What is a Cash-Out Refinance?

Refinancing your home means asking a lot of questions. Like any major financial decision, you want to be sure you have all of the information you need to make the best choice for you and your family. Understanding the way refinancing works can seem overwhelming, but that’s okay! If real estate finance was easy, you wouldn’t need us around. We’re here to help explain a few things that you need to know. 

Today’s Lesson: Cash-Out Refinances

In real estate, there are two basic refinance options: rate-and-term and cash-out refinances. While a rate-and-term refinance could help you save money over time, a cash-out refinance could be a good option for anyone looking for a boost of cash flow in the short term. Cash-out refinancing means that your home equity is converted into cash by creating a new mortgage for a larger amount than what you currently owe. 

For example, if you took out a $200,000 home loan and have paid off $100,000 over time, this means you have $100,000 worth of home equity. If you wanted to convert $50,000 of that equity into cash, you could opt for a cash-out refinance. In this scenario, you would get a new loan for $150,000 — the remaining balance on your original loan plus the $50,000 cash. You pay the balance on the first loan ($100,000) and keep the remaining $50,000. You still owe that $100,000, but you’ll be paying a new lender at a new interest rate.  

Lenders will look at your property’s loan-to-value ratio to calculate how much equity you have, and how much you could potentially cash out. If your home has drastically increased in value since you purchased it — but you’re not ready to sell anytime soon — a cash-out refinance could be a good option. This type of refinance could also be a smart choice if you want to renovate your current home, because you’re essentially using the equity you already have to increase the value of your home. 

Cash-out refinances typically come with much higher interest rates than your initial mortgage, so they’re not always the right option for someone looking to save money long-term. Instead, a cash-out refinance could work for someone looking for extra money in the immediate future. It’s not a get-rich-quick scheme, though. You might be getting a boost of cash right away, but could end up paying more over time. 

As always, make sure you’re working with a team of trusted experts. There are so many individual factors to consider when refinancing your mortgage, and you’ll want someone who has the time to answer all of your questions and make sure your specific needs are meant. If you think a cash-out refinance is right for you, give us a call today!

What is a Rate-and-Term Refinance?

Mortgage rates are lower than in recent years, which means now is a great time to think about refinancing your existing home loan. A mortgage refinance is a big decision, and making the right choice now could save you thousands of dollars in the future. If you’ve never considered refinancing before, you’re probably finding yourself overwhelmed with questions and unfamiliar terms. And that’s okay! If real estate finance was easy, you wouldn’t need us around.   

We’re here to help explain a few things you might want to know.

Today’s lesson: Rate-and-Term Refinance

A rate-and-term refinance changes the interest rate on your loan, the term (or length) of the loan, or both. Unlike with a cash-out refinance, this type of change doesn’t advance any money on the loan — which means you won’t see a lump sum of cash. Instead, this type of refinance can save you money by lowering your monthly payment or by allowing you to pay off your loan faster (saving you money in interest). Rate-and-term refinances are driven by drops in market interest rate values. 

If you purchased your home during a time of high market interest rates, you might want to consider a rate-and-term refinance now while the rates are lower. This type of refinance is also a great option for homeowners who have seen positive changes in their financial situation since they purchased. If your consumer credit score has improved drastically over the last few years you’ve owned your home, you could qualify for a much lower interest rate. 

Rate-and-term refinances aren’t right for everyone. If you’ve only been in your home for a few years and you haven’t experienced any major financial changes, you might be better off waiting a few years or looking for a different type of refinance. 

No matter what you decide, make sure you’re working with a team of trusted experts. There are so many individual factors to consider when refinancing your mortgage, and you’ll want someone who has the time to answer all of your questions and make sure your specific needs are meant. If you think a rate-and-term refinance is right for you, give us a call today! 

Real Estate Terms Explained: Title Insurance

If you’re a first-time buyer, you’re probably faced with a lot of unfamiliar terms as you complete the closing process. But don’t worry! We’re going to use the power of the blog to explain (most of) them to you. 

Today’s lesson: Title Insurance

What the heck is title insurance? 

Technically there are two answers to this question, because there are two types of title insurance: the lender’s insurance and the owner’s insurance. Both policies protect against future financial losses. To put it simply, if your home purchase falls through after closing, these insurance policies can save you and your lender from being financially responsible for a property home that you didn’t actually purchase. Most lenders will require this insurance, and you’ll find it included with the rest of your closing costs. Owner’s insurance is optional, but highly recommended. Both policies are a one-time fee that you pay at closing.   

Why would my purchase fall through after closing?

It’s an unlikely scenario, but it is possible. When you purchase a property, a title researcher will check the ownership history to make sure you have what is known as a “clean title.” This means that there are no pre-existing issues that could prevent the title from becoming legally yours. 

A pre-existing issue could be that a previous owner failed to disclose a creditor’s lien on the house, or the property is caught up in an inheritance dispute, or there are uncollected taxes on the property. In most instances these issues are the result of a minor error and can be cleared up quickly, but there are cases where the title issues take months or even years to resolve. And if you find yourself in one of those situations, you’ll be facing a mountain of legal fees and the potential that you’ll lose the property (and the money you invested) before you even unpack. 

Alright, I hear you. How do I get title insurance? 

Typically your agent or closing attorney will start the process for you. You’ll be charged a one-time fee (the exact cost will vary depending on a variety of factors), and even though you only pay for it once, the coverage will insurance your financial transaction as long as you own the property. Please note: this is NOT homeowners insurance — that’s a completely different type of policy and coverage. If you’re not sure how to find the right title insurance, talk to your closing agent or attorney. We live for this stuff. 

Title insurance may seem like yet another unexpected cost, but trust us, it’s worth it. If you still need convincing, give us a call! We’re here to help you every step of the way. 

Are You Ready to Refinance?

As mortgage rates dip lower and lower, you might be wondering if it’s time to think about refinancing. Many homeowners could find themselves able to negotiate a lower rate, and be able to pay off their home loans sooner than they initially planned. If you’re thinking about refinancing your mortgage, here are a few things to consider before you do: 

Know how much your home is worth.

The amount of equity you have on your home is one of the most important factors in refinancing. Your loan to value ratio, or LTV, is what lenders use to calculate how much equity you have. The less equity you hold, the higher your rate will end up being. A real estate agent can compare your home to similar homes in the area and create a competitive market analysis, so you can have a better idea of how your home is currently valued. 

Have clear financial goals.

There are a few reasons that homeowners decide to refinance. You could lower your monthly payment and give yourself extra room in your budget for other expenses. Another option is to continue making the same payment, but pay off your loan a few years earlier than expected. Some homeowners opt for a cash-out refinance, where you borrow more than the balance due and take the difference as a lump sum of cash. This money can then be used to pay off other debts, such as credit cards or student loans, or used to finance remodeling or other expensive home improvements. There is no right or wrong option — it’s best to work with a financial planner or lending expert to decide what will work for you. 

Don’t wait too long.

The mortgage interest rate market is as fickle as the stock market, and interest rates can change quickly. If you feel comfortable with the way the math is adding up, work with a loan officer (and a closing attorney!) that you trust. Get the necessary paperwork — such as current mortgage statements, pay stubs and bank statements — in order so you’ll know you’re fully prepared. Once you and your loan officer find the best rate for you, be sure to request a written confirmation of the rate you’re being offered. Remember, if it’s not in writing, it’s not legally binding! 

Refinancing your home mortgage can seem like an overwhelming and impossible task, but it doesn’t have to be! We’re here to help connect you with the best agents and loan officers in town, and make all of the necessary paperwork and negotiations are completed properly. Contact us today! 

How to Find the Right Commercial Space

Finding a great commercial property isn’t quite the same as finding your dream home. Instead of looking for the right number of bedrooms or a good school district, you need to consider how the property works for your business — and if you’ll end up spending more money than you make. 

So how do you get the best deal on a commercial property? We’re glad you asked…

Think like a professional.

Commercial real estate is a different ball game. Unlike residential real estate, commercial properties are typically valued based on potential income, or how much money your property could make in the future. For example, a prominent space in an established retail district is going to be valued higher than an off-the-beaten path location. While the financial potential of a property is definitely among the things you should consider in residential real estate, it’s the thing to focus on in a commercial transaction. 

Have a plan in mind. 

Are you looking for a space to house your business, or are you in the market for a multi-family rental property? How much build out are you willing to invest in? If you’re opening a new restaurant, you probably want to look for spaces that already have the foundations (plumbing, gas lines, etc) for a commercial kitchen. If you’re interested in owning and managing a large residential property, you’ll want to consider how many units are in the building and the average rent in the neighborhood. Knowing the business side of what you’re looking for is just as important as knowing what design features you want the building to have. 

Know the neighborhood.

Commercial properties can change hands quickly. Every neighborhood has one of those spots — one year it’s a hair salon, then a pet store, then a coffee shop. Finding a motivated seller can help you score a great deal, but be careful you’re not buying into a “cursed” location. Does the space have enough parking? Is it easy for customers to find? Additionally, you’ll want to do your research on the surrounding businesses — does the area really need another pizza place? It also helps to visit neighborhood business associations or city councils, so you can start to form relationships with the people who will one day become your customers. 

Most importantly, make sure you have a team of experts on your side! We’re always ready to help you close on the perfect property, so give us a call (especially if you’re going to open a pizza place near our office).  

How to Avoid Escrow Wire Fraud

We live in a world of digital transactions. Whether we’re paying bills, buying groceries, or splitting a check at dinner, more and more of our financial interactions are occurring online or on our phones. And while that does add a level of convenience to most situations, it also makes us more susceptible to fraud. When you’re closing on a property — possibly one of the biggest financial transactions of your life — you want to be sure that your hard-earned money is safe. 

Escrow wire fraud has become alarmingly common, and it’s surprisingly easy to fall for. The way it works is simple — you get an email, phone call, or text message from someone claiming to be associated with your agent, broker, or other party involved in your transaction. At first it seems legitimate. The person contacting you sounds official and has the right information, they claim to be affiliated with someone you’re working with… who are you to question it, right? Just give them what they need and get back to your busy day. 

And that’s exactly what they want you to do. Before you know it, they’ve cleaned out your accounts and headed for an exotic location while you’re left picking up the pieces. But not today, evil doers! Here are a few simple ways you can avoid being a victim:

Keep it to yourself.

Never, ever, ever, EVER give personal information (such as your bank account or social security number) to someone you have never spoken with. It doesn’t matter if they insist that they work with someone you do know — do not give them your information. Instead, tell the person that you would like to hear from your agent or broker directly, and hang up the phone. If they’re on the up and up, they’ll understand and have the right person contact you.  

Know who you’re dealing with.

Look carefully at the phone number or email address trying to contact you. Hackers use spoofing technology that make it look like they’re coming from a familiar place, but when you look closely you’ll see that they’re off by one letter or number. It’s also important to pay attention to the URL or web domain listing — is that email coming from fbp-law.com, or fbp-law.co.au? If it’s a different address than what you’ve seen before, ignore the email and contact the right person immediately. 

Stick with the plan.

Be wary of anyone trying to change information that you already have. For example, if you’ve been instructed by your broker to send money to a specific account, don’t trust a text message asking you to “make a last minute change” and send the money somewhere else. Always verify any additional instructions you receive with the right person.

Meet in person.

Do things the old fashioned way! It may seem archaic, but the more you can do in person the harder it is to be a victim of a scam. Request face-to-face meetings as often as possible. It’s easy to fake an email address, but it’s pretty much impossible to fake an actual human being standing in the same room as you. 

Trust your gut!

If something seems fishy, it probably is. Never hesitate to ask questions or demand to speak to the right person. Don’t worry about seeming rude or “bothering” your agent or broker — any reputable real estate professional will tell you that they would much rather address your concerns than see you fall victim to a scam. 

Escrow fraud can be scary, but it can also be easy to avoid. We’re always available to answer your questions and help keep you (and your money) safe!    

Finding the Right Closing Attorney

Buying or selling a home is complicated for anyone, whether you’re a first-time buyer or an experienced flipper. There are a lot of moving parts in every real estate transaction, which means that even the slightest hiccup can cause the entire deal to fall apart. That’s why choosing the right closing attorney is just as important as choosing the right property – some might look perfect at first, but the right choice should be the one that you can really live with.

So how do you find the right closing attorney for your needs? Hey, thanks for asking! We are experts, after all. We’ve put together a list of a few things that will help save you hours of internet searching (and potentially thousands of dollars in misplaced legal fees).

1)    Service, service, service.

They say that the most important factor in real estate is location, location, location. But what happens after you find that perfect spot? You want a closing attorney that has time for you – someone who is available to answer your questions, handle unexpected issues, and be there for you when you need them. Buying and selling property is a major financial transaction, and you want to be sure that your money (and your sanity) is in the right hands.  

2)    The client always comes first.

This is a principle that applies across almost every business model, but it’s especially important in real estate. Your closing attorney should be prioritizing your needs, not the needs of their firm. Working with an independent attorney can help ensure that you, the client, will always come first. You want someone who is upfront about what they require from you, and in turn, honest about what they are doing and why. These key details can be lost when you work with a major firm that is trying to meet quotas (which could result in hidden fees).

3)    It’s all about who you know.

Real estate is a word-of-mouth market. If you’re looking for an agent, where do you turn: the internet, or your friends and neighbors? The same goes for finding the right closing attorney. Some large firms might have shiny offices and slick marketing campaigns, but that doesn’t mean they’re the best at what they do. Look for a closing attorney who has established relationships with your trusted neighbors, friends, or colleagues. The impression a closing attorney leaves with their clients is far more important than the number of floors in their office building.   

In closing (wink wink), finding the right attorney is crucial to a successful experience. The best choice is someone who makes themselves available to you, who puts your interests first, and who comes with a solid reputation. Or, make it easy on yourself and stop looking – you’ve already found us.

Frank’s almost famous real estate blog

HOW TO HAVE A SMOOTH CLOSING, PART ONE, SELLERS

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     I first wrote this list years ago for my first web site.  How times have changed! Now there are pressures in the marketplace to accomplish the entire process of home-buying and home-selling by using the mobile device in your hands. From looking for homes, to signing contracts, to applying for a loan, to transferring funds for closing to signing the closing documents, to recording the documents at the courthouse, the entire process can (in theory) be accomplished without ever having to get into your automobile or see another human in person.

     The reality in 2018 however is that only parts of the process are accomplished electronically. Usually our “closings” involve real people sitting around a real conference table.  The participants are happy and sad,  filled with hopes and dreams for the future on the one hand and fond family memories and melancholy on the other.  It is, without question, my favorite part of the entire process; the signing of the deed and the delivery of the keys harken back to the “Livery of seisin”, later sometimes called the “turf and twig” ceremony…but that is a topic for another day.

Today’s topic is what should Sellers be aware of in preparation for a smooth (happy and sad) closing.

< ![if !supportLists]>1.       < ![endif]>Make sure that your driver’s license name matches the name on the deed when you purchased. If you have changed your name by marriage for example, please provide that information to the closing agent as soon as possible.

< ![if !supportLists]>2.       < ![endif]>If you cannot attend your closing and need to use a Power of Attorney (POA) to authorize someone to attend for you, make sure that the closing agent knows this well in advance, and can either review the POA document you already have or prepare a new one for you.

< ![if !supportLists]>3.       < ![endif]>If the seller is the representative of an estate or a trust or a business entity like a corporation or LLC, make sure that you provide all of the papers available which prove your authority to sign. Examples would be probate documents such as Wills and Letters Testamentary, memorandum of Trust documents, Operating Agreements for LLCs, etc.  When in doubt, call the closing agent as soon as possible to discuss.

< ![if !supportLists]>4.       < ![endif]>If the closing agent sends you a “Sellers Information Sheet” please fill it out thoroughly including social security numbers, loan numbers and written authorizations to obtain payoffs, and HOA contact telephone numbers.

< ![if !supportLists]>5.       < ![endif]>Lastly and most importantly, if you don’t wish to walk out of your closing with a paper check, please be prepared to provide written wiring instructions in advance and to verify them before the funds are sent. The theft of money from real estate closings is an enormous problem in this digital world.  The following language appears on every email sent by anyone in our office.

                 PLEASE NOTE: We Do NOT request or accept changes to wiring instructions via email or fax and without verbal confirmation from our office.

Be smart about using email.  Closely examine any emails you receive to verify that they are from who they say they are from. Fraudsters can change one number or one letter to an email address and fool most people most of the time.  Do not discuss wire transfers with anyone other than your closing agent, after you have verified that they too are who they say they are.  You cannot be too careful. The horror stories about sellers and buyers losing their life savings are unfortunately true and heartbreaking.

Next time, we will work on the Buyer’s side.  Until then, be smart with your technology.

Frank’s world famous real estate blog

Good Day!

 

Last week I had the pleasure and privilege of attending a Real Estate Seminar put on by my friends at Old Republic Title Insurance Company.  And while it was very interesting with various speakers talking about such diverse matters as Ethics and Claims Avoidance, the topic that made the greatest impact on me, for my day to day business, was entitled “Business Email Compromise Fraud.”  Or maybe it was just the speaker.  He was quite impressive, quite informative and what he had to say was quite frightening.  And while I certainly cannot present the material the same way, I am willing to discuss with any of our local real estate agents or investors, in person or in a group, the dangers of Cyber Crime, and to use the speakers phrase, “how to become a harder target”.

 

Let me know if this is something you might have an interest in learning a little more about.

 

 

SOON TO BE WORLD FAMOUS RESIDENTIAL REAL ESTATE BLOG

A group of questions that I encounter constantly is “What is the best way to hold title to my properties?”. 

 

Should I put my homes into a Revocable Trust or a Family Limited Partnership? 

 

What are the advantages of using corporate vehicles like Limited Liability Companies (LLCs) or S-corps?

 

What is the difference between Joint Tenancy deeds and “regular” deeds?  What’s a Quitclaim deed?

 

How can I avoid the need for a Will?

 

     These are very important questions for sure, and every type of instrument has its value, in the right context.  And it should be obvious from the foregoing that some thought and care should be given to these types of decisions.  Back in the day, when we were really busy, we didn’t give that much thought to requests for deeds.  We would draw them up, slap a “no warranty of title” disclaimer on them, collect a very small fee and send them to the courthouse.  That process came into sharp focus more than fifteen years ago because of the following true story.

 

     We were doing a residential real estate purchase closing for a middle aged couple, and, after explaining the advantages of that type of ownership, as a favor to them, had the seller convey title to them as Joint Tenants with the rights of survivorship.  (More on the specific advantages and disadvantages of that type another day.) There were no problems with the closing and everyone left happy.  Some months later, the husband and wife returned and asked that we prepare a new deed from themselves to themselves and their 2 adult sons as joint tenants together.  The stated goal was to allow the sons to get the property, when they passed, without having to probate a will.   So, without much discussion,  the deed was drawn, the fee was charged, and the deed was signed and recorded.  A number of months passed and the father shows up unexpectedly at the office one day saying he wants to undo the deed and take the sons off of the title to the property immediately.  He wants to refinance and needs to have title only in his and his wife’s names.  “Put it back like it was before!”  I say OK, bring them in and I will prepare a deed for them to convey the title back to you and your wife.  He says, “nope, can’t do that, they refuse to sign anything.”  I say, “hmmmm, well, now that’s a problem.  You mean to tell me that your sons won’t give you back what you gave them 3 months ago?  They won’t do what you ask?”  “Nope.”  He left very unhappy.

 

The moral of the story is a little knowledge is a dangerous thing.  Or what works in one situation, may not work in another. Or sometimes, cheap estate planning is not the best way to go.

 

If you have questions about home ownership, estate planning, liability avoidance or whatever, it’s best to take a few minutes, sit down with your favorite lawyer and lay out all the facts. It could be the best investment of time you ever make.

 

Have a great weekend.