Home-Resale Fees Under Attack

As reported in today's Wall Street Journal, home-resale fees (also known as "reconveyance fees" or "private transfer fee covenants") are under attack by a group led by the National Association of REALTORs® and the American Land Title Association. Home-Resale Fees are set by a developer to trigger when any subsequent homeowner sells the property, with the typical 1% of the sales price going to the developer. 12 states, including Maryland, have outlawed this type of transaction fee, but if this group is successful there will be a federal ban on such a practice.

Modifications to the Homestead Deduction Application Process in DC

Thank you to our DC and Montgomery County, MD partner Paragon Title for this information:

The District of Columbia Office of Tax and Revenue has changed the procedure for filing Homestead Deduction Applications. The Homestead Deduction results in a $67,500 decrease in the taxable assessment and places a 10% cap on the annual amount that a tax assessment can increase for qualified owner occupied properties in the District of Columbia. As a result of this change, homeowners will be responsible for filing the application themselves and your title company or title attorney will no longer be able to file it for them a part of the closing. The procedure for filing the Application is not difficult, but the requirements must be met in order for a homeowner to receive the benefit of the Deduction.

In an effort to ensure that anyone who receives the Homestead Deduction actually qualifies, DC has mandated that the Applicant satisfy the following specific requirements:

1. The Applicant must have actually moved into the property.
2. A completed Application must be submitted with the required indicia of domicile: (a) DC Driver’s License with the subject property address on it. (b) DC Car Registration with the subject property address on it. (c) DC Voter Registration. (d) Proof of Paying Income Taxes in DC. i. Current Residents - DC Tax Return ii. New Residents - Pay Stub showing DC taxes withheld.

To ensure that the Application will not be rejected, the Applicant should make every effort to include all of the above indicia that apply. DC has suggested that if the Applicant does not attach a DC Driver’s License or a Car Registration because they do not own a car and/or drive, they should state “I do not drive” and/or “I do not own a car.”

If a DC Voter Registration is not attached and the Applicant is not registered to vote in another state, the application should specify “I do not vote.” The Applicant cannot have a voter registration in any other jurisdiction.

The Homestead Department prefers that the Application and supporting documentation be emailed to Homestead@dc.gov. Applicants cannot take a Homestead Deduction on more than one property. Purchasers who are currently receiving the Homestead Deduction on another DC property must include a “Cancellation of Homestead Deduction” form in that same email. A link to this form can be found on the left side of this Bulletin. Once the application has been submitted, the Homestead Department will acknowledge receipt by email.

Here are some helpful links for DC residents:

ONLINE CHANGE OF ADDRESS: This site allows users to update their address for both their Driver’s License and Car Registration. http://dmv.dc.gov/serv/dlicense/ChangeofAddress.shtm

ONLINE CHANGE OF VOTER REGISTRATION: This site is the DC Board of Elections & Ethics where homeowners can register to vote in the District. https://www.dcboee.org/voter_info/register_to_vote/ovr_step1.asp

HOMESTEAD APPLICATION AND CANCELLATION DOCUMENTS: This link directs you to the Real Property Forms page on the DC Office of Tax and Revenue’s site. Under the heading “Tax Relief” you will find all of the relevant Homestead Documents. http://otr.cfo.dc.gov/otr/cwp/view,a,1330,Q,593974.asp

Flickr photo by alykat

Owner's Title Insurance: Why Your Buyer Needs It

Real estate agents are often asked "Do I need an owner's title insurance policy?" by their buyers. With all of the costs associated with purchasing a home, an agent may be tempted to either answer "No" or even more innocently not have a clear answer as to why title insurance is needed. Title companies and underwriters have material (disclosure: TRGC is an affiliated title insurance company) to help with this - and you should always ask - but here is a story I recently heard which should be enough to convey the importance of owner's title insurance to your buyer. This took place in a different region, and the names are hypothetical, but the story is real.

Tiger Title Company settles a purchase from Sam Seller to Bob Buyer earlier this year. As part of the transaction, Tiger Title endeavors to pay off the loan that Sam Seller had with Lion Lender. Except, they didn't. Tiger Title was owed money from other lenders on other transactions, and did not have enough in the account to cover the payoff amount.

Scared yet?

Lion Lender never got their money. They are now looking to Sam Seller to pay off the loan. Bob Buyer (who now technically owns a property with 2 mortgages on it) is going to be asked to move out. Bob's lender, who thought they were in first position, is now in second.

What's title insurance got to do with it?

It seems clear here that Tiger Title is at fault. They had a duty to pay off the mortgage, and they didn't. They're likely a small shop, don't reconcile their escrow account monthly, and just don't have the money to pay off the mortgage. Bob and Sam could sue them, and maybe they are covered by a surety bond, but that requires lawyering up and waiting months or years before things are settled.

Fortunately, Bob Buyer purchased an owner's title insurance policy. With a phone call, Bob can file a claim and the title insurance company will step into his shoes. In all likelihood, the title insurance company will pay off the mortgage. After all, Bob has a policy for clear title that doesn't take exception to the mortgage. The title insurance company will likely be visiting Tiger Title's home office in short order, but that's their business. Paying off the mortgage immediately means that (A) Bob Buyer stays in his home with only one lien on the property and (B) Sam Seller owes nothing.

Most title companies do not operate like Tiger Title. Most reconcile their file accounts to the penny and reconcile master escrow accounts monthly. Most would step up if there was a shortage and pay it from operating funds.

But do you want to be the agent who either advises against an owner's policy or is unable to explain the importance?

Flickr photo by borman818

MLTA President to Discuss Title Insurance this Sunday on WBAL AM1090

Like many industries, title insurance has come under some scrutiny lately in the media. What goes into a title insurance policy? What does it cost? Is that cost justified?

This Sunday (7/18) at 12:30 PM, Maryland Land Title Association President Nathan Finkelstein, Esq. will speak and discuss the settlement process. He will explain that title insurance producers are in the Real Estate Settlement profession, and will detail the process. He shows title insurance as one component of that process.

For any real estate professionals interested in settlement and title, here is a good opportunity to hear directly from a title industry leader as he answers some pointed questions. Tune into 1090AM at 12:00PM for a general discussion on the topic - Attorney Finkelstein's segment will start at 12:30.

We're Building a Northern Virginia Title Team

Positions are now open for a new Northern Virginia title team we're creating!

We are looking for settlement coordinators (processors), settlement officers and real estate attorneys to work out of our Tysons Corner office.

Interested or know someone who is? Shoot us an email at careers[at]MASettlement[dot]com.