Is a Short Sale a Good Option for Me?

If you’re in the market for a new home in Maryland, you may have seen homes listed as “short sales,” but you may not have had a chance to learn more about how these sales differ from conventional home sales. In a future post, we’ll explain why a seller might consider short sale or foreclosure when behind on their mortgage, but read on for information about short sales in Maryland from the buyer’s perspective, and some of the pros and cons to buying a home via short sale.

What is a short sale?

When a homeowner owes more on their home’s mortgage or other loans attached to the property than the home is worth, the owner can, with their lending institution’s approval, attempt to sell a home through a short sale. Whether or not the seller will owe the difference between the home’s value and their debt (known as the deficiency) depends on the contract existing between the seller and their lender. Generally, the homeowner attempting to sell their home via short sale will not be formally approved for a short sale until they receive an offer that the bank deems worthwhile. While a seller is not allowed to receive any portion of the profit from a short sale, they may be motivated to accept the highest offer possible in order to reduce the amount of any deficiency they could owe.

Pros and Cons for Purchasers

Pro: Buyers are often able to get a home for under market value.

Since the owner in a short sale is seeing the debt they owe become more and more unmanageable by the day, they don’t have the luxury of waiting for a lucrative offer to come around. Provided the homeowner’s bank is motivated to complete the sale, this can result in a good deal for the buyer.

Con: Short sales can take time, and are more complex.

In a short sale, there is an additional lender approval hurdle that must be cleared before a sale can be completed. Both the buyer’s lending institution and the seller’s must approve of the sale price reached by the buyer and seller themselves, since the seller’s bank may end up taking a substantial loss on a short sale. Banks have been known to take weeks or months to decide whether or not to approve of a short sale price, leaving an eager buyer stuck in limbo. Since the timeline of a short sale can be protracted compared to a conventional sale, the standard deadlines in a sales contract for the buyer to obtain inspections and approval on a loan generally need to be made contingent on approval from the seller’s financial institution. It is important to hire a real estate attorney who is familiar with short sales and can draft a sales agreement that will protect your interests and help you make the right purchase for the right price.

If you are considering purchasing a home in Maryland, seek a qualified, knowledgeable, and experienced attorney to assist you in the complex process of purchasing property, and contact Annapolis real estate lawyer Matthew S. Evans III for a consultation at 410-626-6009.

What is the difference between a General Warranty Deed and a Special Warranty Deed?

If you’re planning to purchase a property, it’s important to know the difference among the types of instruments that can convey title to a property. The three instruments most commonly used to convey title are the general warranty deed, special warranty deed, and quitclaim deed. Read on to learn more about the similarities and differences between these instruments.

General warranty, special warranty, and quitclaim deeds are all ways to transfer ownership of real property, but offer very different promises to the recipient of that title. All three forms of title offer the buyer or transferee the assurance that they are receiving the same interest in the property that the seller or transferor themselves had, so that the transferor no longer has any legal right to possess the property. From there, the rights obtained through the different forms of title diverge.

  • A general warranty deed promises that the seller owns the property being sold, that they have the legal right to sell the property and haven’t already sold it to someone else, and that there are no other legal claims, liens, or debts attached to the property being sold.
  • A special warranty deed offers slightly less broad of a promise to the buyer. While a general warranty deed assures the buyer that there are no other liens or claims on that property, and that the seller will defend the buyer’s status as the rightful legal owner of property against any other claims of ownership, the special warranty deed makes that promise only for the period that the seller owned the property. In other words, if someone claims to have a legal right to all or part of the property you buy, but the claim arose prior to when the previous owner had title to the property, then that seller has no duty to defend your rightful ownership of the property.
  • With a quitclaim deed, the transferor promises only that the transferor is giving what he or she had to the transferee. There is no guarantee regarding liens or claims on the property. Generally, quitclaim deeds are used when property is being transferred through a will, or when someone’s name is being added or taken off of a title pursuant to a marriage or divorce, and not when a property is being sold.

Most sellers will provide a general warranty deed to a buyer. If a seller does not offer you a general warranty deed when you purchase a piece of property, make sure you understand the risks entailed, and speak with a Maryland real estate attorney before committing to the sale.

If you are in need of assistance with the purchase of property in Maryland, or with another legal issue regarding real estate or construction law, ensure your interests are protected by obtaining experienced legal representation on your case, and contact Annapolis real estate attorneys at Matthew S. Evans III, LLC to assist you with your case, at 410-626-6009.

Court Stops Homeowner Association from Banning Delinquent Unit Owners from Common Areas

In a recent opinion from the Maryland Court of Special Appeals, the justices imposed limits on the means by which the board of directors of a condominium complex could collect HOA fees. While the opinion was not published, meaning that the case cannot be relied upon as settled law in the future, the opinion offers a valuable perspective on the way courts might approach aggressive HOA fee collection in the future.

The defendant unit owners, the Roses, received notice in June of 2012 that, since they were delinquent in making payments toward maintenance of common areas, they would not be permitted to park in their assigned spots. Mrs. Rose later received a letter describing “the new policy regarding the parking rules of not being able to park if you allegedly owe money,” as well as an email stating that delinquent residents “will be subject to being towed at their expense.” The Roses were also prevented from using the pool for two summers, even when they were the guests of another, non-delinquent owner. The Roses filed suit against the condo complex, arguing that they had an ownership stake in these areas, and that being banned from using their parking spots or the common pools constituted a “taking” (i.e., robbing them of their right to use their property). The Roses succeeded at the trial court, having their right to use the parking spots and pool restored, and the condo complex appealed.

The declaration and bylaws binding each condo owner in the Rose’s complex stated that owners would have a fractional ownership interest in the “general common areas” in the complex, which included streets, sidewalks and parking areas. The declaration also stated that “each unit owner… shall have the right to use all of the recreational facilities for so long as same, including swimming pool and bath house, shall exist.” The declaration stated that all owners were required to pay toward common expenses by submitting their own 1/12th share each month to the Council of Unit owners. Where these monthly assessments weren’t made, the Council was permitted to file a lien against the delinquent unit, recorded with Anne Arundel County. The bylaws stated that the Board of Directors could collect on that lien by foreclosing on it, as a bank would on a delinquent mortgage, and could subsequently sue the owners for any remaining balance. However, the rules did not permit the Council or Board to ban owners from using general common areas when they failed to make their monthly assessments, and stated that changes to the bylaws required approval by 75% of unit owners. The bylaws prevented obstruction of common areas, but did grant the Board the authority to “regulate” parking in common areas, and to create and enforce rules “respecting the use, occupancy and maintenance” of the common areas.

On appeal, representatives for the condo complex argued that, since the bylaws gave the Board the right to make rules governing common areas, the new rules regarding towing the cars of delinquent owners were in fact authorized under the bylaws. They argued that barring delinquent owners wasn’t a “taking,” as they could restore their rights to use these areas by becoming current on their monthly assessments. Instead, they argued that these were only “reasonable and temporary use restriction[s].” The Court of Special Appeals did not agree. The court ruled that the Roses had a right as condo owners to use the common areas, which the Board could not limit without proper authority. Since the bylaws and declaration did not authorize this type of restriction, the Board could not, on its own, adopt a rule permitting these types of restrictions without a vote by the condo owners.

If you are a condo owner in Maryland facing a potential legal issue with your complex’s homeowners’ association, seek knowledgeable and experienced legal help from the Annapolis real estate and HOA law attorneys at the Evans Law by calling 410-626-6009.

Should My Building Be LEED-Certified?

If you’re a construction manager or developer in Maryland, you’ve definitely heard of LEED certification. If you’re about to begin a new project, or are considering renovations on an existing building, you may be wondering if your building should become LEED-certified. Read on to learn about the basics of LEED certification and the benefits it offers to help you decide if it might be a good solution for you.

What is LEED Certification?

LEED, or Leadership in Energy and Environmental Design, offers a certification for buildings which meet certain sustainability and environmental friendliness requirements. Buildings are assigned up to 100 points based on how they measure up in each of the six categories listed below along with possible ways to earn points in each category:

*Location and transportation: choosing a location near public transportation, or installing electric vehicle charging stations

*Materials and resources: using sustainable and environmentally-friendly materials, and implementing a waste-reduction or composting program

*Water efficiency: Careful water metering, or implementation of a water reuse program

*Energy and atmosphere: use of energy-efficient lighting, or use of renewable energy sources

*Sustainable sites: choosing a location for your building that imposes little added impact on the natural environment, or lessening light pollution

*Indoor environmental quality: ample use of daylight, and careful attention to indoor air quality and ventilation

The more positive of a human benefit and the less negative of an environmental benefit a building choice has, the more points it will earn. Innovation in design and regional priority can earn the building additional points. There are three levels of LEED certification—Certified, Silver, and Platinum—awarded based on the number of points that the building earns.

What are the benefits to becoming LEED-Certified?

LEED Certification is not only better for the environment; it can also increase revenue for owners and tenants alike. A LEED certification can increase the resale value of the building. While LEED-certified buildings may cost more to construct, these additional expenses are often quickly recuperated through reduced operation costs. LEED-certified buildings also tend to have better tenant satisfaction. Higher-quality office environments often result in greater employee efficiency and satisfaction, and LEED-certified buildings have been shown to increase sales in retail environments by up to 40%. Additionally, tenants benefit from LEED-certified buildings’ energy efficiency and lower costs of maintenance.

For assistance with any questions surrounding LEED certification, contact Matthew S. Evans III, one of Maryland’s few attorneys who is also a LEED accredited professional, for a consultation at 410-626-6009, with offices conveniently located in Severna Park and Annapolis.

Reverse Mortgages: What You Should Know

If you’re older and have been in the same home for many years, you may have built up a large amount of equity in your home. If you find yourself in need of money, you may be considering taking advantage of this equity by taking out a reverse mortgage. Should serious health issues arise for you or a loved one, you may find yourself needing a large sum of money to help pay off excess medical bills. Perhaps you have a child in need of a loan to start a small business, and you want to be able to offer them this money to help them get ahead. Regardless of the reason, be sure you understand what is entailed in a reverse mortgage, and speak with an attorney well-versed in real estate and mortgage issues before committing to one.

What is a reverse mortgage?

A reverse mortgage is a way for homeowners who are 62 years old or over to change the equity they’ve built up in their home into cash. Since 2008, such loans are mostly known as Home Equity Conversion Mortgages (HECMs). The homeowners can borrow against that equity each month, which increases the loan balance, along with the applicable interest rate. The loan only becomes due when the last borrower or their spouse moves out of the home or passes away. Typically, the home will then be sold to pay back the loan, and the loan will never be larger than the value of the home. These loans are federally insured and regulated by the U.S. Department of Housing and Urban development.

Reverse mortgage or HECM proceeds can be used for any purpose whatsoever. Some borrowers use the money from a reverse mortgage to purchase a second home, or to facilitate saving the money they would otherwise spend on a mortgage payment. Additional loans like the HECM for Purchase and HECM Line of Credit can also make retirement more comfortable for borrowers; speak with a real estate attorney to determine which instrument would best suit your needs.

What are the risks of a reverse mortgage?

If you begin to borrow against the equity in your home when you’re relatively young and healthy, you run the risk of draining the equity from your home too early in your lifetime, forcing you into foreclosure or selling the home to pay back the loan. Reverse mortgages or HECMs may not be a good idea if you do not plan to spend many more years in your home, as you will not be able to recover the full value of your home in a sale due to the loan balance.

If you are considering a reverse mortgage, HECM, or have other legal questions regarding a Maryland real estate transaction, contact Annapolis real estate and construction lawyer Matthew S. Evans III for a consultation on your case, at 410-626-6009.

Why is it Important to Ensure Your Contractor is Licensed?

Doing substantial renovations on your home requires you to make a lot of choices on what you want to change, how you want your home to look, and who you want to hire to help make it look that way. Finding the right balance of talent, reliability, and affordability in a contractor can be a challenge. You might feel tempted to hire an unlicensed contractor who comes at an excellent price. However, this decision can end up costing you more than you’d end up saving. Read on to learn about why it’s important to hire only licensed contractors to work on your home, and learn more about how to research a contractor you’re considering to do work on your home.

What’s so great about a license?

Possession of a license indicates that a contractor has passed the state’s licensing exam and paid requisite fees to register as a contractor in the state. In fact, in the state of Maryland, it is a crime to offer your services as a home improvement contractor, subcontractor, or salesperson without a license from the Maryland Home Improvement Commission (MHIC). This license offers a certain level of assurance that, should the contractor do a poor job or fail to complete the work on your home, you will have a recourse and a means of recovering the lost value. In order to maintain their license, every Maryland contractor must pay into the state’s Guaranty Fund which will reimburse homeowners for the amount they paid to a contractor for shoddy or unfinished work, up to $20,000. Further, a licensed contractor should also have a general liability insurance certificate, which they can present to you prior to being hired. Being a license-holding contractor means that the individual will be easier to track down should a job go south; often, unlicensed contractors travel from state to state, making recovery for bad work a challenge.
In addition to the efforts that a contractor must make to gain a license in the first instance, the loss of a license can indicate a number of troubling qualities about that contractor. A contractor that has been the subject of numerous complaints to the Maryland Department of Labor, Licensing and Regulation (DLLR) could have their license revoked. Additionally, loss of a license can indicate that a contractor has been convicted of a crime.

How do I learn more about a contractor?

Researching contractors and learning about other homeowners’ experiences using them is critical, and easily done online. The DLLR strongly encourages consumers to check on the status of a potential contractor’s license by looking them up by name, trade, location, or license number on the state’s database, found here. Additionally, sites like Angie’s List will provide reviews of contractors from other consumers which you can use to make your decision on who to hire.

What do I do if I was the victim of a fraudulent contractor?

Even if a contractor wasn’t licensed, they can still be sued and prosecuted for failing to perform quality work on your home, as well as for crimes such as lying about their credentials or possession of a license. Before pursuing a claim against a fraudulent contractor, consult with a skilled attorney experienced with law relating to real estate and contracting.
If you are looking for experienced legal counsel to assist you with a dispute with a Maryland contractor or other real estate legal issue, contact the knowledgeable and determined Annapolis real estate, construction and land use attorney Matthew S. Evans III for a consultation on your case, at 410-626-6009.

Is It a Good Idea to Cosign a Loan?

If a younger friend or relative requests your help in obtaining a loan by serving as a cosigner, you may be inclined to lend a hand. After all, it doesn’t cost you anything to help, right? In fact, it could end up having a substantial detrimental impact on your own credit, even leaving you vulnerable to lawsuits from creditors. Learn more about what is involved in cosigning a loan before agreeing, and speak with an experienced Maryland real estate attorney about the contract and primary borrower in question before signing.

If the primary borrower doesn’t pay, you will

Cosigning isn’t merely a theoretical exercise; by cosigning with a borrower, you’re promising to pay the debt should the primary signatory fail to meet their obligation. In this way, acting as a cosigner can be almost as big a commitment as taking out a loan yourself. Remember that when a bank requires a cosigner, it means that the institution isn’t willing to gamble on that borrower alone. While this fact may be due to a paucity of borrowing history rather than a history of late payments and defaults, make sure you know exactly why the borrower has been denied from taking out a loan without a cosigner.

Cosigning with a responsible borrower could provide a boost to your credit

While you’re accepting the risk that a borrower won’t pay back a debt when you cosign a loan, you also stand to benefit from their consistent repayment. When you cosign a loan, that loan will appear on both your and the primary borrower’s credit reports. In the same way that you built a strong credit score for yourself by making mortgage or credit card payments on time, the primary borrower’s timely monthly payments could further strengthen your credit.

Your ability to borrow could be limited

Since a loan you cosign will appear on your own credit score, this also means that your debt-to-income ratio will increase. This number is a representation of how much you make each month relative to the amount you make in debt payments each month. Should you decide to apply for a loan or other source of credit for yourself after you’ve agreed to cosign someone else’s loan, you run the risk that your debt-to-income ratio will be too high to qualify for a good interest rate, or to qualify for additional credit, period.

For legal assistance with real estate matters, contracts, and commercial law in Maryland, contact the knowledgeable Annapolis real estate contract attorneys at the Law Offices of Matthew S. Evans III for a consultation on your case, at 410-626-6009.

A Change in Loan Disclosure Requirements: What Buyers Should Know

Last fall, the Consumer Financial Protection Bureau (CFPB) enacted new long-awaited rules affecting the disclosures homebuyers receive upon closing on a loan. The so-called “Know Before You Owe” rules affect both timing and information provided to prospective homebuyers, arming them with a more complete picture of the loan to which they’re committing, as well as information they can use to shop around for better loan terms and rates.

The new rules introduce a number of changes intended to protect consumers and allow them to have a better grasp on the terms of their mortgage, while also aiming to protect the financial market from another 2008-like mortgage crisis. Within three days of applying for a loan, potential buyers now receive a loan estimate, which provides a clearly-stated fact sheet on the projected monthly mortgage payment inclusive of taxes and other fees, the amount the buyer can expect to pay in closing costs, and yes or no answers to such questions as whether the loan includes a balloon payment or prepayment penalty, and whether certain amounts can increase after you’ve closed on the loan. This loan estimate is intended as a tool for buyers to shop for other loan offers, and to have a clear understanding of exactly what sorts of costs are involved in purchasing a home.

When closing on a home, buyers will receive a revised closing disclosure three days before the loan is scheduled to close. This document now includes the final amount you should be prepared to pay at closing, as well as all locked-in loan costs. The new rules also bring a longer closing period, rising from around 30 days to about 45 days. In part, the longer closing period can be attributed to the addition of events which now trigger three-day waiting periods, such as when a prepayment penalty is added to the terms of a loan, or a loan product changes from fixed- to adjustable-rate, or becomes an interest-only loan. The additional length of the closing period for homebuyers who are using a loan to make a purchase has created a more favorable market for cash buyers who are not constrained by the longer closing time. However, experts estimate that closing times will decrease as lenders and realtors adjust to the new rules.

If you are a prospective home buyer or seller in Maryland and are in need of seasoned legal help to protect your interests in a real estate transaction, contact the experienced and knowledgeable Annapolis real estate attorney Matthew S. Evans, III, at 410-626-6009.

Matthew Evans Selected to Super Lawyers for Second Straight Year

Matthew S. Evans, III is proud to have been recently selected by Super Lawyers for a second straight year as a top rated Construction Litigation Attorney in Maryland for 2016. Only 5% of all attorneys in Maryland are selected as Super Lawyers.

Super Lawyers is a rating service of top lawyers among 70 different practice areas and is comprised of individuals who have been recognized by their peers and for their outstanding professional achievements. Independent researchers, along with evaluations and nominations from peers, make up the rigorous selection process.

In addition to top rated Construction Litigation, the Law Offices of Matthew S. Evans offers a broad range of legal services including contract-related disputes, real estate and construction law, and general civil litigation. They also provide residential and commercial real estate settlement services through their affiliate company United Title, Inc.

Buying a Home After a Bankruptcy

There is a pervasive myth that, once someone has filed for personal bankruptcy, they’ll never again have the creditworthiness to make major purchases or to obtain loans. However, this simply isn’t true. Some lending options are available to borrowers immediately after, or even prior to, discharge, and with careful credit and money management, home ownership is not outside the reach of those who have previously filed for bankruptcy. Read on to learn about obtaining a mortgage after bankruptcy.

Expect a waiting period post-discharge

No matter what sort of home loan you attempt to obtain after a bankruptcy, there will necessarily be a waiting period of some length after your bankruptcy is discharged. The amount of time you wait will depend largely on the form of bankruptcy you filed, as well as the type of loan you seek. Since filing bankruptcy under Chapter 7 entails essentially eliminating the bulk of your debt, this form of bankruptcy does more to injure your credit score, and will require more time to rebuild your creditworthiness. Generally, Chapter 13 debtors are able to qualify to apply for a mortgage in about half the time that a Chapter 7 debtor can, since the Chapter 13 debtor has continued to make payments on their debt and retains more of their credit history.

Conventional loans will entail a longer wait than subsidized loans

Conventional loans refer to those mortgages which are not offered under a federal subsidy program, and comply with the minimum criteria established by Freddie Mac and Fannie Mae. For those who filed for bankruptcy under Chapter 7, there is a waiting period of at least four years from the date of discharge. That potential borrower must also show that they are a good candidate for a loan, and will not again find themselves in a position of needing to file for bankruptcy. For those who filed under Chapter 13, there is a wait of two years from discharge, provided the debtor made all court-mandated payments in a timely manner.

Loans insured by the Federal Housing Authority are an option for those with poor credit histories

FHA-insured loans are a federally-subsidized option which offers more flexible standards on who will qualify for a loan, with a shorter post-bankruptcy waiting period for applicants. For Chapter 7 debtors, that wait is at least two years, provided the potential borrower has established their creditworthiness. Chapter 13 debtors can expect a one-year wait, provided they have made all court-mandated payments and obtained written consent from the bankruptcy judge to apply. Both conventional and FHA loans offer an exception from these time limits where the bankruptcy was outside the control of the debtor, such as due to the death of a spouse, natural disaster, or catastrophic injury or illness. However, exemptions from the time limits are rarely granted.

If you have questions about a home purchase, or need skilled legal assistance with a different real estate matter in the Annapolis area, contact experienced Maryland real estate attorney Matthew Evans III for a consultation, at 410-626-6009.