Your real estate questions answered

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Question: My wife and I just saw a home we love, and we want to buy it. However, we have not yet put our house on the market. Given how it is taking longer to sell property these days, is there a way we can still buy our dream house?

Answer: With the current status of the housing market, buyers might want to consider selling their property before they go looking for a new one. However, since you already found a house you love, it is too late to take that option. You could try presenting an offer to the seller “contingent” on the sale of your house. But most sellers won’t go for such a plan when you don’t yet have a contracted buyer. Another option is to borrow the money you need short term against the value of your current house called a “bridge loan.” Interest rates and costs for such a loan can be high. You can also consider getting a home equity loan on your current property before you put it on the market – typically a cheaper option. If you have enough in your 401K or a “secured” asset such as bonds, you might be able to borrow against those. Talk to a lender or a financial advisor to determine the best options for you. It is important to have an attorney review the contract on the house you plan to purchase, to make sure that the deal (and your deposit) is subject to your getting the funding you need.

Question: My widowed father just passed away. His condo was owned in a revocable living trust, and I am the successor trustee. Do I have to do anything to own the home outright?

Answer: First, my sympathies for your loss. As to your question, assuming the trust names you as both the successor trustee and the beneficiary of the condo, decisions about the home passed to you upon your father’s death. In fact, this easy transition is one of the benefits of having a revocable trust, which is created by the person owning the assets and can be changed by him at any time. You will now be able to sell the condo or, subject to approval by the condo board, to live there. When you are ready to sell, the lawyer or title company handling the closing will want to review the trust to be sure the power to sell the condo indeed rests with you.

Question:  Does it make a difference whether I close on a house I am buying on a specific date of the month?

Answer: It doesn’t make much of a difference, so you should schedule your closing for when it is most convenient for you and the seller. The out-of-pocket costs you must pay at closing are a bit lower when you close at or near the end of the month. This is because you must prepay interest on your mortgage for the first month, so if you close, say, June 29, you only need to prepay one day’s worth of interest.

Question: My elderly mother owns a condo but she has become ill. Should I take steps now to avoid having to probate her condo in the event she gets sicker and dies?

Answer: A growing number of attorneys are turning to “lady bird deeds” in just these situations. Your other could do one of these deeds to put you and any siblings you have, if appropriate, on the deed. She would retain what lawyers call a “life estate,” meaning she can live there as long as she wants and sell it without your (or your siblings’) consent if she decides to. The advantage of this type of deed is that she keeps full, legal control of the property. You should know, though, that there are some risks involved. If you, or your siblings, if they are on the deed, have a judgment filed against you, it can become a lien on the property. Also, in rare situations, things don’t always turn out as planned. Recently, for example, a woman put her two sons on her deed in this way. Tragically, one son died shortly after getting married; now the young widow, in the family for a very brief time, is entitled to a share of the condo when mom dies. A lawyer can help you determine if this type of deed, or perhaps a different legal approach, is right for your mother’s situation.

Question: I am buying a house, and we have a written contract. The seller has told me she will leave certain things in the house, such as the fixtures and drapes, but this is not in the contract. Is her word binding?

Answer: As a lawyer friend of mine likes to say, if it’s not in writing, it’s as if it never happened. To be enforceable, an agreement must be written down and signed by both parties. Your lawyer or real estate agent can draft this agreement, or you can even do it yourself. If you do draft it yourself, be sure you include exactly what is to be left in the house (green cotton drapes in the living room, crystal chandelier in the front hall, etc.), that it is signed by buyer and seller and that there is no additional fee for these items.

Question: I am interested in buying a condominium conversion unit for investment purposes. The contract looks like a standard form. Should I just sign it?

Answer: No legal agreement is ever a standard form. It is always subject to negotiation on both sides. Especially now that the market has softened, the seller may be even more willing to make concessions. This is important because many of these type of contracts (prepared by the seller’s attorney) go out of their way to protect the seller but don’t do much to protect you and your money. For example, many contracts treat the deals as a cash deal even if you plan to get a mortgage; this means if you don’t get the mortgage for some reason, you may still be forced to buy the unit or forfeit your deposit. Before you sign any contract, consult with a lawyer who can help you understand the contract’s fine print and can negotiate with the seller if you desire.

Question: My widowed mother added me, her only child, to the deed of her unit in a Coconut Creek condo several years ago. Now she has died. I have been told I need to probate her estate in order to sell this condo, but that doesn’t seem right to me.

Answer: When your mother added you to the deed, she must have neglected to put in the important language “joint tenants with rights of survivorship.” Had this language been included, her death would have allowed the unit to pass immediately to you. However, without such language, her portion of the unit instead goes to whomever she left it to in her will. That probably is you, but you will need a court order via a probate, to legally acquire her portion of the title.

 

Ask Gary Landau your real estate questions

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Question: I have an adjustable rate mortgage but I think the bank incorrectly figured my last interest-rate increase. I have tried to call them but haven’t made any progress. Until this is resolved, I plan to stop making payments. Do you think this is a good way to get them to resolve the issue?

Answer: You should never stop paying a loan for any reason, until it is completely paid off. When you stop paying, you hurt no one but yourself. First, when you stop paying your credit history and score quickly plummet. This can affect not only your future home purchases but even your current credit card interest rate. What’s more, your lender will almost immediately begin tacking on late penalties and fees to what you owe them. Rather than hear from the company about your possibly incorrect interest rate, you will hear from their foreclosure department, letting you know your property is heading for their foreclosure list. A better plan would be to write a letter, or have your attorney write one, to resolve the matter. Down the road, if the bank is indeed in error, you will be able to get a refund or credit from them. In the meantime, keep making the payments they say you owe.

Question: My spouse and I have a signed contract to buy a home. Now we are having second thoughts. My Realtor says we must go forward with the deal. Is she right?

Answer: Whether you can back out of the deal depends entirely on the contract you signed. This is one reason why it is so important to have a lawyer review the contract before you sign it. If the contract gave you a certain number of days to inspect the house and back out if you are unhappy with what the inspector uncovered, if you are in that time frame you may be able to get out of the deal. Or, if you are buying a condo, under Florida law you can back out up to three days after receiving the “condo documents” from the seller. Your contract may also give you the ability to end the deal if you do not qualify for financing, providing you applied in a timely fashion. If your contract does not provide for these provisions, or if you are past the time period to cancel for these reasons, you will likely have to go forward with the deal or forfeit your deposit. In any situation regarding a contract, it’s best to consult with an attorney and not solely on the advice of a non-lawyer.

Question: I have finally repaid my entire mortgage. Can I have a burn-the-mortgage party?

Answer: By all means, have a party. But don’t burn your actual mortgage, nor your satisfaction of mortgage, indicating that you have paid. You never know when you will need those papers should the bank erroneously later claim that you aren’t paid up or doesn’t file the proof of payoff in the public records. So put the originals in your important-papers vault, and torch a copy at your celebration.

Will versus Trusts – How to avoid probate pitfalls

Both wills and living trusts can be used to designate how your assets are to be distributed once you pass away, but there are some significant differences between wills and trusts. While wills are simpler and cost less to create than trusts, trusts are not subject to probate if done and funded correctly.

 

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The Legal Process of Probate

Probate is a legal process that follows a person’s death. During probate. the validity of the deceased person’s will must be established in court. Once this is established, the deceased individual’s assets and liabilities, such as past-due taxes and outstanding debts, must be reconciled; any liabilities, including legal fees, are paid for by the liquidation of the assets. The assets that remain are then distributed to the beneficiaries of the will. This entire process of probate is entered into the public record.

Wills vs Trust: How to Avoid Probate

With a living trust, you can avoid probate. Assets that are placed into a trust are then managed by the trustee. When people set up living trusts, they can either name themselves as trustees or a third party (often the trusted child). Upon death the trustee can pass on the assets to the beneficiaries designated in the trust (keeping in mind that creditors still may have a stake).  Of course, the government still requires the payment of taxes on the transfer of these assets if the estate is large enough, but it does not become a matter of public record and the legal fees of probating a will can be eliminated.

Although the trustee manages the assets within the trust, specific guidelines can be placed on the trust. AS far as asset management and passing on assets goes, a trust gives people just as much control as a Personal Representative (Executor) in a will.

Like a will, any type of asset can be placed in a living trust. Everything from bank accounts to commodities can be placed in a trust. It may not be common, but a trust can even be used to manage a fine collection of artwork or tea pots.

Wills vs Trust: How to Choose The One That’s Right For You

If you only have a few assets, then a will may suit your situation well. It is an inexpensive, easy way to designate who you want to receive your assets upon your death.

If you have any assets of significant value though, a living trust may be a better option. It will help avoid probate, gives you more flexibility and speed up the transfer of assets. The key is to take the steps once the trust is executed to physically place the assets (bank accounts, brokerage accounts) into the trust. If that step is not taken upon death a probate will be required of any asset not placed into the trust.

 

WHAT ARE THE STEPS THAT LEAD TO A CLOSING?

Once you sign the deal, you’re on your way to buying or selling a home. However, several steps must occur for this transaction to be completed.

They are:

  1. Closing attorney (or title company) contacts seller’s current mortgage(s) to get package for paying off loan.
  2. If the deal is for a condo,  approval of new buyer must be requested and received; maintenance payments must be current (or back payments included in the closing figures).
  3. Attorney (or title company) conducts a title search of the property, checking to be sure there are no liens or other title problems before the sale; title insurance protecting the buyer from potential title problems is obtained.
  4. If property is a house, a survey of boundaries is conducted
  5. Roof, termite and general inspection is conducted; (depending on the terms of the contract) problems detected must be fixed by seller before closing.
  6. Buyer obtains hazard (and if necessary, flood) insurance prior to closing.
  7. Attorney (or title company) prepares documents for the sale, including the deed, bill of sale, affidavits and other necessary papers. Attorney calculates prorated payments of mortgage, taxes, etc. for the date of sale.
  8. Just before closing, buyer conducts a “walk-through” of the property to be sure any problems detected during the inspection have been corrected.
  9. On the day of closing, buyer brings required funds in a cashier’s check. Buyer and seller sign required papers.
  10. The sale is complete. (Congratulations!)

PROBATE-YOUR HOME GETS SPECIAL TREATMENT

Homesteaded property enjoys a complicated and confusing status under Florida probate law.  It isn’t a probate asset, but to get its special non-estate status, it has to be certified as such by a probate judge.  In other words, the only way to keep it out of probate is to take it there first, unless the owner takes the necessary action while alive to avoid probate.

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Once someone decides to make an asset their homestead, the homestead laws can supersede what someone puts in his will. For instance if a person wants to leave his homestead to his girlfriend, that bequest won’t work if he’s still married at the time of his death. If a decedent is married, his spouse will have rights to the property until she dies, even if she is excluded from the will. She will have the right to choose between a life estate in the property and, in some cases, a 50 percent interest in the property even if she isn’t on the property’s title.  Furthermore, the decedent’s descendants also get rights to the homesteaded property.

 An example of how this probate/non-probate status of homestead property works is as follows:

 Ted Testator has a homestead condominium that he leaves to his 3 adult sons, Danny, Martin, and Joe in his will.  Ted dies and then Joe moves into the condo.  He doesn’t give his brothers access and won’t pay any of the carrying charges.  Even though a probate estate has been opened, the Probate Court won’t have the authority to hear this case.  A separate action must be brought in the Circuit Court, if the brothers want Joe out or want to sell the property.

 While the Probate Court cannot decide Joe’s fate, the Probate Judge can declare a property “homestead.”

While homesteaded properties are still subject to liens directly placed against them, like taxes and mortgages, they enjoy protection from other creditors.  As such, a homestead usually cannot be sold to meet other obligations of the estate. This protection can shelter the home’s equity for the heirs of the decedent, whoever they might be.

Ultimately, Florida’s laws dealing with homesteads and with transferring the property of deceased parties are extremely complicated and nuanced.  Given that most people do not have to deal with them on a regular basis, the help of an experienced estate attorney can be valuable.  An experienced attorney can manage these complexities and ensure that the family’s rights are protected throughout the process.