REAL Exclusive Magazine

Financing “As-Is” Properties

By C. J. Coury

A rarely used loan product, the FHA 203(k), is fast becoming one of the hottest topics on the training front. The renewed interest in this evolving product is due to the high number of distressed properties on the market and the declining amount of “cash” buyers to sell it to “as-is”.

There are numerous misunderstandings about this product that I would like to help clarify:

1. The maximum loan amount is currently $417,000
2. There is no maximum sale price for the property
3. There is no maximum amount for the repairs or improvements
4. The improvements can exceed the purchase price
5. The rate is the same or similar to that of a standard FHA loan
6. This is a first mortgage – not a second
7. The loan is typically a 30 year fixed

There are many advantages that this product offers – here are a few:

1. No repairs need be completed prior to closing
2. Realtor provides comparables to MLO
3. Appraisal is completed based on the renovated property only
4. Appraiser is selected from small list of 203(k) expert

This product will open up a whole new list of available properties to your non-cash customers and eliminate the problem of “low appraisals” due to property condition that cause the need for a renegotiation. My suggestion is that you reach out to a Mortgage Loan Officer that is a 203(k) specialist when you have a customer that you think might benefit from this outstanding product. If they are closing 4 or more of these loans per month they will be able to process your transaction smoothly and efficiently while removing most of the angst associated with a somewhat complicated product.

Talk to a 203(k) specialist MLO today and start selling more homes tomorrow!!!

C. J. Coury is a Senior Vice President with Bank of America and oversees their residential mortgage division serving Sarasota, Manatee and Charlotte Counties. Prior to joining Bank of America in 1995, C. J. was President of Mortgage Brokers of America in Birmingham, MI for 7 years. He has been an active mortgage finance professional since 1983. C. J. may be reached at (941) 952-2888 or by email at charles.j.coury@bankofamerica.com.

A Guide To Financial Fitness Part III

By Rhonda Coblentz

After running my first marathon, my confidence was at an all-time high. I had overcome the “impossible” and finished! Always pushing myself to the next level, this year I set a new goal—to run a race in the mountains. Training in Florida on our sea-level, flat terrain is a completely different animal than running up and down steep hills.  But nothing was out of reach for me now; my euphoria and my legs could take me anywhere.

About a month before the mountain race, an illness landed me flat on my back. I lost weeks of work; weeks of training time, and suffered a sucker-punch to my strength and confidence.

I went to the mountains to compete anyway. I persevered, pushed, pained, and powered my way up those wretched hills, so beautiful to view in a sunset but so grueling and demanding from the pavement.
 
Before joining The Principal®, I first worked as a mortgage broker and a real estate agent. Those of us in the profession felt that marathon-finishing euphoria during Sarasota’s real estate selling spree. Our commissions were fat and frequent, and many of us took advantage to purchase investments of our own. Our confidence was at an all-time high.  I understand the business, and I totally comprehend the setbacks. Many of us were going strong and the industry landed us flat on our backs. It’s been grueling, to say the least. Now is the time to establish a recovery plan. Now is the time to pick ourselves up, dust ourselves off, and be ready for the future. Now is the time to run in the mountains.

Fitness and finance…the parallels are endless. Whether marathons or markets, races or real estate, we can apply principles learned in one discipline to the other.
 
In this series we covered the check-up, the strategy, and taking the first step toward greater financial security.  We discussed staying focused on the goal, examining diet and lifestyle, and overcoming. Through it all, I’ve stressed the importance of defining and working to reach your goals—physical and financial—with the help of a coach. Today we’re going to review a few big-picture issues that help define your financial fitness.

Fitness means different things to different people. We come in all shapes, sizes, and energy levels, not to mention ages. A twenty-something bodybuilder and a forty-something career woman juggling job and family define fitness in starkly different terms.
 
One of the potential benefits of working with a financial coach is that the focus is completely set on you.  What does fitness—or financial security—mean to you? It’s not a one-size-fits-all question. Does it mean being debt-free? Having an emergency fund equal to six months’ income?  Being set for retirement? Do you know where you are at? As your financial coach I will help you define and work toward success on your terms.

What is your strongest asset? Is it your business? Is it your real estate including your home? Is it your health? For real estate professionals and other entrepreneurs, your income hinges on optimum health. If you can’t work, you don’t get paid; it’s that simple.  Something that may surprise you 1 in 10 people age 25-64 suffers from disability compared to 1 in 222 housing units catching fire . One mission as your financial coach is to help you define your strongest assets and then help protect them through strategic planning, income protection, and asset protection strategies designed to help you weather life’s unexpected twists.
 
Who are you working so hard for? That answer may change the way we structure your financial planning. A good coach helps you define and align your planning with your values.   Are you working so hard for your family and children? For a lasting legacy?  Are you pouring your life into your business? Is your business your retirement plan? If so, what is the health of your business? Representatives of the Principal Financial Group® specialize in small- to medium-sized business valuations, 401(K)s, and most of all, helping you see the reality of your financial picture.

While financial fitness means something different to everybody, confidence and increased financial knowledge are a universal language.  Call me today to help you gain back your composure and find solutions to help protect yourself and your future.  Gaining financial health can give you the satisfaction of impacting your family for generations to come. It starts and ends with a plan, and can work best with the help of a financial coach to guide you every step of the way. Even if it means running up a mountain in the worst shape and unfavorable conditions.

Did I mention the view from the top?
Glorious.

Source: 1994 Statistical Abstract of the United States.
Insurance products from the Principal Financial Group® are issued by Principal National Life Insurance Company (except in New York) and Principal Life Insurance Company. Securities offered through Princor Financial Services Corporation, 800/247-1737, member SIPC. Principal National and Principal Life, and Princor® are members of the Principal Financial Group®, Des Moines, IA 50392. Rhonda Coblentz, Principal National and Principal Life Financial Representative, Princor Registered Representative. #6474082011

As a Financial Representative and Registered Representative with the Principal Financial Group®, Rhonda Coblentz works with individuals and business owners in the planning and execution of the steps  to help achieve their unique financial goals.  With a background in the real estate and mortgage industries Rhonda offers a well-rounded approach to her business. Rhonda acts as a resource for her clientele, who benefit from the firm’s 130-plus years in the industry.  The Principal® offers financial products and services, including 401(k) plans, IRAs,  mutual funds, investments, insurance, and banking services . Contact Rhonda at 941-504-9010   #6531082011

November 2009 Exceptional Properties

Fine Homes and Luxury Estates for Sale Over $1,000,000

Exceptional Properties Cover Feature:

Jim Soda, Prudential Palms Realty, 941.809.7759

7817 Valderrama Way, Country Club East, Lakewood Ranch Bradenton Florida

Lakewood Ranch’s 7817 Valderrama Way, a new Gibraltar furnished model home, is located in  Country Club East. This custom designed and decorated model is being offered with a 1 year lease back and a Signature 2 year warranty. The home was built to the highest standards utilizing the finest craftsmanship and finishes. Country Club East’s 7817 Valderrama Way is available fully furnished.

Due to a production mishap the Exceptional Properties cover in the print edition is not 7817 Valderrama Way.  REAL Magazine will rerun 7817 Valderrama Way with the correct cover in the January 2010 edition. We apologize for the inconvenience. Read More

REAL Magazine November 2009

Featuring: 5510 Inspiration Way; Sarasota Bay Front Anna Maria at Legends Bay, Safe Place and Rape Crisis Center.

Read More

The Architectural “Process” Continues….

By Clifford M. Scholz

After understanding the client’s desires, goals and dreams, completing the preliminary design work and selecting a contractor to work with is the next step in “The Process”.

This is when the “rubber hits the road”, as the talking is over and the actual 3 dimensional concept is born. At this point I have an unformulated approach to laying out the early sketches for the site, floor plan(s) and front and rear renderings. This creative activity is really just me sketching. It is very important at this time to be thinking in 2 and 3 dimensions at the same time. I believe that a rough sketch of the site, plans, and elevations serve as a good beginning, while fine tuning the sketch overlays. This part of the design can happen quickly, or it can take a few extra sketches to fine tune it. Much of our work is renovation/restoration work and the constraints of that work can either quicken or extend the timeframe. The end result is hand drawn renderings/plans of the components of the home or commercial structure. For me, this is the most fulfilling segment of our work. Typically the critique goes well and the remaining scenarios are massaging the design concept to the site and the client’s finer needs. Many times we construct a model of the structure for the clients review. This is maintaining the “total communication” with our client, so that we are sure that they understand our work to date. I also include at this presentation an estimate of what I believe to be the projected construction costs of the improvements.

As the preliminary design work is progressing I like to introduce our clients to a number of quality contractors who I feel would work well with the client. A lot of this is also personality matching, as the clients will have a rather long business relationship with the contractor. Getting the right personality match is vital to a smooth project. I recommend that each of the contractors meet individually with the client. At that meeting I recommend that the contractor show the client their offices, meet with the personnel that will be working on the job, see a project under construction, as well as a finished project. All of the contractors that are introduced are very able to complete the work, and typically the clients will gravitate to one or two of the choices.

When, preliminarily, the contractor is selected, we then work with them in estimating the construction costs and timeline of the project. Our preliminary drawings are then combined with written and abbreviated outline specifications. The drawings indicate the quantity and location of components of the building while the outline specifications denote the quality and standards that we expect in construction. This is invaluable information at this time as we can then modify any aspects of the design prior to starting the construction documents. I like options in life, and the ability to tweak the budget or the design at an early stage saves time, money and heartache later on down the line. At this time, we also continue our permitting status and ascertain if there is a FDEP (Federal Department of Environmental Protection) permit required, along with any other variances or code compliance items to review and address. Sometimes this will include meeting with the permitting authority to review various aspects of the project. At this stage, our work will also include reviewing the structural, mechanical, electrical and plumbing concepts with the contractor. Once those parameters are established then work can proceed to the next stage- construction documents – detailing the final product on paper.

As founder of CMSA, Cliff has over 35 years of experience in architecture and construction. His sense of design and clear-cut goals has created a reputation for quality and excellence for his firm. As lead architect, he is responsible for the design of projects consisting of custom residential developments, office structures, commercial renovations, golf clubs and high-rise condominium buildings. He takes a proactive role in every project as the client contact, and directs his team of highly skilled professionals to keep every endeavor in balance.  Cliff received his Bachelor of Science in Architecture from Lawrence Institute of Technology in Southfield, Michigan, and a Bachelor of Architecture from the University of Miami in Coral Gables, Florida. Cliff is also a Licensed General Contractor in the State of Florida and certified as a LEED AP. Cliff may be reached at 941-923-2400 or via email at cscholz@cmsa1.com.

Go Global  –  Why Florida?  Why Now?

By Patricia Tan

I just returned from a marketing trip to U.K. and I will be back there again later this month. Typically these trips consist of us taking a booth at an international property show and/or holding seminars that talk about investing in Florida real estate, or emigrating to USA. It is a wonderful opportunity for me to meet lots of consumers and partners in those markets and understand how they view Florida and more particularly perhaps, their perception of our very own Gulf Coast.

I was encouraged by the large number of visitors to our booth and seminars at the last show. Many of them were very serious about making an investment or buying a second home here, and had already conducted a lot of their own research.

In addition to selling properties, we like to contribute to the consumers’ research and provide them with facts that will help them make a decision in our favor. During these few months we have been focused on why an investor should buy in Florida and more importantly, why they should do it now. These are some of the messages we convey:

Great Prices – Statewide, the existing-home median sales price in August 2009 was $147,400 a 22% decrease from a year ago when it stood at $188,500. The median sales price for a condominium in Florida was $107,500, down 32% from a year earlier. Many homes are selling for about half of what they were worth at the height of our property boom.

Rising Volume of Sales – A signal that today’s “buyers market” may be changing.  Home sales in August 2008 were up 28% over August 2007, while sales of condominiums jumped 45% in the same period.

Reducing Inventory – We still have enough inventory to allow buyers to find their dream home or ideal investment, but the trend is definitely downwards and buyers do have a more limited choice than they did even just a few months ago.

Financing is Available – Some USA lenders will once again loan to foreign nationals, and credit can now be more easily obtained in the buyer’s home country, as their local economies improve. Many international investors leverage investments in their home countries in order to become “cash buyers” here.

Currency Benefits – The US Dollar has weakened against many other currencies. A foreign investor can significantly reduce the cost of his investment by maximizing the favorable exchange rate.

Long Term State Growth – Economic and demographic trends continue to favor Florida. By 2010 economists forecast that Florida will be the third-most-populated state in the country, and our population is expected to swell about 75 percent by 2030. Florida has been one of the 10 fastest-growing states in the U.S. for each of the past seven decades, and growth will continue to provide a foundation for other economic development, such as new jobs and growing incomes. All of these trends are positive indicators for real estate appreciation.

Magnet for Migration – Florida is the number one destination for U.S. immigrants from U.K.  Its relative proximity to Britain, accessibility through many daily international flights, wonderful climate and alluring lifestyle options all add to the attraction. This interest from the international market complements migration we see from other states – not just retirees, but families who move here to take advantage of new jobs and our high performing school system.

Favorite Retirement Destination – Florida will benefit from the migration of the aging Baby Boomer generation, roughly 80 million strong. Demographic studies show that the Sunshine State’s mild climate and outdoor amenities continue to make Florida a top retirement destination.

A Great Place to do Business – Florida has always been a business-friendly state – no state income taxes, plus incentives from local municipalities encourage businesses to set up shop here. Florida ranked No. 1 in the nation for workforce; among the top 10 in technology and innovation, and also in access to capital; and moved up to rank third overall in Chief Executive’s survey of the best places for jobs and business growth (Chief Executive, March 2009).

As a British National who moved here in 1997 I truly enjoy sharing my Florida experience with others who may be considering a similar move. Judging by the crowds we saw during our recent trip to U.K. I expect to be joined by many of my countrymen very soon!

Patricia Tan was born in England, and moved to Sarasota in 1997. Her career afforded her the opportunity to live and work in many countries around the world, including Australia, Hong Kong, Singapore, Malaysia, Indonesia, Germany, France, Belgium, Netherlands and the United Kingdom. She spent five years as a Director of an American real estate franchise in England in 1990s. Patricia has served as Chairperson of Sarasota Association of REALTORS®’ International Council, and serves on Florida Association of REALTORS®’ International Operations Committee. She currently works as International Sales Director for Prudential Palms Realty. Patricia may be reached at 941-487-5107 or patriciatan@prudentialpalmsrealty.com.

A Guide to Financial Fitness – Part II

By Rhonda Coblentz

I am a recovering couch potato.

In March 2008, I finished my first marathon.

There I was, remote control in hand, when I saw the commercial for the Sarasota Marathon. Two thoughts struck immediately: “I wonder if I can do that,” and “I can’t do it on my own.” Call it a moment of inspiration or one of insanity, but I called the race organizer and inquired about a coach. It was a crossroads, a choice to begin something new—to become an overcomer.

At first, my goal was to run the half-marathon, just 13.1 miles through beautiful coastal Sarasota. Halfway between wild idea and race day, my coach and fellow runners encouraged me to go for the full marathon. People said I was crazy; my daughters told me I couldn’t do it. The pain was often intense and there were days I could barely walk. But I kept my eye on the goal and pushed forward with every ounce of determination and perseverance I could muster. And when I was fresh out of determination and sorely lacking in perseverance, my coach was there. He motivated, supported, and eventually cheered me on during the grueling 26.2 miles of pain, pleasure, and sheer willpower.

The journey to financial fitness is never a 50-yard dash. We’re training for the long haul; we want to finish well. In health or in wealth, we do not plan to fail; we fail to plan. Nobody grows up thinking, “I want to be overweight and sedentary,” or “I don’t want to be financially successful.” But so often, planning and then getting there requires stepping out of your comfort zone.

In Part I of this series, I discussed the steps to get started on any fitness plan—whether physical or financial. The steps included getting a check-up to find out what shape you are in; developing a strategy; and taking the first step. In Part II, I want to look at three more areas: staying focused on the goal, examining diet and lifestyle; and overcoming setbacks.

Staying focused on the goal
How do you stay focused on your financial goal when the economic picture is shaky at best? It takes a disciplined plan and a strong support system. It requires an ongoing look at “YOU, INC.” We work so hard for our day-to-day finances, whether for our own business or our employer. But if you fast-forward to retirement age and look back on your income-producing days, what did you do for YOU, INC.? At the close of business, will YOU, INC. be thriving? Or bankrupt and dependent on your children?

As a financial representative with the Principal Financial Group®, I coach my clients to keep focused on their goals. I help them stay on track. Together we examine choices, adapt to changes, and fine-tune the positive steps we can make so that their future financial picture reaches peak performance.

Examining diet and lifestyle
To finish my marathon, I needed to make some lifestyle changes. I needed healthy calories that would provide stamina, strength, and energy. I needed less fat and more protein to build muscle. I needed to schedule in time to run. I took the advice of my coach who had run this race before.

Reaching financial fitness is no different, but what do you change? One of the advantages I provide personal and business clients is financial expertise and knowledge backed by a solid company with a stellar reputation. Whether you are just getting started on your financial planning journey or simply needing a review to be sure you are still on track, I help clients answer some hard questions. Do I have enough income protection? Asset protection against creditors? What will I need to retire? Am I paying too much in taxes? What is my primary business concern? What does financial security mean to me? At my age and income, what don’t I need? Where can I trim expenses to make room for more savings? How can I get there from here?

Overcoming setbacks
During my marathon training, I had made quick initial progress. But then I encountered a level of pain that almost sent me back to the couch. I kept in constant communication with my coach, and he taught me specific stretches, examined my stride, and adjusted my regimen. I’d never have finished without his expert advice.

My clients rely on me to help them weather economic setbacks. Regular communication is key; we are in this race together. When life happens and finances take a hit, it’s time to re-evaluate. When was the last time you reviewed your plan with someone who did not create your plan? The same asset allocation that has performed poorly may need a strategy revision to recover, just as eating the same foods may not help you to lose excess weight.

Reaching the finish line
What stops people from getting a personal fitness trainer? People usually think of the expense; but is it really more expensive to get fit than the cost of getting well again? We’re all trying to be health-minded, to feel better physically. But if we get fit and live longer, let’s make sure we won’t outlive our money! There are only two ways to make money: you at work for your money or your money at work for you. My goal is to help your money work harder so that you reach the finish line.

At the Principal Financial Group®, we specialize in both personal planning and in planning for the small- to medium-business market, providing buy-sell reviews and business valuations.

Action conquers fear. Many people are at a financial crossroads, afraid to make a decision. Inaction is often a passive decision to go broke safely. Are you ready to run your financial marathon? Call me for coffee—or a juice bar—and let’s get started on your financial fitness today.

Insurance products from the Principal Financial Group® are issued by Principal National Life Insurance Company (except in New York) and Principal Life Insurance Company. Securities offered through Princor Financial Services Corporation, 800/247-1737, member SIPC. Principal National and Principal Life, and Princor® are members of the Principal Financial Group®, Des Moines, IA 50392. Rhonda Coblentz, Principal National and Principal Life Financial Representative, Princor Registered Representative. #6474082011

As a Financial Representative and Registered Representative with the Principal Financial Group®, Rhonda Coblentz works with individuals and business owners in the planning and execution of the steps  to help achieve their unique financial goals. With a background in the real estate and mortgage industries Rhonda offers a well-rounded approach to her business. Rhonda acts as a resource for her clientele, who benefit from the firm’s 130-plus years in the industry. The Principal® offers financial products and services, including 401(k) plans, IRAs,  mutual funds, investments, insurance, and banking services . Contact Rhonda at 941-504-9010 #6531082011

Reaping What We Sow

By Tracy Eisnaugle

Getting your hands dirty and relying on the earth can be just the inspiration that one needs to realize that with some hard work, patience and a lot of love you too can reap the rewards from your own garden full of fresh fruits and vegetables.

Last February I decided to give gardening an honest try. As a certified over-planner and known germaphobe this was going to be a challenge for me, but I knew I had to get over all my internal dilemmas and just dig in. After some late fees on library books and endless online investigating I selected what I hoped to be the perfect spot in our backyard for the future garden. After researching the different planting techniques, fencing materials, soil compositions and plants that would prosper in our area I ended up with an accurately measured layout and a list of items I needed from our local garden center.
 
In our home my husband handles all the outside maintenance while I take care of the inside, which works great since I am an interior designer and he is a landscaper. Our roles are clear and have been respected for years, so for me to stake claim to a section of the yard and request plants and sod be removed was a test of our boundaries. Location, size, soil, and fencing were all debates I was prepared to argue and since Jeff does not come home with artwork or furniture or attempt to select paint colors, I knew I had to tread lightly.

Determining the location was easy I needed level, sunny land that had some wind protection and no roof runoff with the spring and summer showers on the way. With our sandy soil, which does not retain water or have any nutritional value, I decided to build raised plant beds and bring in organic soil.  I also took into consideration that I needed to be able to walk around each row of plants to water, feed, pick and give tender attention when needed. I had planned the size of the garden based on the fencing I found online, which was disagreed upon by my landscaper and had to be reselected. So out with my beautiful layout and off to the store we went.

Although my original design was adjusted multiple times it is finally in place and working. I planted beefsteak tomatoes, grape tomatoes, red peppers, green peppers, a mix of sweet and hot peppers, bi-colored sweet corn, carrots, cucumbers, green beans, herbs and two types of lettuce. Watering from my rain barrel every other day, keeping the tomatoes caged and in some sort of control, and staking up the green beans is a lot of work but it is very enjoyable and stress reducing. With the proper gloves, knee pad and boots my germaphobe self was able to get lost in the garden for awhile each week.

The garden was fully installed and underway by the last week of February and now many months later I am happy to report that we have enjoyed tons of tomatoes, fresh herbs, lettuce, green beans and peppers galore. The corn got flooded out with the summer rains and my cucumbers and carrots did not make it either, but it is rewarding to see things flourish and mature.

Many lessons were learned this year with my first garden, and during our brief winter I plan to make some adjustments. It’s true when you grow it, it taste better and as a result you actually eat better. Getting back to the basics and providing for ourselves seems to be a growing trend. So join me in getting dirty, enjoy the fruits of your labors and share your edible rewards with your neighbors.

Tracy L. Eisnaugle has practiced interior design in Sarasota since 1997 and is currently self employed providing design consultation services in the area. She is a graduate from Florida State University with a Bachelor of Science in Interior Design and continues her education by attending annual conferences. Her past experience includes, Design Center Manager for Lee Wetherington Homes, high-end residential design and model merchandising. Tracy may be reached at 941.232.3358 or by e-mail at tleisnaugle@msn.com.

Real Estate Investing For Baby Boomers

By Jeff Riddell

Last article, we discussed middle age real estate investing. Next is the 50-65 bracket—I’ll call them the baby boomers. In my opinion, this is the time to become more conservative in your real estate investing; and more diversified in your real estate holdings regardless of whether you are a beginner or long term investor. If you started your real estate investing career earlier while you were in the 20-35 bracket—or even in the 35-50 bracket—by now you have probably accumulated a pretty nice portfolio of real estate holdings such as houses, small multifamily and maybe even some industrial properties, office properties, strip center or free standing retail buildings. You should also have benefited handsomely from appreciation and mortgage amortization by this time, especially if 15 year mortgages were your choice.

Often the road to diversification is through refinancing and redeploying the tax free refinance proceeds into other real estate. Also, since these are peak earnings years for most people, you may now be able to add more to your real estate portfolio than ever before—especially if the kids are out of school and off your payroll. However, to avoid too many eggs in one basket, people in this age bracket may also decide to sell some real estate assets and diversify. A 1031 exchange may be the answer to make sure that their real estate piggy bank is not reduced by payment of capital gains taxes and recapture of depreciation.
 
What about the people who are in their 50s or early 60s whose only real estate investment is their home? If you are in the 50-65 age bracket, a diversified investment portfolio is important; most advisors agree that diversified investment portfolios should include real estate. For people in this age bracket whose portfolio consists of stocks, bonds, mutual funds, CDs and other non-real estate assets, it may be time to add some real estate. If you’re too busy with your regular job—or at an age where you are not inclined to work at your real estate investments—take a look at real estate investment trust (REIT), limited partnership (LP), limited liability company (LLC) and tenant-in-common (TIC) real estate investments. For a moment, let’s take a closer look at REITs and TICs.

Regarding REITs, there are publicly traded REITs and non-publicly traded REITs—sometimes called private REITs. There are actually two kinds of private REITs: Those that file with the SEC but are not listed on a stock exchange; and truly private REITs which do not report to SEC at all, but I will refer to both collectively as private REITs in this article. Since publicly traded REITs are listed on a stock exchange, your stock broker can introduce you to them. For private REITs, you will need the help of a securities registered representative who specializes in direct private placement securities (DPPs)—and who knows which sponsors have private REITs available. Although past performance is no guarantee of future results, REIT returns have been impressive recently.

Regarding TICs, they (tenant-in-common ownership of real estate) are nothing new. TIC (tenant-in-common) just means that a single property has more than one owner. Any group can co-own real estate as tenants-in-common, even what I call traditional properties like a strip shopping center, office building or apartment project. Such co-ownership, however, does not avoid the headaches of property management unless the co-owners can afford professional management.  Sponsored (syndicated) tenant-in-common (TIC) properties, on the other hand, may be a way of participating in real estate without management headaches. Although some TICs are treated as pure real estate and are sold through real estate brokers, most are marketed as securities through securities broker-dealers and their registered representatives. Therefore, like private REITs, you need to be in touch with a securities registered representative who specializes in DPPs to purchase most TICs.
 
Next article, we’ll talk about seniors.

Jefferson F. Riddell is a Florida Board Certified Real Estate attorney with thirty-five years of experience assisting people with a variety of residential and commercial real estate matters. U.S. 1031 Exchange Services, Inc is a 1031 exchange qualified intermediary (QI) and a member of the Federation of Exchange Accommodators (FEA). As President of U.S. 1031 Exchange services Jeff has been facilitating 1031 exchanges for more than twenty years. Jeff has been awarded the Certified Exchange Specialist (CES) certification. Jeff may be reached at 941-366-1300 or via email at jeff@us1031.com. www.us1031.com

RESPA/Regulation X Changes

Information Courtesy Of C. J. Coury

The U.S. Department of Housing and Urban Development (HUD) has announced significant revisions to the lending requirements under RESPA/Regulation X. These changes impact the Good Faith Estimate (GFE) and HUD Settlement Statements (HUD-1 and HUD-1A) and will be effective with new first mortgage applications taken on or after January 1, 2010. These important regulatory changes will place new requirements on lenders to ensure that borrowers are better positioned to understand their mortgage transaction. Following is an overview of the four key changes associated with the new Regulation X requirements.

1. Good Faith Estimate (GFE) and HUD Settlement Statement (HUD-1) Forms
Redesigned and with substantial changes, the GFE and HUD-1 forms will standardize how fees are disclosed – making it easier for borrowers to compare offers between lenders. The GFE and HUD-1 will also be aligned to provide even greater transparency for borrowers when comparing settlement charges at closing. Specific enhancements include:

• All lenders will be required to disclose fees in the same manner
• Loan feature information has been added to the forms
• All lender fees will be combined and shown as a single amount (fees paid by lenders, property sellers or builders and fees paid outside of closing will be included in the total settlement charges)
• A reconciliation of the GFE to the HUD-1 will be required

2. Settlement Service Provider List
Lenders will be required to provide the borrower with a Settlement Service Provider List that includes settlement service provider names. This pertains to any settlement service where the service is required but the borrower can select a provider – for example: title, pest and septic inspections.  In addition:

• The list must include service providers available in the local market
• If the borrower selects a service provider from the list, the lender will be subject to certain fee tolerances (see #4 below for a list of fee tolerances) for the charges associated with that provider
• If the borrower selects a service provider not on the list, the settlement service is not subject to the tolerance.

3. Re-Disclosure Restrictions
Lenders will be bound to fees disclosed on the initial GFE, except in certain situations where there are “changed circumstances” associated with a loan.

• Changed Circumstances:

− If a changed circumstance occurs, only those fees affected by the changed circumstance may change
− If the estimates within the GFE are inaccurate but no change circumstance occurs, the lender is bound to the amounts shown on the last disclosed GFE
− If a changed circumstance occurs, the lender must re-disclose within three business days after receipt of the information regarding the changed circumstance. or the ability to re-disclose (and change a fee) is lost
− Lenders must retain documentation relating to the changed circumstance and fee change, if re-disclosed, for three years

• The definition of “changed circumstances” include the following:
− Acts of God, war or disaster
− Changes or inaccuracies in information relating to the borrower or the transaction that was relied upon in providing the GFE
− Changes to the loan amount or estimated value of the property
− New information regarding the borrower or transaction not relied upon when the initial disclosure was provided
− A lock event (locking the rate or expiration of the lock) or a change in the deal structure requested by the borrower

4. Fee Tolerances
In an effort to improve the accuracy of the settlement charge information provided to borrowers, new restrictions will be placed on lenders regarding how and when fees disclosed on the GFE may change. Tolerances on changes to settlement charges between the final GFE and HUD-1 will be defined in three categories:

1. Charges that cannot increase at settlement:

− Origination charges
− Discount or premium points for a specific interest rate selected
− Adjusted origination charges (after the interest rate is locked)
− Transfer taxes

2. Charges that cannot increase in the aggregate by more than 10% at settlement:

− Required settlement services that the lender selects, such as appraisal services
− Title services and lender’s title insurance (if selected by lender or if the borrower uses a company identified on the Settlement Services Provider List)
− Owner’s title insurance (if the borrower uses a company identified on the Settlement Services Provider List identified).
− Required settlement services (such as  Pest Inspections) that the borrower selects from the Settlement Services Provider List
− Government recording charges

3. Charges that can increase at settlement:

− Required settlement services  that the borrower can  select, if the borrower selects a service provider not listed on the Settlement Services Provider List
− Title services and lender’s title insurance, if the borrower selects a service provider not listed on the Settlement Services Provider List
− Owner’s title insurance , if the borrower selects a service provider not listed on the Settlement Services Provider List
− Initial deposit for borrower escrow account
− Daily interest charges
− Homeowner’s insurance

Note: For 1 and 2 above, these fees will not be subject to the tolerances should a changed circumstance occur that directly impacts the fee and a revised GFE is provided within the three business day time period after receipt of the information regarding the changed circumstance.

C. J. Coury is a Senior Vice President with Bank of America and oversees their residential mortgage division serving Sarasota, Manatee and Charlotte Counties. Prior to joining Bank of America in 1995, C. J. was President of Mortgage Brokers of America in Birmingham, MI for 7 years. He has been an active mortgage finance professional since 1983. C. J. may be reached at (941) 952-2888 or by email at charles.j.coury@bankofamerica.com.

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