The Hamad Law Firm wishes everyone a happy and safe holidays this season. We hope that 2011 has been as joyful for you as it has been for us, and we look forward to another great year in 2012.
Mortgage Rates Hit Record Lows
Did you know? According to the AP, today, October 6, 2011, the average 30-year fixed rate mortgage price dropped to 3.94% – the first time that number has dropped below 4%.
Buying a house? Refinancing? Contact us today to handle the transaction. If you don’t already have a real estate agent or a mortgage banker/broker, we can help you with that too.
Some Frequently Asked Real Estate Questions
There are some questions that just get asked all the time. Rather than writing a full article on each, I’m just going to give some quick responses today.
Q: How Long is the Real Estate Closing Process
A: Well this depends – and for the most part, it doesn’t depend on the closing attorney. The bank (in a refinance) or the bank and the seller (in a purchase) are going to be the determining factors – as well as you, the borrower. If you get the bank all of the information they ask for, as soon as they ask for it, banks can usually get a refinance (or the bank side of a purchase) done in as little as 2-6 weeks. You should also decide on your real estate attorney quickly, so that the attorney can get started.
Delaying factors could include a seller that is not ready to move, a bank that is just slow, or a title search that comes up with problems.
Q: How Long is a Real Estate Loan Closing Itself?
A: Real Estate Loan Closings usually take between 30 and 60 minutes. Depending on the speed of the borrower and the attorney, and the size of the loan package, the closing may take up to two hours.
Q: Do Both Parties Sign in the Real Estate Loan Closing Process?
A: This question is mainly only relevant to purchases. The only people that sign in the closing process are those who’s names are on title to the property. This means that in a purchase, only the buyer/borrower is signing. The seller will sign a deed, a transfer tax form, and a couple of other forms, but they are not part of the loan closing itself.
Q: I Want To Move My Property From Me to My Wholly Owned Business. Do I Need A Lawyer?
A: This is a loaded question. For the sake of this question, I am also going to assume that it is being asked about an LLC or Corporation and not a Sole Proprietorship.
If you have a current loan on your property, you will need the banks permission to transfer the loan to your business – even if you own the business yourself, and even if it uses pass-through taxation. As to the actual question at hand – you do not have to have an attorney, but I never recommend doing property transfers without one. A simple, seemingly innocuous mistake can make your life miserable down the line.
Q: In a Short Sale, is the Owner Really Off the Hook?
A: Maybe. It depends on the exact agreement with the bank. That being said, in most cases, yes, the bank will discharge the remainder of the debt – otherwise a short sale is fairly pointless for the borrower.
Q: Can a Bank Sell a Home Even After a Loan Modification?
A: Loan Modifications are tricky. They contain a lot of complicated language and agreements. If the loan modification has actually been granted and finalized, and you have adhered to the new terms, the bank probably cannot foreclose on, and sell, the home. That being said, they usually do not grant a forbearance during the loan modification process – so they can still go after you right up until when they grant a modification. Also, of course, once the modification is granted, if you don’t keep up payments, they can bring you into foreclosure all over again.
If you need help with any of these topics, don’t hesitate to contact the Hamad Law Firm, LLC, today.
Nigerian Scammers Are Everywhere!
By Attorney Daniel Hamad
As people – including attorneys and real estate agents – look for any deals to be found in this dismal market, scams have become more and more prevalent, and the scammers have become more sophisticated. Sophisticated enough that you can find even attorneys taken in by them.
We typically call them Nigerian scams, but realistically they rarely come out of Nigeria any longer. In fact, the United Kingdom (England) seems to be the most common nation for scams. The scammers usually are not actually citizens of the U.K., and perhaps are not even located there, but they’ll have an English name and all the documents you could want (including a passport scan) to “prove” that they are who they say they are. A word to the wise: if somebody contacts you from outside of the United States, don’t trust them, even if it’s from a supposedly reputable and first world country.
Let’s review how one of the common scams goes. First, a purchaser contacts an attorney (usually by e-mail) and says that they would like to purchase a property in that attorney’s area. They will name the property and it will be a property currently for sale. A sophisticated scammer will sign an attorney engagement agreement when asked, and provide a scan of their supposed passport or other identifying documents. They will want the attorney to handle all the negotiation for them, or to hire a realtor that they know. They will want no direct contact with the seller.
Things to look for: 1) overly formal language even after several e-mails; 2) An all cash deal, sometimes with supposed bankers in the US but where no bank is identified; 3) A quick closing requested (usually only a few weeks); an immediate offer to transfer (some/all) funds; 4) grammar that may not be poor, but has verb tense / grammar mistakes in areas where English speakers usually do not err; 5) they do not want to personally inspect the property prior to closing, asking you to do it or hire someone to do it.
Some scammers have gotten sophisticated enough that they will even agree to provide certified funds, rather than wiring funds to an attorneys IOLTA/trust account. To be clear: never, ever provide wire information to somebody you haven’t met and cannot verify. You will get this same advice for every bank, realtor, and attorney out there.
These scammers basically rely on everybody’s (attorneys, sellers, realtors) desire to get properties sold. It seems like easy money – a quick cash deal paying at or near asking price. Perfect for everyone. But the purchaser will start to make “mistakes” as time moves along. They will deposit or provide incorrect amounts of money for the purchase. They will not provide certified funds when they previously had said they would. Their bankers won’t be able to prove whom they work for. The purchaser won’t show up when he should. The “mistakes” will all be related to timing and to funding, putting everyone in a bind as time winds down. They will then push for the closing to happen anyway, with everyone invested in it happening, and that is when they’ll have you.
If you are contacted by somebody like this, let your instincts take over. If something does not seem right about them, don’t do the deal. You might lose out on a closing – but you avoid the risk of losing a lot more than that. Talk to the person on the phone, at the least. Do not simply rely on e-mail. Request several forms of ID. Check their grammar… and under no circumstance provide your bank account information.
Save Some Cash by Taking Cash
By Attorney Daniel Hamad
Though mortgage rates have gone up over the past few months, we’re still seeing rates that are some of the lowest that have ever been available. A 30-year fixed mortgage is still available in the low 5% range, and a 5/1 ARM may be as low as 4%. This has been great for the traditional refinance industry. Most people have refinanced their primary home loans and their home equity lines to take advantage of these rates – but that’s not all they can do for you.
These low rates lead to some interesting possibilities if you’re in debt – and really, who isn’t? We all have credit cards, car loans, student loans, and who knows what else. Maybe we even just want to buy a vacation house. Few people consider that when they refinance, assuming the availability of equity in the home, they can take out more than just enough to cover their mortgage – they could also take out enough to cover their schooling, their car, or anything else they may have or need. With rates so low, now is a time that you can pay for your higher priced loans with the proceeds from a refinance. In fact, doing so won’t even hurt your Debt to Income ratio, since you’re paying off one debt with another debt.
Depending on how you choose to proceed you may be required to take the proceeds as a direct debt payoff, rather than simply as cash. This is a little more complicated as the escrow agent will have to know the actual balances of each debt at the time of closing (for secured debt such as a mortgage or car loan), or you may have to mail out checks (in the case of unsecured debt such as credit cards) , but it’s less likely that you will incur a penalty in the interest rate because the equity is going directly to the payoff of another debt. If you take cash, on the other hand, you’re taking out more debt. Depending on your financial situation this may or may not make sense for you – talk to your mortgage broker for details.
As always, be careful when you choose to take out a loan. Make sure you can afford it. But if you want to save a few bucks, or make payments simpler, you should consider a cash-out (or debt-reduction, for lack of a better term) refinance.
If you’re looking for ideas and advice, or need an attorney for a closing, feel free to contact the Hamad Law Firm, LLC, today.
Go from Upside Down to Right Side Up (Part III): Foreclosure & Alternatives
In Part I of this article we discussed Loan Modifications and Payment Plans. In Part II of this article we discussed Sales and Short Sales. Let’s now move on to Foreclosure and Deeds in Lieu of Foreclosure.
Foreclosure is an action of last resort for banks. They don’t want to do it – it can only make them lose money. But they will do it if they think they’ll lose more money otherwise. If you have gone through their loan modification process and they did not approve you, that’s a sign they don’t have faith that you can pay them even a reduced amount. Then you’ve gone through the sale process and couldn’t sell it for a price acceptable to the bank. This means they think they can do a better job – whether that’s true or not. It means they aren’t going to listen to reason any longer, when it comes to the loan at issue.
Before we get to the details of foreclosure, let’s talk about a Deed in Lieu of foreclosure. This is a tool used by those who have just had enough and want to walk away from their loan. This involved basically signing over the property to the bank. If the bank accepts it, you (and they) can avoid the entire foreclosure headache – and avoid (if they agree) them coming after you for the remaining balance on the loan. You can then walk away worry-free.
Foreclosure is a heck of a process. It takes time, effort, and worry – on both sides of the room, and it results in the maximum hit to your credit. In Connecticut, we have only judicial-process foreclosures. The bank can’t just kick you out – they have to go to court. There are two types of foreclosure procedures – strict foreclosure or foreclosure by sale.
In a strict foreclosure, a public sale of the property is announced and conducted. A lis pendens is filed providing notice to the public.
In a strict foreclosure, the bank takes possession of the property directly. An amount of time is set aside for the owner to pay, but at the end of that, if the property is not paid for, it becomes the banks. You can usually count on this process taking north of two months – minimum.
Unfortunately Connecticut is not a non-recourse state. What this means is that if the sale of the property does not bring in enough money to pay off the loan, the lender can continue to come after the debtor for the remainder.
Wills & Estate Practice Added
Hamad Law Firm, LLC, has added a Wills & Estate Law practice. At this time the practice is limited to simple will preparation. Contact us today to find out what we can do for you!
Jobs: Real Estate Closing Attorneys
The Hamad Law Firm, LLC, is looking to add additional contract closing attorneys throughout Connecticut. Qualified applicants should have at least one year of experience conducting real-estate closings. Most closings will be “witness-only” refinances.
Closings should have the ability to print letter- and legal-sized documents and should have a document scanner available to them.
Interested particularly in Connecticut attorneys. New York, Massachusetts and Rhode Island attorneys are also welcome to submit their application.
Submit resume, references, per-closing fees, counties you are willing to work in, and any other information you feel is relevant to jobs@hamadlawfirm.com.
EOE. No benefits.
Go from Upside Down to Right Side Up (Part II): The Short Sale
In Part I of this article we discussed Loan Modifications and Payment Plans. Let’s now move on to Short Sales and Sales of property in general.
When selling a piece of property it behooves you to get a real estate attorney. In Connecticut nearly all purchasers are going to have attorneys, so you don’t want to be left without one on your side. When conducting a sale generally, you’re going to have both a realtor and an attorney assist you. The realtor will market the property, and the attorney will review and negotiate the deal, and make sure you get paid fairly.
In the case of a standard sale this will all be straightforward and hopefully as easy as breathing. Unfortunately, due to the decrease in property values over the past couple of years, many owe more on their mortgage than their property is worth. That’s all well and good if you’re staying in your home – you don’t really care what the value is most of the time anyway. When it really, really does matter is when you need to get out of that home because you can no longer afford the mortgage.
If you’re “under water” or “upside down” – you owe more on your mortgage than your home is worth – and you can no longer afford the mortgage due to job loss or any other reason, your next step is to attempt a “short sale.” That is, you’re going to try to sell the property for less than you owe. Not only that, but you’re saying you don’t have enough money on hand to make up the difference. In this case you enter the convoluted world of bank approval. Even if you’re a daring soul who would normally sell a piece of property without an attorney, you shouldn’t even think about it in the case of a short sale. The bank will have many, many requirements and many, many dates you must have things in by. You’re going to have to prove to them that you can’t afford the mortgage and that they’ll get more money out of you by allowing a short sale – and taking a hit on the value of the loan – than they would by foreclosing on the property.
You’ll hire a real estate agent and find a buyer as you normally would. The buyer is going to make an offer which is presumably market value, but below the value of the loan. You’ll then have to submit that offer to the bank (along with following all of their other requirements) and see if they approve it. Understand that they are under no obligation to approve it. They will only do so if they think it’s the smart thing to do from a purely business perspective. Their approval – or lack thereof – may have nothing to do with your perception of reality.
Should the bank accept the short sale you should generally be off the hook for the remainder of the loan. It most likely will affect your credit rating, but not as badly as a foreclosure would. Usually short sales take a long time to go through and require a lot of work. Due to this, many real estate attorneys will not touch them. Fortunately, there are always some that will.
Look for us next time when we talk about Deeds in Lieu of Foreclosure and Foreclosure itself in Going From Upside Down to Right Side Up, Part III.
Go from Upside Down to Right Side Up (Part I): The Introduction & The Loan Modification
Over the past few years we’ve seen the housing market go from bad to worse. Foreclosures are up, values are down, and homeowners are wondering when the next shoe is going to fall. Have you had your house appraised lately? In most cases, that value is going to be considerably lower than it was when you purchased the property. Now the question is, how much do you owe on your mortgage? Is it more than your property value? Is it less? If it’s more, your mortgage is considered “upside down” or “under water” – that is, you can’t expect to sell the property right now for more than you owe. That’s right – something we never expected to happen has happened – property values have shrunk and people can’t sell their homes without coming up with extra money to pay off their loan.
You’ve been paying your mortgage year after year yet you find yourself owning no more of the value of your home than you did when you started – and maybe less. It doesn’t seem fair, does it? Unfortunately that’s the way of the world right now, so what can we do about it?
Let’s first point out that if you don’t intend on moving anytime soon, the effect on you may be limited or nonexistent. You’re going to pay your mortgage as you always have. Just close your eyes and ears to what’s going on with property values right now. You’ll just continue on as you expected when you purchased the property. Eventually you’ll want to move, but by then we hope property values have gone back up. If not, then come back to this article then and think about what to do again.
Now if you do not fall into the above category, and you need to do something now, there are five basic methods of solving the problem: (1) Payment Plan; (2) Loan Modification; (3) Sell the property, including at short sale; (4) Deed in Lieu of Foreclosure; (5)Foreclosure.
(1) Payment Plan; (2) Loan Modification
Load Modifications and Payment Plans really belong together in this discussion. They are the only two methods, of the five listed above, that allow you to keep your home. All of the others result in you moving through one method or another. They simply try to save your assets and credit score.
Both methods are similar and are generally applied for in the same way. Entering into a payment plan with your bank generally indicates that they have delayed some payment requirements but that eventually the entire balance of interest and principle will be owed. A loan modification, when approved by the bank, may reduce your principle balance owed, or your interest rate. Either of these has obvious advantageous benefits.
When you want to apply for a loan modification or payment plan, you are really asking your bank to give you a break. You are asking the bank to make it easier for you to make your payments, thus helping them regain more of the mortgage they gave you, even if it isn’t as much as they expected to get back, or as fast as they expected it. To apply in either case you need to contact the bank and have them walk you through their application process. If this makes you uncomfortable you can have an attorney do it for you, but it’s often not worth it. An attorney costs money and at the end of the day they can often do no more than you can on your own.
The bank will have you give it considerable financial information related to your assets, incomes, and liabilities. It will then make a decision as to whether or not they believe a loan modification (or payment plan) is beneficial to them. The process is not fast and certainly not painless. It can take months and require constant attention, so be aware.
Remember, the bank is making this decision based on their interests, not yours. Due to this, if you are in good shape they are going to reject the application – they think you can pay back the original loan agreement. At the same time, if your financial situation is too serious they are still not going to approve it – they don’t think you’ll be able to pay back even a modified loan. Loan modifications therefore work best for those that have had a reduction in income or circumstances, but are not unemployed or at a similar level of trouble.
Join us next time for Part II of this series: Go from Upside Down to Right Side Up (Part II): Selling the Property & The Short Sale
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