Equity – New Workfor Equity Requirements

equity. new work-for-equity requirements

Well, we recently got caught in another regulation change on our way to closing. Are you aware that there are new work for equity requirements? Do you even know what that means?

We do a lot of lease to own contracts for selling. We buy homes and put tenants under lease to own because they’re unable to get traditional financing. We work on their credit and give work for equity credits to help them raise their needed down payment. That’s been working beautifully for years. As with everything else in the 2010 finance regulations, new requirements!

1.  For existing construction, which is generally our area: only repairs or improvements listed on the appraisal are eligible for work for equity. Any work or materials not included on the appraisal are not eligible.                                                         

OK, so here’s the problem. What appraisal? This means that, before I put a tenant in with work for equity opportunities, the lender wants me to get an appraiser to look at the work they will be doing and set a price for it. Ugh.

Then, the appraiser must look at it after the work is done to confirm the work and the value. Ugh.

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Carbon Monoxide Detectors – required after 1/1/10

North Carolina map

Because we have rental properties, this applies directly to us and our business.  Because so many of you also have rental properties, I’m posting this information I received from the City of Greensboro.

If you live or own outside of North Carolina, please be sure you keep track of the ordinances in your area.  Real estate related laws are changing at lightening speed!

CITY OF GREENSBORO

FOR IMMEDIATE RELEASE

New State Law Requires Carbon Monoxide Detectors in Rental Properties, Homes

GREENSBORO, NC (December 18, 2009) – Carbon monoxide is a silent killer. It’s odorless, colorless and tasteless, and according to the Centers for Disease Control and Prevention, more than 400 people in the US die from carbon monoxide poisoning each year.

Because of the dangers of this toxic gas, beginning January 1, 2010, a new state law will require carbon monoxide detectors to be installed in all existing rental units with fossil fuel appliances or fossil fuel fired heating systems.

Specifically, the law requires that:

  • Owners of existing rental units shall provide at least one carbon monoxide detector on each level of each unit.
  • The detectors can be electrically hardwired or battery-operated.
  • All detectors must be approved by a nationally recognized testing laboratory.

Also, beginning January 1, 2011, all new homes being constructed must have a carbon monoxide detector installed outside of each separate sleeping area in the immediate vicinity of the bedroom(s).

For more information about this new law, call the City of Greensboro’s Engineering & Inspections Department at 336-373-2155.

Vacant House Insurance

Vacant Home Insurance

Do you have a vacant property? Has it been vacant for more than 30 days? If so, you may not have insurance coverage.

Some insurance companies cover vacant properties for up to 90 days. Ask your agent about your vacancy coverage.

Vacant house insurance is generally more expensive than regular homeowners insurance for a number of obvious reasons. First, there’s no one living in the house to watch and protect it. Vacant properties tend to be a target for thieves, vandals and vagrants. And, the potential for water damage and infestations of animals or insects goes up.

If you can have someone check on the house daily,  the risk factor of insuring the home decreases significantly. Also, if you can maintain active security systems, your property is more protected and your insurance rates are lower.

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Owner Financed Homes Qualify for $8000 Tax Credit

$8000 tax credit

There’s a lot of action going on with the $8000 tax credit and we’re getting lots of questions concerning whether or not our Agreement for Deed qualifies.

“Yes”, is the answer! We close with an attorney and submit a HUD-1 with the buyer’s tax return so the return can be amended.

The following comes from the IRS web site:

Q. Can a taxpayer claim the first-time homebuyer credit if the purchase is pursuant to a seller financing arrangement (for example; a contract for deed, agreement for deed, installment land sale contract, or long-term land contract), and the seller retains legal title to secure the taxpayer’s payment obligations?

A. If the taxpayer obtains the “benefits and burdens” of ownership of a residence in a seller financing arrangement, then the taxpayer can claim the credit even though the seller retains legal title. Factors that indicate that a taxpayer has the benefits and burdens of ownership include: 1. the right of possession, 2. the right to obtain legal title upon full payment of the purchase price, 3. the right to construct improvements, 4. the obligation to pay property taxes, 5. the risk of loss, 6. the responsibility to insure the property and 7. the duty to maintain the property. (New 7/2/09)

So, if you’re in a lease-to-own situation, you may be able to give the owner a nice downpayment that enables them to owner-finance and qualify you immediately for the $8000 tax credit.

*Start owning today!

5 Things that can Hurt Your Chances of Getting a Mortgage

Mortgages

1. Credit Report errors

The key to getting the best mortgage rate is good credit.  One in four adults have serious errors on their credit reports. The Fair Credit Reporting Act requires credit-reporting agencies to fix these mistakes but it’s up to you to find the problems and to ask for the errors to be corrected.  We discussed Increasing Your Credit Score in an earlier post.

Order a free copy of your credit report from each of the three reporting agencies:
Experian
TransUnion
Equifax

Tell the credit reporting agency about any errors you find.

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