We received another question from a viewer: “We are getting ready to purchase a new home (my partner and I), but I’m the only one that is going to be obligated on the financing portion of the deal– can we add my partner to title?”
When we say “title,” we are referring to the person named as an owner on the deed. When a property is conveyed to you by the seller, they are granting their interest to you as the new owners.
When two or more people are purchasing a property, one or more of them may not be financially obligated to repay the loan. A person who is an owner but does not have an obligation to repay the loan is sometimes referred to as a “non-obligor” or “non-borrower.”
One easy solution would be to have the additional name(s) added to the deed after closing. Be careful because the mortgage that borrowers sign includes a covenant stating that the buyer won’t transfer the property without the lender’s permission. Adding a partner to title after closing may be deemed such a transfer resulting in default.
If you know you are going to transfer the property, then you want to notify your lender well in advance of closing.
The lender will likely agree to allow your partner to be a co-owner. Usually, the lender’s only requirement is that the non-obligor owner must sign the mortgage and a few ancillary documents at closing. If the borrower does not repay the loan, the lender will foreclose. The right to foreclose must also be granted by the non-obligor; otherwise, the non-obligor may have the right to claim that the lender cannot foreclose their interest.
In conclusion, you can be a title holder and not be obligated to the loan.
If you have any questions about a Non-Obligor Title holder contact us by calling (781) 319-1900.
We received another question from a viewer this week: “I just purchased a property with cash and I haven’t received a tax bill. What should I do?”
Since you purchased a property with cash, you do not have a lender or servicer helping you manage the payments for taxes and insurance, so you do not have an escrow account. Therefore, it is your responsibility to make sure that these items are paid when they come due.
Most municipalities will not invoice the new owner for sometimes up to 6 months or even one full year. Don’t forget to pay your tax bill! We will make sure at the time of closing the taxes are adjusted as of the day of closing and we will remind you if your town collects quarterly or semi-annually.
When you do receive the tax bill in the mail, they will most likely remain in the former owner’s name for some time. Make sure to contact your town’s tax collector to inform them that you are the new owner. This sometimes expedites bills being issued in your name.
If you have any questions about Tax Bills contact us by calling (781) 319-1900.
This week we received another question from a viewer: “I have the ability to purchase a real estate property with cash. What should I be thinking about?”
When deciding to pay cash or obtain financing, always get professional advice from your financial advisor, loan professionals, and CPA. Back in the day, occasionally people would just hand over a check for a deed without completing any due diligence. We do not recommend doing this. When we represent clients that are paying for a property without seeking a loan, we would do everything we would normally do and treat the transaction as if a lender was involved. Our due diligence includes:
Conducting a title exam;
Obtaining a municipal lien certificate;
and Ordering a plot plan.
Every buyer should determine whether the seller owns the property and that all liens will be released. Buyers should verify that there are no outstanding taxes. If there is an outstanding real estate tax obligation, the buyer should require the Seller to pay the outstanding taxes and adjust as of the date of closing. Finally, we obtain a plot plan to verify that the structures do not encroach onto a neighboring lot and that structures on neighboring lots do not encroach onto the lot that the Buyer is purchasing.
In sum, Stiles Law will apply the same level of due diligence as would be required in a financed transaction.
An often overlooked detail in a cash transaction are ongoing responsibilities for real estate taxes and insurance. Buyers should remember to pay all real estate tax bills, even if they are not yet in the Buyer’s name, and to always maintain homeowner’s insurance.
If you want more information on Cash Transactions, please contact us at contact Stiles Law at (781) 319-1900 or stiles-law.com.
This week we are answering another question from a client who asked: “There’s a property up for auction in my neighborhood. I’d like to bid on it — what should I do?”
First you should look at the legal notice that you found in the newspaper.
There are specific requirements on how to bid on the property. You will need a certified check. Often times, these auctions do not actually take place. That is why we always recommend you make the check payable to yourself, so you’ll be able to deposit it back into your account very easily. It will be challenging if you make that check payable to the either the auction company or law firm.
Once you are at the auction, you may wonder what you should be thinking about? You should know the value of the property. Figure out the number you would want to bid. Be disciplined and do not bid higher than that number. Also, be prepared for the worst possible scenario. For example, the septic system fails, and water is running for 5 days and there is mold in the property. Stick to your number. The event itself will be very exciting and you may have a strong desire to win. But don’t get sucked into the auction frenzy. A miscalculation could be extremely detrimental.
What about the occupants that are already there, do I have to evict them? Yes, you do. You are essentially taking the property subject to EVERYTHING. The first mortgage is typically the one that is foreclosing. Which means if notices were delivered correctly, all the junior liens will be wiped out.
What if the occupant that took out the mortgage is still living on the property? Well, this is challenging because title insurance companies will not allow their agents to issue title insurance when the former owner remains in the property. We recommend not purchasing a foreclosure when the occupant remains.
If you cannot purchase title insurance, then you would be defending the foreclosure and that it was all done correctly. Not the best way to start your real estate investment portfolio.
What else should you be thinking about? Think about the fact that there is a strong chance that this auction will not happen or be postponed. This happens for many different reasons, such as the person might file for bankruptcy, or the bank might decide not to foreclose on the property because the occupant remains in the property. Finally, be prepared that the bank may have a large amount of debt due on the property and will want that amount, regardless of what you value the property. If this is the case, they would simply take the property back into their portfolio and try to capture the highest value in the open market by hiring a professional agent.
We invite you to watch our video on buying a bank owned property. There is less risk associated with this type of purchase.
If you want more information on real estate investing at foreclosure contact us at contact Stiles Law at (781) 319-1900.
In this week’s video, I want to update you on a recent video that covered purchasing a bank-owned property. In our prior video we discussed how to purchase a bank-owned property, things to look for in the P&S, and things to look for in the transaction itself.
There is a recently decided case that came down that is relevant to the process of conducting a foreclosure. Thompson v. JPMorgan Chase Bank, N.A., No. 18-1559, 2019 WL 493164 (1st Cir. Feb. 8, 2019). In short, lenders and servicers were not using the precise language of the default provision in the mortgage when notifying borrowers of their impending foreclosure. The United States First Circuit Court of Appeals ruled that Massachusetts law required “strict compliance” when a lender exercises its right to foreclose. Id. citing Pinti v. Emigrant Mortg. Co., 472 Mass. 226 (2015). So what does that mean for the buyer or subsequent owner of a foreclosed property?
If you are buying a bank-owned property, before spending any money, confirm with the bank if they are compliant with Thompson v. JP Morgan Chase. Your attorney and title insurance underwriter will review the notices that were sent against the default provision contained in the mortgage. If the notice is not identical, the foreclosure may be deemed invalid. If the lender has complied with the requirements of Thompson, then the transaction will proceed as an ordinary bank-owned purchase.
What if you bought a bank-owned property? If you purchased an owner’s title policy, you are protected. Further, once three years have passed since the date of the foreclosure auction, the former owner’s claim for improper notice is barred.
We received this question from a viewer: “Can I use funds in my IRA to purchase real estate?” In short: yes! So long as the holder of an IRA follows very specific rules, it is possible to use funds in an IRA to invest in real estate.
Investors who want to use funds in their IRA will use what’s known as a “self-directed IRA.” Before starting this process, investors should meet with a real estate attorney, CPA, and their financial advisor. Like all investments, it should fit into your overall financial plan while maximizing tax efficiency.
There are a number of companies that handle self-directed IRA funds. There are many rules and restrictions which make costly mistakes possible. It is imperative to work with a reputable company.
You may ask: “What do I need to do?” The investor will transfer IRA funds into a separate custodian’s account. Instead of investing in the stock market, bonds, and other securities, investing in real estate is possible. One important principle to remember is that the investor cannot commingle funds. In other words, the investor may not partner personally with IRA funds. At the outset, the investor must determine whether they have enough funds in their IRA to complete the entire transaction.
One exciting opportunity that many investors overlook is lending from a self-directed IRA to others who are investing in real estate. An investor may be willing to pay a rate of interest that is far higher than the rate of return in other types of investments. As with the more traditional approach to self-directed IRA investing, before considering any type of investment, you should consult with your real estate attorney, CPA and Financial Advisor first to consider your risk and objectives.
If you would like more information about investing with a self-directed IRA, contact Stiles Law at (781) 319-1900 or stiles-law.com.
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.