Many people who are having trouble making their mortgage payments are turning to consultants who promise to help them modify their loans. The problem: Often, these “loan modification” businesses are actually scams. In a typical scam, a consultant demands a large upfront fee – sometimes as much as $3,000 – and then disappears without doing any work.

Prosecutors in 19 states have taken legal action against various “foreclosure rescue” businesses, as has the Federal Trade Commission, but many homeowners continue to be bilked. In Washington state alone, the attorney general’s office is investigating complaints involving as many as 100 companies. Be very careful before you hire a consultant who promises to negotiate for you. If you’re in debt trouble, your best bet is often to consult a reputable attorney.

A landlord could evict a tenant who sued the landlord for a personal injury, according to the Alaska Supreme Court. The tenant was a handyman at a motel who rented a motel room at a reduced rate. He sued the motel after he slipped and broke his leg. The motel owners responded by throwing him out. According to the handyman, this was illegal retaliation against him that violated the state’s landlord-tenant law.

But the Supreme Court sided with the landlord. It said it was true that the state landlord-tenant law prohibits retaliation against a tenant who tries to enforce his rights under the law. However, in this case the handyman wasn’t trying to enforce his rights under the landlord-tenant law; he was filing a personal-injury lawsuit, which is a different matter. [Read more...]

Over the past year, there have been a number of instances where a bank has agreed to provide a mortgage, then has changed its mind and reneged on its agreement at the last minute. In the past, such conduct was unheard of. It’s still rare – but the credit crisis has changed a lot about the way banks operate, and this is one result. As a buyer, you might want to protect yourself by spelling out in your purchase and sale agreement what will happen if the bank backs out.

Of course, many purchase and sale agreements already include a mortgage contingency clause, which says that the buyer’s offer is dependent on being able to get a mortgage. But you might want to be sure that the contract makes the offer contingent not just on getting approval for a mortgage, but on the lender’s actually following through and funding the loan at the closing.

Here’s a common scenario: Both parties to a real estate deal are ready to close, but for some reason the seller can’t move out by the closing date. Maybe the seller is moving to a new home or place of business, and the new place isn’t quite ready yet. Maybe the closing date is the last day of the month, a notoriously difficult day on which to hire a moving company.

One solution is to go ahead with the closing, but have the buyer rent the property back to the seller for a short period to give him or her time to move out. [Read more...]

More and more commercial buildings are being designed to meet environmentally friendly, or “green,” standards. In addition, a growing number of communities around the country are adopting “green ordinances” that mandate certain environmental standards for large commercial buildings or developments.

As a result, commercial leases in these buildings need to take green issues into account. And since this is a new area, how these issues should be handled isn’t always clear, and can lead to considerable negotiation between the parties. [Read more...]

New rules from Fannie Mae are making it harder to get a mortgage for a condominium unit. Effective this past March 1, the mortgage giant will no longer purchase mortgages for condo units in new buildings unless at least 70% of the units are sold or under contract. Previously, Fannie would purchase mortgages as long as at least 51% of the units had been sold.

As a result of the change, a number of people who thought they would have no trouble getting a mortgage suddenly found out otherwise. They might be able to get out of their purchase and sale agreement, assuming they have a mortgage contingency clause. [Read more...]

While the average price of a primary residence declined last year, the average price of vacation homes and investment properties declined even further, suggesting that many of these properties might now be available at an attractive cost. The median sales price of a vacation home was $150,000 last year, down from $195,000 in 2007, according to the National Association of Realtors. That’s a 23% drop in one year.  A typical investment property cost $108,000 last year, down from $150,000 in 2007. That’s a drop of 28%.

 Sales of these properties have been off, which might explain the price declines. Sales of primary residences were down 13% last year, but investment-home sales were down more than 17% and vacation-home sales were down 31%. Vacation-home buyers appear to be looking at their properties as a long-term investment. Some 58% of purchasers say they expect to keep the property for 11 years or longer.

Can a city block property owners from making improvements to a building or a neighborhood on the grounds that doing so would destroy its value as a historic landmark?

A closely watched case in Chicago could answer that question. Although the case is specific to Chicago, cities and property owners across the country are paying attention to it because the same issues could be brought up in many other places. [Read more...]

A majority – some 53% – of individual landlords in the U.S. make mistakes on their income tax when it comes to reporting rental income and expenses, according to a study by the U.S. Government Accountability Office.

That means that out of about 8.9 million individual landlords in the country, nearly 5 million aren’t paying the correct tax.

And of those 5 million, fully a quarter paid too much tax and should have had a lower tax bill, the government says. The agency’s figures are based on a comprehensive review of landlords’ returns that have recently been audited. Altogether, landlords misreport their income by about $12.4 billion every year. [Read more...]

Real estate prices are in a slump in most places, but this can be good news if you want to transfer real estate assets to your children as a means of estate planning. Often, a good way to reduce estate taxes is to give your heirs an interest in your assets now, while retaining control of the assets. That way, you get the interests out of your estate at today’s values, rather than later when they will presumably be worth more and trigger a higher tax. And when asset values are low, it’s an even better idea to transfer a partial interest. You can give these interests outright, but there are other techniques that can magnify the savings. For instance, you could consider putting a vacation home into a trust or a limited-liability company, putting investment real estate into a family limited partnership, or putting your home into a qualified personal residence trust.

The average rent for a residential apartment fell in the fourth quarter of 2008. Although the average decline was small – only 0.4 percent – the drop was significant because this was the first time rents have fallen overall since 2003. The average vacancy rate was 6.6 percent, up from 5.7 percent a year earlier, according to research firm Reis Inc. The average office rent fell 1.2 percent in the fourth quarter. This marks the end of a surge in office rents that saw the average increase by 10.6 percent in 2007. [Read more...]

Can a landowner who planned to build a shopping plaza sue a city for changing the land’s zoning to “residential”? Maybe … but only if the rezoning almost totally destroyed the land’s value. That’s the result of a decision by a New York appeals court. Parviz Noghrey wanted to build a shopping center in Brookhaven, N.Y., but before he could do so the town adopted a moratorium on commercial development, and then changed the land’s zoning so it could be used only for houses. Noghrey sued, claiming that the town violated the U.S. Constitution by “taking” his land without paying him compensation.

The court didn’t throw out the suit, but it made it very difficult. Noghrey doesn’t have to prove that the town made his land worthless, the court said. But he can’t claim that the town “took” his land from him unless he can show that he was left with only a “bare residue” of value. According to the court, Noghrey must show that the value of his land was reduced by around 95% in order to win in court.

A shopping mall cannot prevent a union from leafleting in front of a tenant’s store to urge a boycott of the store, according to the California Supreme Court. The union in this case represented employees of a San Diego newspaper. Union members wanted to protest outside a department store in the mall, urging shoppers not to patronize the store because it bought ads in the newspaper.

The mall objected. While the mall allowed protests and other political activities inside, it required protesters to obtain a permit, and it had a policy of denying permits to anyone who wanted to protest against one of its tenants. By a 4-3 vote, the court sided with the union. [Read more...]

Fannie Mae has announced a national policy under which it will no longer immediately evict tenants from homes on which it forecloses. Under the policy, the mortgage giant will in effect become a landlord or property manager for many homes where there is a foreclosure. Renters often face a difficult situation when a property is foreclosed upon, and this move will help those in Fannie-backed properties by providing some breathing room while they figure out what to do next.

Starting May 1, 2009, new rules will apply to most appraisals of single-family homes requested by banks as part of the mortgage process. Lenders will have to comply with these rules in order to have their mortgages purchased by Fannie Mae or Freddie Mac. The new rules are part of an effort to keep appraisals honest. In the past, some lenders had allegedly pressured appraisers to provide certain valuations for properties in order to allow a mortgage deal to go through. The rules were agreed to by Fannie and Freddie; the Federal Housing Finance Authority, which regulates them; and New York Attorney General Andrew Cuomo.

Originally, the rules required lenders to use outside appraisers rather than appraisers who worked for the lender. But industry officials complained that this would require them either to use less-qualified appraisers or to pay more for appraisals and pass the increased cost on to the consumer. Under a compromise, lenders will be able to use in-house appraisers, but a variety of “firewalls” must be created to ensure the appraisers’ independence. In addition, a lender may not give an appraiser a “target” value for a property or tell an appraiser how much the customer wants to borrow.

The recent economic stimulus law contains a big tax break for first-time homebuyers: If you buy a home by November 30, 2009, you can claim an $8,000 tax credit.

Congress had previously approved a similar credit, but it had required homebuyers to pay back the money over time. In effect, it was an interest-free loan. Under the new law, however, the credit doesn’t have to be paid back – it’s free money. [Read more...]

A little-known mortgage program operated by the U.S. Department of Agriculture – that’s right, the same agency that inspects and approves the meat in grocery stores – is enabling many people to afford a home even if they can’t come up with a traditional down payment because of the economic downturn.

The program is designed to help people buy homes in rural areas – but “rural” is loosely defined and in some cases can mean a town of up to 25,000 people. As a result, many people can qualify if they are living in a small town or are willing to move to a smaller suburb that is 10 or 15 miles outside a major city. [Read more...]

Some people are finding it harder to get a mortgage these days … because of their credit card company. Why? Because credit card companies have reacted to the recent economic downturn by reducing many cardholders’ credit limits and cancelling inactive cards. The companies’ goal is to reduce the risk of non-payment.

The problem is that whether you can get a mortgage – or how good the terms of that mortgage are – depends to a great extent on your credit score. And a major factor in your credit score is the ratio of how much you’ve borrowed to your available credit. When a credit card company cancels a card or slashes your credit limit, it increases this ratio, which can in turn lower your credit score.

Banks have been getting stingier for a while. Even in the second quarter of 2008, almost two-thirds of U.S. banks said they tightened their standards for credit card loans. And the situation appears to have gotten worse since.

Here are some “alarm bells” that can cause a bank to lower your credit limit:

• Living in an area with worsening unemployment or plummeting home values.
• Suddenly charging necessities to a credit card, such as groceries, utility bills or insurance premiums.
• Running up high balances, taking cash advances, sending smaller payments, or not paying the bill in full when you have a history of doing so.

Of course, you can’t do much about the place you live in. But if you’re concerned about your credit score, it’s a good idea to avoid the other “alarm bells” above.

It’s also a good idea to make an occasional small charge to your inactive cards, just to keep them active. And if your company does reduce your credit limit, call and ask why, and see if you can talk them out of it.

Note: If you have a “rewards” card and you regularly charge groceries and other necessities in order to get a card benefit, you don’t need to stop. What the companies are concerned about is a sudden change in your typical habits.

Many people are paying too much in property taxes, and may be eligible for a reduction or a refund. Property taxes are calculated by taking the assessed value of your home and multiplying it by the local property tax rate. But since home prices in so many areas have decreased recently, it’s possible that the assessed value of your home is now larger than its actual value – in which case you might be entitled to a tax break. So it’s worth looking carefully at your bill to see what your assessed value is, and whether it still makes sense. In some areas that are suffering from a sharp housing price decline, tax authorities are proactively reviewing valuations. Los Angeles County recently reduced its assessments of 128,000 homes, with an average tax savings of $750.

In addition to the fact that home prices have dropped in most parts of the country, there can also be mistakes in an assessment. Often, an assessor doesn’t actually inspect the property; he or she just looks at it from outside or works from a written description. There have been cases where the assessment was based on an incorrect square footage or number of bedrooms, and cases where a half-bathroom was assumed to be a full one and a screened porch was treated as a year-round living space. If your assessment is several years old, it might not take into account changes in the neighborhood or surrounding development that have affected your property and reduced its value.

How can you prove your case? One way is to hire an appraiser. Another is to find a number of comparable houses in your area and look up their assessed value, to see if your assessment is out of line. In some areas, you can discuss the issue directly with an assessor, but in other areas this isn’t allowed. In either case, you might end up have to file an appeal of your assessment. Nationwide, assessment appeals are successful and reduce property owners’ taxes between 30 and 50 percent of the time, according to the National Taxpayers Union. If you think your assessment is too high, it’s best to act quickly; there are often strict deadlines for challenging a valuation.

Even if a black tenant’s family was subjected to racist comments and verbal abuse by a white tenant’s family, the black tenant can’t sue the landlord, says the Ohio Supreme Court. The black tenant claimed she kept an extensive record of the harassment and reported each incident in writing to the landlord. However, the landlord (a public housing authority) allegedly didn’t do anything. An Ohio law prohibits landlords from discriminating against tenants because of race. However, the landlord in this case didn’t itself harass the black tenant, the court observed. And the law doesn’t say that a landlord has to prevent other people from mistreating a tenant.

Despite this court’s ruling, this is a very difficult area for landlords. Landlords in many states may have a legal duty to protect their tenants’ safety and peace of mind – not to mention a moral obligation and a strong business interest in preventing this sort of misbehavior. On the other hand, it can sometimes be difficult for landlords to be sure of the facts when different sides tell different stories. We will be happy to assist you if you are facing a difficult situation with a tenant conflict.

A condominium association can prohibit owners from displaying any objects on or in front of their doorways – including Christmas decorations and crucifixes, says a federal appeals court in Chicago.

In this case a woman sued because the condo rule had prohibited her from placing a traditional Jewish mezuzah on her doorpost. She claimed this amounted to religious discrimination. But the court said that the rule was valid as long as it was a blanket ban on all objects, religious or otherwise. [Read more...]

Homebuyers, businesses, and residential and commercial tenants are all showing interest in “green” buildings these days – those designed to save energy, use sustainable materials and have less of an impact on the environment.

Many buyers and renters are willing to pay a little more for a green building – especially if they can recoup their money through energy savings.

But if you’re serious about going green, think carefully about the legal aspects. You’ll want to make sure the building really is as green as it claims, and that you get what you pay for. [Read more...]

Wondering which remodeling projects are most likely to pay for themselves in terms of resale value? The latest edition of Remodeling Magazine’s annual survey of builders and real estate agents is out, and it offers some answers, both nationally and for different regions. Of course, every house, every community, and every remodeling project is different, and the results will vary widely from home to home. But the national averages make for interesting reading.

Nationally, the project with the highest recoupment percentage is a fiber-cement siding replacement. This costs an average of $13,212 and increases resale value by $11,633, or about 88%. This is followed by adding a wooden deck (85.4%), installing vinyl siding (83.2%), a minor kitchen remodeling (83%), and a window replacement (about 80%, depending on the materials). [Read more...]

A homeowners association in a development could prohibit homeowners from leasing their homes, says the Indiana Supreme Court. In this case the homeowners association sued an owner for renting her house, which violated the terms of her deed. (The homeowner had broken her hip and moved to a nursing home, and wanted to rent her house to help pay her nursing home costs.)

The homeowner argued that the “no-lease” provision in the deed was illegal. She said it violated the federal fair housing laws because it discriminated against racial minorities, who were statistically more likely than whites to rent a home rather than buy one. But the court said that even if this were true, the “no-lease” rule was still valid. [Read more...]

Some people borrow money from their parents or other relatives to purchase a house. If a relative has enough money on hand to be able to finance a home purchase, this can be a very “friendly” alternative to a traditional mortgage. In addition, for some people without a sufficient down payment or credit history, it might be one of the few ways to arrange buying a home.

If you borrow money from relatives and you plan to pay them back in regular installments over time, it can be a good idea to “formalize” the loan and legally record the mortgage. Why? If you do, then you can deduct your mortgage interest on your income taxes. [Read more...]

A landlord can’t put a clause in a lease that says it won’t be liable if a tenant has a slip-and-fall injury, says the Idaho Supreme Court. The law on this issue varies from state to state, but the Idaho ruling is interesting and points out that landlords need to be very careful if they want to limit their responsibility for injuries.

The lease in this case said that the landlord was not liable for any slip-and-fall injuries either inside or outside the premises, or “from any other sources.” A tenant was walking between two buildings and fell into a sinkhole. The court said a landlord has a legal duty to use reasonable care to make sure leased premises are not hazardous to tenants. And it said that if the lease allowed the landlord to escape this duty, it was invalid.

The court said a landlord presumably could limit its liability in some ways. For instance, a lease probably could prevent lawsuits for injuries that were not caused by a lack of reasonable care on the landlord’s part. But the lease in this case went too far.

A landowner can sue a city for announcing that it was going to take some property by eminent domain, and then doing nothing else for a long time. That’s the result of two recent decisions by the highest courts in Nevada and Missouri.

In the Nevada case, the city of North Las Vegas announced that it was going to condemn an acre of a business’s property for a flood control project. However, the city did nothing for a year, after which the business sold a 20-acre parcel that included the disputed acre. [Read more...]

The Federal Reserve Board has issued a number of new rules for home mortgages that are designed to protect consumers. The rules apply to “subprime” mortgages and to some “Alt-A” mortgages (which are given to buyers whose credit is less than ideal but is better than subprime).

The rules include:

• Lenders cannot offer a mortgage unless they first verify the borrower’s income. [Read more...]

If you take out a second mortgage or a home equity line of credit, be aware that it could affect your estate plan.

The reason: Many people plan to leave their house to one child, and the rest of their property to their other children (or other heirs). But their will doesn’t say specifically whether the child who inherits the house will receive it subject to any debts, or whether the debts must be paid off by the other children. This can lead to some hard feelings between the children. [Read more...]

Should you refinance now?

Mortgages are often divided into two types, “conforming” and “jumbo.” For some time, a “conforming” mortgage has been any loan up to $417,000, and a “jumbo” mortgage has been any loan over that amount. The reason is that $417,000 was the largest loan that could be repurchased by Fannie Mae and Freddie Mac, the two quasi-governmental mortgage-buying agencies. Because lenders could not re-sell a loan over $417,000 to these agencies, they often charged a higher interest rate for them.

To help borrowers, Congress recently raised the “jumbo” amount from $417,000. The new limit is $417,000 or 125% of the median price for houses in the geographic region, as determined by HUD, up to a limit of $729,750. [Read more...]

The typical homebuyer today is 39 years old, has a household income of $74,000, searches for eight weeks, sees 10 homes, and makes a down payment of 9%, according to research conducted by Bankrate.com. Married couples constitute 62% of homebuyers, with single women accounting for 20%, single men 9% and unmarried couples 7%. (The remaining 2% of buyers were classified as “other.”) Perhaps surprisingly, only 40% of homebuyers have children under 18 living at home. Some 36% of purchasers pay the asking price or more. Only 28% of purchasers pay less than 95% of the asking price.

Some people decide to do some “homemade” estate planning and put their house in a child’s name. They figure this will avoid probate and get the house out of their estate for tax purposes. This might be a good idea in some cases. But remember, if you give your house to your child now, any appreciation in the value of the house between now and the time it’s eventually sold will be a capital gain for your child. And if your child doesn’t live in the house as a principal residence for two of the five years prior to the sale, he or she will owe capital gains tax on this increase in value. (And this is just one of the things that can go wrong.) Estate planning is a very complicated field and it’s easy to make a mistake if you try to do it yourself. Tell us your concerns, and we’ll be happy to point you in the right direction.

The down market in real estate has created a boomlet in two obscure types of property sales: the “short sale” and the “house swap.” A short sale is an alternative to foreclosure. If a property owner is unable to make mortgage payments, but the lender doesn’t want to go through the legal hassle of foreclosure, the owner and the lender may agree to a short sale. The property is sold, and if the sale price is less than the balance on the mortgage, the lender writes off the difference.

For lenders, this can be a good deal not only because the cost of foreclosure proceedings is high, but because owners of property in foreclosure often stop caring for the property, resulting in maintenance problems that lower its value. [Read more...]

Congratulations – there’s oil, coal, gas, salt, gemstones, or some other valuable material under your property. But how exactly do you sell someone the right to develop it? Most sales of real estate are sales “in fee simple” – which means the buyer owns the surface of the land, the earth underneath it, and the air space above it. But it’s possible to split up these rights. In particular, it’s possible to sell the earth underneath the property, and the right to extract minerals from it, while retaining control over the surface.

This often happens. A property owner will sell to a mining company the right to dig far under the surface. Often this seems like “found money” to the owner, who has no great concern about what happens a mile below the property. [Read more...]

The second owner of a building could sue the builder for construction defects that led to the development of mold, the Iowa Supreme Court has ruled. The case involved a home that was built in 1995. In 2000, the original owners sold it to another family. The second family then discovered water damage and mold. They claimed the mold was the builder’s fault, but that the defects that caused the mold were hidden and couldn’t have been discovered until after their purchase.

This is a question that has divided courts across the country. The first owner of a building can often sue the builder for defects, because the first owner and the builder typically have a contract or a business relationship. But the second owner of a building doesn’t usually have any relationship with the builder. Nevertheless, the Iowa court said that second owners could sue (and presumably third and fourth owners, etc.). [Read more...]

There’s a growing trend among condominium owners to ban smoking – not just in common areas, but inside individual units and in outdoor areas as well. Bans on smoking in common areas have been around for years. But a ban on smoking in individual units is a relatively new idea – and there are many questions about its legality.

Recently, an upscale 118-unit condo in Minneapolis banned all smoking within the building as well as on private balconies. The town of Belmont, California adopted an ordinance prohibiting smoking in all condo units in the city. A new Utah law permits condo associations to ban smoking, and the attorney general of Hawaii recently issued an opinion that such a ban would be allowed under both state and federal law. However, there have been almost no court cases involving these bans, so we don’t really know yet whether they’ll hold up if they’re challenged. [Read more...]