All posts by tfsammons

Internet Loans: Front Row Seat on the Titanic

Real Estate-Purchases

I caution Buyers NOT to obtain a mortgage loan to buy their house over the internet. It may be okay to get an internet loan if you are refinancing, but even then I would be wary.

An internet loan is like a front row seat on the Titanic. I represent a Seller now and his Buyer got (tried to get, is more like it) an internet loan from a broker in New York. The closing has been set and cancelled three times, because the internet lender can’t get it together and doesn’t understand our closing system here in Illinois. Don’t get me wrong, I love the internet, but it doesn’t work in a mortgage loan setting. You need a reputable local mortgage broker for mortgage. Someone that you can talk to and who knows how the system works here.

Great Elder Law Blawg

Elder Law

A really well done blawg on elder law is the site of Texas attorney Jeanne Pi. Today there’s a story on how online access by senior citizens has increased by 47% in the last four years. That’s not groundbreaking, but to me, it’s interesting. There’s also a ton on medicaid and the dreaded HIPAA. (It doesn’t look like the site can be syndicated to view through a blog reader. But you can sign up for a daily email digest instead.)

How Do Your Closing Costs Stack Up

Real Estate-Purchases

There is a good survey by bankrate.com that shows the high, low and average closing costs in catergories like “tax service fee” or “application fee.”

Title charges have risen in Illinois in the past few years and Buyers’ title charges are about $1000 now. Add to that, loan fees and other “garbage can” charges (an add-on charge like an “administrative fee” or “funding fee” found on most loans) and most Buyers are at around $2500 for total closing costs these days.

Land Trusts: How to Mess Up Your Estate

Estate Planning

I continue to be amazed at how messed up estates can get by using the combination of a land trust and a will.

I was in probate court at the Daley Center (Chicago) and witnessed this family debacle: The deceased had 6 adult children. In his will, he appointed his daughter as executor. The deceased put his house in a land trust and made 5 of his 6 kids beneficiaries of the land trust (The land trust avoids probate and is NOT part of the probate estate–but the personal property inside the house is part of the probate estate.)

The executor (who clearly has some control issues) put a padlock on the house (event though she was just one of 5 owners of the house, not THE owner.) Her brother, who was allegedly humming “You’re Not the Boss of Me” from Malcolm in the Middle, went to the house used a bolt cutter to lop off the padlock and let himself into the house. The executor-sister, horrified by her brother’s behavior, called the police who arrested her brother for trespassing. The probate judge signed an order telling the police the house was not part of the probate estate, so the brother could give it to his criminal attorney to get the case dismissed.

What a mess! This sort of thing reconfirms my belief that a revocable living trust (run by a back-up trustee who is fair and doesn’t lord it over the beneficiaries) is the best way to plan your estate. Land trusts, wills and heirs do not mix.

Single Member LLC May Not Protect Assets

Estate Planning, Real Estate-Purchases

A single-member LLC (Limited Liability Co.) is often used by real estate investors, consultants or others in business for themselves. You must be careful, though, because it will not offer the asset protection that a multi-member LLC (two or more members; husband and wife are okay) does.

If an LLC is sued and loses, the judgment creditor must obtain a “charging order” to get assets inside the LLC. The judgment creditor is then entitled to distributions from the LLC like the other members. If no distributions are made, the judgment creditor gets nothing. This is a powerful shield often used to protect assets.

A Colorado court recently ruled that the assets inside a single member LLC could be taken by the judgment creditor. Most legal commentators agree that you should not use a single member LLC if asset protection is a goal. Easy answer to this problem: Include another member and do “layers” of asset protection rather than relying on one entity.

How to Read Many Blogs at Once

Weblogs

It took me a while to figure this out (guess I’m a little slow…) Blogs are great, but you don’t want to hop all over reading each one that you like every day.

It’s best to use a blog reader. I use Feed Demon It only costs $25. There are free readers out there too.

Once you install it, add whatever blogs interest you. Go to the blog that you like (Feed Demon as a brower that looks like explorer.) Go to the “Syndicate this Site,” “XML” or similar symbol at the blog you like, click it and then click “Add new channel” in Feed Demon. The blogs are grouped by topic in Feed Demon, like “Legal” or “Wine”. You can read each blog in each topic individually or, cooler yet, group all of those under one topic as a “newspaper.”

Real Estate Exchanges- in Reverse

Real Estate-Sales

Real Estate exchanges help you sell “investment” real estate without paying capital gains tax. (Actually, the taxes are deferred, not eliminated.)

Seller can rid themselves of investment houses, land or apartment buildings and they get 45 days to identify 3 replacement properties and 180 days to close on the new property. The seller must put the sale proceeds in an exchange escrow. I set up quite a few of these for clients.

There are also “reverse exchanges.” In a reverse exchange, you buy your replacement property first, then sell your current investment property. The problem is that an exchange accommodator must buy the property (you can’t) and then you buy it from the accommodator once you sell your current property. A reverse exchange is more complicated than a straight exchange and the fees are about 4 times that of a regular exchange. There are two sets of transfer taxes and it is difficult to obtain financing on the property that is acquired first (because you don’t have the equity from your sale yet).

All things being the sale you are better off doing a regular exchange rather than a reverse, if at all possible.

$500 Discount Real Estate Listings Grow

Real Estate-Sales

The number of “discount” limited service listings has increased greatly. A seller lists his or property with a real estate agent who does one thing only: enters the data in the multiple listing service. This gets more exposure for the property and the owner deals directlyu with other agents wanting to show the house. Most also offer a sign and a lock-box for an extra fee. The charge is about $500 to the listing real estate agent up front (but 2.5% is charged by the selling real estate agent at closing). No open houses are conducted and there is no assistance in negotiating the sale contract.

In the last month I have had several clients do this. It seems to be internet-savvy clients under age 35 or so who really like this way of selling.

The only problems are:

1. The listing agents do not take calls and that seems to frustrate other agents trying to show the property;
2. There is no “buffer” when an offer comes in (because the agent doesn’t help with the offer) and negotiating the contract is harder;
3. I had one client who signed up with a southside discount broker who did not list the home in the listing services (MAP and MLSNI) that everyone uses here and no one saw the house. He cancelled the listing when he found out.

This is part of the “unbundling” of real estate services that will continue to unfold.

Medicaid for Those Between Home and a Nursing Home

Elder Law

There is a fairly new program called the Supportive Living Program. This is a program that “waives” the requirement of skilled nursing care normally required for medicaid. It allows low-income seniors to qualify for medicaid-paid “assisted living,” where they otherwise would not qualify because of lack of medical need (medicaid otherwise requires full-time nursing care). The senior must have income of about $900.00 per month; all but $90 of which goes to Medicaid. The “asset” levels are the same as regular medicaid ($2000.00 cash, prepaid funeral, a car etc.) It can be a great alternative for a senior who needs day-to-day help and can’t stay home alone anymore, but doesn’t need the care of a full-time nursing facility.

Click here for more information.