Get Legal Assistance Before You Offer to Pay Someone Else’s Mortgage

[Published July 26, 2012, in the Denver Post and in four Jeffco weeklies]

Last week I touched on the subject of real estate scams, prompting one reader to tell me what had happened to her.  A fellow church member had made a deal with her: “You can live in my house if you help me pay the mortgage. Later you can buy it.”

So this reader did just that, moving into the person’s house and providing the money to cover the mortgage payments.  The only problem was that the fellow church member pocketed the money and didn’t pay the mortgage. Now the bank is about to foreclose on the home and evict her.

Are you paying someone else’s mortgage under such an agreement?  If so, there’s a better way to do it.  One of my previous columns, published on June 9, 2011, was about such arrangements and included a link with advice from a lawyer on how to do it so that both parties are properly protected.  You can find that article and that link at http://www.JimSmithColumns.com.

“Wraps,” as such arrangements are called, can, when done properly, be a win/win for the seller who can’t sell (because he’d have to bring money to the table) and the buyer who can’t get a mortgage (because of a low credit score).  With proper legal agreements in place, the seller can move on without incurring a hit on his credit due to a short sale or foreclosure, and the buyer can have a house to live in while he works on improving his credit enough to get a mortgage.  Read that article and that link and call me if you have questions.

The key is that legal documents have to be drawn up. It may sound expensive because lawyers are involved, but the fee to the lawyers (I was given a quote of $1,500) is likely less than the points and fees you’d incur to get a mortgage.

If you are a seller who can’t sell or a buyer who can’t buy, call me and I’ll put the two of you together

How Can One Be Scammed in Real Estate? Help Me Count the Ways!

[Published July 19, 2012, in the Denver Post and the Jeffco weeklies]

I say “help me” instead of “let me”, because I’d like to hear — and share — other ways in which low-life scammers cheat honest and trusting people out of their money. I have posted this column on my blog to facilitate that sharing.

The lowliest form of scamming is the victimization of elderly people. I personally am familiar with a now-deceased man with Alzheimers whose neighbor befriended him and convinced him to sign a will naming her sole beneficiary. She also had him sign a durable power of attorney, so when a caring neighbor took him to the hospital, she was able to take him home to die.  She had him add her as a signatory on his bank accounts and drained over $30,000 from them even before he died. When an out-of-state relative was alerted to the situation and got the court to name her as the man’s conservator, the neighbor’s scum-bag attorney helped to reverse that decision on a technicality and she inherited the house and sold it.

Another elderly person who walks to the public library (he has no car) to use its computer for email asked me to show him a $4 million home. He explained that he had inherited $24 million from his birth father who had been a miner in Nigeria. (He didn’t know who his birth father was until he was alerted by an email from a scammer in Nigeria.)  This man had been wiring his entire Social Security income to his Nigerian “lawyer” for over two years to pay for one fee after another. I personally took him to a meeting with two assistant district attorneys who specialize in fraud and they, like me, couldn’t convince him to stop sending $700 to Nigeria each month.  He firmly believes that his credit union will start receiving $10,000 every 10 minutes after just one more legal fee is paid. So far, he has sent over $15,000 to his scammer.

A lesser scam I’ve written about before involves advertising a home for rent on craigslist that the scammer does not own. So many of my own listings have been the subject of this scam that I have printed up a sign to put on those listings the minute I hear it has been advertised for rent on craigslist.  The sign says “NOT FOR RENT — Beware of Internet Scams.”

There are many other scams — more than space allows me to describe. Share your stories as comments to this blog post.

Why I Love My Chevy Volt

          For years I have loved my Lexus hybrid and my wife's Camry hybrid.  The increase in miles per gallon wasn't spectacular (about 10-20%), but I loved the hybrid technology.

          On June 11th, however, my values shifted when I took delivery of my 2012 Chevrolet Volt.  Six weeks later, I have driven it 1,500 miles and used only 8.5 gallons of gasoline, but it is not just the economy of the vehicle that has won me over, it is, again, the technology behind it and, more than that, it's a damn fine automobile!

 

          Every night, when I come home, I plug the car into a standard 110-volt outlet in my garage, and the next morning it is fully charged, ready to deliver 40 miles of gasoline-free performance.  Since I average about 15,000 miles per year in my real estate practice, or just over 40 miles per day, I am probably the perfect prospect for this automobile.  Even if I travel twice that between charges, however, the gasoline "range extender" engine gives me up to 40 miles per gallon, so I end the day traveling 80 miles on a gallon of gas (plus ten kilowatt-hours of electricity).

          My first thought when I heard about plug-in electric cars was that, unless I generate my electricity with solar panels,  all I'm doing is switching from gas power to coal power, since Xcel Energy generates most of its electricity from coal.  Once my 9.7-kW solar PV system is installed, I will be using solar-generated electricity for my Volt, but what I didn't realize until recently was the relative efficiency of electric-powered transportation.

          Here's the math for you.  A full charge consumes a little more than 10 kWH of electricity, which costs just over one dollar from Xcel Energy.  On that one dollar of electricity I can travel 40 miles.  That's 2.5 cents per mile.  Even my wife's 35-mpg Camry Hybrid consumed about $4 of gasoline to go that distance -- that's 10 cents per mile at today's gas prices.  My Lexus hybrid costs me about 14 cents per mile for gas, and my colleague's 14-mpg truck costs him 25 cents per mile for gas.  That is a huge differential in fuel cost.  So, forget about waiting to generate electricity from the sun; I feel great paying 10 cents per kWH to Xcel Energy!

          Looking deeper into the technological differences between electric and gasoline propulsion, I begin to understand why electric vehicles are so much more efficient.  Gasoline engines, when used to propel a vehicle, are not highly efficient.  A lot of their energy is wasted generating heat.  (One side benefit I like is that the car doesn't heat up my garage when I pull in at night!  Feel my hood - it's not hot.) Gasoline-powered automobiles expend additional energy in their complex drive train and in transporting all that steel.

          In my Volt, the gasoline engine is not connected to the wheels -- it only generates electricity.  The car's only "drive train" is between the electric engine and the two front wheels.  There is no transmission, no wasted heat generated, and maybe one oil change every 24 months since the gasoline engine runs so seldom. 

          In a standard automobile, energy in the form of friction-generated heat is wasted in braking.  My Volt has all-wheel disc brakes, but most of the braking is done electronically to generate electricity.  For example, when I drove recently from my Golden home to a client atop Lookout Mountain, it took 4.3 kWH off my lithium-ion battery to get there, but by the time I was down the hill again, I had added back over 1 kWH to the car's battery.  I used my brakes, of course, but only now and then did my braking cause any wear on the car's brake pads.  It's expected that I will go over 100,000 miles without a brake job.

          The Volt's electric propulsion system and battery pack are guaranteed by Chevrolet for 8 years or 100,000 miles.  The battery itself is actually 288 separate lithium-ion cells which can be individually diagnosed and replaced.  Even if I have to spend a couple thousand dollars on repairs after 150,000 miles, I will have saved at least $20,000 in fuel costs by then compared to driving my Lexus hybrid the same distance.   This doesn't count the savings in transmission work, brake jobs, oil changes, tune-ups, air filters, etc. 

          One criticism of the Volt has been that if you use the air conditioning, it reduces your 40-mile range.  I haven't observed that, and I drove the car through the entire heat spell from June 11th to present.  To put a number on this topic, I left the car "running" for over 90 minutes one hot day with the A/C on and it used under one kilowatt-hour, decreasing my range by about four miles.   That kilowatt hour cost me 10 cents.  How much gas would your car consume if you were able to leave it idling for an hour?  (It probably would overheat.)  And how much pollution would you create? 

          Initially, I figured that I would want to install a 240-volt charging station in my garage, which could fully charge the car in 4 hours instead of the 10 hours it takes on 110 volts, but before I ordered it, I realized that was silly.  After all, I'm always home overnight, so what's the rush?  Instead, I ordered the 240-volt charging station for my office, so that I can top off my charge when I'm at my desk.  After that charging station is installed, I'll burn even less gas than the 8.5 gallons I burned in my first 1,500 miles.  My friend Steve Stevens has driven his Volt 2,500 miles and used only 3 gallons of gas.

          You're probably curious how my $45,000 "golf cart" performs.  (Base price is much lower, but my Volt is "loaded" with many features my Lexus doesn’t have.)  You'd be amazed.  I can literally peal out if I want, and the "normal" acceleration is superb.  It's far better than my Lexus or Rita's Camry, and even better than the Lexus LS 460 which Rita now drives (a full-size V-8 masterpiece).  The car's responsiveness to "flooring it" is stunning, since there's no down-shifting delay as in a gas-engine car.  

          The car is slightly smaller than a Camry, but bigger than a Prius. With its hatch-back and fold-down rear seating, I can carry everything I need to carry in my real estate business, including my 7-foot-tall, 4-foot-wide sign posts and my parrot Flower's large day cage.  I can also carry 3 passengers in reasonable comfort.  (I like to let them drive!)  I thought I was going to keep my Lexus SUV for showing homes in comfort and for its carrying capacity, but I've hardly touched it in the last 6 weeks and now have it for sale.  Any takers?  It gets 25 miles per gallon, which is impressive when you don't compare it to my Volt's 185-mpg lifetime average. 

          The possibilities from widespread adoption of this technology are considerable -- and it should be noted that other major manufacturers are only months away from introducing their own EV's (electric vehicles).  There is actually an oversupply of lithium-ion batteries right now, waiting for auto makers to catch up.   When the Volt was introduced as a concept car in 2007, the lithium-ion batteries didn't yet exist to power it. 

          Given that 80% of Americans drive less than 40 miles per day, full adoption of this technology could seriously reduce our dependence on foreign and even domestic oil.  It would, in turn, reduce the air pollution and greenhouse gas emissions we currently tolerate.

          Our state and federal governments want to encourage adoption of the technology.  I'm told that next April I can look forward to a $13,000 tax credit -- half on my federal return, half on my state return -- as my reward for purchasing the Volt.   (Note, these tax credits expire after a certain number of Volts have sold, so don't wait.)  And Chevrolet made my purchase easier by offering 72 months no-interest financing (which requires good credit).  I literally have not yet paid a dime for the car, since my first payment isn't until July 27th.  

          Not to be overlooked, widespread conversion from gas-powered to electric-powered automobiles will exacerbate the underfunding crisis of American highways, since that funding comes almost entirely from the per-gallon tax on gasoline.  With my Chevy Volt, I am basically a freeloader -- using our highways without paying to build or maintain them.  This is a crisis we already need to deal with, and I'm happy to do my part in forcing legislators and voters to confront it.

South Golden Home With Legal Rental Unit

[Featured with my column on July 12, 2012, in the Denver Post]

I’m featuring this home again because two weeks ago it carried a much higher price. At the current new price of $395,000, it is a terrific deal and should attract the attention it deserves. The address is 419 Scenic Court, although it fronts on East Street, just north of where East Street meets South Golden Road and just a few blocks from our office. What sets this house apart is that it has a 922- sq.-ft. one-bedroom/one bath rental or “accessory dwelling” unit in addition to the 1,552-sq.-ft. main house. Live in either part and rent out the other. To fully appreciate this home, take the video tour on its website, www.SouthGoldenHome.com. Full details can be found at http://details.SouthGoldenHome.com.

What Are the Buyer & Seller Costs Associated With Buying or Selling a Home?

[Published July 12, 2012, in the Denver Post]

Here in Colorado, we’re blessed with relatively low costs of buying and selling real estate. Aside from the commissions paid to real estate professionals, the only major cost to a seller is title insurance, which can run $1,000 or more, but is reduced by up to 50% if there was a title insurance policy issued on the same property in the prior three to six years. Title One of Colorado offers a 50% discount up to six years after the prior title policy was issued.

Here in the Front Range, at least, there are no transfer or sales taxes on the sale of homes, unlike in many states, just a 0.01% recording fee.

Other costs to a seller are minimal. One of the largest might be the fee paid to the HOA management company for a status letter and HOA documents and for transferring the home on their records. I have complained about these fees in the past, which can run up to $500 and are thoroughly unjustified. Hopefully the legislature will outlaw such fees someday.

There are other deductions for the seller at closing, but they aren’t costs of selling.  The biggest, aside from the mortgage, is the property tax pro-rated to the date of closing. There is also a water escrow to pay the water bill.

Lastly, there is the fee paid to the title company for closing the transaction — typically about $350, split 50/50 between buyer and seller.  The lowest fee I’ve seen is from Ascendant Title, which charges only $125 — $62.50 per side. If there’s a loan to pay off, there will be a fee charged for delivering that payoff to the lender, and another fee (typically $40) for assuring that the lien is released by the public trustee.

That’s about it. In other states you might pay for legal representation to buy or sell a home, but that is unusual here in Colorado, where licensed real estate professionals are granted limited legal authority to interpret and explain the state-approved forms used in real estate transactions.

On the buyer side, you pay no real estate commissions or title insurance or HOA transfer fees (unless specified in the contract, which I’ve never seen). Your only significant expenses are related to any mortgage you get, but if you pay cash, you pay almost no fees at all other than your half of that closing fee, which could be as little as $62.50 at Ascendant Title. Of course, you will have paid for inspecting the home (say, $350) and getting an appraisal (say, $400), and maybe a sewer scope (say, $100) or radon test (say, $150), but not much else — except those loan-related costs, which amount to 2% or so of the loan amount, more if it’s an FHA loan or you borrow more than 80% of the purchase price..

Here's How Our Local Real Estate Statistics Compare with National Stats

[Published July 5, 2012, in the Denver Post]

The National Association of Realtors (NAR) reminds us in its national advertising that “all real estate is local” but omits that reminder when it  releases its national sales statistics each month.

So I thought it would be useful to take the statistics released last week for May 2012 and compare them with the statistics reported by Metrolist, IRES and PPAR, the three MLS’s serving Colorado’s Front Range.

NAR reports that existing home sales in May declined by 1.5% over April, but rose by 9.6% from May 2011. However, here on the Front Range, sales for May increased by 19.2% over April and by 58.6% over May 2011. (In Jefferson County, existing home sales rose 4.4% in May over April and 34.8% over May 2011.)

NAR reports a 6.6-month supply of homes in May, up from 6.5 months in April but down from 9.1 months’ supply in May 2011. The peak supply was 12.1 months in July 2010.  In contrast, we had a 2.3-month supply in May 2012, down from 2.6 months in April 2012 and 4.8 months in May 2011. In July 2010, our supply was 7.2 months.

NAR reports that 25% of May sales were “distressed” (foreclosures or short sales), down from 31% a year ago, but here in the Front Range that percentage was 14%, down from 28.5% a year ago.

NAR reports that 28% of May sales were for cash, but here only 12.3% were for cash.  (A lower percentage of cash sales suggests that more home purchases are by owner occupants rather than investors.)

Altogether, these dramatically different statistics for our area demonstrate what we have already been observing for months — that the national real estate market may be recovering slowly, but our local real estate market is recovering dramatically.

Here’s another measure of how healthy our real estate market is: Of the 11,921 homes or condos entered on the MLS during the month of June, 3,713 or 31.1% are already under contract or sold. The number of days on market is plummeting, and new listings are often attracting multiple competing offers. I have put six buyers under contract in the last month, half of them against competing buyers.

Two days ago, I have posted on my blog my monthly analysis showing the percentage of listings currently under contract by area and price range. [See post below.]  Although these percentages have leveled off or even declined slightly, they are still remarkably high. For example, 49.7% of non-foothills Jeffco listings are under contract.

Buyer Activity Has Leveled Off and Possibly Peaked

Doing my end-of-month analysis for June, I find that we still have an extraordinarily high percentage of listings under contract throughout the Front Range and in every price range, but that the percentages have stopped rising for the most part and are sinking slightly.  Here's my June 30 report by county or MLS area:

And here is the report by price range, showing prior month figures in gray: