Stephen Fryer, Home Buyer in Cincinnati, OH

Hi guys. I don't mean to seem ignorant, but what's ground rent.

Asked by Stephen Fryer, Cincinnati, OH Tue Jan 29, 2013

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This question was asked from this property: http://www.trulia.com/property/3100479636-2233-Brookfield-Av…

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8
There is no ground rent on this property.
0 votes Thank Flag Link Thu Jan 31, 2013
Thanks Greg. How do you know whether there is ground rent on a property. I was actually looking at 826 Newington Ave, Baltimore MD 21217. What do you know about that property?

Stephen
Flag Thu Jan 31, 2013
Ground rents are an unique Baltimore tradition dating back to almost colonial times. it was a method for working people to get financing on their building lot.

It is a 99 year renewable forever lease on the ground. It is like a permanent interest only mortgage on the ground that never pays down. You can redeem it for 16 times the annual rent plus title company charges for preparing and filing the new deed. It is based on 6% interest. When interest rates are low, like today , some people redeem when they buy the house. If rates are high they go with the lower ground rent. Many gound rents have been lost and people don't pay them anymore. Worst case is that the ground rent holder can collect three year back ground rent. But if your ground rent is active you must pay it in two semi annual installments. It is supposed to be registered with the state. If you don't pay the ground rent you can be subject to an ejectment and lose the house. But there are lots of safeguards now after some abuses a few years back. Maryland ground rents have no effect on mortgage financing because FHA, VA and all banks allow them

Bob McGee
Advance Realty Timonium
410-560-4574
Short Sale Specialist.
0 votes Thank Flag Link Wed Jan 30, 2013
If a property has ground rent, the actual land that the house sits on is owned by someone else. You would pay a small annual rent to that person (usually under $500). In many cases it is possible to redeem the ground rent when the property settles for $500 - $2,000 dollars. This removes the long-term land lease and you would own the property. Many owners are willing to negotiate this as part of the purchase agreement.
0 votes Thank Flag Link Wed Jan 30, 2013
Wow, ground rent in the sense that this listing is referring is nothing like a mobile park. Most ground rents in Baltimore are associated with row homes and there are a few single family homes that also have ground rents. The typical ground rent is about $90.00 per year some higher and some lower in this example though it would be paid in two equal payments of $45.00. The state allows you to redeem a ground rent and convert the property to fee simple which is the highest form of ownership meaning you own the ground and the house. You could calculate the cost by dividing the annual ground rent in this example $90.00 by (.06) giving you a redemption cost of $1,500. It is simple to determine whether or not to redeem your ground rent. If you plan to stay long enough maybe you should however, if you would plan to hold the property 10 years then redeeming would yield a net loss of $600 and prove pointless. A few other things to consider if there is a ground rent, you still pay the taxes on the land, the city and state assess the value of land and improvements separately and they don’t give you a break because you don’t technically own the land. Even though you don’t technically own the land no one can come and tell you to move and no one can claim rights to use your property because they own the ground rent.
0 votes Thank Flag Link Wed Jan 30, 2013
Ground rent is an old method used to make homes more affordable. It dates back to colonial times, and some of Baltimore's ground rents are truly ancient. The land is in a 99 year renewable lease at a very small amount per year. So, its not like a trailer park or other land rental because you can't pick up the house and move it. The rights of the ground rent owner are limited by law, and you can buy out most of them if you wish. But, technically, you do not own the land even though you DO own the house.
0 votes Thank Flag Link Tue Jan 29, 2013
Baltimore had dramatic increases in land value where prices of land rose faster than the time it took to build a house on the land. Land owners not wanting to give up ownership of the land created ground rent. This first appeared during WWI and WWII when war workers migrated to american cities and housing was in very short supply.

Ground rent was very common in San Francisco during and following the gold rush of 1848.

Greg Myers
RE/MAX Realty Group
0 votes Thank Flag Link Tue Jan 29, 2013
Dear Stephen,
That is a good question. Some homes purchased allow you to also own the land. Some houses come with ground rent, meaning you have a rental fee for the land the house is built on This fee is in addition to your mortgage. At times, you can buyout the ground rent so you can own the land. You may want to ask if it's possible for the property you are considering. Good luck!
Regards,
Ariana Loucas, RE/MAX
0 votes Thank Flag Link Tue Jan 29, 2013
A good way to look at it is the example of owning a mobile home and living in a mobile home park. You own the home but you pay the park owner for the lot usage.
0 votes Thank Flag Link Tue Jan 29, 2013
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