Homeowner’s Insurance: Why are they collecting so much money for the policy?

 

This week we received another question from a viewer: “I am buying a house and I know I need to get homeowner’s insurance, but why are they collecting so much money for the insurance policy”?

If you are obtaining financing and are granting a mortgage to a lender, that lender will inevitably want you to pay your homeowner’s policy one year in advance. The lender will escrow or impound a certain number of months. At closing, buyers are asked to prepay their insurance for the entire year and to establish an escrow account for future insurance payments. After closing, the lender will collect monthly payments in anticipation of next year’s premium.

Your lender is very concerned about the preservation of their secured asset: your home. For you and their protection, your lender will require that homeowner’s insurance remains in place at all times during the life of the loan. Lenders require prepayment of insurance for the entire year as it means the lender is in control of the next payment for the following year.

In conclusion, do not be concerned, you are not overpaying. You are essentially just paying for that one year in advance and starting your escrow account.

Copyright © 2019 Stiles Law, All rights reserved. Stiles Law is a Massachusetts licensed law firm and all content is based on Massachusetts law. The information presented above is meant to be used for general informational purposes and it should not be construed as legal advice or legal opinion on any specific facts.

What Happens when the Seller Doesn’t Completely Move Out?

 

This week we are answering another question from a client who asked: “What do I do if the Seller isn’t completely moved out on the day of closing?”

Most P&S Agreements contain language that covers this situation. The P&S Agreement will usually mention that the Buyer has the right to access the property for inspections, appraisals, measurements, hiring contractors, and a final walk-through. All buyers should have a final walk-through, preferably as close to the time for closing as possible.

At a closing with Stiles Law, very often the first thing that the Buyer is asked at a closing is: “how did the walk-through go?” Most walk-throughs go well. In some cases, the buyer finds that the seller has left a considerable amount of personal property including furniture, trash, and other hard to dispose items.

Sellers: do a good job. Close enough generally isn’t good enough. We suggest to our selling clients that they may want to be completely moved out one day before closing. This means the seller isn’t moving items until the last possible second and it gives the buyer an opportunity to inspect the property.

Buyers: be reasonable. As with the right of access, the P&S Agreement covers the seller’s obligation to clean the property. Unless negotiated otherwise, the seller must leave the property in broom clean condition. Broom clean is not the same as “perfect condition.” Broom clean does not mean “professionally cleaned.” Broom clean means that the property is free of personal property, including trash, and that the property has been swept or vacuumed.

If the Seller does leave the property in less than broom clean condition, what should the buyer do? We always recommend that our buyers take pictures to show to the seller’s attorney and broker. This really is a situation where a picture is worth a thousand words. If there aren’t many items or you feel confident taking on responsibility for removing them, the closing can proceed. Another common option is to sign the closing documents but hold them in escrow until the seller finishes moving their items. In severe situations, the closing can be delayed as the seller hasn’t performed what they are obligated to do under the P&S Agreement. Once the deed is recorded, the buyer owns the house and everything that is inside.

Lastly, a special note for sellers: buyers don’t want your paint. Buyers want to know what color your paint is. If you plan to leave paint, ask the buyer at the time of negotiating the P&S Agreement. If the buyer doesn’t want your paint, bring it to the dump.

If you would like more information about a final walk-through, contact Stiles Law at (781) 319-1900.

Copyright © 2019 Stiles Law, All rights reserved. Stiles Law is a Massachusetts licensed law firm and all content is based on Massachusetts law. The information presented above is meant to be used for general informational purposes and it should not be construed as legal advice or legal opinion on any specific facts.

What to Do After a Low Real Estate Appraisal

 

This week, we received another question from a viewer: “the appraiser didn’t value our property at the purchase price. What do we do?” In other words, what happens if bank hires an appraiser who determines that the house you are buying is worth less than the agreed upon purchase price?

The first step is always to look at the Purchase and Sale Agreement. Your P&S may identify this as a potential issue and it may offer a solution. If the P&S contains a financing contingency clause it may state that if the appraiser determines the value is less than the purchase price, then the Buyer may terminate the P&S. This provides the Buyer with leverage to negotiate with the seller. Since the Buyer has to terminate, the seller will very often agree to lower the price to allow the transaction to continue.

What happens if the Seller will not negotiate and the Buyer still wants to buy? The Buyer’s next step should be to talk to lender. A low appraisal will result in a change to the loan to value ratio (“LTV”). Without adjusting the loan amount, the ratio between the loan amount and appraised value will be lower. A common solution in this case is for the Buyer to make a larger down payment.

Sellers should remember that the next potential Buyer should receive the same appraisal. Engaging in good faith negotiation is always a good idea.

If you would like more information about low appraisals contact Stiles Law at (781) 319-1900.

Copyright © 2019 Stiles Law, All rights reserved. Stiles Law is a Massachusetts licensed law firm and all content is based on Massachusetts law. The information presented above is meant to be used for general informational purposes and it should not be construed as legal advice or legal opinion on any specific facts.

Assessment vs Appraisal: What’s the Difference?

 

We received another question: “What is the right number, an appraised value or an assessed value?”

First, what’s the difference? An appraised value is a number that is determined by a licensed appraiser. Appraisers must take continuing education classes, they must go through licensing, and often use multiple factors to determine what a fair market value for the property may be. For instances, comparable properties that have recently sold, quality of finishes, or other improvements can impact the appraised value.

Assessed value is determined by the town through the assessor’s office. An appraised value is almost always closer to fair market value. Assessed value is less accurate and is used only to determine your tax obligations.

Appraisals cost money, so what should you do if you want to sell? We always recommend against relying on an assessment. Usually, spending money on an appraisal not necessary because a quality agent can generate an estimated value by doing a comparative market analysis. The agent will come up with a range of what the house may be worth.

Stiles Law, with offices located in Boston and Marshfield, Massachusetts, is a firm concentrating in real estate conveyancing and mortgage lending services, representing buyers, sellers, borrowers, banks, mortgage companies, investors, builders and developers in all of their real estate and mortgage transactions. Stiles Law serves all areas of eastern Massachusetts–the North Shore, Boston, and Cape Cod, in addition to the entire South Shore, including: Plymouth, Kingston, Duxbury, Hanover, Pembroke, Marshfield, Scituate, Norwell, Cohasset, Hull, Hingham, Weymouth, Braintree, and Quincy.

Copyright © 2019 Stiles Law, All rights reserved. Stiles Law is a Massachusetts licensed law firm and all content is based on Massachusetts law. The information presented above is meant to be used for general informational purposes and it should not be construed as legal advice or legal opinion on any specific facts.

Can I Deed My Home into my Trust?

We receive this question often: “I just purchased a property, and would like to move it into my trust. Can I do that?” A homeowner should consider a few things before doing so.

You may violate a covenant in your mortgage. Your lender has not had an opportunity to qualify your trust. If you receive permission from your lender first, you avoid the risk of the lender claiming you are in default and initiating foreclosure proceedings. There are exceptions under federal law for estate planning. You should always consult a real estate attorney, CPA, and often times a financial advisor before deciding to place your home into trust.

There is one more critical consideration: if you have a title insurance policy, you should check with your real estate attorney who will contact your title insurer to determine whether you need a “change endorsement.” If such an endorsement is required, transferring without it could mean your policy no longer protects your interest in your property.

You can transfer your property into trust, but check with your lender and consult a real estate attorney first. If you would like more information about transferring your property into trust, contact Stiles Law at (781) 319-1900.

Stiles Law, with offices located in Boston and Marshfield, Massachusetts, is a firm concentrating in real estate conveyancing and mortgage lending services, representing buyers, sellers, borrowers, banks, mortgage companies, investors, builders and developers in all of their real estate and mortgage transactions. Stiles Law serves all areas of eastern Massachusetts–the North Shore, Boston, and Cape Cod, in addition to the entire South Shore, including: Plymouth, Kingston, Duxbury, Hanover, Pembroke, Marshfield, Scituate, Norwell, Cohasset, Hull, Hingham, Weymouth, Braintree, and Quincy.

Copyright © 2019 Stiles Law, All rights reserved. Stiles Law is a Massachusetts licensed law firm and all content is based on Massachusetts law. The information presented above is meant to be used for general informational purposes and it should not be construed as legal advice or legal opinion on any specific facts.

South Shore Real Estate Blog: The Great Thaw—Five Ways to Loosen Inventory

Bob ThawAnyone involved with today’s market undoubtedly knows that we are in a period of low inventory. This week, we’re going to look at five strategies that allow Buyers and Agents to help thaw an otherwise frozen market.

  1. One Day Exclusive Listing Agreements:

Ordinarily, a Buyer’s Agent will search the MLS looking for homes that meet their Buyer’s requirements within a given area. Due to low inventory, very often there are few homes, if any, to show a Buyer. In this situation, an Agent should consider what’s known as a “one day exclusive listing agreement.” Very simply, the Agent will send a letter stating that they are an Agent of a Buyer who is interested in their home. The Agent will represent/list the recipient’s home for a single day to allow their Buyer to view and potentially submit an offer and as an additional benefit to the Agent, even if the Buyer does not make an offer, for whatever reason, the Seller will often ask the Agent to list their home for sale because now their mindset has shifted due to the excitement of moving. Result: the Buyer is able to see more houses, the Seller is spurred to list their house, and the Agent either sells a house or gets a listing: this is  truly a win, win, win situation.

2. Technology/Social Media: 

One may take the “old school” approach of actually knocking on doors and asking if the owner is interested in selling; and it may work. With social media as a platform to broadcast a desire or need, it’s easy for an Agent to post what their client is looking for, perhaps enticing an otherwise non-selling homeowner to sell their home. For example: “I have a Buyer looking for a 3 bedroom home with a yard big enough for their dog in Mytown, USA.” As an additional benefit, you are marketing and developing your brand as a Real Estate Agent. Friends who didn’t know you were an Agent will be reminded by such posts. Use technology and creativity to “manufacture” inventory and develop your brand.

3. Negotiate a Home Sale Contingency:

Many Buyers are sitting on the sidelines waiting for inventory to increase. The problem is that many of these Buyers are also would-be Sellers. To increase inventory, Buyers who also need to sell should make an offer which includes a home sale contingency with their offer. That said, not all home sale contingencies are created equal. There are generally four types which expire at different points of the sale process: 1) the Seller becoming party to a signed offer, 2) the Seller becoming a party to a signed purchase and sale agreement, 3) the Seller’s Buyer receiving their mortgage commitment, or 4) the Seller closing on their sale and receiving proceeds. An Agent guiding their Buyer should define precisely which type of home sale contingency they are seeking. Sellers should bear in mind that while inventory is low, there’s a good chance that the Buyer will sell their own home quickly assuming their home is properly marketed at a realistic price. The Seller’s agent may be able to evaluate the Buyer’s marketing strategy and home to get a better sense of how likely it will be to sell at the Buyer’s listing price.

Notwithstanding, Sellers may also choose to include a “Kickout Clause” in their counter offer. Generally speaking, a kickout clause allows the Seller to continue listing their house for sale, during which time if the Seller receives a bona fide offer that is stronger than the Buyer’s offer, the Buyer is given a defined period to either waive the home sale contingency or exercise their rights under the contingency to terminate the Agreement. For more information on kickout clauses, read our article, The Offer Part 2 – Contingencies for Sellers to Consider.

4. Negotiate a Suitable Housing Contingency:

Many Sellers are saying that “If I found the right house, I would sell mine.” Those Sellers are sitting on the sidelines waiting for inventory to increase so that they can find their next house. (Some homeowners simply prefer to Sell before they buy. Buying before selling comes with the risk of not being able to find a home to purchase before having to close on their sale.) As with sale contingencies, not all suitable housing contingencies are created equal. A suitable housing contingency generally expires at one of four points: when the Seller 1) signs an offer, 2) signs a purchase and sale agreement, 3) receives a mortgage commitment, or 4) closes on their purchase. The benefit of sharing the risk is that Buyers who would otherwise wait for inventory to increase before listing will be willing to list and sell their homes, thus, increasing inventory.

5. Disclose the Seller’s Time Requirements:

Finally, a Seller may choose to disclose on the listing that they need more time than is customary between signing the Purchase and Sale Agreement and closing: sixty days or even longer is not unreasonable when properly disclosed. Many Buyers are flexible and wouldn’t mind extra time if it means buying the home of their dreams.

While the above strategies do not present a complete panacea, using one day exclusive listings and strategic contingencies can help to bring homes that would otherwise stay off the market, into the market. The common thread between these five strategies is creativity. Creative thinking can help to thaw the frozen market, benefiting Buyer, Sellers and even Agents, alike.

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Stiles Law, with offices located in Boston and Marshfield, Massachusetts, is a firm concentrating in real estate conveyancing and mortgage lending services, representing buyers, sellers, borrowers, banks, mortgage companies, investors, builders and developers in all of their real estate and mortgage transactions. Stiles Law serves all areas of eastern Massachusetts–the North Shore, Boston, and Cape Cod, in addition to the entire South Shore, including: Plymouth, Kingston, Duxbury, Hanover, Pembroke, Marshfield, Scituate, Norwell, Cohasset, Hull, Hingham, Weymouth, Braintree, and Quincy.

Copyright © 2016 Stiles Law, All rights reserved. Stiles Law is a Massachusetts licensed law firm and all content is based on Massachusetts law. The information presented above is meant to be used for general informational purposes and it should not be construed as legal advice or legal opinion on any specific facts. No child labor laws were breached during the creation of this Blog, further Bob Bonkley was compensated for his likenesses and appearances in the same.