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Spring Change?
21 April 2008 By Daniel Dominik
Reading the back pages of the paper, you will find stories of somewhat good news. The last few weeks have started to show positive statistics for Pending Sales and Actual Closings. The number of "New Deals" is up a fraction short of 11% from a month ago in three important micro-markets. First, Single family detached homes in the Southwest metro, priced from $700,000 to $900,000. The second strongest market is residential investment property under $200,000. Finally, the third strongest market of buying activity took place in South/Southwest Minneapolis, and Edina/St. Louis Park in the $250,000-350,000 price range.
Again however, the number of new listings in this period out paced sales, result; the total number of homes available rose, slightly.
The last year has put many of the smaller town banks in a coma with the burden of foreclosures. However, in my conversations with real estate brokers and people who manage bank owned properties, and facilitate short sales, the larger banks are giving more leeway to their employees to start "dealing" a little more liberally. In this author's opinion, let's continue to hope so!
In the Next Issue
Short Sales
The name alone raises a lot of questions. What is the definition of a short sale? How can I, as a buyer's lender or an agent, prepare for one? In our next issue we will discuss some of the fundamentals of a short sale and how Gibraltar Title can help you in advance.
Website Enhancements
gibraltartitle.com
In the weeks proceeding the launch of our new website, we received a lot of positive feedback for which we are very thankful. We also received some great new ideas. Gibraltar Title will always strive to find the most effective ways to meet your goals. With that in mind, we are working on a few new website enhancements. The newest implemented customer suggestion we would like to let you know about is that when you are placing your Order Online you can now select ahead of time if you prefer a particular escrow officer or if you will need to utilize the benefit of a remote closing.
If you have an idea or question for the Gibraltar Title newsletter or website, please don't hesitate to Contact Us
Reverse Mortgages
Gibraltar Title Agency has been closing Reverse Mortgage loans for well over a decade. This is a claim that we are proud to make, because we guarantee that you will not find a staff with more experience and knowledge anywhere in the Twin Cities.
Being Innovative
In a traditionally unchanged industry means finding new ways of being flexible. We realize that sometimes there is a need for special attention and flexibility when closing a reverse Mortgage. Gibraltar Title has the staff necessary to meet the needs of any borrower. Bringing the closing to a location more accessible to the borrower or keeping one of our offices open later, are just a couple of examples of how we will work harder to accommodate most every request.
Want an estimate on Reverse Mortgage fees, including Premium and MRT? Check out our new Reverse Mortgage Calculator.
Exclusivley at Gibraltar Title Agency Click Here (Top)
Preston Is Picked to Run HUD, Despite Having Little Housing Experience. President Bush nominated Steven Preston as secretary of the Department of Housing and Urban Development, a move likely to set off a skirmish between the White House and Congress as both grapple with responses to rising foreclosures and souring mortgages.
full story on WSJ.com
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Happening this month
The entire staff of Gibraltar Title Agency is proud to introduce our two newest employees. Earlier this month we welcomed Lisa Kiedrowski (left) and Denise Laynor (right). Both Lisa and Denise possess a wealth of full service experience in the Twin Cites marketplace, particularly with closing new development, foreclosed and REO Properties. If you haven't yet had the opportunity, feel free to stop by our Edina Location and say hello, or you can call either of them at (952) 830-1904 to talk about your next transaction.
Featured Article
Contracts For Deed
18 April 2008 By Jeffrey Nycklemoe
Contract for Deed Purchases seem to rise in popularity as mortgages become more difficult to obtain. Contracts for Deed were common in the 1980s when mortgage rates were rising and many sellers had FHA mortgages at below-market rates that could be assumed by buyers. In recent years, Contracts for Deed have not been common due to mortgage financing being available to most buyers at relatively attractive rates. We expect that we might see somewhat of an increase in Contract for Deed transactions if mortgage funds become less readily available. We thought a brief discussion regarding these transactions may be helpful.
Fee title remains in the Seller in a Contract for Deed closing. That attribute makes it difficult to get any mortgage financing in the name of the Buyer because the Seller would have to join in the mortgage or otherwise subordinate its fee interest in order to give the new lender first priority, which it will undoubtedly require. That factor, together with the absence of many assumable mortgages, means these transactions will almost always be entirely Seller-financed.
"Sellers need to start thinking of themselves as lenders from the start"
So, what are the dangers and potential pitfalls to Buyers and Sellers in Contracts for Deed? Sellers need to start thinking of themselves as a lender from the start. That means getting all the terms into the Purchase Agreement that are desired such as the interest rate, payment amount, balloon date, late fees, insurance requirements, and tax payment requirements, among other things. Recognize that the CD triggers a due on sale clause in the existing mortgage so that the lender will have a right to call your Note due immediately. That generally means the existing mortgage must be paid off when the Contract for Deed is made. Other than obvious concerns regarding creditworthiness, a Seller does not need to worry about judgments against the Buyer at the time the CD is made. Those may indeed be liens against the Buyers interest in the property, but they do not encumber the Seller's interest. Liens attaching to the property through the Buyer are only a concern to the Seller if and when the Buyer and Seller want to mutually cancel the Contract by a conveyance from Buyer to Seller. In this event, it is imperative that the Seller treats this transaction as a purchase of property, with all ordinary title work being done to assure itself that it receives clear title back from the Buyer. If the title exam preceding this transfer indicates that liens have attached to the property through the Buyer, then the Seller must refuse the deed from the Buyer and instead must proceed with a Cancellation of Contract for Deed proceeding pursuant to Minnesota statute. A successful cancellation proceeding will eliminate the interest of the Buyer and all those lien holders who claim an interest through the Buyer.
Concerns for the Buyer purchasing a property on Contract for Deed are the same as those for any Buyer, plus there are other concerns. An Owner's Policy of Title Insurance is available on a Contract for Deed purchase and is just as important for the Buyer as it is in a traditional, mortgage-financed closing. The most important difference in financing a purchase with a Contract for Deed instead of a mortgage is that that the Buyer loses the property much quicker if the Buyer defaults. A mortgage can be brought to foreclosure sale in three to four months after default during which time the Buyer can cure the defaults. After the foreclosure sale, the Buyer generally has six months during which to redeem by paying the debt in full either through refinance or sale. A Contract for Deed can be cancelled by statutory proceeding upon 60 days notice. During the 60 days, the Buyer has the right to cure, but after that the Buyers rights are extinguished, the property is lost, and there is no post-cancellation right to redeem. The Buyer should make certain that the Contract for Deed gets recorded and it is actually required by statute to record the Contract for Deed. Failure to record is a misdemeanor and can lead to a civil penalty equal to 2% of the contract amount. Recording the Contract protects the Buyer from future liens against the Seller. Just like the Seller, a Buyer should make certain that taxes and insurance are being paid, if that obligation falls upon the other party. Finally, a Buyer will generally not be able to take out a new mortgage against the property without paying off the Contract for Deed at the same time.
So, if you are involved in refinancing a Contract for Deed, you should inform the seller/contract holder early because both a deed and a payoff statement are required at closing. Early contact can help head off potential problems with a contract holder who may not understand that they have obligations. Almost all Contracts for Deed give the buyer the right to prepay, regardless of whether or not the contract holder would prefer to continue collecting payments. Contract holders are obligated to provide a deed and pay State Deed Tax upon the payoff off the contract.
It is common for contract holders to fail to recognize that they have expenses at the time of payoff. Early contact in this regard may not guarantee trouble-free cooperation, but it is always better than last minute notification.
Gibraltar Title is ready and able to close your Contract for Deed transactions. Likewise, if you have already sold on a Contract for Deed and you are considering taking a deed back from the Buyer to cancel the Contract, please contact us before taking those steps. We want to help you make certain that you do not make a bad situation worse.
Jeffrey Nycklemoe, President of Gibraltar Title, has been an attorney in the Minnesota title industry for more than 25 years and has authored numerous articles with respect to Contracts for Deed.
4700 West 77th Street, Suite 100
Edna, Minnesota 55435
952) 830-1904
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