In recent months the real estate market has changed. Albeit for the better in most cases, but there is still some skepticism and some unrealistic expectations on all sides of the transaction. Yes, there are properties that go under contract quickly and are being sold above asking price, and yes in a lot of cases the house closes. However, not all houses are the same, even when located in the same market, so what worked for your neighbor may not work for you.
There are some problems that I see repeatedly. One is when the buyer makes an offer on a house and the house doesn’t appraise for the agreed upon purchase price. In many cases the seller only wants to sell at that contract price. The buyer sometimes assumes that if the house doesn’t appraise the seller will lower its price to make the sale. The buyer may lose costs expended in appraisal, title exam and inspection among other things if the seller refuses to lower the price. He may also lose the home of his dreams. The seller may lose the sale if the buyer cannot pay above appraisal. In this case no one wins.
It is important to have realistic expectations of a home’s appraisal value, whether you are the buyer or the seller, especially if the buyer is obtaining financing to purchase. As a seller, having a pre-appraisal prepared prior to listing can be money well spent and will provide you an in depth understanding of what the house will appraise for, not what someone is willing to offer. As a buyer, you want to protect your offer by making your contract contingent upon the appraisal.
If you are willing and able to make the transaction work no matter how the appraisal comes in, then you are that much closer to having a successful transaction. Experienced real estate agents can help the buyer and seller come to an agreed upon price (based on recent market information) that should be approved for financing so that all parties win. For those that want to go it alone, it can work, however you should be prepared to do a lot of homework and be willing rely on other professionals, whether it be an appraiser or an attorney or both to help achieve a successful sale.
It has been pretty busy around the office, so it has been a while since my last e-blast. For some of my clients this is the first one you have received. When I can, I try and provide a little information about issues that I see on a regular basis and I hope that you find it beneficial.
Since the beginning of the year I have set up quite a few new Limited Liability Companies (“LLCs”). In many cases it is good practice to own real estate in an LLC. This may not be the correct vehicle for everyone, so it is important to discuss the plethora of considerations related to your particular property with an attorney. Some people shy away from using an LLC because of the initial start up costs, the potentially higher loan rate or the additional tax returns. In many instances however, an LLC can be extremely beneficial and may save you time and money in the long run.
When buying property with another person, the LLC Operating Agreement outlines what happens to the property when partners want to split, if one partner dies as well as other matters. Without a written agreement there is the potential for litigation or becoming partners with someone’s relatives. An LLC can also provide asset protection from creditors and perhaps insulate a liability to the specific property and LLC.
One overlooked area is the benefit of using the LLC to own real estate in states where you do not reside. Most people know that upon death their estate gets administered or probated. When there are assets in other states, an ancillary proceeding is needed (a second probate). If you own out of state property through an LLC, you can eliminate the need for the ancillary proceeding, since your Executor will be able to transfer the ownership of the Company privately. This small adjustment in your Estate Plan can save your Executor time and extra probate costs.
So prior to your next real estate transaction or maybe in reviewing your current holdings, consult with a professional and decide if the benefits outweigh your cost and consider transferring your property to an LLC.
Now that your taxes have been filed, it is time to think about your estate plan. If you don't have a Will or a current one, it is in your best interest to seek professional guidance and make sure your family and assets are protected.
I get numerous phone calls asking questions about estate planning, so I thought I'd give you the benefit of the easy answer to one of the most common questions.
Can you draft a Revocable Trust for me, and how much will it cost?
Most of the time, the simple answer is YES, I can, but NO, I WILL NOT.
Most people in Georgia don't need Revocable Trusts. If you hear on a syndicated radio show that everyone needs one, don't worry! Those shows educate the masses and every state is different. In Georgia, it is quick and cheap to probate a Will, therefore you don't need a trust to bypass probate.
Revocable Trusts are used here for only a few reasons:
1. You suspect the chances are high that your Last Will and Testament will be contested. This means that one of your heirs will not think he or she is getting their fair share and they want more money. The heir files a Caveat to the Petition to Probate and argue in court, for example, that you were senile or someone forced you to leave them out of your Will at the time it was drafted.
2. You don't want the public to know whom you left your assets to once you pass. In GA, when you probate a Will, it is filed in the County Probate Court. Anyone can go to the courthouse, check the records and purchase a copy. Please remember a Will is only filed after death and most people do not check the court records. Therefore, most times it doesn't matter that your Will is recorded. This exception would apply mainly to public figures and celebrities.
3. The person telling you that you need a Revocable Trust is trying to make money. Most of the time these "trust packages" are sold to the unsuspecting client for a few thousand dollars. Not only do you receive a nice binder with a long Trust, containing a bunch of fancy words for which you have no idea their meaning, but you then have to transfer every asset you own to your new Trust. This means you re-title the deeds to your house, your stock accounts, your car, etc. It is a lot of work and while beneficial in some states, it is NOT in Georgia.
Call me if you have other qusestions. There is no charge to ask a question. I look forward to hearing from you!
It used to be the case that the landlord worried that the tenant wouldn't pay the rent. When drafting and reviewing leases we discussed default and eviction proceedings and what to do in the event the tenant packed up in the middle of the night or even worse - wouldn't leave and wouldn't pay.
In this market there is a new set of concerns, and those affect the tenant. What happens if the landlord collects the tenant's rent and doesn't pay the mortgage or taxes? Landlords want to see the prospective tenant's financials, but the tenant never thinks to ask about the landlord's solvency. In fact most tenants would assume that if they are paying the full rent on time, then the landlord is paying his mortgage. That is not always the case. Landlords can take rent income and apply it to other expenses. While that may not be ethical or even legal; it happens.
It is important for the landlord and tenant to have subordination and attornment language in their lease or for all parties to sign a Subordination, Non-Disturbance and Attornment Agreement at the time the lease is executed. When worded properly this added language can stop the new landlord (Lender) from having the ability to evict the paying tenant and can protect the landlord from losing a tenant, who wants to vacate after a foreclosure.
Lisa Glauber Shippel