What is a Short Sale?

January 26, 2013 by

What is a Short Sale?
A short sale or short payoff is generally defined
as a sale in which a lender allows the property
securing a mortgage or deed of trust to be sold
for less then the existing loan balance, due to
factors such as the borrower’s financial circumstances,
the property’s physical condition, or
local real estate market conditions.
A short sale is really a form of pre-foreclosure
sale that occurs when the mortgagee agrees
to accept less than the loan amount to avoid
foreclosure. A negotiated short sale may result
in a discounted purchase price for the buyer.
The buyer then finances the acquisition much
the same as in any conventional real estate
acquisition.

Courtesy of Land Title Guarantee Company

Frascona, Joiner, Goodman, and Greenstein P.C. know all there is to know about foreclosure law.  Check them out!
Complexity of Short Sales
Short sales are extremely complex transactions,
even for the experienced Realtor. Part
of the reason is that they are time-consuming.
Lenders are inundated with requests for short
sales and therefore expect all paperwork to be
complete and accurate before even considering
a short sale. Lenders may also request that
the paperwork be resubmitted multiple times,
and just getting the file itself to the lender can
sometimes present a challange.
Additionally, there is no regulation or industry
standard for short sales, meaning every lender
may have different requirements and expectations.
Even a Realtor who is familiar with the
requirements of one lender may not know the
ins and outs of another lender’s requirements.
Furthermore, lenders’ policies and processes
can change often and even vary by investor.

Courtesy of Land Title

John Marcotte

www.boulderhomes4u.com

720-771-9401

Filed Under: Real Estate Topics Tagged With: , , ,

Short Pay-Offs and Redemption

January 25, 2013 by

Short Pay-Offs and Redemptions by Jonathan A. Goodman, Esq.

For foreclosures filed after January 1, 2008, Colorado law no longer provides for an owner’s redemption period. (See Colorado Foreclosure Revolution (Part I). This article explains short pay-off transactions and the ramifications of the loss of owner’s redemption period.)

A “short pay-off” or “short sale” is a transaction in which a lender agrees to accept less than it is owed to permit a sale of the property which secures its note. (Throughout these materials, the term “lender” or “lenders” refers to the collection of institutions aligned on the “lender’s” side, which might include the holder of the note, a loan servicer, and a private mortgage insurance company.) HUD seems to call these sales “Pre-Foreclosure Sales.”

In a typical short pay-off, the lender agrees to accept the net proceeds from the closing (the sales price, minus the cost of closing the transaction, including your commission), perhaps with some additional consideration from the seller (such as a promissory note) in exchange for releasing its lien. Lenders do not agree to short pay-offs to be generous. In negotiating the short pay-off, the lender needs to be convinced that it will come out better than it would by foreclosing on the property and pursuing the seller/borrower for its losses. Though short pay-off procedures vary somewhat from lender to lender, most lenders need to be convinced of the following:

  1. The sales price under the proposed contract is equal to or higher than the amount for which the lender would be able to sell the property after a foreclosure. The lender will require a market analysis from the REALTOR® listing the property. The lender will often confirm the market analysis by contacting its own sources, such as an appraiser or the real estate agents which handle its REO sales.
  2. The commission under the proposed transaction is equal to or less than the commission it would pay its agent for selling the property after foreclosure. The lender will want to know as precisely as possible the amount of proceeds it can expect to receive from the sale. The more precise the estimate, the better.
  3. The lender will want an explanation of the circumstances which created the need for the short pay-off transaction. Common explanations include divorce, medical problems, death, birth of a child taking one wage earner out of the work force, birth of children making the existing home too small, loss of a job, or a job transfer creating the need for a move.
  4. That the seller doesn’t have the money to make up the shortfall on their own. To verify the financial condition of the seller/borrower, the lender will require: financial statements showing the seller’s assets, liabilities, income, and expenses; the seller’s tax returns for the previous two years; and the seller’s paycheck stubs for the most recent pay periods. The most common disputes which arise in short payoff sales concern the seller’s financial condition. On the one hand, the lender will be reluctant to approve a compromise without having the ability to analyze the financial strength of your seller. On the other hand, if this information is provided, there are potentially grave consequences for your seller if a short pay-off is not approved. The lender will have a significantly easier time pursuing your seller for a post-foreclosure deficiency. In certain circumstances, providing the financial information actually decreases the likelihood of closing on the short pay-off.

A borrower with minimal assets, little income, and a willingness to file bankruptcy has little to lose by providing financial information. However, most candidates for short pay-offs have some assets, a good job with garnishable wages, or a desire to avoid bankruptcy. Candidates for short pay-offs need legal advice regarding the advisability of submitting financial information to the lender. Though a refusal to submit financial information to a lender greatly decreases the chances of closing, a refusal to submit financial information does not necessarily preclude closing on a compromise sale.

Short Pay-Off Traps

When working on short pay-offs, certain issues and problems frequently arise. It is important to keep them in mind as you proceed.

Your seller is already facing a potential deficiency lawsuit from its lender; he does not want to be sued by a buyer also. A seller’s ability to close on a compromise sale is not within his control. It is important that in any contract which your seller accepts, his obligation to close is contingent upon successful negotiations with the lender.

Most sellers would like to protect their credit rating as much as possible. A substantial motivation for a short pay-off as an alternative to simply allowing the property to go into foreclosure is avoiding the detrimental credit consequences of a foreclosure. The seller should be advised to seek legal counsel regarding steps which can be taken to ameliorate the credit consequences of the work-out.

It is unlikely that your seller will receive any proceeds from the closing on a compromise sale. (Note, however, that in the HUD short pay-off program, borrowers may receive money out of the sale as an incentive to close.) Yet the closing is likely to force the seller to move. If the seller hasn’t already moved, or doesn’t have some other reason to move, closing on a short-pay might actually hurt the seller. The dawning realization of being homeless might make a short pay seller back out of a closing. Because the foreclosure process generally takes five or so months to run, it might be in the best interest for some owners to live in their home until the end of their redemption period in the foreclosure. Don’t embark on a short-pay transaction unless the seller has already moved out of the property or unless the seller has made an informed decision to move out earlier than he would otherwise need to do so.

These transactions often require a patient buyer. Working through the bureaucracy of the loan servicer, the investor, and the private or public mortgage insurance company takes time. Closing dates may need to be extended. It is important to work with buyers who have flexible closing needs and flexible dispositions.

As many as three entities may be involved on the lender’s side of a short pay-off transaction. It is not unusual for the mortgage insurance company, the investor, and the loan servicer to have several different departments working on the transaction. Errors may arise simply due to bureaucratic miscommunication. It is important to get the terms of the short pay-off transaction (release of liability, no adverse credit consequences … etc.) in writing.

You may occasionally run into a seller who initially does not care about the financial or the credit consequences of a short pay-off transaction because he has filed, or is about to file, bankruptcy. While this may seem to be a blessing, it should raise concern. Bankruptcy affects the seller’s ability to convey title and may disrupt a transaction which you have worked long and hard to put together. A seller filing bankruptcy will usually already have legal counsel. In these circumstances, the REALTOR®; needs legal advice.

A seller who has little concern for the financial and credit consequences of a short pay-off has little incentive to avoid these consequences. Often these sellers seem to be very agreeable until they realize that they will need to move out of the property sooner than if the property went into foreclosure These sellers may decide to let the foreclosure run its course, rather than close on a compromise sale.

Short pay-off transaction may involve the forgiveness of debt which may create detrimental tax consequences to the seller. While residential short pays rarely create capital gains problems for their sellers, a commercial short-pay is likely to cause a recapture problem for a seller. Sellers should consult their tax advisors.

Keeping the above factors in mind should increase your chances of successfully closing on short pay sale.

Jonathan A. Goodman is a shareholder in Frascona, Joiner, Goodman and Greenstein, P.C., a Colorado law firm.   His practice areas include Real Estate, Brokerage Law, Contracts, Land Use, Leasing, Real Estate Title, Association Law, Business Law, and Finance.   He can be reached at contact Jonathan Goodman.

A version of this article appeared in the Colorado REALTOR® News, the monthly publication of the Colorado Association of REALTORS®.

 

 

John Marcotte

www.boulderhomes4u.com

720-771-9401

Filed Under: Real Estate Topics Tagged With: , , , ,

5695 W 109th Cir • Westminster, 80020

January 24, 2013 by

Open House Sunday, Feb 10th 1:00-3:00

5695 W 109th Cir • Westminster, 80020

100_9571

$315,000 MLS# 698134

3 beds, 3 baths, 2459 sq ft

Gorgeous Home in sought after Villas neighborhood! This home shows great, pride in home ownership, and shows like a dream! Open floor plan. Beautiful hardwood floors. Eat in kitchen. Hugh master suit with full 5-piece bath. Lots of storage place. Move in ready, this one shines! Entertaining back yard with a large shed. Easy Boulder, Denver commute. Close to schools and shopping. Near the Westminster Rec Center and The Big Creek open space and trails. Your Buyers won’t be disappointed.

sittingroom-westy livingroom-westy kitchen-westy backyard-westy

 

John Marcotte

www.boulderhomes4u.com

720-771-9401

 

Search Westminster homes for sale

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Fiscal Cliff Avoided: What it Means for Housing and Home Builders

January 23, 2013 by

Fiscal Cliff Avoided: What it Means for Housing and Home Builders

fiscal cliff The fiscal cliff, an economically damaging set of tax hikes and spending reductions scheduled to begin in 2013, has been avoided (for now) and that is good news for housing in the short-run.

The enactment of H.R. 8, the American Taxpayer Relief Act of 2012, will extend permanently most, but not all, of the 2001/2003 tax cuts. The legislation prevents a fiscal drag of approximately $600 billion in 2013, which would have been large enough to push the current weak economy into recession. That in turn would have reduced demand for both owner-occupied and renter housing and threatened the ongoing recovery for home building.

That outcome has been prevented, although future fiscal policy debates loom on the horizon. For example, a legislative fight over the debt ceiling and the delayed sequester will take place in February. And 2013 may be a year in which comprehensive tax reform is under legislative consideration.

But for now, the following items in H.R. 8 are of interest to housing stakeholders and home builders:

Business Tax Items

• Permanently extends the 2001/2003 tax rates for adjusted gross income levels under $450,000 ($400,000 single); good for small business and home builders, 80% of whom are pass-thru entities who pay taxes on the individual side of the code

• Permanently extends the Alternative Minimum patch; again, good for small business owners who are frequently at risk of paying AMT

• Permanently sets the parameters of the estate tax; positive for family-owned construction firms; codifies the 2010 $5 million exemption amount (indexed to inflation) and a 40 percent estate tax rate

• Extends present law section 179 small business expensing through the end of 2013; offers cash flow and administrative cost benefits for small firms

• Extends the section 45L new energy-efficient home tax credit through the end of 2013; allows a $2,000 tax credit for the construction of for sale and for-lease energy-efficient homes in buildings with fewer than three floors above grade

Homeowner Tax Items

• Extends through the end of 2013 mortgage debt tax relief; important rule that prevents tax liability from many short sales or mitigation workouts involving forgiven, deferred or canceled mortgage debt

• Deduction for mortgage insurance extended through the end of 2013; reduces the cost of buying a home when paying PMI or insurance for an FHA or VA- insured mortgage; $110,000 AGI phaseout remains

• Extends the section 25C energy-efficient tax credit for existing homes through the end of 2013; important remodeling market incentive, although the lifetime cap remains at $500.

• Reinstates the Pease/PEP phaseouts for deductions; for married taxpayers with AGI above $300,000 ($250,000 single), the Pease limitation reduces total itemized deductions by 3 percent for the dollar amount of AGI above the thresholds. This is a negative change for some high cost areas, but should only have small impacts. Example, a married household with $350,000 AGI would be $50,000 above the limit and must reduce their Schedule A total by $1,500 raising their taxes by about $500. Only a share of that would be due to the MID.

Multifamily Tax Items

• Extends the 9percent LIHTC credit rate for allocations through the end of 2013; absent the credit fix, the LIHTC program would suffer a loss of equity investment for affordable housing projects

• Extension through the end of 2013 of base housing allowance rules for affordable housing

Also noteworthy are items that are not in H.R. 8, including an itemized deduction cap or a defined fast-track tax reform process. Nonetheless, the return of the Pease rules suggests that items like the mortgage interest deduction will be under debate in 2013.

The resolution of the fiscal cliff now gives way to a series of mini-cliffs due to the need to raise the debt ceiling, establishing government spending levels and deal with the sequester. Over the long run, the future of housing demand, and interest rates in particular, will be affected by how Congress and the President solve the nation’s long-run deficit challenges.

View this original post on the NAHB blog, Eye on Housing

 

John Marcotte

www.boulderhomes4u.com

720-771-9401

Filed Under: Real Estate Topics Tagged With:

Mold Testing and Remediation

January 22, 2013 by

Mold Testing and Remediation

mold_on_window Few states have enacted guidelines that prohibit companies from performing both mold testing and mold remediation. In fact, in most states, the same company that inspects and tests for mold can also be the same company that does the remediation.

That poses the potential for a huge conflict of interest.

“The more stuff a (mold remediation) contractor finds wrong, the more he gets paid,” said Tom Alford, a Certified Indoor Environmental Consultant and certified Mold Remediation Supervisor with Enviropro in St. Louis who only does inspection and testing for mold, not remediation.

Only a handful of other states—Arkansas, Florida, Louisiana, Maryland, Texas and Virginia either have mold licensing requirements or laws in place that prevent or severely limit the ability of a contractor to offer both testing and remediation.

“In Florida, you can either be licensed to be a remediator, which we are licensed to be, or a (mold inspector), which is a person who goes out and does testing,” said Jon Hall, whose remediation company, Advanced Restorations Inc., is located in New Port Richey, Fla. “If (an inspector finds) the presence of mold, they provide the (remediation) protocol to us as the remediator and then we go out and write an estimate based on what needs to be done. Once we’re finished with the work that needs to be done, you have the same company come back and test what we did was correct and the building passes a final inspection.”

Alford said he’s had customers call him after other companies tried to use scare tactics to get them to remove one. One client reached out to him after a mold remediator told her she had dangerous black mold in her home that could kill her small children and it would cost $50,000 to correct the problem.

“They gave her all these articles on black mold and told her that her kids would get sick and die,” Alford said. “I went downstairs and found a crack in her foundation that had mud coming through. She got a $50,000 estimate to do the work when what she needed was a $400 crack repair.”

At the very least, homeowners who can’t find a separate tester and remediator should ensure that the person who does the testing sends the samples off to an independent, accredited laboratory for verification and request the lab sends the results back to the homeowner, before allowing any work to be done.

Alford charges a $300 minimum for testing, with an average cost of $600. If mold is found, remediators will typically set up containment walls around the area being treated to prevent cross contamination to unaffected areas of the home. If necessary, air movers can be used to bring in fresh air or force air out of the area. Eliminating moisture as a food source is key to controlling mold. The most common reasons are water damage from a flood, burst pipes or a leaky roof.

Look for a mold removal company that holds verifiable credentials from reputable organizations like the Institute of Inspection, Cleaning and Restoration Certification and the Indoor Air Quality Association (IAQA). Check with your local licensing authority to ensure the company meets your local requirements and ask the company to show proof it’s insured.

“A lot of companies that do restoration services may not specialize in mold,” Hall said. “They just offer it because it’s kind of part of the package they offer. It doesn’t mean they’re mold experts or specialists in mold. We see a lot of companies that don’t really know what they’re doing when it comes to mold. That can create significant problems for the homeowners if it’s not done properly, so it’s important to hire a professional mold remediation company.”

Angie Hicks is the founder of Angie’s List, the nation’s most trusted resource for local consumer reviews on everything from home repair to healthcare.

 

Filed Under: Real Estate Topics Tagged With: , , ,

How does the foreclosure controversy affect Colorado?

January 21, 2013 by

How does the foreclosure controversy affect Colorado?
Several federal agencies and the attorneys general of all 50 states have initiated investigations based on allegations
that banks failed to review foreclosure documents properly or submitted false statements when they foreclosed on
properties.
The allegations first arose in the 23 states that require a judicial foreclosure. Several of the largest mortgage
lenders in the U.S. have suspended foreclosure proceedings in some or all states. While some lenders have resumed
foreclosures in certain states, the uncertainty caused by the controversy has created a chilling effect on foreclosure
transactions across the nation.
Colorado is somewhat insulated from the foreclosure controversy since the majority of foreclosures conducted in our
state are completed through our unique Public Trustee system. The Colorado foreclosure process differs from most
other states in that the Governor appoints a Public Trustee for each county. The Public Trustee’s Office is a statutory
mediator in the Colorado foreclosure process. Judicial foreclosure is employed only when no power of sale clause is
included in the deed of trust or there is a defect that requires judicial oversight.
The types of documents at issue in the judicial foreclosure states are not required to complete a sale through the
Public Trustee.
The Public Trustees are dedicated to fairness for all parties in the foreclosure process. The Public Trustees, by law,
serve as the neutral, intermediate party between the lender and the borrower to assure that each party can exercise
its legal rights in a foreclosure action:
• Foreclosures are conducted by the Public Trustee’s office on a deed of trust containing a power of sale (right to sell
property at public auction in the event of default).
• The procedure for conducting the foreclosure is set by statute and must be followed precisely.
• The deed of trust is an agreement between three parties: the Grantor (owner), the Public Trustee (who has the
power of sale), and the Beneficiary (lender).
• It is the responsibility of the Public Trustee’s office to ensure that the owners, junior lienors and lenders understand
the Public Trustee’s process and to ensure that each party complies with the statutes.
This is opposed to a judicial foreclosure, where a mortgage is an agreement between two parties, the Mortgagor
(owner) and the Mortgagee (lender). Since no power of sale clause is included in the security instrument, the lender
must sue the borrower and obtain a court order to foreclose.

Courtesy of Land Title Guarantee Company

 

John Marcotte

www.boulderhomes4u.com

720-771-9401

 

Filed Under: Real Estate Topics Tagged With: , , , ,

Foreclosure Timeline Highlights

January 21, 2013 by

Foreclosure Timeline Highlights

New Law Effective January 1, 2008
Pre-foreclosure:
• Lender decides to foreclose and elects
to foreclose with the Public Trustee on
their Deed of Trust or through the
courts judicially on their Promissory
Note
• Attorney hired and documentation sent
from lender
• Attorney prepares Mailing List and all
documentation for presentation to the
Public Trustee
• Attorney sets hearing for Rule 120
Order that authorizes Public Trustee to
auction property if no cure occurs
before sale date—Public Trustee must
have prior to sale
Cure period:
• Notice of Election and Demand
recorded by Public Trustee within 10
working days
• Determination made by Public Trustee if
property non-agricultural or agricultural
within 10–20 days—based on legal
description of property
• Sale date set from NED recording date
• 110–125 days for non-agricultural
property
• 215–230 days for agricultural property
• NED and Combined Notice sent to
owner, any guarantor on the note, and
occupant only
• Notice of Intent to Cure must be filed 15
days prior to sale date
• 45–60 days prior to sale, NED and
Combined Notice sent to all parties on
Mailing List
• Sale date published for 5 consecutive
weeks prior to sale

Sale occurs and Redemption
begins:
• Certificate of Purchase to highest bidder
recorded by Public Trustee
• No owner redemption period.
• Any junior creditor with lien recorded
prior to NED or with any involuntary
lien such as a judgment,HOA lien,
mechanic’s lien or IRS lien that records
after the NED, can file a Notice of Intent
to Redeem within 8 business days
• 1st junior creditor: 5-19 business days
to redeem
• 2nd or after: 5 business days to redeem
• Redemption prior to 12 noon on last day
• If junior creditor redeeming, Certificate
of Redemption and Public Trustee’s Deed
• If no redemption, Public Trustee’s Deed
to holder of the Certificate of Purchase
or any assignee
• All other liens no longer affect property
after Public Trustee’s Deed unless HOA,
mechanic’s lien(s),municipality lien(s),
taxes, omitted party or senior lien(s)

Courtesy of Land Title Guarantee Company

State of Colorado Foreclosures

 

John Marcotte

www.boulderhomes4u.com

720-771-9401

Filed Under: Real Estate Topics Tagged With: , ,

Boulder Area Information

January 17, 2013 by

Boulder Area Information

Boulder offers the perfect mix: A laid-back college town with big-city business smarts.

The city’s approximately 100,000 residents work and play against a mountain backdrop that includes the iconic Flatirons, and the “back range” Indian Peaks Wilderness Area with its snowy Arapaho Glacier. More than 30,000 of those residents attend the University of Colorado- Boulder with its picturesque campus.

Boulder’s unique setting and its high percentage of residents who wear Spandex belies the high concentration of companies in the aerospace, bioscience, data-storage and software industries. National corporations such as IBM Corp., Ball Aerospace & Technologies Inc., Lockheed Martin Corp., Covidien Inc., Corden Pharma International Inc. and Google Inc. are there. They city also has many professional and technical service companies and considers itself a center for alternative and renewable-energy research and natural and organic businesses, among other things.

Boulder’s natural attributes and support from peer companies draw many entrepreneurs to the city. Here, they start and grow new businesses, attracting a good amount of startup and venture-capital funds. In fact, the companies in Boulder drew more venture-capital, per capita, than companies in any other nation, based on industry statistics.

These innovative companies reflect the intellectual energy found in Boulder, which is supported by the University of Colorado, several major federally funded science laboratories and one of the nation’s percentage of residents with college degrees as well as a high quality of life.

CU-Boulder is the Rocky Mountain regions largest and most-comprehensive campus. It offers 3,400 courses, boasts four Nobel laureates and works extensively with private businesses through it Technology Transfer Office.

Boulder’s quality of life largely helps attract and keep the city’s educated work force. After work, residents can frequent local shops and restaurants or head straight into the mountains for hiking in the summer and skiing in the winter.

Boulder’s vibrant historic downtown features the Pearl Street Mall, an award-winning pedestrian shopping, dining and entertainment destination. More retail and restaurants can be found in the city’s central corridor surrounding the Twenty-Ninth Street retail district. The city has more than 400 restaurants, including several that have received national acclaim.

With a resident symphony, four museums, 32 movies and stage theaters, numerous festivals and more than 30 art galleries. The city is a haven for culture. Boulder also offers highly ranked public and private schools, three city recreation centers and one of the regions four hospitals, which has two main campuses.

At the edge of these urban attributes, Boulder prominently features the natural outdoors. The city owns more than 45,000 acres of mountain and plains open space, with more than 200 hiking and biking trails.

Boulder Profile

Square miles: 25.5

Population: 103,606

Households: 43,878

Median household income: $57,231

Median homes sales prices: $567,500

Median age: 29

School district: Boulder Valley

Sales tax: 8.16 %

Top Private Employer: IBM (3,400)

Top Public Employer: University of Colorado- Boulder

Electricity: Xcel Energy Inc.

Online Resources

City of Boulder: www.bouldercolorado.gov

Boulder Chamber: www.boulderchamber.com

Boulder Economic Council: www.boulderbusiness.org

Economic Development Contact/Incentives

Clif Harald, Executive Director, Boulder Economic Council

303-786-7567 clif.harald@coulderchamber.com

Liz Hanson, Business Liaison, City of Boulder

303-441-3287 hansonl@bouldercolorado.gov

The city of Boulder’s Economic Vitality Program supports efforts through public and private sources to help businesses grow and remain in Boulder.  Incentives include flexible tax and fee rebates for primary employers, a microloan assistance program, and parks and recreation discounts for all employees in Boulder. The program provides business assistance services and business retention and outreach efforts.

 

Presented by

Boulder Area Realtor Association

John Marcotte

www.boulderhomes4u.com

720-771-9401

Filed Under: Local news, Real Estate Topics, Things to Do Tagged With: , , ,

No-fee Mortgage Option To Be Introduced

October 23, 2012 by


Lenders would have to offer potential home buyers an option to get mortgages with no fees, under a rule proposed by the ConsumerFinancial Protection Bureau.

Generally, homeowners pay fees and points in exchange for lower overall interest rates on mortgage loans.

“Consumers have a hard time comparing loans when they are dealing with a bewildering array of points and fees,” said Richard Cordray, director of the Consumer Financial Protection Bureau, in a statement. “We want to provide consumers with clearer options and enable them to choose the loan that they believe is right for them.”

In the Dodd-Frank Act, Congress wanted to clean up the process of getting a residential mortgage, which was criticized as a contributing factor to the financial crisis. The idea was to ensure consumers understand the mortgage loans they’re offered, as well as all the accompanying fees.It is always better to know what to look for in mortgage lender know before you mortgage any kind of property.
While good news for consumers, the mortgage proposal is actually easier on lenders. Lawmakers banned extra fees and points on mortgage loans in cases when the originator makes a commission — which happens with most mortgages.

Under this proposed rule, the bureau would allow lenders to keep offering consumers options to reduce their mortgage interest through fees and points, as long as those fees and points actually reduce the overall interest rate on the mortgage. Lenders must offer the no-fee mortgages as well.

A senior official with the consumer bureau explained that the rule was a balance between a blanket ban on fees and the current origination process, which has no rules for mortgage fees. Consumer groups and those in the lending industry weighed in, saying it would be better to keep giving consumers the opportunity to lower interest rates by paying more up front.

John Marcotte 720-771-9401

www.boulderhomes4u.com

boulderhomes4u.com

RE/MAX Alliance

 

Distributed by: CNNMoney.com

© 2012 Cable News Network

Filed Under: Mortgage Tagged With:

Should You Challenge a Re-Assessed Property Value?

October 23, 2012 by


They say nothing is certain in life but death and taxes. When you’re a homeowner, that statement includes property tax–and potentially paying more of it if your property’s value is re-assessed by the county auditor’s office.

While counties vary in how and when property values are re-assessed, most have a process that takes place at least every five to eight years. You’ll know it’s underway when you receive notification from the county auditor’s office by mail. If you’ve been paying taxes on the inflated home values that dominated the market before the housing bubble burst, your notification may actually lead to a lower tax payment.

Nevertheless, despite the continued lull in the housing market’s recovery, some homeowners are receiving news from their county auditor that property values are slated for an increase. As a result, property taxes go up, too. Here is an explanation of your options if you are notified that your home value has been reassessed to an amount higher than what you believe the property is worth:
Your Options

All counties allow the option for homeowners to react to reassessed values, whether up or down.  Start by doing a little sleuthing of your own, and use your county auditor’s website to research the home values of similar properties in your neighborhood (this information is free and public record). Gauge the “going rate” in your market by researching comparable home sales in your neighborhood, ask neighbors what value the county auditor has newly proposed for their property, and explore sites like Zillow and Trulia.

Once you’ve gathered real value data, compare it to the new figure your country auditor has determined—and keep in mind that short sales and foreclosed property figures are typically not considered as a valid form of value comparison. If you still feel confident that there is a discrepancy between the “real” and reassessed value of your property, Marsh Bilby of Marsh Bilby Appraisers & Consultants, LLC says the first step is to understand how the appraisal process works, and the potential costs that it carries.

Unlike the home inspection that was conducted when you bought your property, Bilby explains that appraisal is actually based on a math-appraisal technique using statistics-based evaluation models, and at times, walking audits in a neighborhood.  The appraiser will likely never see the inside of your home in determining the appraised value, but instead bases the figure on a variety of data points like square footage, county information, and the other fees that accompany a home sales transaction, like tax and title, real estate and broker fees.

When considering challenging a property reassessment Bilby advises using a simple cost-benefit analysis approach, much like you would when considering whether or not to refinance a property.
Costs and Savings to Consider

Start by figuring the difference between what you feel the value of the home is, versus the reassessed value proposed by the county. For example, if your home’s proposed “new value” is $300,000 but you believe that it’s worth $225,000-there is a sizeable discrepancy of $75,000.

Counties use a “millage rate,” or the amount per $1,000, to calculate taxes on property. To analyze your unique situation, you’ll need to identify the exact millage rate for your area. For the sake of example, assume that a millage rate of two percent for the above scenario. The $75,000 discrepancy in value would lead to an annual property tax increase of about $1,500, if the homeowner choses to accept the reassessed value. You should also consider any special exemptions that you qualify for, such as homestead exemptions, or owner-occupied exemptions, which vary by homeowner situation and location.

Once you’ve run the basic numbers, consider how long you plan to live in the property to determine whether the proposed new amount is worth challenging. In the scenario above, a homeowner who intends to live in the home for the next five years would potentially pay about $7,500 more in property taxes.  If you decide to move forward once you’ve considered the long-term costs, the next step is to seek a qualified, licensed appraiser.

Bilby says that a typical appraisal fee is around $400, and could potentially be higher for complicated properties, like those with pools or located on a waterfront. Bilby also stresses the importance of finding an appraiser who has several years of experience, and understands that the property is being appraised because of a new county auditor value. Securing an appraiser who is well versed in challenging county auditor appraisals is critical, as it may be necessary for the appraiser to accompany you to county auditor board hearings, to defend the results of his or her appraisal, and reasons for the variance from the county’s value.

Bilby says to keep in mind that you have no way of determining the outcome of contesting a reassessed value (and that the fewer comparable properties there are, the less certain the answer becomes). Should the county decide that their figure is accurate—you’ll have spent at least $400 for an appraisal, in addition to any additional time that the appraiser will bill for attending any required auditor hearings and preparatory fees- but still pay more taxes. On the other hand, not contesting an amount you believe is unfair could lead to paying thousands more dollars in taxes.

If you do intend to sell in the next few years, it’s also important to understand that your property value as determined by the county won’t play much of a role in terms of your sale price. Should you contest the value and win a lowered home value with the auditor, but your neighbors accept the higher value, you won’t be “haunted” by the lower value down the road. Bilby says that a true real estate professional will recognize that there are a lot of inaccuracies in the process, and will use many data points to determine the fair market value of a home.

John Marcotte 720-771-9401

www.boulderhomes4u.com

boulderhomes4u.com

RE/MAX Alliance

 

Distributed By: Mint Life

©2011 Intuit, Inc.

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