Bricks, Mortar and Cheesesteaks: Philadelphia Real Estate

Showing posts with label Philadelphia Real Estate. Show all posts

Tuesday, January 26, 2010

Federal Tax Credits for Consumer Energy Efficiency

What is included in the Federal Tax Credit?

Wednesday, October 22, 2008

Title Insurance and Foreclosure

Following my last post, Liens, Grantors, Grantees, Mortgagor, Mortgagee........., I think it is worth also explaining Title Insurance and Foreclosure in an attempt to get to the subject of short sales. If you did not read the last post, it may be helpful to read it before reading what is outlined herein.

As a buyer or if you are refinancing, you will hear about or deal with title insurance. It has been my experience that most people have little understanding of what title insurance actually is. In the simplest terms, there are two basic types of title insurance. The first type is the Owner's Policy, and the second type is the Loan Policy. There are other types of title insurance, but these are the two types you, the home owner, will need to be concerned with in 99% (not a scientific number) of the cases. The exception may be if you are involved with some type of leasehold property.

The Owner's Policy insures your title to the property. It insures that your title to the property is free and clear of all judgments, liens and encumbrances. When you buy a property, either you or perhaps your agent will order title insurance. The title company will run a public record search. They will check for any public utility, taxes, judgments, liens, mortgages, bankruptcies, restrictions, exceptions, etc.. They will produce a title report, which is a proposal for insurance. I am not sure if every state looks the same, but in Pennsylvania, the title report is broken down into four schedules: A, B, B2, and C.

Schedule A gives basic information. It shows the date through which the title search is valid. This date is referred to as the cover date. It is the date through which the title company was able to search the public record. It also shows the file number, property address, who currently owns the property, and which policies the title company is proposing to insure, the proposed insured names and the amounts insured. In a basic home purchase, there should be two proposed insured parties. The first is the home buyer/grantee for an Owner's Policy of Title Insurance, and the second is the lender/mortgagee for a Loan Policy of Title Insurance.

Schedule B lists all of the items, which need to be addressed to clear title and insure. Thus, it shows the documents, which need to be executed such as a Deed, Mortgage, Affidavits, perhaps a Power of Attorny, etc.. It also shows taxes, mortgages, judgments, liens, etc, which need to be paid to clear the title.

Schedule B2 shows exceptions, conditions, restrictions, etc.. This section discloses the rights of others to the property. There may be previously granted oil rights, gas rights, mineral rights, etc., easements for roads, utilities and pipelines, which can limit the ability of where and how the buyer can use the property, or possibly rights that have been granted to others such as neighbors for access over the land, companies for irrigation, etc. The review of this schedule is important, because these rights supercede the buyer’s rights on their future property. The title insurance will not offer any protection to the buyer for any of these issues.

Schedule C covers the legal description. This schedule can vary from state to state. In Pennsylvania, the legal description is a metes and bounds description followed by a recital, which shows the dates of deed and recording to get from the last owner to the current owner. The recital may include a description of dates and estates to provide the chain of title from the last seller to the present seller. Thus, if the Smiths bought a property in 1960, the recital will show the date of the deed, the date it was recorded in the public record and the book and page where it was recorded, and name the parties who conveyed the property to them. If both of the Smiths passed away, then it will show their dates of deaths and their estates and the parties assigned to be administrators or executors.

So, you have ordered title insurance. The title company has run a search and produced a title report. They will send you a copy of the title report and the seller will receive a copy either from you or from the title insurance company. The seller will go through the report and produce payoffs and bills to clear the title at settlement. They will also be required to produce identification and perhaps legal documents: there may be divorce decrees, wills, etc. These items may need to be reviewed by the title insurance company and additional requirements added to the title report.

The buyer will also be searched in the process of the title search. There may be items that the buyer is required to payoff also. For example, in Pennsylvania, if you have outstanding child or spousal support payments, you will be required to payoff the support before buying the property.

At settlement, the title insurance company will require everything to be paid that the report reflects. They will take the title report and "mark it up". They will mark all items paid and proven "REMOVED". There are other items, especially those found on Schedule B2, that will be marked "EXCEPTED". The excepted items will be still in effect and not covered by the title insurance. Therefore, items like roads and easements and rights will still be in effect and your title insurance will have no bearing on these issues. Typically in Philadelphia, there is a party wall or an alleyway, which others have rights to. After you buy the property and receive your insurance, the others will still have rights to the party walls and alleyways or any other excepted items.

When the settlement is scheduled, the title insurance will run an additional search called a bring down. The bring down will simply be an update to the complete search. They try to close the "GAP DATE", which is the original cover date to get as close to settlement date as possible. Additional items may be found on the bring down. When they insure your title, the title insurance company insures you through the date your deed and mortgage are recorded. They have additional risk in this gap period, where the records can not be searched prior to settlement and until they record your deed. It is pretty straight forward that if they are insuring a clear title for you, they are insuring that nothing is standing in the way between you and your title. There are not taxes due, no judgments, no mortgages on the property, etc.. If something should come up at a later date, the title company is on the hook.

The Loan Policy is a little more complicated. The Loan Policies guarantees a lien position. When you are buying a house and have one mortgage with which you are buying the property. The mortgage is referred to as a purchase money mortgage. It is a first mortgage and should have a first lien position. The title insurance insures that everything is paid off and there are no liens, which will come before this lien.

There is another concept, which is referred to as priority of liens, which is the order in which creditors are paid when borrower's assets are liquidated. When dealing with real estate in Philadelphia, taxes, water and sewer, and gas (PGW) take priority. Even after the loan policy of title insurance is issued, these three items retain a senior lien position to the mortgage. The mortgage will always be subordinate to taxes, water and sewer, and gas (PGW) in Philadelphia. Thus, if you should default and get taken through the foreclosure process, the eventual winner of the sheriff's sale will not only have to pay off the lender/first lien holder, but also the senior liens: taxes, water and sewer, and gas. If there is a second mortgage and judgments, etc., the taxes, water and sewer, gas and first mortgagee would need to get paid off, but the remaining items would get removed.

Now, of course the process and subject of priority of liens, foreclosure and sheriff sale is much more complicated than above described, and further complicated by state liens and IRS liens, which have certain priority positions. There are notification rules and certain processes which apply, etc. that I will not get into in this post.

Thus, when a lender forecloses on a property, they must go through the legal expense of foreclosing, must pay the municipal items and any liens, which are senior to their own. If another party bids against them at a sheriff sale, then the party winning the bid must pay those same costs and expenses.

Now, we keep hearing about a thing called a short sale. A short sale generally happens when a borrower is being foreclosed upon. With the lenders co-operation, the borrower lists the property for sale. The hope is to sell the property and avoid two things. First, to avoid going through with the actual foreclosure, and second, to sell the property and avoid, on the lender's part, the possibility of taking the property back at the sheriff sale. If the lender takes it back, then they have the added burden to market and sell said property. I will go further into this process in the next post.

Wednesday, September 24, 2008

QUOTES ON "HOME"

I have been reading quotes recently mostly for my own amusement. Some quite funny and some quite serious. I ran the word "HOME" and came across the use of many meanings of the word. There are those quotes about the idea of a home town, a house, a country, a family, a place in the heart, etc.. Since many of my readers are either thinking about buying a house to make a home, or are professionals in business of helping people find a house to make a home, I thought you may enjoy the result of my query. The following is a sampling of some of the results. I left the silly ones, which really having nothing to do with anything except they contain the word "home", for the end to give you a chuckle. I hope you enjoy them.

Home is the place where, when you have to go there, they have to take you in.
Robert Frost

The best time to buy a home is always five years ago.
Ray Brown

Human beings are the only creatures on earth that allow their children to come back home.
Bill Cosby

Home is where one starts from.
T. S. Eliot

A house is not a home unless it contains food and fire for the mind as well as the body.
Benjamin Franklin

A man travels the world in search of what he needs and returns home to find it.
George Edward Moore

Home is where the heart is.
Pliny the Elder

The ache for home lives in all of us, the safe place where we can go as we are and not be questioned.
Maya Angelou

Home is not where you live, but where you are understood.
Christian Morgenstern

To be happy at home is the ultimate result of all ambition, the end to which every enterprise and labor tends, and of which every desire prompts the prosecution.
Samuel Johnson

He is happiest, be he king or peasant, who finds peace in his home.
Johann Wolfgang von Goethe

To feel at home, stay at home.
Clifton Paul Fadiman

Home is any four walls that enclose the right person.
Helen Rowland

The ordinary acts we practice every day at home are of more importance to the soul than their simplicity might suggest.
Thomas More

When you finally go back to your old home, you find it wasn't the old home you missed but your childhood.
Sam Ewing

My only concern was to get home after a hard day's work.
Rosa Parks

My career always took me away from home, I was always away from home and I just wanted to be at home.
Tina Turner

When you're safe at home you wish you were having an adventure; when you're having an adventure you wish you were safe at home.
Thornton Wilder

To be an ideal guest, stay at home.
Edgar Watson Howe

I love cats because I enjoy my home; and little by little, they become its visible soul.
Jean Cocteau

Charity begins at home, and justice begins next door.
Charles Dickens

A girl phoned me the other day and said... Come on over, there's nobody home. I went over. Nobody was home.
Rodney Dangerfield

Always be nice to your children because they are the ones who will choose your rest home.
Phyllis Diller

Ten men waiting for me at the door? Send one of them home, I'm tired.
Mae West

Basically my wife was immature. I'd be at home in the bath and she'd come in and sink my boats.
Woody Allen

I have Social Disease. I have to go out every night. If I stay home one night I start spreading rumors to my dogs.
Andy Warhol

Do you know what it means to come home at night to a woman who'll give you a little love, a little affection, a little tenderness? It means you're in the wrong house, that's what it means.
Henny Youngman

My wife met me at the door the other night in a sexy negligee. Unfortunately, she was just coming home.
Rodney Dangerfield

Tuesday, September 23, 2008

CREDIT: For People Who are Thinking About Buying Real Estate

Over and over again, I am running into people who would like to buy real estate and find that they cannot get approved for a mortgage, because they have credit issues. I know this is not some big revelation. I know it is the headline in the news everyday right now. Some of these credit problems are big and will take years to straighten out and others are small items, which can be fixed in a 3 month time period. It may seem hopeless, but it doesn't have to be. What should you do if you find yourself in these circumstances?

First, don't delay and put off your credit problems. It is very easy not to open the mail, screen your calls and forget that the problem exists, but there are solutions. There are non-profit credit counselors available for help in these matters. They can help you straighten out your credit, inform you about the home buying process, and help you qualify for grants if you are eligible. I had one client go through a program, get her credit straightened out and get pre-approved for a mortgage by virtue of participating in what was available at the credit counseling agency. Further, the sooner you start, the sooner you can get your credit cleared up and approved for that mortgage. The next thing will be to find the HOUSE!

Some people suffer from another credit problem and that is no credit. They have never had a credit card, a utility bill, car payment or even a cell phone bill. You do need to establish some kind of credit to get pre-approved for a mortgage. You may want to apply for a major credit card, use it and pay it off in full (don't create a credit problem), get a cell phone, etc.. Credit counselors can also help you when you find yourself in this circumstance.

The Department of Housing and Urban Development provides a list of approved credit counselors around the country. Please, see the following link for Philadelphia HUD Approved Housing Counseling Agencies. At this link, you will also be able to search for credit counselors in other areas.

Second, I would start putting away some cash. These days, you will most likely have to come up with at least 3% of the purchase price for a down payment, appraisal fee (could be as much as $399), inspection fees (in Philadelphia, I would estimate $450) and any other closing costs not covered by a seller assist. If you do not get a seller assist, it is safe to estimate that the closing costs will be 7%-9% in Philadelphia.

Another thing to consider, in this process, is getting your paper work together. Get copies of your bank statements ready for the mortgage company, copies of pay check stubs, and copies of your tax returns. They will be asking for them between the pre-approval and the mortgage commitment. Be prepared to give them any updated copies of the aforementioned documents and copies of the resolutions of any credit problems you may have had. Unless, they have approved a "gift" of money, they are going to want to see that the money you have and some reserves have been in the bank for 2-3 months.

I would stress above all, do not delay. Get working on the problem so that there is a solution in front of you and a time frame laid out to solve the problem. The sooner you address these problems, the sooner you can be in your own house.

Sunday, September 21, 2008

Photos of My Neighborhood * In South Philly

Today, was too nice of a day to sit inside at the computer to write. I went out early, ran some errands, and had tacos for lunch. I came home. I took a nap. I got up to take a walk with camera in hand and took photos of my neighborhood for those of you, who read this blog and are not familiar with what South Philly looks like.

My Block

Two rehabbed houses on Jessup Street, the street behind mine.

This is what typical alleyway looks like... gate and all

East Passyunk Avenue runs at a diagonal
through my neighborhood.
It has cute shops and restaurants.

Living in Philadelphia, you sometimes forget,
there are murals everywhere

10xx Cross Street, runs between 10th and East Passyunk
A normal block with three huge houses added in recent years

My New Friend, Steve

Lady taking her bird out for an airing on 10th Street

Wall by Isaiah Zagar

Just thought the garden looked pretty - right off Tenth Street

Annunciation Parrish

Gino's Steaks and Pat's Steaks sit at the end of the market
People call it the Italian Market or Ninth Street
This is just the South of Washington Avenue. There are actually more stores and stalls on the North side
But I was there too late for it to be open
This is where you saw Rocky Balboa run