Written By: Kristin Duff

Home Owner’s Associations can have some pretty strict demands on your pocketbook and your lifestyle so here are a few things you should look for before buying in a neighborhood with one in place.

“I don’t know why it is that so many people don’t do more research on their homeowners association,” said Mindy Waitsman, an attorney with the Atlanta firm of Weissman, Nowack, Curry & Wilco, which represents about 900 owners associations and condo boards in the Atlanta area. “We all know at some level that our home is one of our biggest investments, but it just isn’t treated that way.”

Waitsman and others who deal regularly with the ins and outs of homeowners association rules and finances say it’s wise to gather as much information as possible about HOA finances and policies before signing a contract to purchase property within one.

Five things to check regarding the HOA governed property you’re considering:

1. Gather all the paperwork you can.

Not all associations will be forthcoming with documentation that provides a snapshot of the HOA, but minimally you or your real estate agent should be able to get copies of the bylaws or the covenants, conditions and restrictions (often referred to in shorthand as CC&Rs), according to Frank Rathbun, a spokesman for the Community Associations Institute, a Washington trade group that represents HOA interests. The CC&Rs are a blueprint for the HOA structure, laying down the rules for the board and its financial structure and how the condo building or development will be maintained.

A few other documents to look into getting are the annual budget, bylaws and regulations, board minutes and the association’s financial statement. Within those, you might get a sense of the HOA’s financial stability, whether it has ample reserve funds to cover emergencies, etc. HOA boards aren’t required to provide all this documentation to potential homeowners, but if a development has a professional management company, a manager might provide them, Waitsman said.

Getting a handle on the HOA finances is important, both Waitsman and Rathbun said — residents could be facing big increases in monthly fees or pricey special assessments, such as for roof replacement, they said.

“The reality is, community associations are businesses, and they should be run like businesses,” said Rathbun. “People have certain expectations with respect to services and amenities, and it’s the board’s obligation to provide those services and amenities.”

2. Ask About Foreclosures Within the HOA.

It might not seem important to ask about the foreclosures when you are buying, but it has become a major issue, and it should be addressed. In any locale, foreclosures can take a toll on the larger community, but they particularly impact HOAs, Waitsman said. That’s because neglected, unoccupied homes not only can be a blight, but homeowners in foreclosure probably aren’t paying their assessments. “One of the questions I would ask (of board members or management staff) is what percentage of the owners are delinquent” on their monthly assessments, she said. “Mortgage companies will certainly be asking that question.”

And if HOAs, as Rathbun said, are businesses, they can flounder just as other businesses can. At least seven Florida condo associations have filed for bankruptcy in the past couple of years, according to the Miami Herald. Most of them got into trouble not because of their own management practices, but because homeowners didn’t pay their bills. Declaring bankruptcy was necessary to keep utilities from cutting off services. Many associations have the legal right to foreclose on residents who don’t pay their annual fees, but in Florida and some other areas hard-hit by the housing economy, HOA management companies have begun to foreclose on owners who are behind.

3. “Am I a good fit for this community?”

HOAs are, in effect, a form of government, and might have rules you didn’t anticipate.

“You have to look at the restrictions, absolutely,” Waitsman said. “People don’t realize that they might not to be able to, say, put out a sign on the lawn saying you’ve just had a new baby, without their permission. Maybe you can’t have a garage sale without permission. You may think you can put in a fence, but you can’t.”

For some, certain rules have come as unwelcome surprises, occasionally leading to lawsuits over such things as erecting elaborate light shows on lawns at Christmas or even flying the American flag.

Such rules — which might also govern the size and appearance of a room addition or even a home’s paint colors — are intended to preserve the nature of the community, protect property values and meet the established expectations of the residents, Rathbun said. He said most residents seem to be comfortable with the idea of restrictions.

“In late 2007, we did a survey of community association residents, and 74 percent of them said the rules protect and enhance their community,” Rathbun said.

4. Before you buy, take a walk.

“Walk the community a few times,” Rathbun suggested. “Talk to the residents.”

Ask them if they’re happy with the way the assessments are being spent, he said. And inquire whether there’s good two-way communications between the residents and the managers or the board.

“Walk around, and you can get a sense of what it’s like living here, whether it’s well managed,” he said. Take a hard look at swimming pools, tennis courts, exercise rooms, playgrounds, etc., to gauge the attention to maintenance.

5. Is it OK to be a landlord there?

“The No. 1 thing that people don’t ever seem to ask (before they buy) is whether at some point they can lease out (the house or unit),” Waitsman said. “People never think of looking, but it’s always spelled out in the declarations.”

She said the matter varies widely from community to community — some forbid tenants, some may require an owner to wait a year before leasing, other may permit it only if they can prove financial hardship.

Waitsman said it’s not only a matter of concern to owner-investors who set out to rent immediately — in this real estate economy, homeowners who want to move may be unable to sell and renting is their only option.

STATE BAR TAKES ACTION TO AID HOMEOWNERS IN FORECLOSURE CRISIS

MEDIA CONTACT:  Diane Curtis   415-538-2028   diane.curtis@calbar.ca.gov

San Francisco, September 18, 2009 — The State Bar of California, alarmed by the number of lawyers preying on vulnerable homeowners, today identified 16 attorneys who are under investigation for misconduct related to loan modification.
“In my 21 years in attorney discipline, I have not seen a crisis of this magnitude. It is truly unprecedented,” said Interim Chief Trial Counsel Russell Weiner, who is waiving investigation confidentiality in favor of public protection. The waiver, allowed by law, is used only occasionally, but Weiner said the seriousness of the problem demanded a strong reaction by the bar in order to protect consumers. This is the first time the names of more than a few lawyers being investigated have been made public.

“The number of attorneys using their law licenses to essentially take money from unwary but trusting consumers is astounding,” Weiner added. “There are literally thousands of victims who have lost money they could not afford to lose. Under the circumstances, the need for public information and protection is paramount.”   

Those attorneys being named by the State Bar have allegedly taken fees for promised services and then failed to perform those services, communicate with their clients or return the unearned fees, Weiner said. Some attorneys misrepresented the services they could provide. “It appears these attorneys may have significantly harmed their clients who were already facing great financial pressure and the possible loss of their homes.”

About one-quarter  – almost 800 cases –  of the active investigations in the Office of Chief Trial Counsel (OTC) are related to foreclosure complaints. The office has experienced a 58 percent increase in active investigations over 2008 due in large part to the huge increase in complaints against attorneys offering loan modification services. “Our office is aggressively investigating these cases and is working proactively with law enforcement,” said Weiner.

In March of 2009, the State Bar created a special team of investigators and lawyers to handle the growing number of complaints received about attorneys offering loan modification services. OTC found that many of the offending attorneys are associated with firms that use telemarketers or phone banks to sign up clients without regard to the facts of the individual case or whether or not the client can be helped, Weiner said.
In many cases, the attorneys work with untrained non-attorney staff engaging in the unlawful practice of law by offering legal advice to prospective clients. OTC also is investigating the non-attorney staff for possible referral to law enforcement.

In recent months, OTC has obtained the resignation of three attorneys who were offering loan modification services. Those attorneys chose to give up their licenses to practice law rather than face disciplinary charges and possible disbarment. In addition, OTC lawyers are preparing to put some attorneys on inactive status pending the filing of formal disciplinary charges

Weiner warned consumers to take special caution when seeking legal representation related to loan modification. “Consumers should not be comforted by advertisements that claim the attorney is a member of the State Bar of California,” he said, noting that all attorneys practicing in California on a regular basis are members. “Such membership does not mean the attorney has any special knowledge, experience or expertise in the area of loan modification. In fact, it appears that many of the attorneys offering these services have little or no prior experience in the area of loan modification.”

The following attorneys have received a significant number of complaints related to the loan modification services they were hired to perform. They are entitled to a full and fair hearing on any charges that may be filed in the future. No discipline may be imposed unless and until the State Bar proves allegations of misconduct by clear and convincing evidence.

• David Arase, Bar No. 233705, Costa Mesa, Arase Law Firm and National Housing Assistance
• Stephen Burns, Bar No. 113371, Los Angeles, Legal Group Network
• Robert Buscho, Bar No. 122556, Fullerton, United Law Group
• Nicholas Chavarela, Bar No. 251632, Santa Ana, Rodis Law Group and America’s Law Group
• Steven Feldman, Bar No. 103676, Mission Viejo, Feldman Law Center
• Eric Johnson, Bar No. 224065, Culver City, Avantgarde Group
• Paul Lucas, Bar No. 163076, Aliso Viejo, Lucas Law Center
• Brandon Moreno, Bar No. 233750, Santa Ana, U.S. Foreclosure Relief Corp.
• Jeffrey Nemerofsky, Bar No. 213014, Laguna Niguel, U.S. Advocacy Law Group and U.S. Financial Products
• Gregory Paiva, Bar No. 207218,Ontario, Law Offices of Gregory Paiva
• Adrian Pomery, Bar No. 249664, Orange, U.S. Foreclosure Relief Corp.
• Ronald Rodis, Bar No. 181873, Newport Beach, Rodis Law Group and America’s Law Group
• Mark Shoemaker, Bar No. 134828, Long Beach, Advocates for Fair Lending
• Marc Tow, Bar No. 78429, Newport Beach, Marc Tow and Associates
• Michael Yellin, Bar No. 255050, Los Angeles, A Fresh Start Loan Modification
• Sean Rutledge, Bar No. 255938, Irvine, United Law Group

The State Bar suggests that consumers be wary of attorneys offering loan modification services under any of the following circumstances:

• Advertisements of the office do not expressly identify by name the attorney who is responsible for the business.
• Office staff will not readily identify by name the attorney responsible for oversight of the business.
• The attorney in charge of the office is too busy or not willing to meet personally with prospective clients.
• The firm advises a consumer to stop paying the existing mortgage.
• The business, through its advertisements or claims of its representatives, makes  claims that sound too good to be true, such as claims of a 90 or 100 percent rate of success in obtaining loan modifications, or claims that a reduction in the mortgage principal is likely to be achieved. 
• The business demands payment of a large fee, even before obtaining a prospective client’s basic income and expense information, and information about the existing mortgage and present home value.
• The attorney responsible for the business is not licensed to practice law in the state where the consumer resides.

There are legitimate loan modification services and ethical attorneys that are providing the promised services for their clients. Two places to start in the search for loan modification assistance are: HUD Housing Counselors, 800-569-4287, http://www.hud.gov/counseling; and HOPE NOW, 888-995-HOPE, http://www.hopenow.com. 

Consumers can also find qualified attorneys through a State Bar-certified lawyer referral service that can be found on the State Bar’s Web site (www.calbar.ca.gov), or by calling the State Bar’s Lawyer Referral Services Directory at 1-866-442-2529 (toll free in California) or 415-538-2250 (from outside California).

Consumers having a problem with the attorney handling their loan modification may contact the State Bar at 1-800-843-9053 or visit the State Bar’s Web site at www.calbar.ca.gov to find a complaint form.

Founded in 1927 by the state legislature, the State Bar of California is an administrative arm of the California Supreme Court, serving the public and seeking to improve the justice system for more than 80 years. All lawyers practicing law in California must be members of the State Bar. In September 2009, membership reached 223,000.

Saturn to Shut Down as Penske Deal Collapses

(Newser) – Saturn’s hopes of a life after GM ended today when a deal to sell the brand to Penske Automotive fell through. GM said it will now begin shutting down manufacturing and dealership operations. Penske canceled the deal—which could have saved about 13,000 jobs—because it couldn’t swing an agreement with an unnamed third party to supply vehicles, reports the Detroit Free Press.

“Without that agreement, the company has determined that the risks and uncertainties related to the availability of future products prohibit the company from moving forward with this transaction,” said a Penske statement.

—John Johnson

Source: Detroit Free Press

Written By: Kristin Duff

There’s no doubt in my mind that one of the most overused words in the world today is EXPERT. It seems that everywhere you turn there are tons of people in every field imaginable that are experts. But the truth is that it takes more than saying you are an expert to actually be one.

In the real estate world a lot of agents claim that they are experts in their field. This being said, you never really know if who you are working with actually is an expert. There are however a few telltale signs that they are not in fact experts. Here are a few things to look for in your realtor to tell if they are just making claims at being an expert.

1.      Do they know their own paperwork?

Your realtor should know the contracts and affiliated paperwork like the back of their own hand. They should be able to answer all of your questions and concerns without hesitation or research. They should familiarize themselves with your particular contract before meeting with you and make sure that everything is correct and no changes need to be made before you sit down to sign them. If there are typos or errors in any of the documentation then the realtor has not fulfilled their responsibilities.

2.      Do they know the area they specialize in?

This is their specialty area. They need to know about the schools in the area, where the closest Starbucks is, all major landmarks and most of the conveniences of the area. If they truly specialize in the area then this should not be a problem. If you give them any single specific about where you want to live, they should be able to provide you that.

3.      Do they know the market and what is currently happening in it?

Your realtor’s job is to know what is happening in the current market. If the current market is swaying towards a seller’s market, as it did a few years ago, then your realtor should act accordingly and make sure you, his or her client, get the best deal possible for YOU! If the market is swaying towards short sales, like it is now, then your realtor should be more than capable of writing up and negotiating a short sale competently. If your realtor is behind in the market trends, then how can they ever expect to help you find what you’re looking for?

4.      Do they know what the buyers in the current market want?

If you are listing your house with an agent it is their responsibility to know what sells. Your taste doesn’t necessarily have to reflect what’s selling but if your taste doesn’t then your realtor should not have a problem with telling you what is selling and helping you to make your home appealing to the largest amount of people possible. If you are looking to buy, then the realtor should have a generalized idea of your taste, and they should take the steps necessary to find out that information. Once they narrow down your taste ion homes, they should have little trouble finding you something comparable.

You can’t fake expertise. If your realtor doesn’t know something well enough to be able to handle almost any situation that comes up during the process they should not call themselves an expert in that particular field. If they choose to call themselves experts and you discover that this is not true, it should make you wonder: What else have they lied about?

Mortgage problems are walloping Americans’ credit scores — latimes.com

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Late payments, delinquencies, short sales and foreclosures are on the rise — and so are the number of borrowers seeing their credit scores plummet, according to scoring company VantageScore Solutions

By Kenneth R. Harney

September 13, 2009

Reporting from Washington - When you do a short sale of a house, or modify the mortgage, is there much of an effect on your credit score? What if you walk away from the mortgage altogether?

A scoring company created by the three national credit bureaus — Equifax, Experian and TransUnion — has some eye-opening numbers. VantageScore Solutions, whose risk-prediction scores are now being used by some of the largest mortgage companies and banks, has found that the way consumers handle their mortgage problems can have profound effects on their credit scores.

For example, loan modifications that roll late payments and penalties into the principal debt owed on the house can actually increase borrowers’ scores modestly. Refinancings of underwater, negative-equity mortgages — which the Obama administration’s Making Home Affordable program offers through government-controlled Fannie Mae and Freddie Mac — may have little or no negative effect on scores, even though the homeowners might have been tottering on the edge of serious delinquency before refinancing.

The Vantage credit score, the primary competitor to the long-dominant FICO credit score, rates borrowers on a scale range of 501 (subprime, the highest risk) to 990 (super-prime, the lowest risk). Unlike Fair Isaac Corp.’s FICO scoring system, whose scores can vary by 50 to 100 points based on which bureau supplied the underlying credit data, Vantage scores are about the same for each consumer.

When homeowners negotiate a short sale with lenders, they sometimes assume that there will be relatively little effect on their scores. After all, the loan was successfully paid off, there was no foreclosure, and the lender voluntarily agreed to accept a lower balance than was owed.

But according to VantageScore researchers, short sales can trigger big drops in credit scores. Sarah Davies, senior vice president of analytics, said a homeowner with an excellent score of 862 might plummet 120 to 130 points after a short sale.

Although it’s true the lender may lose less money through a short sale compared with a foreclosure, “it’s still a derogatory event,” Davies said. The full debt was not repaid and the lender lost money.

What happens when borrowers walk away from their mortgage debts altogether — the so-called strategic defaults that have become commonplace in some large markets such as in California? They should expect 140- to 150-point hits to their scores, plus negative marks on their credit bureau files for as long as seven years.

People who file for bankruptcy protection covering all their debts (mortgage, credit cards, auto loans, etc.) will get hit with an average 355- to 365-point drop in their scores. Bankruptcies remain on borrowers’ credit bureau files for 10 years.

With all the mortgage delinquencies, short sales and foreclosures experienced by U.S. consumers in the last couple of years, has there been a deterioration of average scores across the board? Absolutely.

For example, roughly 36.6 million of the 213 million consumers tracked by the three national credit bureaus in the first quarter of 2008 had Vantage scores above 900 — the super-prime credit rung. That select group represented 17.2% of the country’s consumers.But by the end of the second quarter of this year, just 15.4% — 33.3 million out of 216.9 million individuals’ files — were left among the elite. By credit industry standards, that’s huge.

More Americans’ scores are slipping into the worst credit category as well. In the third quarter of 2006, 34.4 million consumers were in the lowest segment — 16.6% of 206.9 million individuals. But by the second quarter of this year, 18.3% of all files were in that category — 39.8 million consumers out of 216.9 million.

Most of these changes — fewer people with excellent credit, more people in the lowest brackets — have been caused by late payments on home mortgages, serious delinquencies, short sales and foreclosures, according to VantageScore researchers.

But the bottom-line good news about scores is that homeowners facing financial stress can experience minimal dings to their credit if they contact their loan servicer or lender early in the game — when they first discover that they may have trouble making their monthly payments — and take the first steps toward a loan modification or refinancing.

“Start that conversation early,” said Barrett Burns, a former lender and now chief executive of VantageScore. If you wait and fall several payments behind before seeking a modification, “you can lose 240 points on your score” and damage your ability to obtain credit for years.

kenharney@earthlink.net

Distributed by the Washington Post Writers Group.

Copyright © 2009, The Los Angeles Times

Written By: Kristin Duff

As the market changes, once again, we see home prices going back up, slowely over time. The real estate market is an ever changing roller coaster of events. The homes on the market now are priced aggressively and they don’t tend to stay available long. Most of the bank owned properties available are short sales and foreclosures and they are priced to sell, not priced to stay on the market. Consequently, the homeowners not in distress who are selling their homes are pricing their homes aggressively just to keep with the tide. Prices today lead this market to the buyer’s advantage. A home that would have cost close to a million dollars three to five years ago are selling for close to half their cost these years later. So the question for all you investers out there is such: when is the market done falling? When is it right to invest? When will i get the best deal? Well, the answers to these questions lie in the statistics. Asking prices are going back up and the time to buy investment properties is now, before it’s too late to nab the good deals. Don’t be left saying “I Shoulda, I Coulda, If only I Woulda.” Don’t be left in the dust of the next turn on this roller coaster of a real estate market. Call your realtor before it’s too late!

(This Old House) — A tide of foreclosed properties has been sweeping into the beleaguered housing market, bringing down property values, dislocating families, and sending municipal governments scrambling to manage the crisis. But some buyers see a once-in-a-lifetime opportunity in the gloomy headlines; they are buying up foreclosed properties at ultra-low prices.

Real estate agent John Lynch of Keller Williams Greater Cleveland West says he has interested buyers calling from all over the country, and as far away as Israel. Some are buying in bulk. “One investor I am working with right now wants to buy 200 houses all under 10K.”

Would-be homeowners are not excluded from the bonanza. Despite economic fears and the struggling housing market, Tonya Perkins-Stoudermire of McMullan Realty in Cleveland says this may be an ideal time to think about the dream of first-time home ownership.

She tells the story of a friend who waded into the foreclosure market and came out ahead. “My girlfriend bought a house last summer. It has two baths, a two-car garage, and two fireplaces. She loves it. Her house is $350 a month, with taxes and insurance. She’s in her late 40’s and had been a renter all these years.”

Those are the high notes, but these agents tell other stories, too. There’s the one about a far-away buyer who learned he owned a bunch of vacant lots, instead of houses. “It’s not for the faint of heart,” says Lynch. Lynch has seen the same house at foreclosure auctions more than once. “That hurts us all,” says Lynch.

A check-in with real estate professionals, home inspectors, and federal housing officials offers these words to the wise on buying a foreclosed property.

• Budget carefully. Agent Tonya Perkins-Stoudermire says don’t let a small price tag lure you into a quick deal. Be sure to ask yourself a number of questions: Do you have the money for the extensive repairs these houses often need? “Do you have a crew. If you plan to rehab and then rent, can you afford the house if you don’t find a tenant? If you do your homework, there’s little risk,” says Perkins-Stoudermire.

• See the house for yourself. “You can’t buy them sight unseen,” says Bill Richardson, president of the American Society of Home Inspectors (ASHI). “If you’re an investor from Chicago and you’re buying in Tucson, you’ll need someone to evaluate the house in person.” This Old House: What to expect from a home inspection

• Look at the neighborhood. Your homework should include evaluating the neighborhood. You may not be able to recoup the cost of the repairs if the value of the house is depressed by widespread foreclosures or high crime in the area. Tonya Perkins-Stoudermire says she also encourages buyers to study the neighborhood’s appeal at all hours, including at night. This Old House: How to identify a promising neighborhood

• How long has the house been empty? The longer the vacancy the more damage there is, in most cases. Bill Richardson, of ASHI, says if a house hasn’t been “moth-balled” carefully, a long list of ailments set in. “The plumbing seals dry out, sewer gases back up, and bugs that are in the sewer get a chance to get into the house. That’s true for the sinks, toilets, and washer drains,” says Richardson.

• Was it winterized? Don’t turn on the utilities until you know the condition of the pipes. If the pipes cracked during a cold spell, water will leak into the walls, and mold could take hold when you turn the water back on. This Old House: Dealing with mold

• Look at the landscaping. ASHI’s Bill Richardson warns, “If the house has been neglected, untrimmed trees, vines and bushes contribute to the deterioration of the house.” Vines crawl into the windows, and tree seedlings send roots down into the foundation. “It doesn’t take very big trees to mess up pavers, and dead branches crash into the house,” says Richardson.

• Contract for a private inspection. Banks generally require a home inspection when lending money for a mortgage. But even if you’re paying completely out of pocket for an ultra-cheap find, all the pros say it’s crucial to get an up-to-date inspection.

Richardson says previous inspections “are only a snapshot in time,” and conditions change dramatically. “There’s no caretaker on these properties. I’ve looked at quite a few,” says Richardson. “We’ve seen vandalism. We’ve seen previous owners steal cabinets and fixtures. Copper piping has been stolen.”

In some cases an inspection will prevent further damage. For example, if inspectors determine the pipes are cracked, repairs can be done in advance. Richardson said inspectors charge $300 to $500.

• Consider a HUD house. The Department of Housing and Urban Development is currently holding approximately 39,000 houses whose previous owners held mortgages insured by the federal government. HUD houses go to market about six months after foreclosure. Local governments get the first option to buy. After that, buyers who pledge to live in the house have the first opportunity to offer a bid. If the house is still on the market after a period of about 10 days, the listing is opened to investors. Owner occupants end up with about half of HUD’s properties, according to HUD officials.

A fraction of the total foreclosure market, HUD’s inventory is concentrated in Georgia, Indiana, Michigan, Ohio, and other states where the mortgage crisis has been especially severe. But if one of these houses suits your fancy, HUD spokesman LeMar Wooley says the feds offer a few advantages. “You will know the fair price of the property” because HUD updates its appraisals regularly. It offers a “property condition report” too, though that report is not updated. Wooley is thus among the chorus of experts urging buyers to pay for their own home inspection before closing the deal.

If HUD appreciates the value of a good inspector, inspectors likewise say HUD houses are better protected. “The feds often take the steps to winterize the houses. They put anti-freeze in the traps, and drain the pipes. When HUD’s involved it’s a little bit better,” says ASHI president Bill Richardson.

• Don’t expect to profit from a quick sale. Investors who buy intending to do as little as possible to a house, hoping to resell for a profit when the market turns around, may find little profit and a lot of headache. Some cities are cracking down on neglectful property owners, charging penalties that increase over time, and unmaintained homes lose value quickly.

But real estate pros and housing officials report that, overall, investors are a welcome and all-too-scarce resource, and most are fixing up the houses they buy for rent or resell. What’s more, investors and new owner-occupants might get the satisfaction of helping to turn a hard-hit neighborhood around.

COPYRIGHT © 2009 THIS OLD HOUSE VENTURES, INC.