OH, THOSE HAZARDS OF THE ESCROW DESK!
A rather odd story to share. 15 years earlier…
A Buyer entered into an escrow to buy a property. She got a loan through Countrywide, one of those adjustable rate mortgages with impounds attached. Through the years her mortgage payment rose and rose. Finally, 15 years later, the Buyer could not afford it any longer and she requested and received a modification.
Separate from this issue and also 15 years later, the Buyer found out from the City that some of her rooms did not have a permit and she needed to tear them down or get them up to code with a permit.
She looked for her paperwork from way back when and all she could find was our name and number. Since we were the only ones she could find, she decided that she would call us and make us aware that she has some issues that needed to be resolved and for which compensation was due. Her issues: (1) we sold her a property with a loan in which the mortgage payments kept increasing, (2) the property value had remained the same all these 15 years and did not increase like other properties, and now she finds out that (3) the structure did not have all the required permits. Somehow the escrow company, as the most accessible party after all these years, needed to be held responsible.
This person also emphasized, in every other sentence of this 40 minute phone conversation, that she was in her 20’s and disabled when she first bought the property, and because of her age and disability, she did not know what she was doing.
How do I help this client who had no understanding of the role and responsibilities of each party in a transaction? There are at least 7 different parties: the Buyer, the Seller, 2 real estate agents, the loan officer, the title officer and finally, the Escrow Holder who pulls everyone together. How do I help when so much time has passed and the file is no longer in our computer system, much less in physical format?
She must have kept some paperwork from her purchase as she had our company information. My recommendation was that she should look for more paperwork and direct her efforts to finding (1) her loan broker who placed her in this loan, (2) her real estate agent who helped her find the property and (3) the Seller who should have given her the proper disclosures regarding the non existence of required permits. If she had her grant deed she could at least identify the name of the Seller. That would be a starting point. Get that information together, I advised her, and perhaps she could then contact an attorney to see if a case could be made.
When you are in the business for 40 years you pretty much see them all.
A “SHORT” CHAT ON CLOSING COSTS
I would say that for every settlement statement we give out, there is an 80% chance the clients will question the various closing costs. And the higher priced the transaction, the quicker they are to question and/or call.
Closing costs are the bane of every transaction, aren’t they? They can turn a happy occasion to a sad one and the more expensive the property, the sadder or more indignant they become. As I told one client recently, when you buy an expensive property your insurance premium will be higher as well as the property taxes. Expect your closing costs to be higher, too, as some of the costs are not static and are a “liability” fee, commensurate to the amount of liability (property value) that will be shouldered by the companies handling the transaction. Falling into that category are insurance premiums, escrow fees, title premium costs, and government transfer taxes. Loan fees are different.
Closing Corp is a company which gathers closing cost information across the nation and makes it available to lenders. The report shows that, without including property taxes, Washington D.C., New York, Hawaii, California and Washington State were the highest. Click here (PDF Download) for a link to their report.
Some cities, like New York City, have a flabbergasting number of different taxes that are added on to the settlement sheet. In California, one of the biggest closing costs could be the Transfer Tax which is charged on the sales price. Besides the standard County Transfer Tax of $1.10 per $1,000 of the price, certain cities also have their own City Transfer Tax added to the equation. For instance, if you are purchasing a property for a sales price of $1,000,000 in Berkeley, your standard County Transfer Tax is $1,100 ($1.10 per $1,000 of sale price) and then you need to add an additional $15,000 ($15 per thousand of sale price) to pay the City. Ouch!
What is even more concerning is that under the new government required Truth In Lending TRID disclosure regulations, the closing costs are set very early in the transaction. Very little leeway for change is allowed by the time the loan documents are issued and the client sees the settlement statement. Any changes demanded by clients (I want a discount!) when they see the statement will require re-disclosure by Lender, re-draw of loan documents, and a delay to the closing because by that time it is probably 3 days before closing.
A “short” chat? “Short” is relative, isn’t it!
NO CREDIT? NO PROBLEM!
Here we go again. Ten years ago our economy crashed and although many reasons can be attributable to the crash there is no doubt that the leniency in underwriting mortgage loans was a large contributing factor. Have we learned? Apparently not. This article reports that one mortgage company is now planning to lend to those who have no credit history, using alternative payment histories (rent, utilities) as basis to underwrite a mortgage loan. This will provide an opportunity for those who have no credit to get a loan and buy a home.
While I am all for expanding home ownership to those who previously had no chance to enter the race, is the loosening of credit a good way to do this? Will we end up ten years later with another crash?
MY DEBT IS HIGHER THAN YOURS, na, na, na
Are you living in debt? Of course you are! This is the U.S., accruing debt is one of our cherished Bill of Rights. The higher the value of the property value, the higher the possible debt attached to it. So, are you living in one of the 25 highest mortgage debt areas? Not surprisingly, California has 17 out of the 25 and here is the list. Another cherished Right? Americans have the absolute right to keep up with the Joneses.
WHAT ELSE CAN WE BUY ON AMAZON?
There is no stopping Amazon. Earlier this year the news was that Amazon might be getting into the mortgage industry. They have the known name brand, a faithful following, and more importantly, the money to get into it. All they needed was a partner who knew the ropes. Today the headline news is that they are teaming up with Realogy (parent company owns Century 21, Coldwell Banker, Sotheby’s, etc) to offer real estate brokerage services first. Just think how easy it will be! Go right to your Amazon account, the same one you use to buy all your toilet paper and cleaning supplies, click on their “Turnkey” program icon and voila! You will be connected to a real estate agent. Not only that, if you use Amazon to broker your next real estate transaction they will give you “move in benefits” (see article) – between $1,000 – $5,000 worth of Amazon products to sweeten the deal and help you move into your new home.
THE WORLD IS YOUR STAGE AND SO IS YOUR PROPERTY
If you are planning to sell your home at premium value the necessity of staging the interior cannot be over emphasized. For a higher priced property you can easily spend $4,000-$5,000 for the staging. If this is not an empty house, the Seller will need to move their own existing furniture out so that the staging company can bring in their own. So, staging is expensive. Now, we have virtual staging (Of course we do! We live in a world of virtual anything!) which can save time, effort and this horrendous cost, plus, as the article says, “It is no longer about curb appeal, it is about web appeal”. We are all looky loos and now we can go online to drool.
REACHING A NEW HIGH IN RENT AFFORDABILITY
You know you have almost hit the top of premium rent when you spend $1,200 a month and all you get is a bunk bed. Eyebrows up? See the article here.
IN THE MATTER OF DREADLOCKS
California does it again! She takes center stage again by being the first state to enact legislation which would ban hair discrimination in the workplace. Yessir, starting Jan 1, 2020 any employer with 5 or more employees cannot discriminate against a person’s natural hairstyle. See this CBS write up here on the ”Create a Respectful and Open Workplace for Natural Hair” Act (CROWN). The legislation came about when dreadlocks worn by African Americans became a source of discrimination in the workplace. Personally, as a company owner whose clients come in to the office from time to time, I don’t mind the hair type, style or color, as long as it is clean and not messy. Appearance of the staff is always a matter of concern especially if the staff meets with clients.
Will the next legislation be about no hair discrimination when it is a person’s “unnatural” hairstyle/color? If so, I would support that 100% as there is nothing natural about my hair color.
HOTTEST ZIP CODES:
And we are not talking about the heat either. These are zip codes that are hot because their pricing is still affordable, they are still close to large cities, and have better school districts and employment opportunities. #1 is Grand Rapids, MI and #10 is Colorado Springs, CO. Sorry, not a single West Coast city on the list. Realtor.com’s report is here.
Now if you are looking for the hottest rental market, that would be in a West Coast State – Phoenix, AZ. takes the prize. I think I mentioned last month that the Uber driver told me their construction was booming, and voila! Here is why! Jobs and employment are the main factor. The weather, though sizzling hot in the summer, could be another. It’s a lot easier to deal with the sun than the snow.
For my funny of the month I decided that this video takes the prize. You know the saying about “fighting like cats and dogs?” Yep, this is it. Except that everyone knows there really is no fight when dogs are scaredy cats and size apparently does not matter.
Juliana Tu, CSEO, CEO, CBSS, CEI, SASIP
“Escrow is my FOREMOST language!”
The opinions expressed in this blog are solely the author’s.