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Archive for the ‘closing’ Category

The self isolation and quarantines of the coronavirus/Covid-19 pandemic creates challenges and disruptions, including in real estate.  The title and mortgage industries are putting forth efforts to overcome these challenges.

Remote Digital Closings May be Available Soon!

A major effort is underway from title underwriters, legislatures, and administrative agencies to allow “Remote Online Notaries,” (RON) in Wisconsin.  This would allow for fully remote, digital closings without the need to leave home. While it would primarily be available to Sellers, some Buyers can also sign remotely.

E-signing2

Buyers with a loan will need their lender approval to conduct a fully digital closing.  Lenders have many considerations and challenges, including investors, underwriters, mortgage insurance, and legal issues. Some may not be able to offer this service right away and others may allow only certain documents to be signed digitally.

Homestead Title is already conducting digital, remote closings for “Cash” Buyers (where none of their documents are notarized and there is no lender).

Look for important updates on Digital Closings in the coming days.

 

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Homestead Title has implemented a plan to maintain day-to-day operations in response to the Coronavirus (COVID-19) pandemic.

Homestead will continue normal operations, without disruption, during these challenging times. We do not anticipate any delays or cancellations as a result of temporary changes to our business. The majority of Homestead’s team will work remotely from home over the coming weeks. Phone and Email will operate as normal and we are available to help.

Closing officers will be available in our office for any scheduled sale or refinance. We will operate with minimal, in-office staff and appreciate your patience and understanding.

We are committed to supporting and serving our employees, their families, and all those involved in our real estate and title insurance transactions.  As we monitor developments and guidance from public health professionals, we will make any necessary adjustments.

Tips for a Healthy Real Estate Closing:

  1. Only Signors in the Closing Room: Homestead will not allow anyone in the closing room other than necessary signors (Buyers, Sellers, and their attorneys).  We urge Lenders and Realtors not attend closing and will ask them to wait in our outside lobby.
    1. We will include Realtors and Lenders on all questions by phone.
    2. We will overnight commission checks at no cost to the Realtor or their broker.
  2. Sign Separately and Social Distancing: We encourage Buyers and sellers to sign at different times.  We are waiving Seller pre-sign fees until at least June 1, 2020.  Alternatively, we encourage Buyers to arrive on time and Sellers to arrive 35 minutes after the start of closing.  This will allow for minimal contact and more “social distancing.”
  3. Remote or Digital Closings: When possible, Homestead will offer remote or digital closings.  Remote notarization is not yet legal in Wisconsin, so fully digital closings are rarely an option other than for cash purchasers. We will explore all options to accommodate our customers and protect the well-being of our community.
  4. Clean Office Space:  We are providing clean pens and separate paperwork to minimize contact between people. We are wiping down all surfaces with disinfectant wipe throughout the day.
  5. When to Avoid Closing: If any Buyer or Seller is sick,  in contact with anyone diagnosed or suspected of having Covid-19, or has traveled internationally in the last 14 days, please contact us for alternative closing options
  6. Celebrate: We are excited to help you buy, sell and refinance. Yet, we will be refraining from hand shakes, high fives, and other close celebrations.  These are scary times, but together we can do this!

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Imagine signing all of your closing documents for the purchase or your house from the comfort of your couch.  Digital closings are coming and this could soon be a reality.

What is a Digital Closing?

A digital closing is a broad term that can include a number of differedigitalnt scenarios, ranging from the review and signing of a few documents on a computer or tablet to signing all documents remotely on a computer. A digital closing simply means a closing where at least some documents are signed electronically.  There are 3, broad categories of digital closings:

Hybrid Closing:  Some documents are signed electronically while others are signed on paper. This typically occurs in person, at the title company, and may include a traditional notarization or an electronic notarization.

Fully Electronic Closing:  All documents are signed electronically, including the use of in-person electronic notary.  The closing occurs in-person, usually at the title company.

Remote Electronic Closing:  The entire closing occurs remotely, via video, with a remote online notary (RON).

So, when can we do an electronic closing?  Some Hybrid closings are already happening. But, there are still challenges before the industry can implement more extensive use of electronic or remote electronic closings. These challenges include technology of lenders, title companies, and consumers; security and privacy concerns; and the interaction of state and federal laws.

Homestead Title recently participated in the American Land Title Association and Mortgage Banker’s Association’s Digital Closing Boot Camp.  Our take away: Digital closings are coming, but not tomorrow and not in a tidal wave.  Digital closings will soon become another tool in our tool box, giving consumers more options. Remote Electronic Closings are a more distant reality in Wisconsin.  Most importantly, we learned that Homestead Title is more prepared than most in the industry.

Look for more information about digital closings and options to make the closing experience easier, smoother, and more convenient.

 

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This is the first in a series of videos explaining FIRPTA — the Foreign Investment in Real Property Tax Act.
Firptapicforblog

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Homestead Title (1)

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Wisconsin Passes New Privacy Law Affecting Closings

A new state law may make the closing process slightly more difficult. The law makes it harder to order water bills for real estate closings. Being aware of the new law can avoid delay and help ease concerns when the title company asks for information or signatures.

Act 25 And Municipal Water Bills

When a home owner sells a house, they must assure that the water bill is paid in full as of closing. Title companies take care of this by ordering the Seller’s final water bill from the municipality. This is typically the only utility that the title company will handle because it is listed on the offer to purchase and can become a lien against the property if not paid.

Wisconsin Act 25 now prohibits a municipality from releasing customer information to any person (including a title company) without the home owner’s consent. This means, title companies need a written authorization and consent from every seller in order to request the water bill.

While this might seem like a minor detail, it adds time and complication to an already rushed and complicated process. Many sellers are nervous about the process and are skeptical and hesitant to give information and authorization to a title company that they hardly know.

The Wisconsin Realtor’s Association has advised all Wisconsin Realtors to include the following authorization on their listing contract:

The Seller authorizes the Broker and/or the title company Seller anticipates will close the transaction, to obtain any municipal utility customer information relating to the Property, including but not limited to customer usage or account information.

Homestead Title has already revised our Authorization (used for mortgage payoffs) to include any municipal utilities.

Homestead’s mission and passion is to make the closing process easier. By providing education and helping Realtors and Sellers understand the process, we make the process more enjoyable, less stressful, and smooth for everyone involved.

 

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Too Much Money is a Red Flag!

Realtors, attorneys, and home sellers should be alert to red flags that indicate fraud, scams, or troubled deals. One major red flag is when a buyer offers too much money. Sellers should beware of any offer with a purchase price that is far higher than expected or earnest money that is far more than customary in the market.

Common Scams

Foreign Buyer Blindly Purchasing Home

One common scam involves foreign buyers emailing Realtors asking for help purchasing a home. After a few emails, the buyer (usually from China, England, or Canada) will make a full price offer on a home the he has never seen. He will then send earnest money in a certified check. If the red flags weren’t waiving already, they should be when the Earnest Money is way too high. For instance, in Madison, Wisconsin, earnest money typically ranges from $1,000 – $3,000. The foreign buyer will send $100,000 or more in earnest money. They will then ask for a return of the excess money. If you return the funds via wire, as requested, you will soon find yourself in a bind when the certified check bounces. It was fake.

Too much earnest money is a red flag!

For more information on this, common scam: Link here.

Local Buyer Seeking Occupancy

Another potential scam occurs when a buyer seeks to purchase property with an extended, pre-closing occupancy. In this case, we have seen buyers offer substantial earnest money (10-20 times the typical amount) and request occupancy for many months prior to closing. The buyer then moves in, fails to close and refuses to leave. The seller must file an eviction proceeding to remove the buyer.

Again, too much earnest money raises red flags. In additions, extended, pre-closing occupancy should raise a red flag worthy of retaining an attorney.  Interestingly, one of the ways to mitigate the risk of an extended occupancy period is to ask for an unusually high amount of earnest money.  Thus, red flags don’t always lead to fraud.  But they can indicate additional risks.

Unrealistic Purchase Price

Any time a buyer offers far more than the reasonable value of a home, it is a red flag for fraud. In some cases, this kind of fraud can benefit both buyer and seller. But, it may be fraud nonetheless and can expose the Realtor or other professionals to liability and harm.

For additional resources on avoiding Real Estate Scams, check out the following links:

Various Real Estate Scams: http://realtormag.realtor.org/law-and-ethics/law/article/2010/08/5-real-estate-scams-you-need-know-about

Foreign Buyer Scam: https://homesteadtitle.wordpress.com/2010/06/15/real-estate-scam-warning/

Corporate Records Scam: https://homesteadtitle.wordpress.com/2013/02/01/scam-alert-annual-minutes-requirements/

Deed Copy Scam: https://homesteadtitle.wordpress.com/2012/07/20/deed-copy-scam-alert/

Better Business Bureau False Complaint:
https://homesteadtitle.wordpress.com/2012/01/20/better-business-bureau-false-complaint/

 

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Up, Up, and Away

Rates on the Rise, But Sales Remain HOT

Mortgage rates spiked over the last two weeks. In fact, since the end of April, the average rate on a 30-year fixed rate mortgage increased by nearly 25%.

Pressure From The Fed Kept Rates Low

The Fed had helped keep mortgage rates low through a bond purchase program called Quantitative Easing (QE for short). But, recent announcements by Fed Chairman Ben Bernanke signaling a slow down or end to QE spooked the market.

Mortgage rates jumped and have continued to rise since those announcements.

Real Estate Market Continues Hot Streak

Despite rising rates, the real estate market remains hot. Realtors continue to be overwhelmed with activity and many sellers are seeing multiple offers near or at asking price.  Homestead’s numbers are no different. After an incredible year of growth in 2012, we have seen a 30% year over year increase in closings. And, despite the jump in interest rates from April to June, our new orders have not slowed.

Homestead’s growth is both a function of a strong market and of our strong commitment and passion to making the closing process easier for our customers and clients. Our values of caring, empathy, flexibility, loyalty and a hands-on, education based approach have cemented a loyal following of Realtors and do-it-yourself sellers.

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Closing Cost Credits – Buyer Beware!

A simple contract term can cause so much confusion:

“Seller shall provide buyer with a closing cost credit of $3,000 at closing.”

Closing cost credits are often used to help buyers cover their costs or to address contract issues prior to closing. When Buyer’s and Sellers agree on this credit, everyone should be happy. Unfortunately, it is not that simple.

The buyer’s lender must approve all closing credits and they must appear on the HUD-1 Settlement Statement. Problems arise when lenders reject these credits.

Contract Language and Communication

Realtors must draft good contract language and communicate with their Buyers. First, Realtors may provide for a “closing cost and prepaid” credit. Lenders will only allow credits up to the amount of the Buyer’s actual closing costs. Including “prepaids” allows many lenders to increase the allowable credits to include prepaid mortgage interest and tax escrows. Realtors should also avoid excessively large closing cost credits. In Dane County, for instance, it is unusual for closing costs to exceed $3,500. A closing cost credit of $8,000 is virtually certain to be denied. It is also important to communicate with your Buyers and warn them that the closing cost credit requires lender approval. Prepare them for the possibility that the credit may be limited or even rejected.

Avoiding Lender Rejection of Credits

Many Realtors or attorneys include provisions that reduce the purchase price by the amount of any rejected credits. Beware: this can cause delays and the need to re-underwrite a loan. The seller may also credit “prepaid” items to increase the allowable credits. Check with the lender prior to drafting the “closing cost and prepaid credit” provision to make sure it is acceptable. The best practice is to avoid closing cost credits that exceed actual closing costs.

Most importantly, if a lender rejects a credit, there are certain things that are not acceptable:

  • Do NOT have the Seller write a personal check to the Buyer at closing
  • Do NOT ask the title company to write a check to the buyer, and reduce the seller’s proceeds by that amount.
  • Do NOT have the Realtors write a check to the Buyers.

Each of these “solutions” may constitute loan fraud. It is never worth risking a Realtor’s license or an attorney’s practice to assist or instruct their clients in the commission of loan fraud (no matter how unlikely it may seem that there would be any real consequences).

This information is provided by attorney Pete Zarov. This is not intended to constitute legal advice and should not be relied upon in place of individualized legal advice. For more real estate tips, check out Homestead Title’s blog.

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