smartest and safest way to go, especially now with historically low mortgage rates. If you know you will be moving in 5 years or less, you may want to consider an adjustable rate mortgage.
For the remainder of 2010, the conforming loan limits will remain at $523,750 for single families and condos the Boston area. A loan over $523,750 is subject to Jumbo rates and terms.
Jumbo Loans
The loan amount for a Jumbo loan is above Freddie Mac and Fannie Mae conforming guidelines of $523,750 in the Boston area for the remainder of 2010. When the market is very strong, jumbo loans can make a purchase possible; however they often come with higher down payments and higher interest rates.
Adjustable-Rate Mortgage (ARM)
This type of mortgage loan typically has an initial interest rate lower than a 30 year fixed, but is subject to changes in interest rate after a set period. There are 1 year, 3 year, 5 year, 7 year and even 10 year ARMs. The interest rate fluctuates with an indexed rate plus a set margin and the adjustment intervals are predetermined. Minimum and maximum rate caps limit the size of the adjustment. ARMs are popular with those who aren’t expecting to stay in a home for long, or in a hot market where houses appreciate quickly, or for those expecting to refinance. Typically, you can qualify for a higher loan amount with an ARM (due to the lower initial interest rate). Always assume that the rates will increase after the adjustment period on an ARM. You are betting that you’ll save enough initially to offset the future rate increase. Check the payments at the upper limit of your cap (your rate can increase by as much as 6 percent!), you can get burned if you can’t afford the highest possible rate.
Federal Housing Administration (FHA) Loan
This is a very popular government-subsidized loan program with low down payment (i.e., as little as 3.5% for those with qualifying credit scores) and closing fees included. A popular loan for first-time home buyers. FHA loans provide low rates for those who can’t come up with the down payment or have less-than-perfect credit. However, if you can afford 10% or more as a down payment, you might find better rates with conventional loans. Lenders are getting paid a 2 % service fee by the government, so your points should reflect a discount when compared to similar rate loans. There have been a number of recent changes to these types of loans; read more on those changes here.
United States Department of Agriculture (USDA) Loan
As FHA loans became mainstream, many believe it is the only alternative to the traditional Fannie/Freddie loan. However, a lesser known loan program from the USDA may be available in your area of Massachusetts and beyond. Known as the Guaranteed Rural Development Housing Section 502 Loans, these programs are designed for low to moderate income individuals or households purchasing a property in a “rural” community. The definition of rural can be quite surprising; here is an interactive map of the eligible Massachusetts communities.
There are many clear advantages to borrowers under these types of loans, including the benefits of no down-payments, no monthly mortgage insurance and unlimited seller contributions as well as the ability to repair certain aspects of the property and build in those costs into the total loan. With the upcoming FHA changes, the USDA loan requires less out of pocket, a lower guaranty fee and greater flexibility in managing the closing costs associated with the transaction. However, to be eligible to purchase a home with a Rural Housing loan, borrowers will need to earn a higher income to qualify for the same house with USDA than FHA. For more information about these loans visiting the USDA program page and see our blog post here.
1-yr. Treasury ARM
The rate is fixed for one year, after that the loan becomes adjustable every year. The new rate is determined by the treasury average index plus the loan margin (usually 2.25-2.5%). 30-yr. term. Since these have lower rates than a fixed mortgage, when rates go down, you benefit. Watch the margin, however, as it is added to the index to come up with a new rate after the adjustment period. When rates are going up, you could end up paying more interest than with a fixed.
Intermediate ARM
With an intermediate or hybrid ARM, the rate is fixed for a period of time, then adjusts on a predetermined schedule. This is shown by the number of years the loan is fixed, and the adjustment interval. The new rate is determined by an economic index (usually treasury or treasury average index) plus the loan margin (usually 2.25-2.5%). 30-yr. term. When rates are going up, you could end up paying more interest than a fixed-rate mortgage after the initial period. If you aren’t planning to keep your house for long this might work for you as you will receive lower rates initially. Be sure to check the rate caps so you know exactly how high your payments can go. Fluctuating interest rates can mean higher payments over time.
Flexible Payment Option ARM
The borrower chooses from an assortment of payment methods every month. There is a “change cap” limiting how much payments can vary in a year. These can free up cash when you need it. Can be good for buyers with variable incomes (for instance salespeople who work on commission). But some options won’t even cover your interest so with lower payments, your balance will increase each month, and eventually your payments will increase substantially. This could lead to negative amortization. Eventually you will be required to pay down the principal and your payments will increase drastically. If you can’t make them, you lose the house. Many experts will tell you to stay away from these.
Interest-only ARM
These work by allow you to pay only interest for a period of time without paying down the principal. If you don’t plan to stay in a home long, you can buy something you ordinarily couldn’t afford. If you are in a hot market, or a hot neighborhood, you’ll have low payments while your house appreciates in value. You can always pay more on the principal while enjoying the low payments. The day will come when you need to pay down the principal. If your home value has fallen, or your income decreased, two things very common in today’s economy, you could have trouble making the new payments. There’s no surprise many of these loans are now in trouble given the falling housing values and job market. Really, if you can’t pay interest and principal at the same time, chances are you can’t afford the house.
Convertible ARM
A Convertible ARM can be converted to fixed rate after a period of time. You will have a higher rate for the fixed with a convertible loan. You cannot look around for a better deal, which you can with a refinance. Saving the cost of the loan and the hassle of shopping loans are a plus, but you might be crying if the refinance rates are lower than your new fixed. Experts say, “Just refinance.”
Veteran Administration (VA) Loans
A zero-down loan offered to veterans only, the VA guarantees the loan for lenders. These are obtainable with nothing down and no mortgage insurance; also the loan is assumable. It’s possible for the rate to be more than conventional loans or FHA loans, so shop around first. Lenders are getting paid a 2 percent service fee by the government, so your points should reflect a discount when compared to similar rate loans.
Reverse Mortgage
A reverse mortgage is a loan given to older homeowners who need to borrow against the equity of their home while they are still living in it. The debt does not need to be repaid until the house changes hands. Interest is commonly one-year treasury rate, plus a margin and a cap on a rate change. The beauty of these mortgages is that they allow people 62 or older to stay in their homes as they age with no repayments. You must maintain your house, pay property tax, and insurance. Also you cannot take out a second mortgage, rent your home, or use it for business. The loans are complex, so make sure you understand what you are getting. AARP has good consumer-oriented explanations for seniors. We suggest choosing a lender who is member of the National Reverse Mortgage Lenders Association.
Having grown up in Sudbury and now settled there with her family, Gabby’s knowledge of the Sudbury and surrounding market is unparalleled. Plus, she re-defines “concierge” service, going so far as to ensure that her buyers meet their neighbors ahead of time, get local nannies, and find the right preschool. Gabby is writing today about the mutual respect buyers and sellers should have for each other during the real estate process.
Home Buyers And Sellers, You CAN Just Get Along!
Once upon a time there was a newlywed couple house-hunting in the suburbs. They held hands as they strolled into each house, they conversed with their real estate agent about every detail of their wedding and giggled like sixth graders whenever they spoke the words “husband” or “wife.”
Then, they found the house of their dreams. The dreams that mirror “happily ever after” — it was the house they imagined having babies (2 boys and 2 girls – the girls would be twins of course and would share a room painted with Benjamin Moore’s Cotton Candy).
The happy couple told their real estate agent that they wanted to make an offer for asking price, closing the exact day that the sellers wanted to close. They had enough money from their wedding gifts and unfortunate passing of Great Grandpa Charlie to pay for the house in cash. The husband dabbled in construction, so every item that appeared as a result of the home inspection would be “no big deal.”
Both sets of parents came to see the house and everyone oooh’ed and ahhh’ed instead of bringing up the fact that the kitchen wasn’t updated, or that the family room was a little smaller than what they had thought it would be, or that the garage was under the house. The parents all talked about how happy they were and they never said anything that remotely sounded like “YOU paid ____ for this??? Our house cost $37,000 when we bought it …” And then the sellers threw a welcome party for the buyers before they moved in – just to make the proper introduction to the neighborhood.
I’m sure you are thinking that this story is a work of fiction. Nope. Well, aside from the buyers volunteering to pay the asking price and the gushing in-laws, the concept of a truly pleasant real estate transaction doesn’t have to sound so foreign. Without compromising the financial objective of either party, the real estate transaction can be pleasant and satisfying to all parties involved.
The decision to buy or sell a home is as much a personal transaction as it is business. It’s an exciting one, and a process in which I truly love being involved. And although it’s certainly not as straightforward as a show on HDTV about finding the right house, it doesn’t have to be challenging. As much as buyers would like to say that they won’t buy with their hearts, that is crazy – of course they will. It’s a home. It’s where you live. It’s where your heart is. Your life is not one big business transaction.
Everyone remembers the details of their real estate transactions. Even if they bought or sold their house 12 years ago, they will tell you exactly how the buyers or sellers acted, the items negotiated during the home inspection, the credit they received, what they negotiated during the purchase & sale agreement, and the details that still make them happy or cringe.
They may not remember the date they bought their house, but they will remember everything about the closing.
I have been involved in scores of real estate transactions. When multiple persons are involved in the decision-making process for a major life event, so much can get lost in translation and people don’t always behave in a way that they, let’s say, would be proud of if a TV crew were following them around. In addition to the number of family members and friends who know EXACTLY what is best for you, there are many people involved in a real estate transaction — buyers, sellers, two real estate agents, two attorneys, possibly two paralegals, one mortgage broker, one appraiser, at least one inspector, and, sometimes, the nosy neighbor.
If my intention with this piece were to promote the value of experienced real estate agents, this would be the part where I emphasize that it is the role of the real estate agent to quarterback the entire team involved to ensure that everyone wins.
In general, buyers are excited to buy a house. When an offer is made, it is the beginning of negotiations with the seller with the goal of consummating the sale of the home. In today’s market, prices have adjusted and many sellers are having an understandably difficult time grasping the reality of the market.
Because of the resources available in 2010, today’s buyers are also the most knowledgeable, well informed and cautious. The market value of a house is what a buyer is willing to pay. Without giving up any money on the sale side and overpaying on the buy side, there are so many ways in which to make the real estate transaction one that is not so painful.
My thoughts below may seem pretty uncomplicated, and that is my objective. It is easier to have a smooth and seamless transaction than it is to have one that feels more like an act of Congress. It is a business transaction, but the basis of the transaction is emotional. You certainly don’t have become new best friends, but cordial is always appreciated.
1. MUTUAL RESPECT. The tone of the entire transaction is set with the first round of communication between both parties.
* BUYERS: Be respectful of the sellers and their real estate agent. This does not translate into paying more. It shows that you will be a pleasure to deal with. Appreciate your sellers. They have cared for and maintained the house you fell in love with.
* SELLERS: Appreciate your buyers. They love your house enough to buy it. If you receive an offer the first day on the market, it is because your house was priced right and the buyers know the market. Don’t be greedy, it will backfire.
2. DON’T TAKE THE MARKET PERSONALLY
* BUYERS: If a seller decides not to accept your offer, it has nothing to do with what great people you are and how many friends you have in common. It’s usually about the financial picture.
* SELLERS: Most likely, you didn’t overpay for your house. You paid what the house was worth when you bought it. It’s exactly what the buyers want to do now – pay what the house is worth in today’s market. I’m certainly not suggesting that you don’t get frustrated or upset if you are taking a loss or not netting what you had planned, just don’t take it out on your potential buyers. What you “want” and “need” to get for your house is irrelevant. Buyers will pay what they feel it is worth and their mortgage company will lend based on what they feel it is worth.
3. WORK SMART. CHOOSE YOUR REPRESENTATION CAREFULLY.
* Work with real estate agents and attorneys with whom you are comfortable and have trust. This isn’t the time to cut corners and do someone a favor. You deserve to have the best people on your team.
4. HICCUPS
* Every transaction has their “thing” – something that needs to be clarified, negotiated, extended, explained. Know this ahead of time so when your own situation arises, you know that it’s normal and just needs to be dealt with.
5. NEIGHBORS
* SELLERS: Keep in mind that the buyers are now going to have your former neighbors as neighbors.
* BUYERS: Keep in mind that your soon-to-be neighbors are your sellers’ current neighbors.
People like to talk, especially about real estate.
At the end of the day, it’s about common decency. It’s about mutual respect between the buyer and seller of the same house. As much as this is a business transaction, it is even more a personal one.
Gabrielle Daniels Brennan and her mother, Carole Daniels are The Daniels Team of Coldwell Banker Residential Brokerage in Sudbury. You may contact them by phone at 508-277-6956 (Carole cell), 617-320-8150 (Gabrielle Cell), or by Email to [email protected]
Yesterday an interesting case came down involving a nasty tug-of-war between listing brokers and an exclusive buyer’s agent, with the buyer’s six figure deposit caught in the middle. The case is Zang v. NRT New England and can be read here.
In the case, the seller signed the standard exclusive listing agreement with the listing broker which provided for a 5% commission, and cooperation with buyers’ brokers, with an equal split of the commission. Mr. Zang, a potential buyer, showed up at an open house for the condominium, unaccompanied by a broker. The buyer made an offer through the listing agent, but an agreement couldn’t be reached. The buyer then hired an exclusive buyer’s agent who submitted a second offer. The offer was ultimately accepted by the seller, and the parties proceeded to sign a purchase and sale agreement.
The listing broker, however, was none too pleased that the buyer’s broker had entered the picture at the final hour looking for a commission. The listing agent even left a few amusing voicemail messages for the buyer, asking him whether “you think that it’s really fair that [the buyer’s agent] should come in at this late date and capture half of the commission… and what does Alan [one of the listing agents] get for all of his work? Nothing. But, you know, I guess that’s money in your pocket.”
The buyer posted a $122,500 deposit (10% of the purchase price) upon the execution of the purchase and sale agreement. The agreement provided that the listing agent would act as escrow agent and that a 5% commission would be paid by the seller to the listing agent and the buyer’s agent, split equally. In short, the seller’s net sales proceeds were to be reduced by $61,250, of which $30,625 was to be paid to the buyer’s agent at closing.
After the closing, however, the listing agent refused to pay the buyer’s broker his commission, and refused to disburse the remaining escrow deposit, essentially holding it hostage. Big no-no, said the Appeals Court. While the listing agent may have a legitimate dispute over the commission, the court ruled, its fiduciary duties as escrow agent took precedence. The listing agent had no right to retain the buyer’s money, and was contractually obligated to disburse it according to the purchase and sale agreement, period. The court did not sanction this sort of self-help by the listing agent. And the court let stand the buyer’s claims for 93A/consumer protection violation which carries triple damages and attorneys’ fees.
So the lesson for real estate agents here is don’t mess with a deposit even if you feel you have a legitimate beef over a commission. It’s not worth it, and it will subject you to liability.
The newMortgage Reform and Anti-Predatory Lending Act, buried in the fine print of the much publicized Dodd-Frank Wall Street Reform and Consumer Protection Act contains strict new rules aimed at preventing another sub-prime mortgage collapse.
Overview: What Is The Impact To Mortgage Lenders and Originators?
The Mortgage Reform and Anti-Predatory Lending Act certainly changes the regulatory landscape for mortgage originators who focused on high-risk, sub-prime lending, setting tougher new standards and creating new federal remedies for consumers victimized by deceptive and predatory lending. Stripped down, the Act puts the onus on mortgage lenders and originators to ensure, based on verified and documentation information, that borrowers can afford to repay the loans for which they have applied. Pretty novel idea, huh?
The new law essentially codifies good underwriting practices by requiring consideration of a borrower’s “credit history, current income, expected income the consumer is reasonably assured of receiving, current obligations, debt-to-income ratio or the residential income the consumer will have after paying non-mortgage debt and mortgage-related obligations, employment status, and other financial resources other than the consumer’s equity in the dwelling or real property that secures repayment of the loan.”
I don’t see anything in these rules that a financially prudent lender wouldn’t have already implemented in its underwriting processes. Lenders should not be placing borrowers into loans they are doomed to fail.
I’m sure these new rules will result in a few more disclosures and forms, but I don’t see this making a major impact on the conventional residential lending industry. If mortgage professionals think otherwise, I’d love to here from you. Well, onto the details:
New Minimum Mortgage Affordability Standards
The new law essentially outlaws many of the characteristics of the classic sub-prime, predatory mortgage loan, by requiring that:
The mortgage provides that regular periodic payments do not result in an increase of the principal balance of the loan or allow the consumer to defer repayment of principal.
The mortgage does not result in a balloon payment (a scheduled payment that is more than twice as large as the average of earlier scheduled payments).
The income and financial resources relied upon by the lender have been verified and documented.
The underwriting process for a fixed loan is based on a payment schedule that fully amortizes the loan over the loan term, taking into account all applicable costs.
The underwriting process for an adjustable rate loan is based on the maximum rate permitted under the loan for the first five years and a payment schedule that fully amortizes the loan over the loan term, taking into account all applicable costs.
The mortgage complies with guidelines and regulations related to ratios of total monthly debt to total monthly income or alternative measures of a borrower’s ability to pay.
The mortgage has total points and fees amounting to no more than 3 percent of the total loan amount.
The term of the loan does not exceed 30 years.
It would appear that this new law would prohibit so-called “no doc” “no income verification” loans.
The new law also imposes on lenders a duty to verify amounts of income or assets that the lender relies upon to determine the consumer’s ability to repay the loan. Again, a novel idea…In order to “safeguard against fraudulent reporting,” lenders are now required to use IRS transcripts of tax returns.
New Loan Origination Standards
The new law requires that lenders be qualified and registered as mortgage originators under the applicable federal and state laws. The significance of this registration procedure is that all loan documents will require the inclusion of the mortgage originator’s unique identifier, which is to be provided by the National Mortgage Licensing System and Registry. This will enable tracking of the bad guys.
“Steering Incentives” Prohibited
The Dodd-Frank Act will prohibit lenders from “steering” borrowers into more costly loans. It will prohibit mortgage originators from mischaracterizing the credit history of a consumer or the residential loans available to the consumer for purposes of making the loan. Mortgage originators are also prohibited from discouraging consumers from seeking a residential mortgage loan from another lender when the former is unable to suggest, offer, or recommend a loan that is not more expensive.
Predatory Loans Banned
Mortgage originators are prohibited from steering consumers to residential mortgage loans that have “predatory characteristics or effects.” “Predatory characteristics,” include equity stripping, excessive fees, or abusive terms.
Yield-Spread Premium Bonuses Outlawed
The Dodd-Frank Act also imposes new compensation limitations by prohibiting yield-spread premium bonuses, a practice, regulators argue, tends to increase the total cost of the loan to the borrower. Yield spread premiums (YSPs) are fees paid by a lender to a mortgage originator for placing a loan in a certain loan program.
Additional Liability for Mortgage Originators
The Act imposes liability on mortgage originators who fail to comply with these new minimum standards. It provides the penalty of triple damages plus the costs of suit and reasonable attorneys’ fees. Watch out for class actions here!
Our Mortgage Guy, Brian Cav, is back with his Massachusetts weekly mortgage rate report.
Mortgage Rates are at all-time lows right now; 30 year fixed, 20 year fixed, 15 year fixed and even Jumbo Rates, and they are showing no signs of rising! I don’t see them going any lower but staying down at these levels for a while. What’s moving Mortgage Rates? No one really knows right now but this is usually what happens, bonds go up, stocks go down. Stocks go up, bonds go down. It’s really pretty easy to understand. However this mortgage market that we are in is no where near normal. In fact, it’s the total opposite, it’s like nothing we’ve ever experienced.
The housing market is stagnating at record low levels, refinance loans account for the majority of all present loan production. Credit guidelines are as strict as they’ve ever been, it’s really brutal. Home values are off by incredible amounts of inventory. Mortgage Rates are showing no signs at all of rising anytime soon!
30 year fixed mortgage rates remain in the 4.375% to 4.625% range. The 30 year fixed rate mortgage is 4.375% for a qualified borrower. 4.125% is presently being offered for two points.
Inquire within for current MortgageRates or guidelines [email protected] 617.771.5021
Economic Data
Wednesday’s bond market has opened in negative territory following modest stock gains. The Dow is currently up while the Nasdaq has gained. The bond market is currently down, which should push this morning’s mortgage rates higher by approximately .125 of a discount point.
There is no relevant economic data scheduled for release today. This leaves the stock markets to influence bond trading and mortgage rates. If the stock markets move higher from current levels, we should see bond prices fall and mortgage rates rise if the move is sizable. However, if the major stock indexes fall from where they are now, the bond market would likely improve, leading to slightly lower mortgage rates this afternoon.
The only relevant data scheduled for release tomorrow are weekly unemployment figures from the Labor Department. They will post the number of new claims for unemployment benefits filed last week, giving us a small measurement of employment sector growth. This data usually does not lead to noticeable changes in mortgage rates because the data tracks only a single week’s worth of new claims. Analysts are expecting 455,000 new claims, but it will likely take a fairly large variance for the markets to have much of a reaction to this data. This week’s release may carry a little more significance than usual because there is no other data scheduled for release that day.
Friday brings us the release of July’s Employment report that compiles several key employment readings and is based on an entire month’s worth of data. This is a very important report for the financial and mortgage markets and could lead to sizable changes to mortgage rates. I would not be surprised to see the traders prepare for the report by adjusting portfolios late tomorrow and Thursday. This could lead to some pressure in bonds or possibly improvements if market participants are betting on bad economic news coming. The results on mortgage rates should be fairly minimal and could easily be erased after the report is released Friday morning, but it is worth mentioning.
FLOAT or LOCK
If I was closing on a Home Mortgage in the next 0 to 15 Days – LOCK
If I was closing on a Home Mortgage in the next 15 to 30 Days – FLOAT
If I was closing on a Home Mortgage in the next 30 to 60 Days – FLOAT
If I was closing on a Home Mortgage in the next 60+ FLOAT
This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.
Are you a possible Massachusetts First Time Homebuyer?
Do you have a Real Estate client inquiring about current Mortgage Rates?
Do you have any Refinancing questions?
Should you be thinking about Refinancing out of your ARM (Adjustable Rate Mortgage)?
We are pleased to have yet another guest blogger: Debra McPhee, CIC, CPCU, Owner of Suburban Insurance Agency of Holbrook, MA, and a very qualified Massachusetts Flood Insurance Agent. Debbie is here to write about flood insurance, a timely topic given the recent March floods.
A flood can devastate your home and your financial security. Any flood—even a small one—can cause thousands of dollars in damages. Even homeowners in low to moderate-risk zones are at risk. Up to 25% of all flood claims come from people living outside high-risk zones.
Flooding happens anywhere including right here in Massachusetts. Just recently, floods hit nearby towns. People discovered the hard way that when it comes to floods, no one is safe. You don’t have to live near a major waterway to be flooded. Sudden severe storms can cause flooding. Just because it has never flooded in your area, doesn’t mean it won’t.
You might think that your Homeowners insurance covers flooding, but it doesn’t. It covers all kinds of things, but not flooding. Flood insurance gives your home that crucial layer of protection your Homeowners insurance doesn’t provide.
What Is The Definition A “Flood”?
In simple terms, a flood is an excess of water on land that is normally dry. Anywhere it rains, it can flood. A flood is a general and temporary condition where two or more acres of normally dry land or two or more properties are inundated by water or mudflow. Many conditions can result in a flood: hurricanes, broken levees, outdated or clogged drainage systems and rapid accumulation of rainfall.
Myth: Flood Insurance Costs Too Much
You might be surprised how inexpensive it is. The average flood insurance policy costs less than $570 per year. Most homeowners live in a moderate-to-low risk area and are eligible for coverage at a preferred rate with building and contents coverage for one low price. In fact, building and contents coverage starts at just $119 per year. If you live in a high-risk area, a standard rated policy is the only option for you. It offers separate building and contents coverage. If your home is in a high-risk flood area and you have obtained a mortgage through a federally regulated or insured lender, you are required to purchase a flood insurance policy.
How to Purchase Flood Insurance
Flood Insurance is written through the National Flood Insurance Program (NFIP), a federal program authorized by FEMA. Flood insurance is available to homeowners, renters, condo owners/renters, and commercial owners/renters. You need to contact a Massachusetts Flood Insurance Agent for a quote and/or application (all policies written by the NFIP are written through insurance agents).
Typically, there’s a 30-day waiting period—from the date you purchase the flood insurance—before the policy goes into effect. The waiting period, however, does not apply to a new home purchase or refinancing of a mortgage if the mortgagee requires flood insurance.
What is Covered by Flood Insurance – and What’s Not
The following is a summary of items covered and not covered by flood insurance. For specific details as to what is covered, you have to refer to the actual policy.
What’s covered under Building?
The insured building and its foundation.
The electrical and plumbing systems.
Central air conditioning equipment, furnaces, and water heaters.
Refrigerators, cooking stoves, and built-in appliances such as dishwashers.
Permanently installed carpeting over an unfinished floor.
Permanently installed paneling, wallboard, bookcases, and cabinets.
Window blinds.
Detached garages for up to 10% of the building limit; other detached buildings require a separate Flood policy
What’s covered under Personal Property?
Personal belongings such as clothing, furniture, and electronics
Curtains.
Portable and window air conditioners.
Portable microwave ovens and portable dishwashers.
Carpets not included in building coverage
Clothes washers and dryers.
Food freezers and the food in them.
What’s never covered by flood insurance?
Damage caused by moisture, mildew, or mold that could have been avoided by the property owner.
Currency, precious metals, and valuable papers such as stock certificates.
Property and belongings outside of a building such as trees, plants, wells, septic systems, walks, decks, patios, fences, seawalls, hot tubs, and swimming pools.
Living expenses such as temporary housing.
Self-propelled vehicles such as cars, including their parts.
Debra McPhee, CIC, CPCU
Limitations to coverage in a basement
Coverage in a basement is very limited. It includes cleanup expense and items such as furnaces, water heaters, washers and dryers, air conditioners, freezers, utility connections, and pumps.
There is no coverage for the contents of a finished basement and improvements, such as finished walls, floors, and ceilings.
Personal property located in a basement is not covered.
Please call me, Debra McPhee, CIC, CPCU at Suburban Insurance Agent at 781-767-3300 and let’s talk about your flood insurance needs. Don’t let a flood wash away your financial future.
Similar to the obsession over Massachusetts real estate and addiction to the Multiple Listing Service (MLS) is our addiction to The Bachelor / The Bachelorette TV series. Many of us really didn’t want to admit that we were glued to the TV/DVR on Monday nights, or that we conveniently didn’t want to make plans, for fear of missing this show. For those who have much better things to do than to watch, the series revolves around a single bachelor or bachelorette (deemed eligible) and a pool of romantic interests (typically 25). The Bachelor/Bachelorette then go through a *grueling* series of dates with the pool of potential mates, weekly-elimination style, with the winner getting the “final rose” and possibly a marriage proposal.
As a busy Metrowest Massachusetts Realtor and an admitted fan of the show, I can attest that the process that each Bachelor and Bachelorette go through to find *true love* can be easily translated to the real estate home buying and selling process.
Buying & Selling Real Estate Is A Lot Like Matchmaking
Buying and selling a house is serious business. For most, you are buying or selling your largest single asset. In addition to needing data and supporting information to make a sound business decision, there is tremendous emotion that goes into the process. Getting married is more serious (well, to some), but the process is comparable. At the end of the day, if you have grown out of a house, you can sell it. Not as easy in a marriage.
There are so many commonalities between matching Bachelors/Bachelorettes and Home Buyers/Sellers. There is no such thing as a “typical” transaction/relationship. When representing either side, it’s so important to understand the people and what makes each person tick. On the Bachelor, the first night cocktail party actually makes a lot of sense from a home buying perspective. So often, on the first day out with a Realtor, a home buyer will see everything that fits the criteria “on paper” that they think they want in a house. Just because you want a 4 bedroom/2.5 bath Colonial, doesn’t mean you will like all of them. Many get eliminated from consideration on the first day. Unlike the show’s host, Chris Harrison, my job is to understand why you eliminated specific suitors and to make sure that you aren’t introduced to any more!
The Bachelor/Bachelorette Desperately Need A Real Estate Agent!
Jake & Vienna, (c) ABC, The Bachelor
If The Bachelor or The Bachelorette producers are truly serious about helping its “star” find love, I think that Host Chris Harrison should behave more like a Buyer’s Agent during the next season of The Bachelor. For those of you who already appreciate and understand the true value of Buyer’s representation, you are one step ahead. For those of you who think you are getting “a deal” without Agent representation, I have 3 words for you: Jake and Vienna.
Last season’s Bachelor, Jake, had no help. Vienna, his now former fiancée, was the pretty house with the nice big kitchen and partially finished basement. She is the house that is lived in, a house that is ready for you to entertain in. But there isn’t much upstairs. Bedrooms are small, possibly mold in the attic, the poor quality roof needs to be reshingled every few years, ice dams in the winter, and the garage door doesn’t close (catch my drift?). As soon as the season ended, so did they.
If, like a Real Estate Agent, Chris Harrison were acting in the best interest of the Bachelor/Bachelorettes, it would have been his responsibility to not only introduce the Bachelor/ette to the appropriate suitors matching their needs, but to:
Assess the TRUE value of each suitor (house)
Give the Bachelor/ette some history about the suitor and the suitors’ family (neighborhood/community)
Provide information that would reveal any work that has been done to the house, before it came on the market, along with permits, etc.
Work with the Bachelor/ette on their financing – will they be able to afford their choice? What will it cost to maintain the relationship?
Disclose any and all research about their history. If any liens (restraining orders) are in effect, this would be important to know
Very importantly – negotiate EVERYTHING on behalf of the Bachelor/ette
Manage the home inspection (home visits) – make sure the Bachelor/ette is asking the right questions
Make sure that everything proceeds smoothly prior to and at the closing (Fantasy Suite and beyond…)
Getting That Final Rose (The Keys)
Ali & Roberto, (c) ABC, The Bachelorette
Bottom line is that your Real Estate Agent is there to guard and protect your real estate purchase and your wallet. We want you to be as sure about your decision as Ali seems to be with this season’s winner, Roberto. We aren’t here to tell you how to decorate or to follow you around a house like the helicopter date in Bora Bora. We are here to guide you, to tell you if we feel you are making a mistake (Jake and Vienna). To negotiate for you. To point out the big issues that we see while you are ogling the gorgeous marble in the master bath (Ed & Jillian). If you want someone to agree with everything you are doing, bring your BFF along. It could be the most dramatic home purchase process ever or it could be truly enjoyable and exciting (Trista and Ryan).
When buying a home, you don’t want to make a mistake. You don’t want to second-guess anything (Jason & Molly). As Real Estate professionals, it’s our preference that you don’t show up on the cover of US Weekly in tears (or the equivalent). If you decide to buy or sell on your own, don’t come crying to us “After the Closing” when you realize that you overpaid for the house that has taken 3 years to sell or that your Buyer couldn’t get their financing and now you can’t close on your purchase (Brad Womack). We would rather be handing you the final rose at your closing.
Carole Daniels and Gabrielle Daniels Brennan are the #1 real estate team in Sudbury. As a top producing, award winning Mother/Daughter team, Carole offers over 31 years of successful Real Estate Sales and Marketing experience. Daniels and Daniels are #30 in New England and within the top 1% of Agents internationally. Gabrielle and Carole have been a team for 7 years. Prior to Real Estate, Gabrielle spent over a decade in sports and event marketing for ESPN, The Olympics, Coca-Cola, Arby’s and NIKE. They work 24/7 for their clients and love what they do. For more information go to: www.liveinsudburyma.com.
In a few weeks, the *quiet* streets of Allston, Brighton, Cambridge, Boston and other Massachusetts tenant friendly cities will turn into the zoo that is known as student moving week. So it’s time to review frequently asked questions for Massachusetts landlord tenant rental law.
Screening Prospective Tenants
Landlords can legally ask about a tenant’s income, current employment, prior landlord references, credit history, and criminal history. Your rental application should include a full release of all credit history and CORI (Criminal Offender Registry Information). Use CORI information with a great deal of caution, however, and offer the tenant an opportunity to explain any issues. Landlords should also check the Sex Offender Registry to ascertain whether a potential tenant could be a safety risk to others nearby. Use the rental application and other forms from the Greater Boston Real Estate Board.
Under Massachusetts discrimination laws, a landlord cannot refuse to rent to a tenant on the basis of the tenant’s race, color, national origin, ancestry, gender, sexual orientation, age, marital status, religion, military/veteran status, disability, receipt of public assistance, and children. It’s best to stay away from asking about these topics.
Under a two year old Boston zoning ordinance, no more than four (4) full time undergraduate students may live together in a single apartment. The rule does not apply to graduate students or fraternity/sorority houses. The fines for violating this ordinance are stiff; don’t do it.
While on this topic, landlords should ensure that all roommates are signatories to the lease and are “jointly and severally” liable for rent. That way, if one tenant skips out, the remaining tenants remain liable for the full rent.
Students often create problems for landlords. Meet with students personally before signing the lease and firmly explain a “no tolerance” policy against excessive noise, parties and misbehavior. An ounce of prevention is worth a pound of cure here.
Pets
Subject to some restrictions, landlords may prohibit pets altogether or use reasonable rules to control them on rental property. Under federal law, a landlord cannot prohibit a qualified disabled tenant from using a service pet such as a seeing eye dog. There are also restrictions on prohibiting household pets for federally subsidized elderly and disabled housing project.
More topics, including last month/security deposits and illegal lease clauses, to follow next!
Our Mortgage Guy, Brian Cav, is back with his Massachusetts weekly mortgage rate report. With near record interest rate lows, his sage advice, again, is to LOCK IN!
Mortgage Refinancing BOOM! Mortgage Markets are officially at 2010 lows and, extremely close to 2009 lows. We are “near record low” rates, and this is going to be as good as it ever will be, I know, I know… I sound like a broken record. The funny thing is rates are at all time lows and the Federal Reserve has stoppped buying mortgage backed securities a few months ago. U.S. housing and the U.S. economy is the reason for record low mortgage rates, the past 4 months it has all been about economic issues in Europe. Mortgage rates will not go any lower, LOCK in your refinancing or purchase mortgage financing very soon, I know, I sound like a broken record.
Inquire within for current MortgageRates [email protected] 617.771.5021
Economic Data
WEDNESDAY AFTERNOON UPDATE: This week’s FOMC meeting has adjourned with no change to key short-term interest rates. This was widely expected and has not affected the markets or mortgage rates. The post-meeting statement did help influence opinions and bond trading. One of the points of interest was a comment that said the “economic recovery is proceeding” which differed slightly from the previous meeting that said economic activity continued to “strengthen.” Traders are taking that to mean the economic recovery is at a slower pace than previously thought.
The Fed indirectly indicated that concerns about Europe could affect that recovery, but said that they don’t expect that it to push the U.S. economy back into a recession. They also said that inflation remains subdued, which means there is no pressure to raise key rates anytime soon.
Overall, the lack of a change to rates has had no impact on the markets or mortgage rates, but the post-meeting statement was taken as favorable for the bond market. The lack of concern about inflation and the more cautious remarks on the status of our economic growth makes long-term securities such as mortgage-related bonds more attractive to investors.
The stock markets have changed little from their pre-announcement levels with the Dow up a couple of points and the Nasdaq still down a few points. The bond market is currently up, but I don’t think we will see a change to mortgage rates this afternoon since bonds had slipped slightly from morning highs before the 2:15 PM ET announcement. The bond market has improved slightly from its 2:15 PM level, but is still below where it was when rates were posted this morning.
May’s New Home Sales from the Commerce Department was today’s only relevant economic report. It revealed a whopping decline of 33% in sales of newly constructed homes, pushing sales levels down to record lows. This further indicates that the tax credits being offered to homebuyers were heavily supporting the housing market. That raises significant concerns about the growth ability of the housing sector now that they are expiring. This data is favorable news for the bond market and mortgage rates because a weakening housing sector will make a broader economic recovery more difficult and eases inflation concerns. Today’s data usually has little impact on trading and mortgage rates, but the size of decline has allowed the news to influence this morning’s rates.
The only important release scheduled for tomorrow is May’s Durable Goods Orders, which gives us an indication of manufacturing sector strength. It is known to be quite volatile from month to month and is expected to show a decline of 1.3% in new orders from April to May. A larger decline would be the ideal scenario for the bond market and could lead to a decline in mortgage pricing tomorrow.
FLOAT or LOCK
If I was closing on a Home Mortgage in the next 0 to 15 Days – LOCK
If I was closing on a Home Mortgage in the next 15 to 30 Days – LOCK
If I was closing on a Home Mortgage in the next 30 to 60 Days – LOCK
If I was closing on a Home Mortgage in the next 60+ LOCK
This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.
Are you a possible Massachusetts First Time Homebuyer?
Do you have a Real Estate client inquiring about current Mortgage Rates?
Do you have any Refinancing questions?
Should you be thinking about Refinancing out of your ARM (Adjustable Rate Mortgage)?
A lis pendens is Latin for “a suit pending.” Under the Massachusetts lis pendens law, a lis pendens is a notice endorsed by a judge certifying that there is litigation pending involving the title or occupancy rights to a property. Where real estate deals go sour, a court will often issue a lis pendens where a buyer seeks “specific performance” of a real estate contract in order to force a seller to go through with a transaction. Lis pendens are also common in other real estate cases such as boundary, title, zoning, and ownership disputes. The lis pendens is recorded at the registry of deeds against the property and its owner(s), creating a serious cloud on the title to the affected property. A lis pendens will, in many cases, effectively prevent the owner from selling the property until the claim is resolved–thus, earning its well-deserved reputation as dangerous arrow in a real estate litigator’s quiver.
Heavy Ammunition For Buyers
Since the Massachusetts Supreme Judicial Court held in 1998 that the standard Greater Boston Real Estate form Offer To Purchase is a binding contract, buyers have used the lis pendens with great success against sellers who unjustifiably try to back out of Offers to Purchase and Purchase and Sale Agreements. Aggressive buyer attorneys would often obtain a lis pendens without prior notice to the seller (called ex parte relief), and this would give buyers a huge advantage and effectively derail any pending sale of the property until the judge resolved the claim.
Recent Changes To The Law
In response to complaints that litigants were abusing the law with frivolous claims for lis pendens’, lawmakers amended the law in 2003. Now, claimants seeking ex parte relief must show there is a clear danger that the seller, if notified in advance, will convey, encumber, damage or destroy the property. Sellers also have a new remedy to stop frivolous claims: a “special motion to dismiss” which carries with it an award of attorneys’ fees and costs. The playing field is a bit more leveled now, yet the lis pendens remains a powerful tool for real estate attorneys.
Dealing With A Lis Pendens
Dealing with a meritorious lis pendens remains very difficult. Standard owner’s title insurance policies do not insure against them. Further, most title companies hesitate to affirmatively insure a lis pendens as they would effectively be underwriting the ultimate success of the lawsuit. Sometimes, however, coverage can be obtained for an additional premium and/or with some form of indemnification or security. In the absence of insurance, a lis pendens will remain a cloud on title until the claim is ultimately resolved in the courts, which these days can take many years. Given the high cost of litigation, a financial settlement is often the only way to resolve the matter in a cost-effective manner.
As an experienced real estate litigator who has obtained and defended scores of lis pendens’, please contact me with any questions about a Massachusetts lis pendens.
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Richard D. Vetstein, Esq. is an experienced and creative Massachusetts real estate litigator who loves to help property owners defend their contract or property rights in court. Please contact him at [email protected] or 508-620-5352 for a no-obligation consultation.
We are thrilled to have Sheira MacKenzie, a Certified Mortgage Planner with Fairway Mortgage in Needham, MA, who is here to guest blog about the new, tighter Fannie Mae lending underwriting guidelines on adjustable rate and interest-only loan programs. You can contact Sheira at 781-719-4673 or by email [email protected]. Her website is www.sheiramackenzie.com.
Overview Of Changes
Sheira MacKenzie, Fairway Mortgage
For the first time this year, Fannie Mae announced significant updates to its mortgage underwriting guidelines. The changes include strict new ARM qualification standards, the elimination of a once-popular 7 year balloon loan product, and tighter rules for interest only mortgages.
Fannie Mae made its official announcement on April 30, 2010. The changes will roll out over the next 12 weeks.
These changes are intended to ensure that shaky borrowers can afford an adjustable rate mortgage not only during the first fixed term, but once the rate adjusts even higher.
Borrowers Need More Affordability Muscle For Their ARMs
The first guideline change is tied to ARMs of 5 years or less. This is a huge change which will really impact the ARM market. Mortgage applicants must now qualify based on a mortgage rate 2% higher than their note rate. For example, if your mortgage rate is 5%, for qualification purposes, you must be able to afford a 7% interest rate. The elevated qualification payment will disqualify borrowers whose debt-to-income levels are borderline.
Adjustable Rate Mortgages are still a great product… for the right consumer. Today, it is critical to have a team of experts to help borrowers to determine the right loan strategy for their needs. In Massachusetts, we see slightly higher incomes, but consumers need to be aware of their overall monthly obligations prior to applying for a loan. Take your gross monthly income and multiply it by 35%. If your new housing payment (including taxes, insurance, or condo fee) plus your car, credit, and other loan payments is higher than that number, you could be over-extending yourself in the eyes of investors today. Get introduced to a seasoned mortgage expert who can review your credit and monthly obligations with you, and be sure to check with your financial planner prior to embarking on the approval process. Together you can determine if you are best suited for an ARM or fixed rate as well as the best loan strategy for your short and long-term goals.
Pop Goes The 7 Year Balloon Program
The second change is Fannie Mae’s elimination of the standard 7-year balloon mortgage. Balloon mortgages were popular early last decade. Lately, few borrowers have chosen them, though. Mostly because rates have been relative high as compared to a comparable 7-year ARM.
Interest-Only Belt Tightening
Lastly, Fannie Mae is changing its interest only mortgages guidelines. Effective June 19, 2010, Fannie Mae interest only mortgages must meet the following criteria:
The home must be a 1-unit property
The home must be a primary residence, or vacation home
The borrower’s FICO must be 720 or higher
The mortgage must be a purchase, or rate-and-term refinance. No “cash out” allowed.
Furthermore, borrowers using interest only mortgages must show two full years of mortgage payments “in the bank” at the time of closing. Earlier this year, Fannie Mae’s sister, Freddie Mac, announced that as of September 2010, it will stop offering interest only loans altogether.
Between Fannie Mae, Freddie Mac, the FHA, and other government-supported entities, the U.S. government now backs 96.5% of the U.S. mortgage market. So long as mortgage default rates are high, expect approvals for all borrower types to continue to toughen.
Great post Sheira! We welcome you to the ever-increasing stable of guest bloggers on the Massachusetts Real Estate Law Blog. And we can attest from working with Sheira that she is truly a highly experienced, trusted professional, whom any buyer would be fortunate to have on their team.
As a real estate attorney, I always take the time to fully explain to our clients the intricacies of the Massachusetts Purchase and Sale Agreement.
The purchase and sale agreement is the governing contract between the Buyer and the Seller regarding the proposed property to purchase. Most Buyers submit an initial Offer to Purchase to a Seller, which spells out the terms of the contract. The purchase and sale agreement supersedes the offer, and can be thought of as the “long form” contract. At first blush, the purchase and sale agreement, like most legal documents, can be difficult to read and comprehend.
Deal Terms
First, like all contracts, the purchase and sale agreement sets out the terms of the deal. These terms primarily are taken from the offer. This includes the names of the parties, the legal description of the property (taken from the current deed), the purchase price, the mortgage commitment date, the closing date, any Seller credits, and any agreed upon fixtures that will remain with the property or be taken by the Seller.
Title and Deed
Second, the purchase and sale agreement deals with the title to the property and the deed. It lays out the framework for a conveyance (a real estate transfer) in Massachusetts. The agreement spells out that the Seller conveys the deed to the Buyer in return for consideration, then the deed is recorded and the Buyer becomes the owner of the property. However, in Massachusetts, once the deed is recorded at the proper Registry of Deeds, then any title issues “run with the land.” Thus, the new owner becomes responsible for any outstanding encumbrances or liens that were not properly discharged. In order to protect the Buyer, the purchase and sale agreement provides that the Seller must convey “good, clear and marketable” title. Acting as the buyer’s or lender’s counsel, or both, attorneys will review the title exam and work with the Seller’s attorney to clear any title issues, so that the buyer will receive a certification of title and an owner’s title insurance policy.
Seller Responsibilities
Third, the purchase and sale agreement lays out the responsibilities of the Seller. This includes maintaining insurance and upkeep on the property until closing, obtaining a smoke and carbon monoxide certificate at closing, paying the broker’s commission, obtaining a 6(d) certificate for a condominium, and requiring that the taxes be paid by Seller up until the closing date (through an adjustment to the HUD Settlement Statement). The agreement also provides that the Seller’s agent (either the realtor or the attorney) holds the buyer’s deposit in an escrow account.
Anything But “Standard”
There is a note of caution about the standard form Massachusetts purchase and sale agreement. The standard form provides several hidden advantages to a Seller, I’ve written about on this Blog. Thus, buyers must have an experienced attorney revise the agreement and flag those built in deficiencies. For example, if a Buyer were to default prior to closing, the standard form document provides no cap on the damages; a skilled attorney will know to cap the damages at the deposit. The same is true if a buyer loses his rate lock if there is a delay of the closing; a skilled attorney would use language to protect the buyer in this situation.
An experienced attorney will produce a Rider to the purchase and sale agreement that will have language that protects a Buyer’s deposit and provides an aggressive layer of due diligence. For example, if the Buyer is purchasing a condominium, the Rider should have the Seller make representations that the association is not contemplating any special assessments, there are no pending lawsuits against the association, and the budget is in good order. Other issues include seller repairs, septic system/Title V compliance, radon gas, UFFI insulation, lead paint, and buyers’ access to the property while it is under agreement.
Since the P&S is “anything but standard,” an experienced real estate attorney who review and negotiates the document will certainly add value to the closing process.
Richard D. Vetstein, Esq. is regarded as one of the leading real estate attorneys in Massachusetts. With 25 years in practice, he was voted a "Super Lawyer," a "Top Lawyer" by Boston Magazine and "Best of Metrowest." For Rich's professional biography, click here. If you are interested in hiring Rich or have a legal question, email or call him at [email protected] or 508-620-5352.
Overview: Lis Pendens, Latin for “A Suit Pending”
