Opening Titles & Closing Remarks

Let’s Not Get Ahead of Ourselves – Extending the Tax Credit Closing Deadline.

I’ve been hearing some misinformation about the extension of the Homebuyer Tax Credit closing deadline. Numerous headlines reported that the Senate approved the bill to extend the deadline from June 30th to September 30th. I’ve even heard that some lenders believe that?the extension?has?already been?approved.?Neither of these?reports?are exactly true. Here’s what really happened.

Wednesday, the Senate approved adding the bill to extend the deadline to another piece of legislation winding through Congress, namely a bill to extend unemployment benefits among other things. The Senate must still approve this entire bill which isn’t certain, then?the bill?must be approved by the House of Representatives and then signed by the President.

Assuming that all of this happens on or before June 30th, we’ll be OK. If it doesn’t -?well I don’t want to even think about that. We’ll just keep managing our business assuming that deals have to close by June 30th.

It’s always good to remember that whoever writes the headlines, usually isn’t the reporter and probably hasn’t read the entire article.

Senate Bill Introduced to Extend Tax Credit Closing Deadline

This is something to keep an eye on. Senator Harry Reid of Nevada introduced legislation to extend the settlement dealine for qualifying for the federal homebuyer tax credits from June 30th to September 30th.

According to the National Association of Realtors, approximately 180,000 homebuyers potentially could miss out on the tax credit if the date is not extended. Due to the loan volume, underwriting, appraisal and short sale approval delays, many homebuyers who were under contract by the April 30th deadline, may not be able to close by June 30th.

The Washington Post reports that the bill is actually attached as an amendment to another bill that would extend emergancy unemployment benefits and other tax breaks. The passage of the broader bill is not certain as of today.

It’s important to note that?Senator Reid’s?bill only extends the deadline for closing already qualifying transactions. It does not extend the deadline for signing a qualifying contract. The deadline to sign an offer was April 30th and that is not being extended.

I certainly hope?that the deadline is extended.?The growing bottleneck of transactions as June 30th approaches?is quite worrisome.?I can’t imagine that any mortgage lender or settlement agent would feel differently.

Regardless, until this bill actually passes, I advise our clients to continue to manage their current transactions as if the bill will not become law. Stay on top of your transactions and their associated deadlines.

Avoiding Closing Explosions of Cosmic Proportions

This is the month to stay on top of your transactions. The matter-antimatter engine that?s been powering the real estate market is reaching critical mass.

The matter is buyers that are counting on getting either of the Federal Home Buyer Tax Credits and must close their transaction by this June 30. The tax credits most certainly accelerated the closing of a lot of transactions that normally would have closed later in the summer, so June will be busier than normal for everyone in the mortgage finance and settlement services businesses. ?

The antimatter is now common delays due to inspection issues, appraisal issues, loan underwriting issues, funding approval delays, mail out delays, short sales approvals and wire transfer delays. But this month delaying the closing past month end will not be an option for many. The loss of a tax credit will not be acceptable.

According to the Wall Street Journal the National Association of Realtors is asking that the June 30 date be extended. Here?s the link. http://blogs.wsj.com/developments/2010/06/02/realtors-want-congress-to-tweak-tax-credit-timeline/?If Congress agrees?it would be very helpful. I wouldn’t be making any plans counting on this happening though.

So this month, more than ever, stay on top of your deadlines. Keep in touch with inspectors, appraisers and lenders. You don?t necessarily need to be a squeaky wheel, but do make the effort to confirm along every step in the process that loose ends are being tightened up.

Last minute mail outs are sure to risk delaying the closing. Make sure your clients understand that if they are not going to be at the closing, the longer the lead time for preparing and mailing out documents the settlement agent has, the better for everyone.

Attention to the details will avoid the otherwise inevitable dropped balls, resulting delays, and?closing?encounters of the worst kind.

It’s a condo . . . No, wait. Maybe not.

A frequent question for us is whether or not a property that we?re insuring is or is not a condominium. The answer is important because condominiums have different, and often more restrictive, lending rules.

In Indiana, the Horizontal Property Regime Act (HPRA) found in the Indiana Code Title 32,

Article 25 is the operative law regarding condominiums. Chapter 2, Section 7 gives two criteria for real estate to be a condominium. First, the real estate?is subjected to the provisions of the HPRA by the recording of a declaration. Second, the real estate includes not only the unit itself, but an undivided percentage ownership in the common areas of the condominium. (Common areas are everything in the condominium development except the units.)

So to answer the question, we examine the title and look?for recorded condominium declarations. If there isn?t one, it?s not a condominium. If there are declarations, but they don?t subject the real estate to the provision of the HPRA, then it?s not a condo. Only if there is a recorded condominium declaration that meets the requirement of the HPRA is it a condominium.

Confusion reigns in Monroe County because many properties are misclassified in various public records and on property record cards as condominiums even though they are not. It seems that someone concluded that any building that is not single family detached is a condominium, as if it could only be one or the other. Condominiums are created by legal distinctions, not by characteristics of the physical nature of the improvements. Out-of-town appraisers are frequently the victims of this misinformation which mucks up their appraisals.

In fact, there are a number of developments in Bloomington that are attached row houses that are not condominiums. In the typical situation, there is a building envelope including the land and the improvements which the owner owns in fee just like a single family home in a subdivision. These developments have common areas (often the land between the building envelope and the street) that are owned by a homeowner?s association. These common areas are not owned in percentages by all of the unit owners. The unit owners instead have easement rights over the common areas.

The confusion is heightened in Monroe County because there are some developments that are not condominiums but the building and land owned is erroneously described as a unit. There are also developments that predate the HPRA (Hyde Park Condominiums, for example) that may or may not be a condominium.

Ask the Title Guy – How do I make sure that my closing is wired? Part 3

Indiana’s new Good Better Funds Law is effective July 1, 2009. Many of my clients are expressing concerns about back to back real estate closings and how to avoid long delays in funding while waiting for wire transfers to be received by the title company.? If a chain of two or more closings is happening with a single closing agent there won’t be?nearly the problem with getting acceptable funds. Once the closing agent receives wire transferred funds on the first transaction the proceeds from each successive closing will already be in the closing agent’s escrow account and wire transfering?will be unnecessary. If a chain of transactions?is closing with more than one title company or closing agent then the first closing agent will need to wire transfer the seller’s proceeds to the next title company.

To minimize delays, I recommend that you try and schedule your closings on Tuesday or Wednesday mornings. A Tuesday or Wednesday closing will be among the first ones to be worked on by the lender each week. Friday closings only get worked on after the previous days closings are completed. We find that many scheduled Friday closings get bumped back to later in the day or rescheduled for the following Monday. Closing Tuesday or Wednesday puts your deal near the front of the line.

A closing that is completed by 10:00 a.m. or 11:00 a.m. will allow enough time for the closing agent to order the wire transfer to the next closing agent and for the wire transfer to be sent and received by the banks involved.? Successfully completing wire transfers involve a number of people and processes. The title company at either end has little or no control or influence over these people or processes. Some banks will process wire transfers immediately. Some banks do them in batches only two or three times a day. Over the years I’ve come to realize that no one I can talk with knows for sure when a wire transfer has actually been sent. When people tell me that they’ve sent the wire they almost always mean that they’ve just given it to the next person in the process.

I am confident that John Bethell Title Company, Inc. will handle the logistics of this new law fairly well. Our bank processes wire transfers as they receive the requests. We receive email confirmation of wires transfers sent and received. We have a later cut-off than at most other banks. Much of the process is within our own control. Still, wire transferring will take longer than cutting a check to someone. The irreversible nature of wire transfers requires that we employ careful accounting procedures to prevent data entry, transcription or other errors; more procedures than we need when cutting checks.

Scheduling your closings for earlier in the day and earlier in the week will allow for the money to get to where it needs to be when it needs to be there.