Archive for the 'Real Estate News' Category

Home Maintenance Checklist 101

Spring is officially upon us! Besides blooming flowers and gorgeous weather, we often also associate this time of year with spring-cleaning.  

But, it doesn’t have to be overwhelming. Creating a simple annual maintenance checklist to properly care for your home can prevent potential issues from becoming major problems.

Make sure your yearly home inspection includes all major systems (HVAC, electrical and plumbing), the interior and exterior of your home, water and septic tanks, doors and windows, and the attic or basement if applicable. 

Your home maintenance checklist might start to look similar to this:

 

Monthly

  • Test smoke and carbon monoxide detectors.
  • Change air filters in the heating and air conditioning system.
  • Clean range hood filters to avoid possible grease fires.
  • Trim back any shrubbery or plant growth around the outdoor HVAC unit by at least 18 inches.

Spring

  • Change the air-conditioner filter.
  • Remove leaves and debris from gutters and downspouts
  • Replace batteries in smoke detectors.
  • Inspect sink, shower, and bath caulking for deterioration.

Fall

  • Drain and winterize exterior plumbing.
  • Vacuum lint from dryer vent.
  • Power wash windows and siding.
  • Schedule seasonal service of the HVAC system before summer and winter.

Conducting your own home inspection and utilizing a maintenance checklist will make it easier for you to manage the upkeep of your house. We hope you’ve found these tips helpful!

FIRPTA Affecting Transactions

The Foreign Investment in Property Tax Act (FIRPTA) is a certificate of non-foreign status. FIRPTA addresses the disposition of U.S. real property interest by a foreign person. Section 1445 of the Internal Revenue Code requires that all transferees (buyers) of real property owned by a foreign person withhold and pay to the IRS up to 15% of the amount realized on the sale.

 

When dealing with a foreign seller, at the very beginning, agents should be confirming if the seller is a foreign seller or not. If he is a foreign seller (non-resident alien) and does not have an individual tax payer identification number (ITIN), then the agent should recommend he seek the assistance of his CPA in order to apply to the IRS for his ITIN and help him through the paperwork.

 

Who is a non-resident alien? A non-U.S. citizen who does not pass the green card test or the substantial presence test is considered a “non-resident alien.” If a non-citizen currently has a valid green card, he would pass the green card test and would be classified as a resident alien.

U.S. Real property interests include: Interest in a parcel or parcels of real property.

The IRS definition of an agent: Any person who represents the transferor (seller) or transferee (buyer) in any negotiation with another person (or another person’s agent relating to the transaction in the settling of the transaction).

Liability of agents: If the transferee (buyer) or other withholding agent receives a certification of non-foreign status and the agent knows that the document is false, the agent must provide notice to the transferee (buyer) or other withholding agent. If the notice is not provided, the agent will be liable for the tax that should have been withheld but only to the extent of the agent’s compensation from the transaction.

SB 407 Water Conservation Retrofitting

Starting January 1, 2017, water conservation retrofitting goes statewide for single family dwellings. All homes built on or before January 1, 1994 are required to update to complying water conserving fixtures on or before January 1, 2017. Commercial buildings and multi-family units built prior to January 1, 1994 are required to make the transition on or before January 1st 2019.

A seller or transferor of single-family residential real property, multifamily residential real property, or commercial real property must disclose to a purchaser or transferee, in writing, specified requirements for replacing plumbing fixtures, and whether the real property includes noncompliant plumbing. Fixtures include water closets, urinals, showerheads, lavatory faucets, and kitchen faucets. Noncompliant fixtures can only be replaced by fixtures complying with the requirements of CALGreen and the California Plumbing Code.

As of January 1, 2014, SB 407 requires non-compliant plumbing fixtures to be replaced by water-conserving plumbing fixtures when a property is undergoing alterations or improvements as defined by the California Building Code and California Green Building Code.  These codes define alterations and improvements as any construction to an existing structure which enhances or improves the structure. Construction related to repairs or maintenance of the structure are not considered to be an alteration or improvement.

For more information, please check out these useful links:
http://www.bsc.ca.gov/Codes.html

https://www.calwater.com/conservation/conservation-kits/

FinCEN Geographic Targeting Order

FinCENOn July 26, 2016, the Financial Crimes Enforcement Network (“FinCEN”), a bureau of the United States Department of Treasury, issued a Geographical Targeting Order (“GTO”) requiring title insurers, their subsidiaries and agents, to report certain information in connection with the purchase of 1-4 unit residential real properties in Covered Transactions.

A “Covered Transaction” is an all-cash transaction in which the property is being purchased by a limited liability company, corporation, partnership or a similar legal or business entity, and the purchase price is $2,000,000 or more (for properties in the counties of San Diego, Los Angeles, San Francisco, San Mateo or Santa Clara, California).

If a property is being purchased in a Covered Transaction that meets these criteria, the proposed insured purchaser must provide all information necessary for the Title Company to complete IRS form 8300.

What are Covered Transactions?

* The property being purchased is 1-4 unit residential property;

* The property is located in any of the designated counties of California

* The sales price meets the designated threshold amount;

* The purchaser is a legal entity (i.e., a corporation, LLC, partnership or similar business entity);

* The property is purchased without a loan or similar form of external financing; and

* Any portion of the purchase price is paid using currency, cashier’s check, certified check, traveler’s check, money order, personal check or business check.

 

To satisfy this requirement, we may need to obtain additional information from other parties involved in the transaction.

For more information, please visit the following links:
http://www.alta.org/fincen/081216_FAQ_FINCEN_GTO.pdf
https://www.fincen.gov/news_room/nr/pdf/GTO_Phase_2_FAQs%20_081916.pdf

City Property Report Requirements

Screen Shot 2016-08-12 at 3.29.46 PMSeveral cities have updated their retrofitting and property report requirements. We have the latest report requirements here on our website: http://americantrustescrow.com/city-property-report-requirements/. Check back often for updates!

TRID Closing Timelines

We did an analysis of what effect the ‪#‎TRID‬ implementation had on the median days to close for all closings before the 10/3/2015 implementation of TRID and all closings under the new rule which were opened after 10/3/2015.

Here’s the data for Refis (R) and Resales (S).

We have seen no significant closing delays since the TRID rule was implemented.

How have your transactions been going since the TRID rule rollout?

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Owner’s Title Insurance Policy Update

New RegulationThe CFPB is requiring that the owner’s policy be disclosed as “optional” due to the fact that unlike the lender’s policy which is required by most institutional lenders in the country, an owner’s title insurance policy is not a transactional requirement nationwide.

This new descriptor was written to and applied nationwide with no allowance for customary contractual requirements in Southern California. Some parts of the country do not have the risk and liability of real estate transactions as we do in the highly populated State of California and thus Owner’s policies are considered optional and not a contractual obligation as they are here. As a reminder, the Closing Disclosure is a lender document and does not release the seller of any obligation to provide the buyer with required items per the mutually signed purchase agreement.

Here is a consumer friendly link on title insurance that might be helpful to your clients: http://www.consumerfinance.gov/eregulations/sxs/1026-38-g-4/2013-28210?from_version=2015-01321

New Los Angeles Seismic Retrofit Ordinance

LA Seismic OrdinanceOn October 9, 2015, the Los Angeles City Council passed an ordinance to establish mandatory standards for earthquake hazard reduction.

Article1, Division 93 – Existing Buildings of wood-frame construction

Applies to buildings where a permit for construction was applied for before 1/1/78 and the ground floor portion of the structure contains parking or other similar open floor space that causes soft, weak or open-front wall lines, and there exists one or more stories above.

Compliance Requirements 

If a building is within the scope of this division and receives an order from the city, the owner must:

1.) Within 1 year provide a structural analysis demonstrating that the building meets or exceeds requirements as is OR will meet or exceed requirements after structural alteration OR plans for demolition

2.) Within 2 years, obtain all necessary permits for rehabilitation or demolition

3.) Within 7 years  complete construction or demolition under all necessary permits

 

Article 1, Division 95 – Non-Ductile Concrete Buildings

Applies to buildings where a permit for construction was applied for before 1/13/77.

Compliance Requirements

If a building is within the scope of this division and receives an order from the city, the owner must:

1.) Within 3 years, submit on the form provided by the Department a completed checklist for the Department to review and approve

2.) Within 10 years, if deemed ductile, submit an evaluation of the building documenting whether the building meets or exceeds requirements (click link below to see details of evaluation)

3.) Within 25 years, complete all necessary demolition or retrofit work on the building

To read the full ordinance, please click here.

Learning the Rights and Responsibilities of Escrow

Escrow Title DifferencesPrior to looking into the process of buying a home, the term “escrow” may be foreign to you. After you’ve been through it however, you quickly realize what an important part of the process escrow is and why prospective home buyers should learn more about it.

When buying or selling a home, a large amount of money is at stake. Escrow is the term that essentially ensures the safety of this money and is a crucial part of the process that enables the transaction to take place.

Defined in layman’s terms, escrow is what happens when money is deposited by a buyer into an account proctored by a neutral third party. That neutral third party is known as an escrow agent or officer. This agent essentially holds onto the funds until all sides of the sale agreement are fulfilled by both the buyer and seller. Upon the completion of all tasks necessitated by the terms of the contract, the escrow account is opened and the money is then transferred to the seller.

This service works to ensure the safety of both the buyer and the seller. Prior to purchasing a home, a buyer wants to make sure that all measures are in place to make the investment a sound one, while a seller wants to make sure that the buyer has the appropriate funds to make sure the sales goes through. If something falls through on the deal, the money in the escrow account can be transferred back to the buyer.

Escrow Versus Trust

Many home owners often think of escrow as a trust agreement. While these two terms are often used interchangeably, there is an important difference between these two terms that often begs an explanation.

In terms of banking, there is not much to discern a trust agreement from escrow. Each is the process of depositing funds to a third party until the payer and payee both complete terms of an agreement. However, the key difference between these two terms lies in how the terms of said agreements are carried out.

In a trust, the relationship between the agent and the beneficiary can be a lot less defined than that of an escrow agent and the buyer and seller. A trustee’s duties are to take care of the trust assets so as to benefit the beneficiary in the agreement. This can include a broad range of activities and practices that only work to improve the standing of whoever is set to receive the funds.

An escrow arrangement is a lot like this, but with a narrower dictation as to how the deal is to be carried out. In escrow, the agent or officer works as a fiduciary between buyer and seller, rather than a representative of either. The element of the deal that dictates the officer’s action is the terms of sale written into the contract itself. This is a very narrow and special type of trust arrangement that only takes place in the real estate field.

New Mortgage Regulations Aim to Safeguard Against Future Crises

Mortgage Regulations QRM ruleIn an effort to learn from mistakes from the past and safeguard for the future, the government is finally putting into an action a series of reforms and rules that would qualify lenders for residential mortgages. The measure also includes the creation of agencies such as the Federal Deposit Insurance Corporation, as a means to establish a strong system of checks and balances that will help to keep lending standards in the right place. Stemming from the 2010 banking reform bill that was a result of the financial crash in 2008 and subsequent years in crisis, the government is instituting a new system called the qualified residential mortgage (QRM) rule. The QRM rule outlines a series of obligations a loan must meet in order to be considered a safe loan and eligible to be sold to investors as part of a mortgage-backed security without having to maintain 5 percent of the loan amount in their ledgers. This is a safeguard that will allow lenders to loan money for less money to the borrower as they won’t have to pass along the risk-retention cost to the buyers. According to the National Association of REALTORS®, this move is a win for both lenders and borrowers, because it allows for a broad range of occurrences and situations so as to not limit lenders into creating an even tighter real estate market by increasing costs and adopting stricter policies. “NAR applauds the Federal Deposit Insurance Corporation for finalizing the Qualified Residential Mortgage rule today, which includes a broad definition of QRM and aligns with the Qualified Mortgage standard implemented earlier this year,” NAR President Steve Brown says.

QRM Rule Allows For Wide Range of Home Buyers

While many were fearing a reform that would ultimately weed out buyers facing difficult financial factors such as student loans, the QRM rule will actually work to make mortgage lending a universally attainable process for all demographics of serious home buyers. The QRM rule has been aligned with the QM rule, the qualified mortgage rule, which went into effect at the beginning of this year. Together, the two rules provide a unified, universally accepting front that economists hope will spur the continually ailing real estate market. The QRM rule, considers a loan qualified if the borrower’s debt-to-income ratio is 43 percent, among other factors. Another improvement was the removal of the idea of a singular down payment requirement, which NAR was strongly opposed to. “Importantly, the final rule relies on sound and responsible underwriting rather than on an onerous down payment requirement to qualify as a QRM loan,” Brown says. “NAR strongly opposed earlier versions of the rule that included 20 and 30 percent down payment requirements, which would have denied millions of Americans access to the lowest cost and safest mortgages.” With the QM rule already in effect, the QRM changes are expected to flow smoothly when the rule goes into effect 12 months from October 21. This grace period allows lenders to align their practices with the new rules, if they haven’t done so already.

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