Buying at a Foreclosure Auction

 

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.

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.

Thompson v. JP Morgan Chase: Massachusetts Foreclosure Update

 

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.

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.

Investing in Real Estate with a Self-Directed IRA

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.

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 is a 1031 Exchange?

 

In the last few videos, we have discussed topics related to real estate investing. This week, we are discussing 1031 exchanges. Your natural question may be, what is a 1031 exchange? A 1031 allows a real estate investor to defer the payment of capital gains by allowing a “like-kind exchange.”

When a real estate investor sells, they may have to pay capital gains tax. If that real estate investor intends to sell their property but wants to acquire another investment property, they can utilize the services of a qualified intermediary to perform a like-kind exchange. A like-kind exchange simply means that the property that is sold and acquired is of the same kind, that is, investment property.

What will you need? First, you must use the services of a qualified intermediary. An ordinary CPA or real estate attorney will not suffice—though you should consult both before attempting to perform such an exchange. A qualified intermediary is certified by the IRS to handle the proceeds of the sale. The real estate investor never touches the proceeds.

What are the basic limitations? A 1031 exchange is only available for investment properties. The investor must identify three properties within forty-five (45) days of the sale. Finally, the second transaction must occur within six (6) months of the sale.

1031 exchanges can defer capital gains taxes and substantially increase the real estate investor’s purchasing power. If you have any questions about 1031 exchanges or would like a referral to a qualified intermediary or CPA, contact Stiles Law by calling (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.

The Massachusetts South Shore Real Estate Blog: 2016 Should be the Year of Cooperation

Bob With Arms Wide OpenTo most, January is a time for resolutions. It’s a time for change. For those of us in the Real Estate industry, early spring is the more appropriate time for resolutions. We work hard all year round, but as you undoubtedly know, the winter is often our brief respite–a time to relax and recharge. With spring having apparently sprung, it’s time to declare what the coming year will represent: to us, 2016 is the year of cooperation. It’s undeniable that cooperation, especially in the context of real estate transactions, is key. It may be corny, but it’s undoubtedly true: we’re all in this together. The happier and more respectful we are, the more peace we can expect in return.

First on our list of resolutions is to not “point fingers.” It’s so tempting and often temporarily satisfying; however, there is nothing that sours a relationship quite like pointing a finger. In our office, we use the phrase, “he/she threw someone under the bus.” The sentiment is the same. Deflecting attention to another party by blaming them for the impasse causes significant friction. How can we expect to manage, guide, or lead our clients if we’re down in the mud? Your client has hired you as an expert, not as their cheerleader. It’s tough to give them the stern advice to reach for solutions rather than pointed conclusions.

Resist the urge to lob that after-hour bomb. Sending an email, after a long day of work, is a tempting way to blow off some steam. Throwing that last Haymaker can feel satisfying, but it’s ultimately posturing for a new battle in the morning–or worse  yet, later into that evening. A quick email or text stating that you’re hopeful to reach an agreement or even a quick joke can set the tone for a productive morning.

Seek  out like-minded professionals. This seems intuitive, but all too often we find ourselves negotiating terms with the Seller’s uncle who happens to be an attorney. He may be a tax attorney, but how hard could real estate law be, right? We’ve all had clients that went with the lowest possible rate they could find online–you would think with the name “Big Jim’s Mortgage Emporium and Discount Dry Cleaning” they would have seen it coming–only to be surprised that the lender couldn’t deliver on time. There’s nothing wrong with seeking a low rate, but sometimes that rock bottom price comes with some rocky service. Perhaps even worse, a Buyer or Seller will decide to go alone without an experienced real estate agent. This almost always results in a tough, bumpy closing. The lesson: seek out professionals—your clients will thank you. For some of our thoughts, read our other articles like: Ten Reasons to Use a Real Estate Agent When Selling Your Home .

Approach negotiation strategically. This resolution goes hand in hand with our call for hiring professionals. Much of the service that our clients are looking for is the understanding of how to craft a deal. We understand that, usually, a party cannot get everything they want. It’s hard to ask a client to compromise, but getting that last “morsel” doesn’t promote getting what they truly want. Additionally, demanding a win on each issue may result in “deal fatigue” and possibly withdrawal from negotiation.  There’s an old expression in litigation: “to obtain a binding settlement, both parties must leave equally unhappy.” In real estate, we don’t need to equate negotiation with litigation. Our favorite transactions (and almost always our clients’ favorite transactions) are ones where both sides are happy (or at least satisfied), often finishing with the clients embracing and engaging in a meaningful way. For more, read our article Catching More Flies with Honey in a Hot Real Estate Market. That last repair item or few dollars isn’t worth the pain and risk that it will inevitably bring. Coach your client to swallow their pride and give the other side a small “victory.”

Maintain perspective. It’s easy to lose sight of what’s important by focusing on the minutia of the deal. The Seller listed the property because the Seller wants to sell. The Buyer made an offer because the Buyer wants to buy. Our clients hire us for guidance, not obstruction. It’s the intention of the parties to make a deal, not win a negotiation. Frankly, sometimes it’s our job to get out of the way.

Take the long view. Often, a real estate professional will deal with the same issues routinely. While we all must zealously represent our clients, keep the big picture in mind both short and long term. Short term, keep your client’s ultimate goal in mind. Forcing the issue on each point may not further their global goals. For the long term, remember that you may be on the other side of a similar issue in another transaction. While there’s nothing wrong with an inconsistent position, it’s critical to maintain professionalism. We all work with the same people routinely: your reputation is your greatest asset. It’s hard to improve a reputation for not maintaining a fair, professional demeanor.

With all of this in mind, let’s collectively declare that 2016 will be a year filled with cooperation and many deals for all.

Click here to get to know our team.

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.

 

 

The Massachusetts South Shore Real Estate Blog: Happy Cinco de Mayo! The Best of the Blog

SombreroHappy Cinco de Mayo! It’s the beginning of May, the summer is ahead of us, and the weather has finally turned to the best that New England has to offer.  In honor of this glorious time of year and the fifth of May, we’ve come up with a list of our five favorite blog articles:

  1. Ten Reasons to Use a Real Estate Agent When Selling Your Home
  2. Demystifying Closing Costs
  3. Title Insurance – Protection for the Purchaser of Real Estate
  4. When to Retain a Real Estate Attorney
  5. Catching More Flies with Honey in a Hot Real Estate Market

While these happen to be our favorites, read through the rest of our articles to find your own favorite. Stay tuned for more original content in the coming weeks.

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 © 2015 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.