Glen Oaks Escrow

$8000 Federal Tax Credit Is NOT “Given Back” At Escrow

The Federal Government, in an effort to stimulate the economy, enacted a first time home buyer tax credit earlier this year that would give homebuyers up to $8,000 to help offset the costs of purchasing a home. Many REALTORS and homebuyers alike, have asked for the refund to be “given back” during the close of escrow. Since the program is a “tax credit” the money comes back from the government when the new homeowner files their income tax return as opposed to receiving the money at the close of escrow. Escrow officers want their clients to know this ahead of time to help avoid frustration when a buyer thinks they will receive an additional $8000 to help them close their escrow.

To help avoid confusion, here is more information about the tax credit and the form that needs to be filled out in order to apply for the tax credit.

The credit:

* Applies to purchases that close after April 8, 2008, and before Dec. 1, 2009. (The Senate is on the verge of extending the deadline as of today)
* Applies only to homes used as a taxpayer’s principal residence.
* Reduces a taxpayer’s tax bill or increases his or her refund, dollar for dollar.
* Is fully refundable, meaning the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed.
* The credit is claimed using Form 5405.

This year, qualifying taxpayers who buy a home before Dec. 1, 2009, can claim the credit on either their 2008 or 2009 tax returns. They do not have to repay the credit, provided the home remains their main home for 36 months after the purchase date. They can claim 10 percent of the purchase price up to $8,000, or $4,000 for married individuals filing separately.

The amount of the credit begins to phase out for taxpayers whose adjusted gross income is more than $75,000 or $150,000 for joint filers.

For purposes of the credit, you are considered to be a first-time homebuyer if you, and your spouse if you are married, did not own any other main home during the three-year period ending on the date of purchase.

The IRS has a YouTube video, “The $8000 Tax Credit Explained” and other resources that provide details about the tax credit.

This is not intended as legal or tax advice. To fully understand the tax credit and apply successfully for the refund, please consult a tax professional.

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Docusign | Digital Signature Technology For Realtors

Every Tuesday, here at the Glen Oaks Escrow website, we post Technology Tips designed to help you, the REALTOR®, grow your business, keep up to date on the latest technologies, and move you forward into the new era of real estate.

Last week’s Tech Tuesday post featured a video from Albert Tran of the California Association of Realtors discussing the latest version of zipForm’s, which allows Realtors to type their contracts online. One of the great features for California Realtors in zipForms is that it is DocuSign compatible, meaning that Realtors can have their contracts electronically signed, securely and legally, by all parties in the transaction. While at the CAR Expo in San Jose this year, I stopped by the DocuSign booth and spoke with DocuSigns, An Bui. Here is a video of our conversation with her explaining a little bit more about the DocuSign product.

Docusign also has a great blog that answers many of the common questions about their product, such as the legality of electronic signatures, illustrates why DocuSign Electronic Signature might be a Realtor’s best friend, and discusses new features of the DocuSign product, such as their new iPhone application.

DocuSign and zipForms are two technologies that are a huge step in the right direction for Realtors who are interested in making the real estate transaction as seamless and efficient as possible. I suggest you check them out.

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Domestic Partners in California-Register To Avoid Escrow Delays

Across California, as we process escrows for same-sex buyers and non-married couples over the age of 62 who are buying permanent residences or vacation homes, the topic of registered domestic partnerships arises. It’s important when choosing how to hold title to know how California law defines a Domestic Partnership, as outlined below. Buyers who meet these qualifications must register with the State of California to receive their Rights of Survivorship. Any other domestic partnership registration or out-of-state same-sex marriage will not be accepted by the State and can delay the escrow process.

California law states that in order to hold title as community property with or without  Rights of Survivorship you must be either husband and wife or registered domestic partners. Why are buyers interested in Rights of Survivorship? Rights of Survivorship defines co-owners as having equal possession and interest in the property, so if, for example, one of the partners were to pass away, the property simply transfers to the surviving partner.

Sometimes, same-sex couples, as well as opposite-sex couples, who are not married and over 62, will begin the escrow process assuming that because they’re registered as domestic partners in their home state (or perhaps were married in Canada) that they qualify as domestic partners in California. This is false and can result in the buyers having to vest title as single persons.  It may be an option for the buyers to go through the process of registering as domestic partners with the State during escrow in order to hold title as community property, but this can run the risk of delaying escrow as there is time and hassle associated with appearing in court to file the appropriate papers, etc.  If buyers are aware of the facts surrounding domestic partnership ahead of time, they can register on their own time and save everyone involved stress and delays in order to take title as community property.

By clarifying California’s domestic partnership rules and regulations to your buyers, you will help them create a lasting financial arrangement that properly and legally reflects their relationship.

To be registered domestic partners in California, both persons must:

• Have a common residence;
• Agree to be responsible for each other’s basic living expenses;
• Neither be married, nor a member of another domestic partnership;
• Not be related by blood;
• Be at least 18;
• a: Be members of the same sex, or
  b: If at least one is over age 62, be of opposite genders;
• File a Declaration of Domestic Partnership with the California Secretary of State wherein each partner must consent to California court jurisdiction if the couple seeks a dissolution or nullity of their relationship.

It’s also important to consider certain clarifications to these stipulations:

• Legislators limited domestic partnership for opposite-sex couples to only those where one partner is over aged 62 in order to protect benefits like Social Security.
• To be eligible for the rights and responsibilities of domestic partnership, under California law you must be registered with California’s statewide registry. The state of California does not recognize same-sex marriages performed in Canada or domestic partnerships registered in other states in the U.S., nor does it offer the benefits to couples registered as domestic partners by cities within California.

It is important to keep in mind that there are potential tax and other legal implications to how you take title in the purchase of property.  The implications are generally unique to the specific situation at hand and we at Glen Oaks Escrow advise buyers and sellers to consult with their CPA and/or attorney for advice pertinent to their specific situation.

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Winforms Update Coming November 16th | Now Mac & PC Compatible!

Tuesdays, here at the Glen Oaks Escrow website, we post Technology Tips designed to help you, the REALTOR®, grow your business, keep up to date on the latest technologies, and move you forward into the new era of real estate.

In early October, while at the California Association of REALTORS Expo in San Jose, I had the opportunity to chat with Albert Tran, the Director of Training and Technology Services for CAR who talked to me about the new release of Zipform 6 (the re-branded, and improved Winforms) on November 16^th.  If you are part of the 30% of the C.A.R. membership who is still hand writing your contracts, the new release of Zipform 6 is the perfect opportunity to take your contract generation digital.   Take a look at this video interview with Albert to learn more.

Albert’s key points include:

• November 16^th is the release date and CAR members can choose to optionally update at this time.  The update will become mandatory early next year (February or March 2010)
• Winforms is being rebranded to “zipForm 6″ – all the functionality you are used to with Winforms, but a new name along with some added features.
• zipForm 6 is both PC & Macintosh compatible
• zipForm 6 will have the same user interface for both the desktop and web versions of the software
• zipForm 6 is compatible with DocuSign electronic signatures
• More information can be found here:  http://www.car.org/winforms/

If you are new to zipForms and WinForms software, there are several upcoming zipForm 6 webinars that are free for CAR members.  The webinar training schedule and registration links can be found here on the CAR website.

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The Opening Package from Escrow – Why It Matters

Within 48 hours of receiving a contract, Glen Oaks Escrow mails out an opening package to both the buyer and seller. These packages contain “homework”, i.e. paperwork that escrow needs back promptly in order to move forward and ensure that a transaction closes on schedule. It is integral to all deals that the buyers and sellers expect to receive these packages and understand the importance of returning them to escrow as quickly as possible.

Some of the information that the packet requests from the buyer includes:

• the vesting form describing how title to the new property will be held
• contact information for the lender or mortgage broker
• insurance details

From the seller, our opening package forms prompt for details such as:

• contact information for the HOA
• contact information for the lender on the first and, if applicable, second loan
• any applicable tax withholding details like the 1099 form
• directions on how to distribute the proceeds from the sale

Much of our work at Glen Oaks Escrow can’t begin until we have these documents completed, so in order to ensure an on-time escrow process, return your opening package documents within 3-4 days of receipt. For sellers who want their proceeds promptly at the close of escrow, and for buyers who want the keys to their new property, completing the opening package promptly is the best way to ensure that everyone gets what they want, when they want it.

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What is a Blog and Does It Relate to Real Estate?

Tuesdays, here at the Glen Oaks Escrow website, we post Technology Tips designed to help you, the REALTOR®, grow your business, keep up to date on the latest technologies, and move you forward into the new era of real estate.

What is a blog and how does it relate to real estate? You aren’t the only one asking.  As I talk with Realtors about social media, this is one of the most common questions I get.   Blog is a contraction of web log.  In its simplest of descriptions, it is a type of website.  It is a type of website that allows for entries to be posted (like journal entries, or articles) that are commonly displayed in reverse-chronological order (By the way, you are reading a blog right now).  Blogs are a type of social media – this is because blogs allow for interaction with readers because they can post comments on articles which creates the opportunity for interaction with your blog audience.

Blog Terminology Basics:

Blog (noun):

A type of website that allows for entries to be posted (like journal entries, or articles) that are commonly displayed in reverse-chronological order.  For example, this article you are now reading is part of the Glen Oaks Escrow Blog.  Blog entries remain indefinitely on the site and are always available to readers.  Often, blogs allow for the current article to be distributed to its readers via email in addition to always being available on the site.

Blog/Blogging (verb):

To maintain or add content to a blog.  Example:  I “blog” by writing the weekly technology tip series of articles that you are reading on the Glen Oaks Escrow Blog.  Or, Stacey is blogging this week about the topic of Social Networking for Realtors.

Blogger (noun):

The person who generates the content for the site.  I, Stacey Harmon, am a blogger because I am writing this post.  Also, many of the escrow officers from Glen Oaks Escrow are bloggers because they are generating posts about escrow topics like “The Closing Statement Exposed”

Post (noun):

This is the term most often used for a particular entry, or article that appears on the blog.  Posts typically will have a headline, an author, and the article.  For example, right now you are reading a post titled “What is a Blog & Does it Relate to Real Estate?”, authored by me.  The most recent post appears at the top of the blog.  The post is also classified part of a particular category (in our case, some of our categories are “Escrow”, “Technology Tuesday Tips”, and “Events”).  These categories make it easy for you to find a post on a particular topic after some time has passed and the post is no longer at the top of the page.

Subscribe (verb):

One of the great features of blogs is that readers can subscribe to the site.  Many of you are reading this post in your email – that is because you are subscribed to our blog, meaning you don’t have to go to the Glen Oaks Escrow blog to read the new posts.  Instead, they come straight to your inbox.  As you find other blogs on the web, they will also have the ability for you to put in your email address and have their posts come directly to you – keep an eye out for this.  It makes staying updated very convenient! (Sometimes the subscribe functionality is presented as “RSS” – this is an alternative way to subscribe to the site, and wording to look out for if you don’t see the word “subscribe” on the site)

Who Blogs?

These days it seems that everyone is blogging:  The Administration, Martha Stewart, Mark Cubin, The Desert Sun, and Glen Oaks Escrow.  Blogging has grown exponentially over the past few years.  According to the New Media Lab 2008 Social Media White Paper, there are 184 million people worldwide that have started a blog, 346 million people read blogs, and 95% of the top 100 U.S. newspapers have reporter blogs.  In addition, there are roughly 1 million blog posts every day.

So, How Does Blogging Fit with Real Estate?

For Realtors, having a blog offers the opportunity to express and establish their expertise out on the internet (where we all know buyers are looking, and sellers are wanting their listings to be), rank well with Google (blogging is by definition VERY search engine friendly), reach a geographically wide audience, and/or target specific niches, all in a very financially affordable way.  Compared to print marketing, blogging is cheap (it can even be free!).  But, keep in mind that blogging takes time.  And, you should have an average, or above average, ability to write.  If you are not developing content that people want to read, you are not going to have an effective blog.  So, blogging may or may not be the right decision for your business.  However, even if you decide that a blog isn’t going to be a part of your current business plan, understanding what a blog is, and reading blogs, can be a very helpful in your education process and real estate career.  There are some outstanding blogs focused on the real estate industry.  I highlighted one last week. And, for the curious, here are a few more:

Real Estate Blogs to Check Out:

Realtors:

• Miamism:  Maimi real estate blog by Enrique Garcia & Ines Hegedus-Garcia
• Phoenix Real Estate Guy:  Jay Thompson’s blog on all things Phoenix Real Estate
• First Time LA Home Buyer:  Great niche marketing blog by Los Angeles Realtor Nick Segal
• Active Rain:  Over 160,000 Realtors and affiliates belong to this site and blog about all things real estate.  This site is a great way to get started blogging. Blogging at their site was free and easy, but now there is a moderate monthly fee for new accounts if you want the public to see it.  I still think that it is an excellent way for Realtors to start blogging, however.

Industry News:

• Inman News
• Bloodhound Blog
• Agent Genius

Another Perspective – Blogs In Plain English:

Also, Common Craft has done a great video illustrating the concept of blogs.  It isn’t real estate specific, but does a great job of showing how blogs came to be and the value that blogs provide.  It is well worth the 3 minute watch:

If you think that blogging might be for you, stay tuned. Future posts will discuss great ways to get started with blogging as well as vendors who can help you execute a full blogging strategy.

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The Timeline To Foreclosure Explained

Whether you are a REALTOR considering getting into the niche business of dealing with REO’s, a buyer looking to find a deal on a home by seeking a foreclosed property or a seller looking for information on what happens when a foreclosure proceeding is started, you need to know and understand the foreclosure process. By understanding this process, you will know how long the process may take, which entities are involved, and when the proceedings can be halted. Below is a simplified version of the process.

Defaulting on one’s loan causes the start of foreclosure, the process by which the lender takes over the home in order to recover their principal investment. Once the house is either sold on the steps of the title company or the court house at the Trustee’s Sale or “repossessed” by the lender, it is sold and the former owner must vacate at the discretion of the new owner. When there is a power of sale clause in the deed of trust the non-judicial process of foreclosure is used.

Notice of Default:

In California, the timeline of non-judicial foreclosure begins when the trustee files a notice of default. This is a letter that is sent to the owner/trustor notifying him or her of their default of the loan. This notifies the owner of the intent of the lender to follow through on their right to collect on the debt. The copy of the notice, which is recorded at the County Recorders Office of the appropriate county, is mailed to the address of notice as per the deed of trust.

Notice of Trustee’s Sale

No sooner than ninety (90) days after the trustee records the Notice of Default, the Trustee must publish a notice of trustee’s sale in the local paper and simultaneously file that notice with the county recorder’s office. No sooner than twenty days (20) after the notice of trustee sale is filed, the home may be sold at public auction for the amount of the debt plus foreclosure costs. If no one bids at the auction, the lender assumes ownership of the property, and may dispose of that property to recover their cash investment.

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REALTOR Resource: Agent Genius-Targeted Towards REALTORS Looking To Get The Edge

Tuesdays, here at the Glen Oaks Escrow website, we post Technology Tips designed to help you, the REALTOR®, grow your business, keep up to date on the latest technologies, and move you forward into the new era of real estate.

If you are a REALTOR that wants a “leg up” on the competition, you are off to a good start.  By reading this weekly technology tip series, you will be introduced to an array of tools that will help you be informed and stay a step ahead.  One of my goals with this series is to introduce you to other great websites that will help you continue your education about the industry and allow you to evolve with it.

This week, I’m bringing to your attention to AgentGenius.com – a online real estate industry magazine that discusses “what’s hot in technology, new and inventive real estate business models, the nature of the real estate industry, hot topics that impact consumers and so much more…”

The site has great contributors including a host of agents who are actually making money by applying social media techniques to their real estate business.  You will also find content related to real estate coaching, ethics, marketing, tech & new media, mortgage, and more.  The days of the Realtor magazine delivered via snail mail have evolved.  You can now get up to the minute articles and discussions about what is happening in the industry right now.  It is a great site!

And I’m not the only one who thinks so.  Inman News awarded them an Innovator Award for 2008.  So, AgentGenius.com is definitely a site to watch, one to bookmark, and if you are so inclined, one to subscribe to (just like you can or have subscribed to this one – why not have the information come straight to your email?! – if you have no idea how to do this, just send an email to stacey@staceyharmon.com and I’ll be happy to help you).

Happy reading!

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An All Inclusive Trust Deed and Note: The Advantages and Disadvantages

In these tough economic times, many homes have been languishing on the market, making it difficult for Sellers to move on to other homes and locations. In order to make a sale, a Seller can offer to do a “carryback”. A carryback loan, also known as a “seller carryback” or “seller’s second”, is a loan which is financed by the Seller of a property to help a Buyer purchase the house. Normally, this aids in the completion of the sale of the property. It could also refer to the part of the purchase price the Seller is able and willing to finance for the buyer.

For instance, the typical seller carry back situation is 10% down, 10% seller carry back and 80% first mortgage. This is a percentage of the purchase price. An example is a $1,000,000 house would have a $100,000 down payment, a $100,000 seller carry back and a $800,000 conventional first mortgage deed. Another scenario for a seller carry back is if the seller owns the property free and clear and the seller carries a first mortgage or trust deed. Sometimes there is a first trust deed which the buyer can take over and the seller carries a second mortgage.

Utilizing a seller carryback works well when the Buyer cannot come up with a big down payment or they may not fit into the “conventional” loan process because of their career or past credit history. Understanding the potential pitfalls of doing a seller carryback, but also knowing the rewards, is crucial to this type of sale. In a seller carryback scenario, both parties need to exucute an All Inclusive Trust Deed.

An “All Inclusive Trust Deed” or AITD is a “Seller Carry” that “wraps” or includes an underlying loan or loans of record. It is usually recorded at the close of escrow with a Grant Deed conveying full to title to Buyer and Title Insurance is issued. The AITD’s face amount includes the unpaid balance(s) on underlying encumbrances, plus the remaining unpaid balance of the Sellers equity.

Sellers remain responsible for the payment on the underlying loan(s) or until they are paid in full. The Sellers equity position in the note is always the difference between what is owed to the Seller and what the Seller owes the underlying lender.

The AITD becomes a junior trust deed, subordinate to the underlying trust deed(s). The inputed interest rate (9% or applicable Federal securities rate, which ever is lower) is the minimum interest rate allowed for Seller financed transactions. The Documentary Transfer Tax on the grant deed is based on the purchase price LESS the liens of record.

Advantages:

The Buyer does not need to qualify for a loan with a lender and closing costs are minimal. The Seller has advantage of installment sales income tax recording method, so long as payments are received in more than one tax year. The Seller, by agreement in writing with buyer, may prohibit prepayment of up to a 12 month period following the sale.

Because the underlying loan(s) may have a lower interest rate, or may have been paid down considerably, the Seller’s effective interest rate yield may be higher than the actual note rate. The Seller benefits from the “Interest Override” which is the difference between the interest rate on the existing loans of record and the rate negotiated on the AITD.

Disadvantages:

Recording may alert an underlying lender to enforce the “Acceleration Clause” or “Due on Sale Clause” and require the underlying loan to paid in full. At this time, the underlying loan would be considered in default and said lender could start foreclosure proceedings.

Paying off an AITD:

There are two types of AITD payoffs: Equity Payoff and Full Payoff.

The AITD should not be reconveyed until such time as any equity of the seller and the existing deed(s) of trust have been paid in full. At all times the seller is responsible for the underlying loan(s) of record, since there has been no release of liability given by the existing lien holder(s). Any late payments and/or default, will reflect on the Seller’s credit accordingly.

Being able to sell a house quickly by not having to wait for a mortgage company to approve a buyer or having to rely upon an appraiser to come in with the “right” price can sometimes make this type of an arrangement attractive. However, be sure to consult a real estate attorney and professional tax advisor on the implications (or benefits) before entering into a transaction.

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