Rusty Law

Minor Homeowners Create Major Changes

The youngest homeowner is four years of age on the books for the first-time homebuyer tax credit.  Apparently the kid was renting his first three years and wisely decided to cash in on that tax credit before he had mastered the alphabet.  There are hundreds of minor homeowners like him, who claimed the $8,000 on first time home purchases.  With the extension of the program, however, the Treasury Department put the tax credit jar on a higher shelf.  

The Treasury Department hosted millions of dollars in questionable claims, ranging from the four-year-old homeowner to the lack of documentation that would verify eligibility for the program.  The first-time home buyer tax credit, originally scheduled to sunset at the end of November 2009, was extended to the end of June for the actual close of the transaction, and with that extension comes additional specifications.  

The program is limited to primary residences, and those have to be purchased for less than $800,000—no million dollar homes for first time buyers!  Also, the purchaser must be at least old enough to vote and able to provide a HUD-1 Settlement Statement.  

Even with these higher requirements, the First-Time Homebuyer program has increased annual income limits ($125,000 for singles and $225,000 for married couples), and as long as the buyer uses that property as a primary residence for at least three years, the buyer gets to keep the money.  

Real estate has a lot of deals right now, and continues to be a first-time buyers’ market with the extension of this tax credit.  

Strong Spring

Spring cleaning is still a few months off, but the tax credit extension for first-time home buyers will uphold housecleaning for the real estate market through the winter.  

The first-time home buyer tax credit is valued up to $8,000 and does require certain income; also it has expanded eligibility to provide $6,500 to those who have lived in their homes for at least five consecutive years, again with income qualifications.  This tax credit, scheduled to sunset in November, has been extended into spring, stipulating you must have a signed contract by April 30, 2010 and be closed by June 30, 2010.  (Military service personnel have a year beyond those deadlines to take advantage of the tax credit.)  

I like the idea of the program because it activates the market.  Even if there are more investors than first-time home buyers, it is creating real estate transactions.  However I do not like the idea of fake stimulus.  Those funds came out of the Treasury.  It is a transferring of wealth and it messes with Invisible Hand.  The government is trying to stimulate behavior, but we are going to have to pay.  

The tax credit will create a strong spring for the real estate market, but the seasoning may weaken the dish as a whole.  

Home Owners' Association Dues

The only way to defeat a home owners' association claim is to outsue.  That costs a lot of money and takes a lot of tenacity.  Do not withhold association dues though, because that gives them an incentive to put a lien on your property.  

With a home owners’ association, there are two contracts in play which are not connected.  The first contract is an acceptance of the property along with the responsibility to pay the association dues.  The second contract is that the home owners’ association will do certain things.  With a home owners' association dispute, you are dealing with a debt situation versus an action situation, and you have to consider whether the debt attaches to the person or the property, depending on the contract.  

Keep your maintenance fees current.  Even in a foreclosure situation, keep the home owners’ association fees current because if they are not current, the judge might rule against you.  Also, if you withhold fees, really you are affecting your neighbors.  Things can get very emotional, which is why attorneys are needed to keep emotions out of it.  

To dispute a home owners’ association, you have to outsue and outlast, but in the meantime, pay the dues.  

O. J. Simpson's Homestead

Constitutional Homestead rights attach once you own the home, live there, and plan to live there.  How that affects O. J. Simpson domiciled in Nevada is another issue when it comes to homestead exemption.  

Homestead is very powerful, especially in Florida, attracting celebs with big debts like O. J. Simpson and Bernie Madoff, because it does not put a dollar cap on the exemption from creditors.  Everything in that house is exempt because of homestead exemption if constitutional homestead is established.  This may be further strengthened in the case of a blood relative living there or a spouse, but if the glove does not fit….

Value of a Real Estate Agent

Everyone wants to buy a foreclosure because it is a deal, but there are all kinds of surprises in the pudding, as my brother says.  You need a doctor to prescribe a tranquilizer for the transaction, but with over 40 million Americans without health insurance, better use a real estate agent.  

“There’s a sucker born every minute,” that does not mean you have to be one.  P. T. Barnum is popularly cited for that quote, though that is not what he said.  He was misquoted, which is a very bad thing in real estate.  

The first case you read in law school regarding real estate law is Pierson v. Post concerning who gets to keep the dead fox, the guy who chased it or Pierson who stepped in and shot it.  Post gets the fox.  He did the work to chase it so he gets to keep it; however, commissioned real estate sales do not work that way without a contract.  

It is a free market, and a buyer can work with a real estate agent for a couple of months, then decide to purchase directly from a developer or through another agent.  There is no legal issue against this, though it is not fair to the agent who has spent the two months with the buyer.  There is no legal obligation, but there is an ethical issue the buyer may not be aware of.  

The best way to gain access to the real estate market is to get someone who knows what the market is, an agent who can advise you on pricing and other considerations.  I recommend having someone on your side.  First of all, make sure you like your real estate agent, that you have a good working relationship, then understand what that relationship is.  Your agent is spending time, effort, and his or her own money on a contingency to help you find a property, and then oversee the transaction through the closing.  

My office works closely with real estate agent Jim Smith on a lot of short sales in St. Augustine and the surrounding area.  Jim Smith is at Century 21 St. Augustine Properties, and can be reached at (904) 797-6000.  

Be careful out there.  There is a lot of opportunity in real estate and a lot of pitfalls.  Now is a good time to have a real estate agent on your side.  

Real Estate Trades

A real estate trade is not the same as wife swapping, but it does involve a specialized service, matching people and their property interests.  

Nobody fully appreciates the very hard work realtors do, and this particular area of expertise in the real estate market is another example.  Real estate trading is not a standard MLS; it involves a two-sided transaction, not just one, but does not cost any more than a regular transaction, and can cost less.  

A real estate trade involves a direct exchange of properties, generally with a simultaneous closing.  It entails very close matching and a large dose of mutual benefit.  

The legal issues of real estate trading are as follows:  disclosure disclosure disclosure.  (Comes right after “location location location.”)  

A dollar only has value because we say it does.  If someone has a home for sale in Jacksonville and wants to move to St. Augustine, while a homeowner in St. Augustine is trying to move to Jacksonville, then that exchange of properties could have great value for both parties.  Providing that disclosure is fully satisfied, a real estate trade can be a very good, and equitable arrangement.     

Libby Wiseman is a resource for real estate trades in Jacksonville and St. Augustine.  I recently spoke with her on “Land Title Talk,” which airs Wednesdays at 7:30 on WFOY 1240 AM.  If you missed our conversation, you can learn more about real estate trades at www.libbywiseman.com, or contact Libby at 1-800-853-0771.  

Land Title Discovery

Columbus may have sailed the ocean blue, but it was Amerigo Vespucci who signed his name on the map, forever naming the two continents of the New World:  “America.”  Not to discredit Columbus, but land title is very important.  

Amerigo Vespucci was a well-known explorer of the era, and the era was the Renaissance when individuality had become popular, crediting accomplishments with a person’s name.  We do not know who tamed fire or set the wheel in motion for humankind, but we do know that there was a cartographer, Martin Waldseemuller, who produced maps updated with the newly discovered continents of the New World.  Like an artist’s signature, Vespucci put his name on South America.  

Yes, there was a dispute over title, but eventually Vespucci’s name appeared on North America as well.  And Columbus got a day named for him, across the calendar for all time.  

If you want land, put your title on it.  Have the land surveyed, do a title search, and insure the title against other claimants.  Clear title is the difference between a day and a continent.  

Happy Columbus Day!  

The Fox Pelt & Title Insurance

Who owns the dead fox, the guy who chased it until it was tired and cornered, or the guy who shot it?  

Most of our law comes from English Common Law, and Pierson v. Post is one of the cases that stemmed from it, and influences property title in America today.  Post chased down the fox and Pierson shot it.  The dead fox was awarded to Post.  Which work created the property?  Who improved the property?  

Nobody wants to be clever like a dead fox.  People have a misconception that NOT getting title insurance is a cost-saving measure.  Hopefully the title is good.  The title is supposed to be good.  But you do not get insurance for what you can see on the title search.  

Risk is involved.  Even in passing property from parent to child, you want to get a survey and maintain title insurance.  Title insurance is based on the risk assessed of that title having a problem, the hidden risks that you cannot see in a title search, or the debatable claims.  

Even if you are one hundred percent correct in your claim, the expense to defend it could be greater than that of your resources, or the value of the property itself.   Title insurance saves you in legal costs, and could save your house for you.  

Title insurance is not for what you know is right; it is for unexpected risk.  Own the fox.  Pay the title insurance.  Keep the house under your control.  

Brave New Market

Oysters can change sex at random, turn grit into pearl, and purify water at a rate of twenty-four gallons a day per adult bivalve.  With champagne production down 44% this year, there is no better time for the eastern oyster to colonize new real estate.  The same is true for first time homebuyers.  

Home sales are up 28% while the price is down 22% statewide in Florida, August to August, driving first time homebuyers off the fence by the lemming-load.  In the real estate market, there is always a deal to be had, and the buyers are having it!  

As we colonize this brave new market, there are more than a few differences to keep in mind, for example: 

• Credit requirements have gone up
• “Full Doc” really means Full Documentation
• Reserves are more important than ever, and more scrutinized too
• Source and season of gift money is crucial to make a loan savory for a lender 

Lending has changed.  Loans are happening, but it is a brave new market.  

Aldous Huxley’s Brave New World was published in 1932 at the start of the Great Depression.  The futuristic dystopia describes natural humans in an unnatural world, one without foreclosure defense attorneys, where very little recourse is available to the mass population.    

Language Barrier - Realty Check

Some words you can’t say on the radio.  Some words you can’t understand in person, even in English.  Here in Florida, where people have real estate licenses like they have drivers’ permits, real estate language is comprehendible by most parties, but clarity comes in the title of the plot.  

Every good book needs a good title, just like land, but whereas two different books can share the same title, that doesn’t work in real estate.  In real estate, each piece of property needs a distinct, clear title; otherwise, it’s a piece of fiction.  

You don’t have to be a jargon-head to buy land, but you do need clear title to own it.