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Kim N. Bregman's Blog

By Kim N. Bregman | Broker in Boca Raton, FL
  • What is Title Insurance and Why do you need it?

    Posted Under: Home Buying in Boca Raton, Property Q&A in Boca Raton, Home Ownership in Boca Raton  |  June 25, 2014 7:09 PM  |  99 views  |  No comments

    One of the first questions I get when reviewing an Offer to Purchase or Real Estate contract with a Buyer is “ What is Title Insurance” and “Why do I need it?”   These are great questions and ones every savvy (or even bewildered) homebuyer should be asking.

    Title insurance is normally purchased at the same time as you buy your home.  Unlike other types of insurance, your title insurance policy, for a one-time premium paid at closing, provides protection to you and your heirs for as long as you own your house. Also unlike other types of insurance, title insurance protects you from events that happened in the past: a forgery, forgotten heir, hidden mortgage or tax liens or other claims by people or entities who may truly (but unbeknownst to you) have a right to your property.

    If you get a mortgage as part of your purchase, chances are the lender will insist that you get title insurance, indeed a special form that specifically protects the lender. Technically, you don't need title insurance any more than you need homeowner's insurance to offer peace of mind against a fire loss. But this unique form of protection insures that you actually own your property, free and clear of impediments and, as a consequence, it is worthwhile.5

    Many Buyers think that title insurance is something they can choose to forego. After all, the title company did a search of the property already. Why not just review the commitment and forgo the policy?  It is a common misconception that a title search will uncover every possible defect in title. Title searches only discover events and documents of public record, so anything done illegally or without proper documentation may not be known until some time in the future.

    Remember, even the most thorough title search is prone to human error. And even if the title company or your closing attorney has done their job perfectly, there may have been an error in recording or at some other step in any previous transaction including the property.

    Lenders do not consider title insurance optional. In fact, nearly all institutional lenders insist on having their own policy separate from the owner’s policy. If it’s important for their partial investment in the property, it is even more important for the homeowner to be protected for the full value of the home. The lender’s policy protects the lender for the amount of the loan, and for the validity and position of their lien. Only an

    Owner’s policy fully protects the buyer against title problems that arise after the home is purchased.

    There are potentially hundreds of ways title to your property can be compromised. Even if you don't lose your property altogether, certain title defects can make it impossible for you to sell or even give away your property. Here are some, but no way all, of the possible title defects covered by title insurance:

    • Forged deeds, releases, or wills.

    • False impersonation of the true owner of a property.

    • Documents executed under invalid or expired powers of attorney.

    • Misinterpretations of wills, or discovery of a later will after the first will goes through probate.

    • Mistakes in recording deeds

    • Undisclosed divorce by someone who conveys title of a deceased former spouse.

    • Claims resulting from the use of aliases or fictitious names by someone earlier in the chain of title.

    • Liens for unpaid estate, inheritance, income, or gift taxes.

    • Disputed or fraudulently obtained release of a mortgage document.

    • A misapplied tax payment.

    • Undisclosed heirs who surface years or decades later.

    The party responsible for paying for the two policies -- buyer's and lender's -- varies from state to state and sometimes from county to county. In some locales, the buyer may pay for one; the seller, the other.  If you're buying the owner's and lender's policies from the same company, "in many cases, there's a substantial discount.

    If you pay for the title insurance, you have the right to select the company. If you're not paying but want to choose the company, be prepared to share some of the costs.

    Be wary if the seller is pushing his
    title company.  A title search is meant to find errors before you buy. Use the same company that your seller did years earlier and odds are you'll get the same results. Often, searchers aren't using actual records but summaries or extracts of those records. A fresh set of eyes (and extracts) could unearth problems, allowing you to fix them before you buy.  I always recommend that my Buyers retain their own real estate attorney to review Title and survey and state exceptions and clear any known defects.

    If you're getting advice from your seller, you’re a real estate agent that is not an Exclusive Buyer Agent and your mortgage lender, look to the lender.  The lender's interest dovetails with yours in getting these things done thoroughly and correctly. The lender is guaranteeing a large amount of money based on the assurance that the property you're using as collateral is really yours.

    If you want to verify that the underwriter issuing the insurance policy is currently sound, check its financial solvency with ratings companies like Fitch Ratings, Demotech Inc. or A.M. Best Co.

    Once the closing takes place, the title company records the documents and issues the final title policy, which you should keep in a safe place with other legal documents.

    Should a title problem arise at any future date, the title company will stand behind the policy holder, both monetarily and with legal defense if necessary, to pay claims and defend their title to the property.

     

     

  • Consumers Beware: Fake Exclusive Buyer Agents on Ris

    Posted Under: Market Conditions in Boca Raton, Home Buying in Boca Raton, Investment Properties in Boca Raton  |  June 14, 2014 12:59 PM  |  66 views  |  1 comment


    AVONDALE, Ariz., Jun 13, 2014 (GLOBE NEWSWIRE via COMTEX) --

    Over the last several months, the National Association of Exclusive Buyer Agents (NAEBA) has seen an increase in the number of real estate agents claiming to be Exclusive Buyer Agents in spite of working within a company that takes listings or even taking listings themselves. Per the industry definition, an Exclusive Buyer Agent never works with sellers and works within a company that does not take listings. Because an Exclusive Buyer Agent has no inventory to sell, they can work as a true advocate for the buyer regardless of which home is viewed or purchased. 

    According to NAEBA President Chris Whitehead, "The definition based on the company taking no listings goes back to the Common Law of Agency. In most states, when contracting with a real estate agent, a consumer is actually contracting with the broker and the agent is simply acting on behalf of that broker. Therefore, in order to state that one works with buyers exclusively, the broker, and as such the company, must actually work with buyers exclusively, not just the agent." In spite of a few states states no longer following the Common Law of Agency, the legal industry definition stands. 

    Over the last several years, consumer groups, financial experts, and even the U.S. Housing and Urban Development (HUD) office have advocated the use of an Exclusive Buyer Agent when purchasing a home. Unfortunately, as when anything is recommended so highly by multiple organizations, a few people will make false claims and it appears that Exclusive Buyer Agency is no exception.  NAEBA Headquarters has seen complaints regarding "fake" Exclusive Buyer Agents increase from 2 - 3 per month to 2 - 3 per week. 

    NAEBA President Whitehead, however, states that it is easy to verify that your agent is an Exclusive Buyer Agent.  He adds, "Simply check if your agent's brokerage takes listings or sells homes.  If the answer is no, you have a true Exclusive Buyer Agent." 
    About NAEBA

    The National Association of Exclusive Buyer Agents (NAEBA), created in 1995, is an organization of companies dedicated to representing only buyers of real estate. NAEBA member brokerages do not list homes for sale and never represent sellers. This restriction to one side of the real estate transaction avoids conflicts and ensures that the interest of the home buyer is protected at all times from house-hunting and negotiation to inspection, financing and closing.


  • New E-Mortgages

    Posted Under: Home Buying in Boca Raton, Financing in Boca Raton, Home Ownership in Boca Raton  |  June 5, 2014 11:34 AM  |  100 views  |  No comments

    WASHINGTON – June 3, 2014 – An electronic mortgage process could cut 30 days off the average 52 days it takes to close a loan, according to a team developed by Fannie Mae to study e-mortgages.

    What's more, going paperless could save the mortgage industry an average of about $1,100 per mortgage – about $1 billion a year.

    The industry has been slow adopting e-mortgage, however, and faces several hurdles in a transition to an all-electronic system. But the Consumer Financial Protection Bureau's new mortgage disclosure forms process could boost the change since they'll be disseminated electronically.

    "This (change) will allow stakeholders much earlier in the origination chain to derive value from going electronic," says Nancy Alley, vice president of strategic planning at Simplifile, a company that helps record mortgages electronically. "That should help adoption. Plus, an electronic process should drive a better consumer experience."

    The industry has been gradually progressing toward digital mortgages. About 25,000 mortgages had electronic promissory notes in 2013 – but that only represents about 1 percent of all U.S. mortgages originated last year, according to Michael Cafferky, product development manager at Fannie Mae.

    Fannie Mae created a team called "Advancing eMortgage" charged with improving the electronic mortgage process. The team has focused on three key elements:

    • Borrower financial passports: online employment and financial profiles that borrowers can share with lenders.

    • Loan file service: electronic storage vaults for documents and data from loan files.

    • National mortgage registry and clearinghouse: enhancements to a decade-old system that keeps digital records on electronic promissory notes for real property.

    Source: "Advanced eMortgage: Why Are We Still Using Paper?" Fannie Mae's Housing Industry Forum (May 6, 2014)

  • Tips for Buying a Home After a Short Sale or Foreclosure

    Posted Under: Home Buying in Boca Raton, Financing in Boca Raton, Foreclosure in Boca Raton  |  March 24, 2014 6:59 AM  |  547 views  |  2 comments

    If you thought you were barred from buying a new house after a foreclosure or a short sale, the rules have changed.  FHA has taken a big step toward acknowledging that the economy forced many responsible homeowners into default or bankruptcy. 

    Boomerang buyers are able to buy again a little sooner after FHA's recent announcement of the Back to Work - Extenuating Circumstances exception.  Homeowners that lost their homes due to a loss in employment or income, now have the ability to buy as soon as 12 months after a bankruptcy, foreclosure, short sale or a deed in lieu.  

    If you went through a foreclosure, you were put into a penalty box for 3 to 5 years in the past and couldn't buy another FHA home during that period.  Now under certain circumstances, you may be able to get an FHA loan again after just 12 months.  The FHA went back and analyzed behaviors and found folks who lost their homes after extended unemployment or a massive drop in income don't pose as much risk as previously thought.

    If that's your situation and you can show you've recovered financially and you agree to attend housing counseling you may have the normal wait of 3 to 5 years waived and you may be able to qualify again.

    Meanwhile, with Fannie Mae loans, if you have a foreclosure, you are normally banned for 7 years from buying a new home.  However, there was a different rule for short sales.  If you cooperated with your lender, took care of your property, and got a short sale done, you were supposed to be banned only for 2 years.

    However, here's what happened.  Fannie Mae discovered that the credit bureaus are so inaccurate with their data, that they were posting short sales as foreclosures on your credit report in error!  They were putting you in a penalty box for 7 years and devastating your credit.  So instead of facing the 2-year penalty…you were unjustly facing 7 years.

    That's why it's so important that you go to review your credit reporting and see what's on your reports with each of the credit bureaus.

    Fannie Mae's "fix" is that if you can provide documentation to prove you did a short sale (not a foreclosure), they'll take you out of the penalty box after 24 months, not 84 months.

    Some rebound buyers' only credit impairment was the foreclosure.  These buyers can repair their credit faster than would-be buyers whose credit history contains other issues.  Either way, buyers must "get their credit house in order," paying off or settling old accounts and bank judgments.  Your first objective is that since you're going to have to wait, make sure the rest of your credit is clean.  A foreclosure remains on a credit report for seven years, though the negative impact will fade as time passes, according to myFICO.com, a website operated by the FICO credit-scoring company.

    An established history of paying other bills on time can help.  High current debt relative to income also can be a problem because lenders won't approve a loan if the borrower's debt-to-income ratio exceeds their guidelines.

    The FHA requires a down payment of at least 3.5 percent of the purchase price.  The minimum down payment for a conforming loan without mortgage insurance is 20 percent. The days of 100% loans are over.  While you are repairing your credit you need to be saving for a down payment as well.

  • Pre-Qualification versus Pre-Approval

    Posted Under: Home Buying in Boca Raton, Financing in Boca Raton, Home Ownership in Boca Raton  |  February 20, 2014 4:53 AM  |  502 views  |  No comments

    When you initially set out to purchase a property, the real estate agent(s) and home seller will want to know you can actually afford to purchase the property. After all, if you can’t afford to buy it, you’ll be wasting everyone’s time.  Aside from affordability concerns, you may find other issues that disqualify you from obtaining a mortgage.  For these reasons, most real estate agents will require that you get pre-approved, at a minimum, before they even begin showing you prospective properties.  Most agents have a mortgage contact they’ll likely refer to you to get the ball rolling.  Once you are under contract you should shop around to find the best mortgage product that meets your needs.

     

    What Is a Pre-Qualification?

    If you choose to finance the home purchase with a mortgage, you’ll need to get pre-qualified first.  A “pre-qualification” isn’t as robust as a pre-approval, but it’s a good first step to ensure you can purchase the home you desire.  A pre-qualification is a pretty straightforward, simple check to see what you can afford based on your income/debt level, assets, down payment, employment history, perceived credit score, and so on.  You can get pre-qualified very quickly and easily with a bank or mortgage broker.

    A pre-qualification is simply supplying estimates without any verification of the information you provided and without a look at your credit score.  That said, a pre-qualification, or pre-qual, is just a determination of what you’d likely qualify for if you made an offer and applied for a home loan.  Most contracts will require that you get a loan approval within a designated time frame before the contract can be considered binding.

    What Is a Pre-Approval?

    A pre-approval, on the other hand, actually has legs. It’s a written, conditional commitment from a bank or mortgage lender that says you are pre-approved for the mortgage financing in question. It comes only after filling out a loan application, supplying verified income, asset, and employment documentation( if not retired),  running credit, and underwriting the loan file. Acquiring a pre-approval shows the interested parties (sellers, agents) that you’re a committed buyer, increasing your chances of sealing the deal at the price you want.  It will also show you how much house you can afford, not just an estimate.  You need to be prepared to produce bank statements, pay stubs, tax returns and authorization to run a credit check as part of the pre-approval process. Once you provide all the required documentation and get the pre-approval letter from a bank or lender, it is typically valid for 60-90 days. Just note that things can change during that time, such as your credit score, so it’s not 100% guaranteed.

    One of the key factors in either a pre-qualification or pre-approval is your “debit to income” ratio.

    The “debt-to-income ratio“, or “DTI ratio” as it’s known in the industry, is the way a bank or lender determines what you can afford in the way of a mortgage payment.  By dividing all of your monthly liabilities by your gross monthly income, they come up with a percentage.  This figure is known as your DTI, and must fall under a certain percent in order to qualify for a mortgage.

    The maximum debt-to-income ratio will vary by mortgage lender, loan program, and investor, but the number generally ranges between 40-50%.

    A basic example of debt-to-income ratio:

    $120,000 annual gross income as reported on your tax returns/pay stubs

                Monthly liabilities: $3,500

                Monthly income: $10,000

                35% debt-to-income ratio

    In this example, your debt-to-income ratio would be 35%.  However, the debt-to-income ratio goes into greater detail and comes up with two separate percentages, one for all of your monthly liabilities versus income (back-end DTI ratio), and one for just your monthly housing payment (including taxes and insurance) versus income (front-end DTI ratio).

    Front-End and Back-End Debt-to-Income Ratios

    So in the above example, if your monthly housing payment makes up $2,000 of your $3,500 in monthly liabilities, your front-end DTI ratio would be 20%, and your back-end DTI ratio would be 35%. Many banks and lenders require both numbers to fall under a certain percentage, though the back-end DTI ratio is more important.You may see a debt-to-income requirement of say 30/45.  Using the example from above, your front-end DTI ratio of 20% would be 10% below the 30% limit, and your back-end DTI ratio of 35% would also have 10% clearance, allowing you to qualify for the loan program, at least as far as income is concerned.

    Max DTI Ratio for FHA  and VA Loans

    The max DTI for FHA loans that are manually underwritten is 31/43. However, for borrowers who qualify under the FHA’s Energy Efficient Homes (EEH), “stretch ratios” of 33/45 are used. These limits can be even higher if the borrower has compensating factors, such as a large down payment, accumulated savings, solid credit history, potential for increased earnings, and so on.

    For VA loans, the maximum debt-to-income ratio is 41% (back-end).  Again, as with FHA loans, if you have compensating factors and the lender allows it, you can exceed the 41% threshold.

    How to Figure Out Your DTI Ratio

    If you’d like to figure out your debt-to-income ratio, simply take your average gross annual income based on your last two tax returns and divide it by 12. Then add up all your monthly liabilities and divide that total by your monthly income and voila.  Keep in mind that you’ll need a free credit report to accurately see what all your monthly payments are.

    The credit report will show you what your minimum or monthly payment is for each tradeline, which makes it simple to add them up.  Some banks and lenders allow installment credit cards such as those issued by American Express to be excluded from the debt-to-income ratio as they often account for thousands of dollars a month, and likely get paid off in full monthly.

    The debt-to-income ratio is a great way to find out how much house you can afford, as well as the maximum mortgage payment you qualify for.  Simply add up all your liabilities and your proposed mortgage payment plus taxes and insurance to see what type of loan you can take out.

     

  • Boca Raton Sales Statistics - Luxury Properties

    Posted Under: General Area in Boca Raton, Home Buying in Boca Raton, In My Neighborhood in Boca Raton  |  January 21, 2014 4:46 AM  |  524 views  |  1 comment

    Below are the numbers for Luxury Properties priced above one million dollars for the past 30 days in the Boca Raton, Florida area. The single family home luxury market continues to move fast with multiple properties changing hands.

    Luxury Single Family Homes

    Total Properties Available    376

    Price Range   $1,025,000  – $25,000,000

    Total Properties Pending 4

    Total Properties Sold   17

    Price Range    $1,035,000  -  $4,831,450

    Average Days on Market 145

    Luxury Condominiums

    Total Properties Available   60

    Price Range    $1,025,000 – $13,950,000

    Total Properties Pending    4

    Total Properties Sold    4

    Price Range   $1,075,000 - $1,975,000

    Average Days on Market  137


  • Boca Raton Sales Statistics

    Posted Under: General Area in Boca Raton, Home Buying in Boca Raton, Investment Properties in Boca Raton  |  December 6, 2013 9:08 AM  |  536 views  |  1 comment

    Below are the numbers for Luxury Properties priced above one million dollars for the past 30 days in the Boca Raton, Florida area. The single family home luxury market is booming with several properties changing hands. Luxury condos are moving a little slower this month.

    Luxury Single Family Homes

    Total Properties Available 364

    Price Range $1,022,819 – $25,000,000

    Total Properties Pending 29

    Total Properties Sold 11

    Price Range $1,100,000 – $3,550,000

    Average Days on Market 297

    Luxury Condominiums

    Total Properties Available 58

    Price Range $1,025,000 – $13,950,000

    Total Properties Pending 4

    Total Properties Sold 0

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