Team Reba Real Estate

First, let me preface this post with the fact that I am not an attorney, nor do I play one on TV or in real life.  The following are comments of mine based on several client experiences. 

The title of the post is a  little twist on the usual saying of, “good fences make good neighbors” but from a real estate perspective it all depends on whether or not the neighbor (or you) put the fence up where it ought to be. Many people buy a house without checking the fenceline to be sure that it really is at the appropriate boundary, part of this is due, I think, to the fact that most people don’t want to pay the extra cost of a survey.  In the Seattle and general King County area it is common to see pricing for a survey run around $1200-1500 so it’s certainly not what most people want to pay out of pocket on top of the cost of a new fence, which can be thousands of dollars.

Depending on the size of your fence, and style, a fence can be a pricey addition.  Most people appreciate a fenced yard, and particularly those with dogs and/or children that they want to keep free from roaming.

Rarely does a fence actually go along the exact boundary line of a property.  So, as a buyer of a home you have to decide if you want to pay for that survey or extended title policy where a look at the fence will bring up the details. From what I’ve seen, the title company, once a fence-line mistake has been discovered, will make that an exception of the policy coverage because the buyer is now aware of the mistake.  If a fence has been in place for many years without an agreement between the seller and his/her neighbor, there is a chance that the encroachment could create a situation of what is called adverse possession.  Each state has its own rules around how this works so you need to consult local attorneys and law if you need help in a situation where you think this may have occurred, or it is in the process of being done.

A former neighbor of mine in Seattle had a crazy case of this and it created a long term boundary dispute between him and his neighbor for years.  The ante seemed to be upped each time it came to the surface resulting eventually in a court hearing, and it is still unresolved.  In some cases, the encroachment does end up causing land to be lost - as in a case of where I showed a property to a buyer client of mine in Snohomish County where the tax info showed that 5.2 acres were on site but the agent only noted 4.7-ish on the listing details.  The explanation I received when I asked about the discrepancy was that an adverse possession claim had successfully taken .4 acres of land from this owner.  All I could think and hope was that someone had told that homeowner to file a petition with the county to have their taxes reduced since they weren’t officially the owners of that portion of land any longer.  I have no idea if that happened or not since the people weren’t my clients.

Are there lessons learned here via these few examples?  I hope so, and they are numerous.  If you didn’t get them the first time reading through this post, email or call me and I’ll be happy to discuss them with you.

So, be a good neighbor and happy fence building!

Then you might want to know about a servicing company that can help with the 3rd party servicing of loans.  Traditional purchase and sales usually involve conventional bank financing and these larger firms usually have their own loan servicing departments or they contract it out.

As a private property owner who is selling, you can also use a similar service if you are offering seller financing for your home.  Considering how the mortgage markets have been getting tossed around it might give you a selling advantage in today’s selling market.  This service can also be used for private party contracts and for seller carrybacks.

Check out the website of Contract Servicing to learn more.  Always do your own due diligence before hiring any firm.  This company is a division of Fidelity National Financial.

Recently, I was able to confirm my belief in the notion of there being only 2 degrees of separation between any one of us and another person.  Even though the more commonly held viewpoint is that there are 6 degrees of separation, or in the case of a fun game, known to many, “six degrees of Kevin Bacon.”  I started my belief in 2 degrees after Michael and I first met 7 years ago shortly after which I held a party called the Mix & Match. The intent was to bring my friends together and some new people into our circle by asking each couple and single invited to bring a single person I personally didn’t know to the party.  What we found was that there were roughly 2 degrees of separation between a large number of people at the party once people started asking how they knew me or Michael.  Leap forward to this year and how I’m even more solidied in my view…

So, a client I’ve been working with for over a year by email comes into the USA for a monthlong trip.  The couple lives overseas in South Africa where the husband works for a government run organization.  He’ll be retiring in the next 1-3 years and, since they have family here, will be moving back to the Pacific NW to be close to their daughters who live up this way. 

Now, I’ll say, these folks were referred to me by an agent in Idaho so I really didn’t think much about who else they might know.  I did get them introduced to an agent in Vancouver and one in the Portland, OR area since these are some of the locales they are considering outside of the Greater Seattle area.

It turned out that with my client’s price point requirements we didn’t really find much for them in King County that was interesting, so we ventured down to Pierce County and focused on the City of Tacoma for the most part since it had commuter services to Seattle and a pretty decent housing stock that met our requirements list.  The house hunting crew consisted of me, the couple, and one of their daughters.  The first day we all went but on the 2nd day their local host offered to take the daughter mall shopping, something she (at 22 yrs old) was more interested in.

While out driving around on our 2nd day of home hunting I got a phone call from a friend and colleague of mine in escrow, Jamie Kondo (yes, one of our co-contributors to this blog).  I told her I couldn’t really talk and asked if I could call her back.  She asked, “are you with your out of town clients?”  Yes.  And she then said, “I think I just met their daughter.”

Huh?

It turns out that the host couple who my clients were staying with in Newcastle, WA are related to Jamie.  In fact, the lady she was telling me about, who brought my client’s daughter to where she was, is her aunt.  That’s 2 degrees of separation to me.  So, from Idaho, to South Africa, to Seattle/Newcastle to Pierce County (Jamie’s stomping grounds) and Oregon (where the daughter lives). 

Jamie and I have worked together on many real estate transactions over the 5+ years we’ve known each other (through 2008) so it’s pretty funny to have this connection work itself out with neither of us having generated it.

What really cracked me up was to hear my clients say that I’d just proven a point to their daughter.  They’d always stressed to their kids that you should always watch your actions in public because you just never know who knows who in the room and where information about any bad behavior might go.  A good lesson for agents too as bad service may travel farther and wider than you can imagine.

Kevin Bacon… I may just have you beat.

Something that is done in the home sales process is the ordering of a title insurance policy for the buyer and the buyer’s lender.  In WA State typically the seller will buy a policy for the buyer at the full sale value of the property and the buyer buys a policy for the loan amount for the lender, if there is one being used in the transaction.  All sellers must provide what is called “marketable title” to the buyer at the time of closing - meaning there are no “clouds” on the title which could include liens, claims to ownership, etc.  If a seller cannot provide a clear title either the deal can be delayed, if all parties agree, until the problem is handled or it might squash the deal depending on the issue.

What happens during the actual process is this:

1.  A listing agent might order a “preliminary title policy” which allows the listing agent and the seller to review what items are noted that affect the property from a title aspect.  Hopefully these people will actually review the document and make sure there are no outstanding items or at the very least begin to work on clearing any issues.

2. When an offer is secured on the property then either one of the agents (listing or buying) will update the title to show the buyer’s info and the sale amount. Title policy prices are based on the value of the property and not just on the type of coverage supplied. By updating the title, this will trigger the title company to send out a copy of the title report, and hopefully any underlying documents that may be part of the title report, to the buyer’s agent and their buyer client.

I’ve noticed that a lot of people, including some agents, don’t know how to read these documents when they arrive.  In fact, I’ve had the odd experience in my broker’s office once of saying to the staff, “oh, good, the title report’s here” only to be told that this was a shocking statement.  I asked what people normally did with these reports and was told that most agents just throw them away. YIPES!  Over time I’ve also found that some title companies are better about sending copies of the reports directly to the buyer client than others.  We always ask for a report to be sent to me and one to my clients but this is often missed.  Regardless of a title contingency element being in a contract you still want to review the report to make sure no items may come up that will affect “marketable title” since it is still a contractual element for closing.

3. If items are noted that are of concern then, if a title contingency is in place, the buyer may make a formal request to have certain items removed or cleared from title.  Even if there isn’t a contingency any items impacting the title need to be cleared by closing (as noted above).

What are some typical items you might see?

mechanic’s liens (workman or construction place a lien for payment of a bill)

utility or tax liens (could be from non-payment or deferred payments if a senior discount was given)

if it’s an estate, perhaps payment of medical care that was provided by the state or there may be other claims on the home from other family members.

easements (be careful with some of these - I had one bite me in the butt with a neighbor who tore up my yard during his house sale) - it’s always best to read what the easement is for and who is responsible for paying the costs of upkeep, replacement, etc.

Covenants, conditions & restrictions (aka CC&Rs) - usually when the property is part of homeowner association and can affect single family homes, townhomes, and condos.

This list isn’t exhaustive but can begin to help you understand that you need to be aware of the issues involved.  When you have questions always feel free to call your agent or the title company for help in understanding what you’re reading and how it affects you, if at all.

The amended Washington Domestic Partnership Law (RCW 26.60) becomes effective June 12, 2008.  If you would like more information go to http://www.secstate.wa.gov/corps/domesticpartnerships/ At the website, you will find a summary of the 2008 changes, access to the 196 page statute and answers to frequently asked questions such as “Who can register as domestic partners?” and “How do we register a domestic partnership?”

Per the Washington State website, “the amended laws generally involve dissolutions, community property, estate planning, taxes, court process, service to indigent veterans and other public assistance, conflicts of interest for public officials, and guardianships.” For more information about the differences in the 2007 - 2008 laws go to ttp://www.secstate.wa.gov/corps/domesticpartnerships/laws_and_regulations.aspx.

 If you have questions or concerns regarding these changes to the laws, please consult licensed professional advice from an attorney.

Did you know that if you are over 60 years of age you might qualify for exemptions or deferrals of property taxes in the King County area?  Not everyone knows that this is an option so if you haven’t heard of it before you might want to go to this link at the King County website to learn more.  Even if you don’t live in King County, you can always check your local county - most areas do offer these kinds of programs.

I’ve had clients in the past that have either looked into these programs or been part of them already and it’s a common item for me to look for in a title report if I’m working with an estate sale.  If a person was on the deferral program the taxes do have to get paid off eventually and there is an interest rate added on as well, which I believe is 5% right now.  Typically the trigger for repayment is when the owner moves out and sells the house (you must reside in the home to qualify) or the owner dies and the home is sold that the payoff occurs.

If it’s an exemption, my understanding is that there is no repayment of the difference between the exempt amount and the current assessment.

For buyers who are purchasing property you’ll want to be sure and check the title report that you “should” get in the mail or via your agent.  I can tell you that I’m sadly aware that many agents throw their copy away assuming the title company sent a packet to the client - but clients frequently don’t know what these packages are and they throw them away too and don’t read the policy info and underlying documents regarding the home.  Escrow companies read them because they’re looking for payoff info that they’ll need to close out the transaction.  Title companies are supposed to be reviewing the info in the title report and determining if there are any problems that might impede the sale, but what they think is important and what is important to you, the buyer, may be two different things.  I ended up with the bad end of one of those situations in a past home purchase prior to becoming an agent and I use it as an educational moment for my clients today. 

Believe me, finding out after the fact and when my neighbor was about to tear up my yard for sewer access and I’d spent a lot of money landscaping my yard, it was an eye opener to find out I could possibly become financially responsible for the over $10,000 cost of repair to my neighbor’s sewer line.  Maybe I’ll write a post about that some time so that I can lay out the thoughts and steps involved that would have brought that to light when I purchased the house.  It’s the one failure of an item within a transaction I think I ever saw happen with my old agent.  We worked together 10 years as client/agent and now he is a colleague I think highly of within this industry. 

If you are a seller, and particularly if you’re helping sell a house from an estate sale, pull the preliminary title report so you can see if any charges need to be paid at closing so you don’t get a surprise.  Also, it will let you know if there are any liens on a property or other outstanding issues that could cloud the title and make it difficult or impossible to sell.

I’ve been asked this question quite a lot lately. Most people think of escrow as the account in which a lender pays taxes and insurance from or where you go to sign your closing papers in a real estate purchase or refinance transaction. Both are good examples of escrow. For those who have always been curious about what escrow is and what an Escrow Officer does, well here it is.

Whether you are the buyer, seller, lender or borrower, you want the assurance that no funds or property will change hands until ALL of the instructions in the transaction have been followed.

Escrow is the process in which money and/or documents are held by a disinterested third party until the terms, conditions and instructions of all interested parties are satisfied.

In a real estate purchase transaction, once the parties have a written agreement and in most cases loan approval too, the closing process begins and escrow is opened with an Escrow Agent. The Escrow Officer then reviews the preliminary title report and obtains information and documentation necessary to clear title. When title is clear and loan documents have been received from the lender, the Escrow Officer prepares the HUD Settlement Statement which contains a breakdown of all fees, payoffs and settlement costs associated with the transaction. Next, the closing documents need to be signed. In most cases, there are documents that must be Notarized. In other words, signed before a Notary Public licensed in the state where the documents are signed. Most Escrow Officers have this license but Notary services can also be found at UPS stores, FedEx Kinko’s, banks, etc. Outside of the United States, the documents would have to be signed before an officer at a U.S. Consulate.

After all documents have been signed, the Escrow Officer forwards the documents to be recorded on to the title company with instructions to review and hold until further instructed. If there is a loan, the original loan documents are delivered to the lender for review. On the day of closing, after all conditions have been met and all the necessary funds are received by the closing agent, the title company is instructed to record. Once the conveyance document (ex: Statutory Warranty Deed) and/or security instrument(s) (ex: Deed of Trust) have been recorded, the Escrow Officer will disburse funds according to the Final HUD Settlement Statement. In Washington State, once the documents are recorded and funds are available for the seller, the transaction is considered “closed”. The parties are notified and the real estate agents usually coordinate getting keys to the buyer. 

Even after closing, there is still work to be done. If there were underlying Deeds of Trust paid off at closing, a Full Reconveyance must be recorded for each Deed of Trust. The escrow company may charge a reconveyance tracking fee in order to track the recording of this very important document.

This was a brief explanation but I hope you now have a better idea of what escrow is and what I do as an Escrow Officer.

For information on escrow accounts held with a lender for payment of taxes and/or insurance visit http://www.hud.gov/offices/hsg/sfh/res/respafaq.cfm

(The above information is not intended to be used as legal advice and pertains mostly to residential properties located in Washington State. If you have legal questions, please contact your Attorney. Of course, not all scenarios are the same and processes may differ from those explained above.)