Most people were happy to hear that Congress passed the payroll tax cut extension, extending the tax break for two more months. But Congress still has a budget to meet, and if taxes are reduced in one place, costs have to increase somewhere else.
So where did they get the money to fund the payroll tax cut? The answer is simple -- mortgages. Effective April 1, 2012, Fannie Mae and Freddie Mac will raise the guarantee fees charged to lenders. The new fees will be in effect until October 21, 2021. How much will the fees increase? It's difficult to say how much the fees will go up on any given loan, but overall the increase should average out to about .1% (that is, one-tenth of a percentage point).
That may not seem like a whole lot on a monthly basis, but your lender will pass this extra cost on to you. And when you add up the extra money you will pay over the life of your loan, it will add up to quite a bit. Of course, when they start collecting these fees from ALL mortgages, well, they will make up what income they lost as a result of the two-month payroll tax cut extension.
So the two month payroll tax cut extension translated into a nine and a half year mortgage cost increase. A little delayed gratification can sometimes go a long way.
Thursday, January 26, 2012
Thursday, January 19, 2012
Beware of Association Finances Before Buying!
When buying a condominium, or a home that is part of any association with regular monthly assessments, buyers have a lot to worry about these days. It's not uncommon for a buyer to find a condo or home in an association for an amazing deal. But as a buyer, you can't just look at the unit you're buying.
Sure, it's an amazing deal. Sure it's in great shape, and just needs a little bit of touch up. Sure, the monthly assessment is low and there is no special assessment pending; or, there is a special assessment, but the seller will pay it off. And hey, it's so cheap you can buy it in cash, you don't even want to get a loan. But beware, are you buying someone else's headache?
During the course of your transaction, your attorney should obtain a Section 22.1 Disclosure for you. She should also get you the assocation's budget. Look at these documents carefully. Is the association in the red? Does it appear that a lot of units aren't paying assessments? Even though your unit may be paid in full by the time you close, how many other units are not paying assessments? Are there many units in foreclosure? Has the association spent down their reserves, or do they still have enough money left for a rainy day?
This last year, many a real estate transaction has gone south because the buyer decided that the association was a risky proposition, even though the home they were purchasing was perfect in every other way. Sad stories abound -- about the association who had to keep the lights off in the hallways during the day because they could barely pay the electric bill, or the associations that had to keep amenities such as pools and clubhouses closed because they could no longer afford the maintenance. In some instances, associations have had to issue special assessments just to keep up with regular monthly bills.
If you are financing the purchase, your lender should look into the association's financial health for you. Loan are often (but not always) turned down because the bank doesn't want to lend money to buy a condominium in a risky association. Whether or not you are getting a loan, but especially if you are buying all cash, do your research! You don't want to buy yourself a new problem.
Sure, it's an amazing deal. Sure it's in great shape, and just needs a little bit of touch up. Sure, the monthly assessment is low and there is no special assessment pending; or, there is a special assessment, but the seller will pay it off. And hey, it's so cheap you can buy it in cash, you don't even want to get a loan. But beware, are you buying someone else's headache?
During the course of your transaction, your attorney should obtain a Section 22.1 Disclosure for you. She should also get you the assocation's budget. Look at these documents carefully. Is the association in the red? Does it appear that a lot of units aren't paying assessments? Even though your unit may be paid in full by the time you close, how many other units are not paying assessments? Are there many units in foreclosure? Has the association spent down their reserves, or do they still have enough money left for a rainy day?
This last year, many a real estate transaction has gone south because the buyer decided that the association was a risky proposition, even though the home they were purchasing was perfect in every other way. Sad stories abound -- about the association who had to keep the lights off in the hallways during the day because they could barely pay the electric bill, or the associations that had to keep amenities such as pools and clubhouses closed because they could no longer afford the maintenance. In some instances, associations have had to issue special assessments just to keep up with regular monthly bills.
If you are financing the purchase, your lender should look into the association's financial health for you. Loan are often (but not always) turned down because the bank doesn't want to lend money to buy a condominium in a risky association. Whether or not you are getting a loan, but especially if you are buying all cash, do your research! You don't want to buy yourself a new problem.
Thursday, January 12, 2012
Chicago Condo Conversion Developers May Have to Provide Relocation Assistance
Do you qualify for relocation assistance from your landlord? You may, if you meet the following criteria established by Section 13-72-060(F) of a new ordinance governing Chicago developers:
1) Your landlord is converting the property to condominium and recording the condominium declaration on or after July 30, 2012.
2) You have a lease or other rental agreement to occupy your unit.
3) The unit is your primary residence.
4) Your household income is not greater than 120% of median income for the "Chicago-Naperville-Joliet, Illinois Metropolitan Fair Market Rental Area", and you can provide written evidence of your household income.
5) You are not buying your unit, or any unit, in the condominium conversion.
6) Your landlord has not obtained an order of possession for your unit against you.
If you meet these criteria, you may qualify for a flat relocation fee of $1,500. If your rent exceeds $1,500, your relocation fee will be higher (up to your highest monthly rent amount), but not exceeding $2,500. A landlord may not enter into a lease with you which waives this relocation fee; if he does, that portion of the lease will be unenforceable. Furthermore, the fee, minus unpaid rent, must be paid to you within seven days after you completely vacate your unit.
1) Your landlord is converting the property to condominium and recording the condominium declaration on or after July 30, 2012.
2) You have a lease or other rental agreement to occupy your unit.
3) The unit is your primary residence.
4) Your household income is not greater than 120% of median income for the "Chicago-Naperville-Joliet, Illinois Metropolitan Fair Market Rental Area", and you can provide written evidence of your household income.
5) You are not buying your unit, or any unit, in the condominium conversion.
6) Your landlord has not obtained an order of possession for your unit against you.
If you meet these criteria, you may qualify for a flat relocation fee of $1,500. If your rent exceeds $1,500, your relocation fee will be higher (up to your highest monthly rent amount), but not exceeding $2,500. A landlord may not enter into a lease with you which waives this relocation fee; if he does, that portion of the lease will be unenforceable. Furthermore, the fee, minus unpaid rent, must be paid to you within seven days after you completely vacate your unit.
Thursday, January 5, 2012
Chicago Ordinance to Protect Renters and Buyers in Condo Conversions Takes Effect
Effective January 1, 2012, a new Chicago ordinance that was passed last May finally went into effect. The goal of the ordinance is to protect buyer of new condominium conversions, as well as tenants of buildings that are in the condominium conversion process.
Developers must obtain a license for residential real estate development from the city. If a developer is recording the condominium declaration after January 1, 2012, the developer must provide a Condominium Disclosure Summary in a format approved by the city. This summary shall include various details about the condominium development, such as 1) a description of the property's amenities; 2) financial information regarding assessments, budget, reserves, and operating expenses; 3) a description of applicable warranties; 4) parking information; 5) information about the building's or unit's infrastructure, such as appliances, HVAC, hot water heaters, elevators, masonry, and security systems; 6) restrictions such as limits on rentals, sales, or use limitations; 7) association-provided or other monthly service information, such as waste removal or cable; and 8) a list of all contractors who worked at the property, complete with license and registration numbers. The city may request other pertinent information in the summary as well. This summary must be filed with the city at least 90 days before the first unit is offered for sale, and must also be delivered to all prospective purchasers.
Before signing any lease after January 1, 2012, the landlord must notify the prospective tenant of the proposed condominium conversion in writing. This notice should be attached to the lease. If the developer/landlord intends on recording the condominium declaration on or after for July 30, 2012, the developer must notify all tenants in writing at least 180 days prior to the recording of the declaration. Depending on the circumstances, the tenant may also qualify for relocation assistance from the landlord.
If a developer fails to comply with the new ordinance, the city will withhold transfer stamps, in essence stopping the developer from selling any of the condominium units, until after the developer complies and pays the fines, or posts a bond equivalent to the maximum fine.
Developers must obtain a license for residential real estate development from the city. If a developer is recording the condominium declaration after January 1, 2012, the developer must provide a Condominium Disclosure Summary in a format approved by the city. This summary shall include various details about the condominium development, such as 1) a description of the property's amenities; 2) financial information regarding assessments, budget, reserves, and operating expenses; 3) a description of applicable warranties; 4) parking information; 5) information about the building's or unit's infrastructure, such as appliances, HVAC, hot water heaters, elevators, masonry, and security systems; 6) restrictions such as limits on rentals, sales, or use limitations; 7) association-provided or other monthly service information, such as waste removal or cable; and 8) a list of all contractors who worked at the property, complete with license and registration numbers. The city may request other pertinent information in the summary as well. This summary must be filed with the city at least 90 days before the first unit is offered for sale, and must also be delivered to all prospective purchasers.
Before signing any lease after January 1, 2012, the landlord must notify the prospective tenant of the proposed condominium conversion in writing. This notice should be attached to the lease. If the developer/landlord intends on recording the condominium declaration on or after for July 30, 2012, the developer must notify all tenants in writing at least 180 days prior to the recording of the declaration. Depending on the circumstances, the tenant may also qualify for relocation assistance from the landlord.
If a developer fails to comply with the new ordinance, the city will withhold transfer stamps, in essence stopping the developer from selling any of the condominium units, until after the developer complies and pays the fines, or posts a bond equivalent to the maximum fine.
Subscribe to:
Posts (Atom)
