All posts by Robert Bevans

Creating Home Ownership for Your Kinds–Try an LLC

Uncategorized, , ,

When parents want to help their children buy a home, they are often stymied by the myriad gift and other tax considerations which make providing for their children a difficult task. Recently, with the assistance of Scott W. Hazard, a Senior Vice President at GuardHill Financial, and a financial planning associate, our firm was able to circumvent the obstacles and provide a “clear path” to generous parents for effecting real assistance to their children.

There follows a description of how this transaction was structures:

      1. The generous parents form an Limited Liability Company (the “LLC”). The parents became the Managers of the LLC and are majority Members. The Operating Agreement for the LLC provided that the parents put substantially all of the cash required to close the purchase into the LLC. The children are also Members under the Operating Agreement but only to the extent of a few thousand dollars, which entitled them to a small share of the interest in the LLC.

      2. The LLC entered into the Purchase and Sale Agreement for the purchase. The LLC also became the Mortgagor when the purchase closed. Disclosure of all aspects of the transaction was made to the Mortgage lender, and the only extra document the Lender required were the personal guarantees of all four Members of the LLC.

     3. The transaction took place in 2008. Prior to the end of the year, each of the parents made gifts of $26,000 to the children. These gifts were made in the form of amending the Operating Agreement to increase the percentage interest of the children as Members of the LLC. The parents intend to make similar gifts in 2009 and thereafter, until the home is 100% owned by the children.

     4. Because of the size of the gifts, no gift tax return was required of the parents and the parents were not forced to use up any of their lifetime transfer exclusion. If the children are able to develop additional funds, they may make payments to the parents at any time to increase their Member ownership. It is generally advisable for the parties to obtain an appraisal of the home from time to time to make an accurate measure of the value of the Member transfers.
Even in today’s sometimes difficult real estate market, parents want to assist their children to become homeowners. The LLC route described herein is one which has many advantages, and I would recommend that any parents who are inclined to assist their children in attaining home ownership consider it.

Kids at College–Some timely advice for Parents

Health Care Proxy/HIPPA, , ,

Among the learning experiences for parents with children away at college is the fact that having reached the age of 18, your child is no longer your ward, and you are no longer your child’s legal guardian.  That doesn’t mean that cannot pick up the tab for tuition, room and board, but you are not, as of right, entitled to see your child’s grades, and you are not, as of right, entitled to be informed of health issues confronting your child or to make medical decisions for your child.

The grade issue can be circumvented by interaction with your child. The health considerations are a little bit more complicated and require some forethought.  The two documents that will assist you in being in position to help your child in medical emergencies, or even routine medical decisions, are a Health Care Proxy (which gives you the right to make “informed consent” decisions for your child) and the FICCA form (which gives you access to your child’s medical records).  These documents are part of our standard Estate Planning package when we assist our clients with Estate Plans. We are now suggesting that the appropriate execution of these forms, and in certain instances, a durable Power of Attorney, become part of your checklist for sending your child away to college either in January or August.

We, at Topkins & Bevans, can prepare these forms for you, and explain their proper execution, for a minimal fee. We can do this work from Massachusetts, and you can execute them in your state as long as you acknowledge that the documents have been drafted in accordance with Massachusetts law. Please contact me to go over what is required, and how we can assist parents in this area. With the reticence that many medical institutions have developed to release medical information and records, the Health Care Proxy and HIPPA Form have become “don’t leave home without it” items.

The Resource Triangle–“Three” who can make it Happen

Marketing / Communication, Uncategorized, , , ,

As I have evolved from an attorney who sat in my office and waited for the phone to ring into a realist who started to understand that marketing is an essential part of doing business, one thing became clearer and clearer. My best efforts involved finding motivated and talented realtors and mortgage originators with whom I could work on a regular basis.

This “Resource Triangle”, as I like to call it, makes perfect sense. All three professionals involved have one goal in mind, the successful closing of a residential real estate closing. All three have something else in common: if the transaction does not close, none of us gets paid. So if a realtor in one of my Triangles calls me up late on a Saturday afternoon and tells me she or he has a Buyer who is leaving town this evening, can I come by and introduce myself, I need to appear even if it means my Saturday night plans are delayed, or even cancelled. The same availability is required from the mortgage professional. If we are going to be “Resources” and part of the Triangle, we need to be there, any time, any place.

Once the Triangle is established, it can work to everyone’s advantage. The reliability component is huge. When I tell my realtor-partner, I can turn the Purchaser and Sale around in no longer than 48 hours, and I DELIVER on my promise, he or she knows that the chances of the deal coming together are increasing at a rapid pace, and what may have looked like “bragging” was only describing a standard that he or she knew could be achieved. When the mortgage originator promises a full-blown mortgage commitment in fourteen (14) business days, AND DELIVERS, comfort and credibility abound. When I promise a client who owns a home, and is buying another, that my realtor-partner can get their present residence sold in less than a month, AND DELIVERS, I look good, my realtor-partner looks good, and the magic word “closing” is that much closer.

I have been fortunate in that I have developed several unique Triangles in my practice, the difference in make up and composition being a function of the clients I am working with and geographic compatibility. The networking groups I am involved with, such as BNI, are a natural source for Triangles.

Most of the people reading this post are Triangle-eligible. They fit into one of the three (3) categories described.  I urge each and every one of you to get your Triangles in motion at the earliest possible opprotunity. The confidence in referring your most trusted clients and customers to people who have time and again DELIVERED can make all the difference for you. You will no longer be a face in the crowd. You will be the one person who can make the deal happen

The Perfect Closing-One Lawyer’s Dream

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Strangely enough, after more than forty years of doing residential closings, I cannot remember one closing which was perfect in every way. My state, Massachusetts, still has lawyer’s serving as closing agents and also reviewing the title and writing the title insurance. This means that my firm, Topkins & Bevans, is responsible for checking at the appropriate registry to make sure that the Seller really owns the property, and there are no liens which cannot be paid off, or accounted for, at the Closing. We also need to check on water and sewer charges, and other municipal liens (such as property taxes) and common area fees, where a Condominium Unit is involved. Once we receive the rest of the “figures” from the Lender, we produce a HUD-1 Settlement Statement and distribute same to the Buyer and Seller, most of the time at least 36 hours prior to the Closing

There are a lot of balls up in the air, and our job is to try to assemble all of the players, and have each of them walk away with the thought that they had been well attended to, and fairly treated. So, in a perfect world, these are the goals, which I would always try to attain in my “perfect closing”:

1. The Buyer. Buyers are almost always nervous, whether this is their first, or twenty-first, purchase. My job is to make them calmer. I do this by being prepared for each closing. The Form 1003, which is a part of the Lender’s closing package, is packed full of information. I can find out the age of the Buyers, how many kids they have, what they do, and where they work. This almost always leads to a comment like:”Oh, you are a nurse, my sister-n-law is a nurse.What is your specialty?” or “Oh, you have four children, I have four children, where are they at school?” Get the picture!!! I have identified something I have in common with the Buyers. I am a human being, too, not a robot who is there to make sure they do not purchase the home of their dreams. I tell my Buyer at the start that I will take as much time as they wish going over, and explaining, the HUD-1. I tell them that this is really the most important part of their closing. The numbers on the HUD-1 help them to establish an “opening balance sheet” for their home. I never try to rush closings; this is a big moment for the Buyers, and I want them to relish it. Whenever possible, I take a picture of the Buyers with my digital camera after the Closing and send it to them with an email. I want them to have a memory of their “big day”

2. Sellers. Sellers have feelings, too. I tell them that I will explain the HUD-1 to them as well, especially if they do not have an attorney present. I try to move the closing along so the Seller is not inconvenienced.

3. Realtors. Most realtors come to closings. I try to involve them in the proceedings as much as they wish. I will ask their opinion on certain issues, and assist them by having an extra copy of the HUD-1 available for them to take with them. Lately, I have been trying very hard to make sure that Seller’s Agent, or the Buyer’s Agent, gets paid from my Client’s Account at the closing. These people have worked as hard as the Listing Agent for their commission, and there is no reason to make them wait additional weeks to be paid.

4. Mortgage Professionals. Most of my Originators do not attend the closing. I think they should but they do not. Since they are not there, I ALWAYS call or email them after the closing is completed. I tell them just how the closing went, and if the closing went especially well, I urge them to contact the realtor(s) or Buyers to inquire. The positive reinforcement the originator receives may be helpful for future referrals.

If I can do all these things every time, my closings will be perfect.I am not there yet, but at least I know what I am shooting for. I would be interested in hearing from any of you with helpful hints as to how I can make my closings better. I used to have a slogan “my closings close”. That is an important statement, but I would rather be able to say “My closing closed, and I enjoyed they way I was treated”.

Review of Condominium Financial Statements and Operations–Some Guiding Principles

Condominium, trusts, ,

One of the functions of an attorney representing a Buyer of a Condominium is to review the financial statements and operations of the Condominium, as well as the constituent condominium documents such as the Master Deed and the Condominium Declaration of Trust. In a future post, I will delineate what I look for in the Condominium Documents. This post, however, concerns the important information which can be gleaned by doing a careful review of the Condominium Financial Reports,  and Minutes of Trustees, and asking some questions of the Condominium Trustees, either directly or through the Selling Agent or Buyer’s Agent, as the case may be.

        1. Condominium Statement of Operations

                          a.  Look at ALL of the captions, especially Repairs. Do the Repair costs seem high? If they are more than a few hundred dollars, more information is needed.  Is the Condominium “patching” where they should be making capital improvements? Will the new Buyer be required to pay for prior problems? Higher than normal Repair costs can tell you about how carefully the Condominium has been managed. See if the Condominium has a caption for “Accounting” and “Legal”. If there is none, that may be a danger sign. The Trustees may be “winging it” on decisions where they need professional guidance.

                    b.  See whether the income received represents payment in full from all units for the entire year. If that number does not compute, there are almost always delinquencies for common area fees. Massachusetts Condominium law ( and most other jurisdictions, too) gives the Trustees broad powers to start litigation for common area fees. The cost of same, including attorneys fees, is to be borne by the delinquent Unit Owner. If there are delinquencies, it may mean that the Trustees, for one reason or another, are not making real efforts to collect what is due from their neighbors. That is a danger sign for a potential Buyer, and could signal problems down the road.

                    c. If possible, obtain Financial Statements for more than one year. Carefully analyze the receipts section. If the number is consistently on the rise, it means that the Trustees are constantly raising the common area fee. Find out what the reason for that has been. If there is a pattern of loose or sloppy management, it may manifest itself in continuing increases in the common area fee.

     2. Condominium Balance Sheet

                             a. Look for how much is in the Reserve Account. While many Condominiums have taken a “pay as you go” approach to improvements, make sure that a Reserve Account is, at least,  in existence. In most states, Trustees are required to maintain an Operating Account and a Reserve Account. If there is no Reserve Account at all, the Trustees are not adhering to their statutory responsibilities. Perhaps, they are not adhering to other provisions of the Condominium law, as well.

                              b. See if there are any Accounts Receivable on the Balance Sheet. If there are, they are more than likely from delinquent Unit owners. Inquire as to the status of collection efforts. If they have not begun, that is a red flag for poor Condominium Management.

The other thing I always ask to see are Minutes of the Trustees for at least the prior Eighteen (18) months. If none exist, or if the Trustees do not regularly meet, there may be problems. I try to ask why.  If there are Minutes, i look at them for any indication that a Special Assessment may be coming. This can be an unpleasant surprise for my client, and when I know a Special Assessment is “right around the Corner”, I can sometimes request that the Seller bear some of the cost thereof. Depending on whether the Special Assessment is forward (something new that really is not the Seller’s issue) or backward (a repair of a roof or other important constituent common area part) I have had some success in requests for contribution.

1031 Exchanges–Having Your Cake and Eating it, too!!!!

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1031 Exchanges, tax deferring transactions much used in our Western states, are moving east, and you should know more about them, if you own any kind of investment real property. In the landmark Starker decision in 1979, the United States Supreme Court substantiated the validity of the delayed exchange process. Prior to that time, the courts had never sanctioned an exchange whereby the relinquished property was sold and at a later date, replacement property was purchased. What this means to you as an owner of investment property, is that you can dispose of property in which you have sizable gain, but perhaps the headaches of management, and replace the old property with a different more manageable property, or even an ownership interest with others, in new property.

If done correctly, a 1031 Exchange can permit an investor to defer tax due in connection with the sale of real property, enabling the investor to consolidate, diversify, leverage or relocate her investment. Fortunately, in 1994, the Internal Revenue Service promulgated “Safe Harbor” regulations which provide the steps to take to make sure a 1031 Exchange produces the desired tax deferral. At Topkins & Bevans, we have always advised our exchanging clients to use a Qualified Intermediary which is affiliated with a Title Insurance Company. There have been some problems with intermediaries absconding with funds in the past, but never, ever, have there been problems with the Company we work with, OREXCO, an affiliate of Old Republic Title Insurance Company. In myriad transactions, we have been most satisfied with the level of expertise, service and financial integrity provided by that organization. OREXCO is best reached locally by contacting Lynne Bagby, the New England Regional Account Manager, at lbagby@ortc.com.

The key to a successful Exchange is identifying replacement property in a timely manner. It is essential that the investor locate “like-kind” property. Generally, real estate is like kind to all other real property, except foreign real property, as long as it is held for investment or the productive use in a trade or business. There is a 45 day time frame in which the investor must “identify” replacement property. Identifying the property on a timely basis is not all that must be done. It is also essential to “close” on the identified property in or within no longer than 180 days from the sale of the subject property. The 45 and 180 day periods are calendar days. There is no grace period if the day in question falls or a Saturday, Sunday or holiday.

Even if you own property with another investor, you may be able to exchange property if he or she does not wish to. In this type of transaction, you must clearly indicate and allocate each investor’s interest in the property before you sell. The investor who wishes to exchange may do so, and the other investor may receive cash (taxable). It is, of course, very important that the investors be clear on their intentions before entering into an exchange agreement with the Qualified Intermediary. Once a relinquished property is closed where all exchanging properties are under one exchange agreement, the exchangers do no have an option of dividing proceeds and buying separate replacement properties.

It is also possible to enter into an exchange transaction where part of the tax is deferred and a portion recognized as taxable gain. If the equity in your investment property is $150,000,00, and you wanted to use only $100,000.00 to purchase your investment property, and take $50,000 out to buy a new car, you would have a partially tax deferred exchange. The $50,000 you took to purchase the car is considered taxable cash “boot”.

Even is you live in one apartment, in the three family dwelling you own as an investment, you may be able to utilize a tax free exchange for the other two units. That type of approach works out extremely well if you are converting the investment rental property into condominiums for sale to third parties (See my previous post on this type of advantageous transaction). The unit you live in is sold as your principal residence, and you are eligible for the tax exclusion permitted for the sale of your principal residence where you resided for at least two of the last five years. The other two units can be sold as part of a 1031 Exchange, as long as the percentage of the value of the property is consistent with your past tax returns. This is a somewhat complicated area, and you should consult your tax advisor with regard to the particular aspects of this type of 1031 Exchange transaction.

I would be more than willing to communicate with you, and your tax advisor, to discuss any type of 1031 Exchange which you may be interested in. You should also feel free to contact Lynne Bagby at OREXCO for assistance. Our firm has enjoyed an extremely positive relationship with OREXCO and drawn much of the materials for this post from information furnished by OREXCO. If you use a sold, reputable company like OREXCO as your Qualified Intermediary, you will have little, if any, risk about the safety of your funds. In these days of uncertainty, selecting the “right” Qualified Intermediary is more important than ever.

TOPKINS & BEVANS is a mid-sized suburban Boston law firm, with offices located in Boston, Waltham and Braintree. Elliott Topkins, the senior partner in the firm, has more than 35 years of experience in real estate and estate planning matters. He is best reached at etopkins@topbev.com.

1031 Exchanges, tax deferring transactions much used in our Western states, are moving east, and you should know more about them, if you own any kind of investment real property. In the landmark Starker decision in 1979, the United States Supreme Court substantiated the validity of the delayed exchange process. Prior to that time, the courts had never sanctioned an exchange whereby the relinquished property was sold and at a later date, replacement property was purchased. What this means to you as an owner of investment property, is that you can dispose of property in which you have sizable gain, but perhaps the headaches of management, and replace the old property with a different more manageable property, or even an ownership interest with others, in new property.

If done correctly, a 1031 Exchange can permit an investor to defer tax due in connection with the sale of real property, enabling the investor to consolidate, diversify, leverage or relocate her investment. Fortunately, in 1994, the Internal Revenue Service promulgated “Safe Harbor” regulations which provide the steps to take to make sure a 1031 Exchange produces the desired tax deferral. At Topkins & Bevans, we have always advised our exchanging clients to use a Qualified Intermediary which is affiliated with a Title Insurance Company. There have been some problems with intermediaries absconding with funds in the past, but never, ever, have there been problems with the Company we work with, OREXCO, an affiliate of Old Republic Title Insurance Company. In myriad transactions, we have been most satisfied with the level of expertise, service and financial integrity provided by that organization. OREXCO is best reached locally by contacting Lynne Bagby, the New England Regional Account Manager, at lbagby@ortc.com.

The key to a successful Exchange is identifying replacement property in a timely manner. It is essential that the investor locate “like-kind” property. Generally, real estate is like kind to all other real property, except foreign real property, as long as it is held for investment or the productive use in a trade or business. There is a 45 day time frame in which the investor must “identify” replacement property. Identifying the property on a timely basis is not all that must be done. It is also essential to “close” on the identified property in or within no longer than 180 days from the sale of the subject property. The 45 and 180 day periods are calendar days. There is no grace period if the day in question falls or a Saturday, Sunday or holiday.

Even if you own property with another investor, you may be able to exchange property if he or she does not wish to. In this type of transaction, you must clearly indicate and allocate each investor’s interest in the property before you sell. The investor who wishes to exchange may do so, and the other investor may receive cash (taxable). It is, of course, very important that the investors be clear on their intentions before entering into an exchange agreement with the Qualified Intermediary. Once a relinquished property is closed where all exchanging properties are under one exchange agreement, the exchangers do no have an option of dividing proceeds and buying separate replacement properties.

It is also possible to enter into an exchange transaction where part of the tax is deferred and a portion recognized as taxable gain. If the equity in your investment property is $150,000,00, and you wanted to use only $100,000.00 to purchase your investment property, and take $50,000 out to buy a new car, you would have a partially tax deferred exchange. The $50,000 you took to purchase the car is considered taxable cash “boot”.

Even is you live in one apartment, in the three family dwelling you own as an investment, you may be able to utilize a tax free exchange for the other two units. That type of approach works out extremely well if you are converting the investment rental property into condominiums for sale to third parties (See my previous post on this type of advantageous transaction). The unit you live in is sold as your principal residence, and you are eligible for the tax exclusion permitted for the sale of your principal residence where you resided for at least two of the last five years. The other two units can be sold as part of a 1031 Exchange, as long as the percentage of the value of the property is consistent with your past tax returns. This is a somewhat complicated area, and you should consult your tax advisor with regard to the particular aspects of this type of 1031 Exchange transaction.

I would be more than willing to communicate with you, and your tax advisor, to discuss any type of 1031 Exchange which you may be interested in. You should also feel free to contact Lynne Bagby at OREXCO for assistance. Our firm has enjoyed an extremely positive relationship with OREXCO and drawn much of the materials for this post from information furnished by OREXCO. If you use a sold, reputable company like OREXCO as your Qualified Intermediary, you will have little, if any, risk about the safety of your funds. In these days of uncertainty, selecting the “right” Qualified Intermediary is more important than ever.

Condominium Operations–It’s Time for a Change

Condominium, , , , ,

Over the years, I have had many opportunities to become part of the Condominium process. I have drafted Condominium Documents, both conversions and new projects. I have closed literally thousands of mortgage loans, which involved either Condominium purchases or refinancing. I have also represented Buyers and Sellers of Condominium Units of all shapes and sizes. Based on my experiences, the following changes need to be implemented in Condominium operations, and we, as real estate professionals, need to be leading the way through our Boards and Legislative contacts to effect the following:

1. Condominiums Should be Required to file Annual Reports with the Secretary of State.     Most Condominiums do not keep current the names of the Trustees for the Condominium. I have, on many occasions, received 6(d) Certificates executed by individuals who are not the Trustees of record. In their Annual Report, the Condominium would be required to name the current Trustees, and affirm that the requisite filings have been made at the appropriate Registry of Deeds.

 2. Condominiums with Six (6) or more units Should be Required to produce, and keep current, Condominium websites. There is much too much inefficiency involved when a Condominium Unit owner attempts to sell his or her Unit. At the very least, the Condominium website will contain the following sections:

          a. Floors plan for each Unit. These are on record at the Registry of Deeds, but they are relatively easy to replicate on a website.

          b. A set of CURRENT Condominium Documents. Put them on the website as they exist at the Registry of Deeds, including all amendments. If nothing else, this will save the many trees which are killed to copy sets of Condominium Master Deeds and Declarations of Trust. The Buyer’s attorney can do his or her review of the Documents from the website. So can the Lender or the closing agent. Everyone wins, except Staples.

          c. The name of the current Management Company,if one exists, along with telephone number and email address of the contact person. Someone needs to be in charge of providing financial information to the putative Buyer. The website can designate that person.

          d. The website will contain a “ready to print” form of 6(d) Certificate. It is an outrage for a Seller to be required to pay $50 or $100 to the Management Company to deliver a 6(d) Certificate. It should be able to be printed out, at any time, and ready for Trustee(s) signature.

3. Condominiums Need to do a Review of their Documents, at least once every five(5) years. There are some very old documents in place, which are not responsive to modern Condominium living.  Rights of first refusal were in vogue in the 1970’s and 1980’s. What real purpose do they serve now? Some descriptions of common areas are prolix. Many lenders are requiring Condominiums to have arbitration provisions with regard to disputes. Older documents rarely, if ever, contain arbitration provisions.

4. Condominium Trustees need to be more vigilant in terms of collecting Delinquent Common Area fees. There is a statute in place which gives the Condominium Trustees broad powers to collect delinquent fees. Many of us in the Massachusetts Bar fought long and hard to have this provision enacted after some Condominiums in the late 1980’s and early 1990’s went bankrupt under the crush of non-paying Unit owners. We are in a difficult economy at present. That does not excuse non-payment of Common Area fees. Many Trustees are totally unaware of their rights to collect these fees. In case my readers do not know, the Trustees can commence a collection action, charge the Unit owner, in full, for attorneys fees and the obtain a judgement which will permit the Condominium to foreclose on the Unit, with rights ahead of even the First, and other,Mortgagees. That being the case, it has been my experience that as soon as this collection action is commenced by the Trustees, the Mortgagee(s0) steps in and makes the Unit current on its Condominium Fees. It should be a requirement in the Condominium Statute that the Trustees commence an action at any time a Unit is two months behind in paying common area fees.

The ideas set forth herein are not new, but they need to be acted upon. The current, inefficient way that Condominiums are being operated limits our opprotunities as real estate professionals. I would welcome any further suggestins any of you may have. I live with these probelms every day, and,probably, so do you.

Knock on that Door!!!! A Proven Approach to Condominium Due Diligence

Condominium

Over the years, I have represented many people who have purchased Condominiums. I have become familiar with many “due diligence” procedures, including examining the Master Deed. By-Laws and even Minutes of Trustees in those rare instances where the Condominium operates within preferred standards of governance. For your information, I intend to direct the identification of, and solutions for, many current abuses and shortcomings of Condominium governance in future posts.

Having described above some ways for an attorney to help a putative Condominium purchaser, I must fall back on the most successful measure I have seen to make the Condominium purchaser understand what he or she is buying, the good old-fashioned “knock on the door”.

Anyone who purchases an existing Condominium without one (or more) “door knocks” is walking into an uncharted situation which can often lead to financial loss and emotional misery. What do I mean by the “door knock” you ask.

The door knock is that step the Buyer takes to find out what it is really like to live at Dreamhoue Condominium. You knock on the door of a neighbor in the building, introduce yourself as a potential Buyer, and then you rattle off these questions (there are probably manyI have missed, and maybe my readers will fill these in for me in comments): 

            1. What is it like to live here? Do my neighbors respect my rights?

            2. Are the neighbors friendly? Do you know them? Could you trust them with your child, your dog, your goldfish?

            3. What do you do when there is a power outage? A noisy sterro? A howling dog?

            4. Are you being kept informed by the Trustees of impending assessments, or plans for improvements? Are there reserves set aside for future contingencies?

            5. Do you feel that Condominium changing in any way in terms of mix of owners, or renters?

            6. Have you ever been a Trustee? Do you know if the same old group continues to manage things, year after year?

            7. When was the last time there was a common area fee increase?

            8. Do you attend Trustee’s meetings? If not, why not?

            9. Do you attend the annual meeting of Unit Owners? Is it well publicized and are you encouraged to attend?

As I indicated above, there are many more questions you, as Buyer, or even Buyer’s agent, can ask. You may say “why would these people speak with me”  You may wonder “why would these people give me accurate answers”. The plain truth is that they may be speaking with their future neighbors. If they lie, or embellsih, and they need to make eye contact with you in the hall or on the elevator, it is going to be very uncomfortable for them. My experience is that most people do tell the truth, even though it may hurt them financially. In any event, these people behind closed doors hold the key to what really happens at Dreamhouse Condominium, and they should be spoken to, and listened to,  as soon as practicable, and in any event, before you plunk down that Deposit and move forward with your purchase. If you  get answers you can live with, you almost certainly will find Condominium  ownership in that location ,or building ,pleasurable. if you do not get the answers you are seeking, move on until you find a situation where the answers meet your standards. Only then will DreamHouse Condominium provide the road to a dream and not a nightmare.

New Restrictive Financing Guidelines are Killing our Industry-A Call to Action

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In a recent article in the New York TIMES, problems besetting our industry were the main focus. Examples of people who had committed to purchase as yet unbuilt homes, free standing and condominiums,  and were now “trapped” by new FNMA/FHLMC Guidelines, which have made many financing programs much more restrictive, in terms of down payment and sales of project units. While I did not generally recommend 95% and 90% financing to many of my clients, such programs were a fact a life as recently as 18 months ago, and that high leverage was often the only way a family could purchase the home of their dreams. New Condominiums were not limited to 70% pre-sale, either.

So, when FNMA and FHLMC developed more rigid standards for borrowing, at this difficult time in the housing industry, I have to ask myself “why”. These entities are no longer owned by public stockholders. For all intents and purposes, they are part of our government. Yet, the very same government that has given lip service to the real estate recovery as being essential to an overall recovery permits these agencies to act in a manner which prevents real estate activity.

Who, if anyone,  is really benefiting from the new restrictions on residential lending? Certainly, the potential Buyer who has put down a deposit without a financing contingency is not benefiting. That deposit money is probably gone, as liquidated damages for the Buyer’s failure to perform. So, not only is the contemplated sale up in smoke; so is any other real estate purchase for the Buyer losing his or her Deposit. “No sale” hurts the realtor, the mortgage originator, the closing agent and, ultimately, the Seller or Developer, because holding on to the Deposit is a poor alternative to making the sale of the property in question at the contract price.

It is time for each of us, whatever role we play in real estate, to inform our elected representatives in Washington, DC that these restrictions need to be eased. Dropping interest rates, alone, will not stimulate a  real estate recovery. Programs with some leverage need to be brought back. Pre-sale requirements need to be lowered. If we sit back and allow these new restrictions to continue, we have no one but ourselves to blame for what happens to our industry. Make the phone calls; send the emails, petition the people you put in office. The stakes are much too high to sit on our hands.

Massachusetts Real Estate Transactions-A world of their own

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I am frequently asked by out of state realtors and mortgage professionals about deals “going into escrow” or the work of the “title company.” Very few out of Massachusetts people are aware of the idiosyncrasies of Massachusetts real estate practice, which include the following:

            1. An Offer and then a Purchase and Sale Agreement. The standard approach for a residential real estate transaction in Massachusetts involves signing a Offer, with respect to which a small deposit ($500 to $1,000) is delivered to the listing broker, a subsequent home inspection in or within seven (7) days of the Offer, a period of time after the Offer to review the Condominium Documents and financial materials, and then the execution of a Purchase and Sale Agreement, with substantially greater detail than the Offer, shortly after the home inspection is completed. Generally, there is a 5 to 10% total deposit associated with the signing of the Purchase and Sale Agreement, held, in escrow, by the listing broker or the Seller’s attorney. There is an important case which held that the Offer is an enforceable contract, but in almost all instances, the parties utilize the two-step Offer and subsequent Purchase and Sale Agreement for their deals.

            2. Massachusetts Real Estate Attorneys Stay Much More involved in the Total Transaction than in Other States. As a result of some statutory provisions, Massachusetts attorneys almost always serve a closing agents for purchases in Massachusetts. There is a Supreme Judicial Court (highest court in the Commonwealth) ruling which permits an attorney to represent both the Buyer and the Lender, as long as there is disclosure of same to the Buyer, and as long as the Buyer is apprised of the fact that if there is a conflict of interest between the Buyer and the Lender, the attorney will withdraw representation of the Buyer and represent the Lender, only. In my more than 40 years of practicing in Massachusetts, this has happened on two occasions, so there is really not much risk.

           3. Massachusetts Attorneys serving as Closing Agents do the Closing Scheduling and Write the Title Insurance for the Transaction. In most other states, there are “title agencies” which write the title insurance and prepare the title abstracts. That is not the case in Massachusetts. The experienced real estate attorney has the wherewithal to take care of the entire transaction, including title insurance. This permits closing in Massachusetts to be conducted speedily and without delay, because there is one central focus for the closing, rather than disparate elements which need to be tied together.

My firm is equipped to represent Lenders and out of state Buyers and Sellers for real estate purchases and refinancings. We welocme the opportunity to work with you on your Massachusetts transactions. With offices in Boston, Braintree and Waltham, we are equipped to handle the entire Commonwealth of Massachusetts, including Martha’s Vineyard and Nantucket for you and your customers.