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Allison Simson

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Using Their IRAs to Make Home Loans

by Allison Simson & Joyce Nenninger
Question: Joyce, I’ve heard about using my IRA to make a loan…can you provide more information? 
Answer: Yes! According to Kelly Greene of the Wall Street Journal, investors can use self-directed individual retirement accounts (IRAs) to write short-term mortgages, primarily to buyers of fixer-upper properties or borrowers in need of bridge loans to cover mortgage payments on their old homes while they wait for them to sell. Most IRA investors impose interest rates of at least 10 percent, though the maximum is set forth by the state. Additionally, they typically do not lend more than 50 percent to 70 percent of the home's value. While some of these investors are willing to help homeowners encountering financial difficulties, others look forward to foreclosures because they can take ownership of properties at a dramatic discount. However, foreclosed properties can cost them so much money for legal fees and repairs that their IRAs could run out of money; and investors then would be forced to obtain a loan or shell out money for the taxes and penalties imposed when IRAs are closed.
 
For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442. Email - [email protected] or visit their web site at www.SummitRealEstate.com. Allison is a long time local in Summit County. Summit Real Estate – The Simson/Nenninger Team is located at the Dillon Ridge Marketplace. Allison’s long-time residency and years of real estate experience can help you make the most of any buying or selling situation. She’s a Certified Residential Specialist (CRS), the highest designation awarded to a Realtor in the residential sales field. Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.  

Damned lies and median house prices

by Allison Simson & Joyce Nenninger
Stats are often misinterpreted
Question: Allison, the average home prices in Summit County are very strong, but we notice that we’ve seen lots of different numbers. What should we look at when trying to get average sales price:
Answer: Good question. One of the most commonly referenced statistics in the real estate industry is the median sales price of homes. According to Stephen Bedikian, many articles are published in newspapers the day after the National Association of Realtors releases its quarterly Metropolitan Area Existing-Home Prices report with conclusions about the healthy or unhealthy state of the local real estate market. Unfortunately the median sale price is frequently taken out of context and misinterpreted.
Even someone who slept through most of their math classes will remember that the arithmetic mean and median statistics are different for the same data set. The average is the sum of the numbers divided by however many numbers you started with. The median is the number in the middle, when the numbers are listed in order.
The reason that the mean or average sale price for a market area can be misleading is intuitively obvious and that's why it's rarely cited. A few sales in the extreme luxury segment of a market -- think $30 million or more in Bel Air -- can push up the average for the entire local market area.
The median sale price can also be misleading particularly in down markets. Let's consider the San Francisco market. The median home price reported by NAR in the first quarter of 2007 was $748,100. In the second quarter it was $846,800 -- a jump of more than 13 percent. Wow, that appears to be a sure sign of a healthy market. Or is it?
To get a truer picture of market conditions, let's consider a few more statistics: price indexes (using a repeat-sales price methodology), the number of sale transactions, price reductions and inventory growth. From April to June 2007, the S&P Case Shiller Home Price Index showed a decline of just less than 1 percent, not an increase of 13 percent. Likewise the home-price index published by OFHEO showed a decline of just less than 1 percent for the second quarter. The S&P Case Shiller index covers only resale transactions while the OFHEO data covers multiple sale types but only for conforming loans.
FIS Data Services reports that sale transactions increased about 25 percent between the first and second quarters, which is to be expected given that period corresponds to the spring selling season. However, according to Altos Research data, the market inventory level increased almost 40 percent during the second quarter and the percentage of houses listed with a price reduction increased from about 33 percent to 43 percent.
So what actually happened? Sales transactions increased with a greater proportion on the high end versus the previous quarter. There appears to have been little actual appreciation as evidenced by the Case Shiller and OFHEO numbers, while inventory increased and prices of many listed properties were reduced. So next time you read that median house prices have increased in your area, don't celebrate prematurely. Conduct more research before you reach a conclusion about market conditions in your area.
For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442. Email - [email protected] or visit their web site at www.SummitRealEstate.com. Allison is a long time local in Summit County. Summit Real Estate – The Simson/Nenninger Team is located at the Dillon Ridge Marketplace. Allison’s long-time residency and years of real estate experience can help you make the most of any buying or selling situation. She’s a Certified Residential Specialist (CRS), the highest designation awarded to a Realtor in the residential sales field. Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.  

Homeowner’s living trust became nearly worthless

by Allison Simson & Joyce Nenninger
Homeowner makes big mistake after refinancing
I recently came across this article by Bob Bruss that I thought would be extremely helpful to anyone who owns property in a living trust. It’s a good reminder to pay attention to the trust a regular intervals.
“Nobody, including me, likes to think about death. But it is inevitable, as I was reminded during a recent hospitalization for major surgery. Thankfully, because of the excellent surgeons, nurses and my friends, I came through the experience successfully.
After I recovered, I learned from the doctors I had been very close to death. When I got home and was feeling better, one of the first things I did was review my estate plan.
In the process, I discovered my old living trust had become nearly worthless. The primary reason was, like most real estate owners, in the last few years I refinanced my properties to take advantage of lower mortgage interest rates. As part of the process, the lenders required me to take my property titles out of my living trust, record the new mortgages, and then put the titles back into my living trust.
But I carelessly didn't follow up and the title companies failed to re-deed my properties back into my living trust. The result was my living trust had become virtually empty because it was "unfunded." If I could make that mistake, think of how many other homeowners and realty investors also have worthless, empty living trusts.
Especially because I wanted to revise my estate plan and change my beneficiaries, I decided to hire a trusts and estates attorney. The total cost, including recording fees, was about $1,300. That is far less than the 3 to 10 percent of gross assets it costs to probate a typical estate.
Frankly, although I am an attorney and could prepare my own living trust to avoid probate costs and delays, I'm glad I hired another attorney.
Among the extra improvements he suggested were (1) a durable power of attorney for lifetime asset management (in case I become unable to manage my assets); (2) a "living will" (also called an advanced health care directive) so the designated person can make health care decisions, such as taking me off life support if there is no reasonable hope for recovery; and (3) a "pour-over will" for any assets omitted from my new living trust. The attorney also made certain all my property titles were correctly transferred to fund my living trust.
EVERYBODY NEEDS A WILL. Shockingly, less than 20 percent of U.S. residents have a written will. For those who have a will, after they die their assets will be distributed according to their wills by the local Probate Court. Probating an estate, even a modest one, usually takes six to 18 months or longer before the heirs can receive their inheritances.
For individuals who die without a written will, the state law of intestate succession determines who will receive their assets. Especially in second marriages, the result is often not what the decedent would have wanted. Again, the local probate court supervises intestate succession distribution, subject to costs and delays.
However, if no written will and no relatives can be found, a person's assets "escheat" to the state. That means the probate court will sell the assets and deposit the proceeds into the state treasury. That is not the result most people want.
HOW TO AVOID PROBATE. Even if you have a written will, it usually won't avoid probate costs and delays. Well-known methods of probate court avoidance include holding real estate titles in joint tenancy with right of survivorship (or as tenants by the entireties between husband and wife) and holding bank accounts or stock brokerage accounts with "payable upon death" designations.
But all these methods have major drawbacks, especially when two or more persons own an asset but one becomes incapacitated such as by Alzheimer's disease, a coma or a severe stroke.
A better alternative to avoid probate costs and delays for most individuals is a revocable living trust. This is simply a method of holding title to major assets, such as a home, investment property, bank accounts, common stocks, mutual funds, and other major assets.
When a living-trust grantor creates a living trust, he is its initial trustor, trustee and beneficiary. That means he can buy, sell, refinance and manage the assets as before.
However, if he becomes incapacitated, then the named successor trustee, such as a spouse or adult child, takes over management and can even sell the assets if necessary. There is no necessity to have a conservator appointed by the probate court. Husband and wife can either have individual living trusts or a joint living trust.
After a living-trust grantor dies, the successor trustee then distributes the living-trust assets to the individuals and/or charities named in the document. The local probate court does not become involved, so distribution usually is completed within six months.
ADVANTAGES OF LIVING TRUSTS. Among the many advantages of a revocable living trust are (1) easy amendments or revocation as desired by the trustor; (2) ownership benefits remain unchanged, including income-tax deductions and the principal-residence-sale tax exemption; (3) avoidance of multistate probates if real estate is owned in more than one state; (4) privacy because living trusts do not become public, as do written wills filed for probate; (5) the successor trustee manages the living-trust assets if the trustor becomes incapacitated; and (6) the successor trustee distributes the assets after the grantor's death.
DISADVANTAGES OF LIVING TRUSTS. Among the few disadvantages of revocable living trusts are (1) no statutory period to limit creditor claims (as occurs in probate court); (2) the cost and inconvenience of "funding" the living trust (usually far less than the cost of probating an estate); (3) when refinancing mortgages, lenders usually require taking real estate out of the living trust for a moment while the mortgage papers are signed and recorded; and (4) a living-trust trustor needs a "pour-over will" or a "back-up will" for any assets that were not included in the living trust.
SUMMARY: Revocable living trusts offer many advantages and few disadvantages to avoid probate costs and delays for heirs as well as conservatorship during the grantor's lifetime.
By avoiding involvement of the local probate court, living-trust beneficiaries usually receive their assets within six months after the decedent's death. More details are in the new special report, "Pros and Cons of Living Trusts to Avoid Conservatorship and Probate Costs and Delays for Your Heirs," available for $5 from Robert Bruss, 251 Park Road, Burlingame, Calif., 94010, or by credit card at 1-800-736-1736 or instant Internet delivery at www.BobBruss.com.”
 
 
For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442. Email - [email protected] or visit their web site at www.SummitRealEstate.com. Allison is a long time local in Summit County. Summit Real Estate – The Simson/Nenninger Team is located at the Dillon Ridge Marketplace. Allison’s long-time residency and years of real estate experience can help you make the most of any buying or selling situation. She’s a Certified Residential Specialist (CRS), the highest designation awarded to a Realtor in the residential sales field.  Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.   

Things to know before buying a vacation home

by Allison Simson & Joyce Nenninger
Question: What are some of the major items one should consider before buying a vacation home?
Answer: According to Inman news reports, market conditions, taxes and hazard insurance are among the top concerns for buyers of second homes. Although there are other considerations.

Nationally, home sales declined 4.1 percent in 2006 from 2005. But, vacation-home sales rose 4.7 percent in 2006 to a record 1.07 million sales, according to the National Association of Realtors (NAR). The increased interest in buying vacation homes for personal use rather than rental is expected to continue throughout this decade.

The annual Investment and Vacation Home Buyers Survey from NAR found that vacation-home buyers intend to hold on to their property for a median of 10 years. Thirty-eight percent of respondents plan to keep their property for 11 years or more.

With a long-term horizon in mind, it's important to make sure that the home you buy lives up to your expectations. To complicate matters, residential real estate is an intensely localized business. Many vacation-home buyers buy outside of their local area.

The NAR survey revealed that the typical vacation-home buyer in 2006 bought a property that was a median of 215 miles from his or her primary residence. Forty-two percent bought a vacation-home within 100 miles of their home; 32 percent of the properties were 500 miles or more away.

Even vacation-home buyers who purchase within 100 miles of their primary residence are likely to find that real estate custom and practice might differ considerably from what they're used to. And market conditions are so variable today that you can find different forces at play even within one community.

Buying outside of your local area requires diligent pre-purchase investigations to make sure that you end up with a home that brings you pleasure. Here are the sorts of things you should look in to:

Check out the condition of the local market. Is it a buyer's or a seller's market? If the area is flooded with inventory, find out which homes are selling and why. You usually can't go wrong if you buy the type of home that is in high demand. It may be worthwhile to wait for such a property to come along.

Are there any natural hazards to be aware of such as forest fires, flooding or hurricanes? Can you get insurance for these hazards to protect your investment?

If you're buying in a rural community and you've experienced only urban living, you may need to familiarize yourself with such things as septic systems and percolation tests.

With this in mind, you'll probably have the best success if you choose a real estate agent from the local area to represent you in your vacation-home purchase. Ask acquaintances who own in the area for recommendations. Or, have your real estate agent at home find a competent agent to work with.

After you decide on an agent, ask for a list of all the fees that will be levied in connection with your out-of-area purchase. For example, some communities have transfer taxes and others don't. Find out how much your property tax will be and how much they are likely to increase over time.

Buyers who purchase a vacation home a long distance from home should investigate what local resources are available for property management. You may purchase in a planned-unit development that includes onsite management. If not, can you hire someone to look after your property when you're not there?

It's a good idea to take a few vacations in the area where you think you want to buy -- and at different times of year -- before you actually purchase. You may find after spending more time there that you really don't want to own a property that you may only visit infrequently.

THE CLOSING: It might make more sense to continue renting if you plan to spend only a week or so a year there.

 

 

For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442. Email - [email protected] or visit their web site at www.SummitRealEstate.com. Allison is a long time local in Summit County. Summit Real Estate – The Simson/Nenninger Team is located at the Dillon Ridge Marketplace. Allison’s long-time residency and years of real estate experience can help you make the most of any buying or selling situation. She’s a Certified Residential Specialist (CRS), the highest designation awarded to a Realtor in the residential sales field.  Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.  

Finding perfect house is all about timing

by Allison Simson & Joyce Nenninger
Question: Allison, We want to buy a home in Frisco, Colorado, and have been looking for only a week or so.  Our Realtor tells us the second home market in Summit County- and especially Frisco is moving very briskly and we’ll have to act quickly. My question is, have I been looking long enough?

Answer: It's not uncommon for buyers to look for six months or more before finding the right house or condo to buy. Sometimes, it takes even longer if listings are in short supply. Lucky are the home buyers who find a great property that suits their needs soon after they start their search. But, finding the right property earlier than anticipated can pose a problem for some buyers.

Common concerns are: Have I looked long enough to understand the local market and the range of housing options available? Could there be another, even better listing on the market, perhaps at a better price? Will an upcoming listing be more appealing? Should I wait and see what else might come along, or should I go for it?

HOUSE HUNTING TIP: Don't pass over an ideal property just because you found it quickly. Instead, complete due-diligence investigations to satisfy any concerns you may have about the property before you make an offer. You could regret it if you don't buy the listing and it takes years to find another suitable property.

First, search the Internet, if you haven't already, to see if there are similar listings on the market in the area where you want to live. Ask your agent to show you as many of these as possible, unless you can rule out a listing based on your criteria without having to a look at it.

For example, you may need a main-floor bedroom and bath for an aging parent who visits frequently. You can usually get a sense of the floor plan of a house from the information provided on the Internet. If critical information isn't provided online, your agent can check for you. Look at as many homes as possible that might suit your needs. This will help you to decide whether to go ahead or wait for something better.

A critical variable to consider before making your decision is how often listings like the one you're considering become available. Ask your agent to provide you with a list of similar listings that sold within the last six months or one year.

You won't be able preview these listings. So, ask for your agent to give you as many details about the properties as possible, including how long they took to sell and whether they sold for more or less than the list price. You might want to drive by the listings so that you can at least get a curbside impression of how they compare with the listing you're considering.

You may find that listings similar to the one you like come along frequently. They don't sell quickly and rarely for over the list price. In this case, there's no urgency to buy quickly.

However, if you discover that listings like the one you covet come on the market infrequently, you should seriously consider going ahead with an offer. Certain kinds of properties in certain areas are always difficult to find. An example would be a charming home in move-in condition in a popular neighborhood that is within walking distance of great restaurants.

When these homes come on the market, there is often pent-up demand. You may not be the only buyer who has been waiting for just such a listing. This means that you could end up paying more than the asking price if you end up bidding in competition with other buyers who want the same kind of a property you do.

THE CLOSING: Don't pass up a good listing because you don't think you know enough to make an informed decision. Instead, accelerate your due-diligence investigations so that you are prepared to make an informed decision.

Dian Hymer is author of "House Hunting, The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer's Guide," Chronicle Books.


 

For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442. Email - [email protected] or visit their web site at www.SummitRealEstate.com. Allison is a long time local in Summit County. Summit Real Estate – The Simson/Nenninger Team is located at the Dillon Ridge Marketplace. Allison’s long-time residency and years of real estate experience can help you make the most of any buying or selling situation. She’s a Certified Residential Specialist (CRS), the highest designation awarded to a Realtor in the residential sales field.  Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.  

SecondSpace enters second-home market

by Allison Simson & Joyce Nenninger
Venture-backed startup launches two Web sites targeting second-home owners

According to Elizabeth Sweesy, SecondSpace, a Bellevue, Wash.-based Internet startup backed with venture funding, launched two real estate Web sites today targeting the growing vacation homes market.

With LandWatch.com and ResortScape.com, the company aims to connect people to their next second home or land for sale and also to provide information about local services in the towns where their properties are located.

SecondSpace was founded last year by two Internet veterans -- former Classmates executive Anil Pereira, and former Microsoft technical leader Alok Sinha. The team received $6.5 million in venture capital from Ignition Partners and an undisclosed partner last July.

The second-home market includes some 43.8 million owners, according to Census Bureau data, and SecondSpace hopes to fill a niche with what it calls a "lifestyle marketplace" to give consumers all the information they need for their "home away from home."

"The whole idea is to give people second lenses," said Pereira, president and CEO of the startup. With the average second-home owner either looking for or already owning a home that is located at least a few hundred miles away from his or her primary residence, he said, "We started to realize there's this geographic and temporal disconnection between owners and communities."

Second-home sales accounted for 36 percent of all existing-home and new-home sales in 2006, down from a 40 percent share in 2005, according to the National Association of Realtors' latest research. Investment-home sales dropped from a 28 percent share in 2005 to a 22 percent share in 2006, while vacation-home sales rose from a 12 percent share in 2005 to a 14 percent share in 2006.

Second-home markets are more about lifestyle, Pereira said, with the activities and atmosphere taking priority over the home itself in most cases. So the company started out trying to pull those considerations into its search technology.

While on ResortScape.com, for instance, a person looking for "skiing in Vermont" will see a number of property listings in skiing areas of the state, but may also get suggestions for properties near ski resorts in similar areas.

The sites also offer information on local service providers for homeowners who live out of the area but need information on local plumbers, landscaping or maintenance providers, for example.

"You don't necessarily need to know what you're looking for," said Sinha, chief technology officer of SecondSpace. He further explains that with the sites' semantic searching, a person who enters "50 acres in Montana" will also be able to see results for 52 acres of land or 49 acres in Montana.

Competitors in the online second-home market space include HomeAway.com, which is more focused around connecting vacationers with homes that are for rent, and EscapeHomes.com, which offers to connect buyers with second homes.

SecondSpace generates revenue by charging real estate brokers a $50 monthly subscription fee to have their property listings included in searches on the site. The company also builds custom sites for developers and sells data about second homes.

The site is free to consumers and the listings for local service providers are currently free, though that may change in the future, Pereira said.

The chief executive also said that SecondSpace plans to expand into other verticals, but will still target the same 39- to 60-year-old consumer demographic -- the baby boomers searching for second homes.

The company offers brokers several ways to upload listings, as well as analytics to show who's looking at which properties on the sites.

 

 

For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442. Email - [email protected] or visit their web site at www.SummitRealEstate.com. Allison is a long time local in Summit County. Summit Real Estate – The Simson/Nenninger Team is located at the Dillon Ridge Marketplace. Allison’s long-time residency and years of real estate experience can help you make the most of any buying or selling situation. She’s a Certified Residential Specialist (CRS), the highest designation awarded to a Realtor in the residential sales field.  Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.  

Boomer 'Elites' Will Pay a Premium for Homes

by Allison Simson & Joyce Nenninger

Question: Of course, we’ve all heard the term “Baby Boomers” but I recently heard the term “Boomer Elites”. What is that?

 

Answer:  Good question! Baby boomers are touted as being the wealthiest generation in U.S. history. But only one in 10 are considered affluent, according to a recent study conducted by Focalyst, a market research firm that is a joint venture of AARP and the Kantar Group. Of the more than 30,000 U.S. adults over the age of 42 who participated in the study, only 9 percent (or one in 10) have an annual household pre-tax income of $150,000 ($100,000 if retired).

Home ownership is important for this financially savvy group, which Focalyst dubs “Boomer Elites.” The study finds them well prepared for retirement; 95 percent (compared to 75 percent of all boomers) have some sort of savings or investments.

They consider their home as an investment, according to Heather Stern, director of marketing for Focalyst. The average home value for this group is $519,000 compared to $282,000 for boomers overall

Not only do almost all Boomer Elites own their own home, but they are more likely to own multiple homes. Approximately 21 percent of the Boomer Elites own at least two homes, and 7 percent said they plan to purchase an additional home. Among all boomers, only 8 percent own a second home and 2 percent plan to buy a second home


 

For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442. Email - [email protected] or visit their web site at www.SummitRealEstate.com. Allison is a long time local in Summit County. Summit Real Estate – The Simson/Nenninger Team is located at the Dillon Ridge Marketplace. Allison’s long-time residency and years of real estate experience can help you make the most of any buying or selling situation. She’s a Certified Residential Specialist (CRS), the highest designation awarded to a Realtor in the residential sales field.  Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours. 

Question: We’re in the process of applying for a mortgage to finance our second home in Wildernest.  With all the mortgage turmoil that is going on, do you have any suggestions about getting the right loan?

Answer:  The mortgage market is undergoing some “remodeling” right now, but it’s not necessarily cause for alarm.  There are still some great loan products out there, and according to Ilyce Glink with Inman News, when it comes to shopping for a mortgage, the most important thing to remember is that the best loan for you may not be the cheapest loan you're offered, or the loan with the cheapest monthly payments.

The loan you choose needs to work for your personal finance situation not only on the day you close, or for the first year, but for the entire time you plan to live in the property and keep that loan.

In the past few years, hundreds of thousands of buyers have flocked to subprime loans like moths to flame. Even those with perfect credit found themselves signing on the dotted lines for loans they thought offered an interest rate of only 1.99 to 3.99 percent, as opposed to the 6 to 7 percent those loans were actually carrying.

Choosing the best loan means you have to take the time to understand both what your needs are, and what kind of loan will meet those needs. Do you want the stability of a fixed-rate loan? A loan that is part fixed, part adjustable? Or are you a risk-taker who might benefit from an adjustable-rate mortgage (ARM)?

Once you decide which loan you want, here are some tips for negotiating for the best deal:

1. Know what you want before you call the lender. The mortgage market is extremely competitive for conventional loans, that is, for loans that are $417,000 or less. To find lenders, you can look at BankRate.com, but you should also ask your real estate agent to recommend several lenders her clients have worked with successfully. Ask your friends who they worked with, and don't forget to check out the biggest national lenders, including Bank of America, Countrywide Financial, Wachovia and Chase, as well as local banks.

2. Consider using a mortgage broker. Brokers often have access to more than a dozen end lenders, and their job is to do the shopping around for you. Just don't be fooled into thinking that the mortgage broker is on your side. Mortgage brokers are paid by the end lender (the practice is called a "service fee premium"), and they receive a higher fee if they sell you a more expensive loan. So, choose a reputable mortgage broker and ask him to disclose in writing what his fee will be from the end lender.

3. Stay on top of interest rates. Interest rates change frequently during the day. If you decide to float your loan, watch the bond market activity closely. If rates seem to be dropping, you'll be able to react quickly and call in your lock. (Be sure to get confirmation in writing that your loan has been locked and at what interest rate.) Many lenders will offer you the opportunity to reduce the interest rate on your loan at least once between the time you apply and the closing date. You may want to look for a loan that offers this feature.

4. Watch the points and fees. The number of points and fees can change as frequently as interest rates, as lenders struggle to stay competitive with each other. You may see zero-point, zero-fee loans being offered, but lenders will often give you a lower interest rate in exchange for paying points and fees upfront. This may sound good, but you're effectively financing those points and fees over the life of the loan. As we went to press, Bank of America was offering loans at competitive interest rates without any points and fees. Other lenders may offer similar programs. It pays to shop around, particularly if you can save $3,000 to $8,000 or more on the purchase of your home.

5. Don't be afraid to ask for what you want. In a buyer's market, lenders are hungry for business. If you ask them to reduce the fees (without raising the interest rate), they may well do it. Ask each lender you're working with to provide you with a detailed listing of the fees and charges for your loan. Then, you can compare lenders on an apples-to-apples basis. Then, go back to each lender and ask for the elimination of specific fees. Basically, you're asking the lender to bid on your business. It's takes moxie, but is perfectly doable.

6. Consult with your real estate attorney before you apply for the mortgage. Although attorneys aren't used in every state to help buyers and sellers close on their homes, I believe they provide a useful service. (Full disclosure: I'm married to a real estate attorney.) If you live in a state where real estate attorneys are used, you'd be smart to consult with yours before you apply for your mortgage. Real estate attorneys who do a lot of house closings will be a tremendous source of information about good home inspectors, title companies, and mortgage lenders. They can give you resources, point you in the right direction, and help guide you to a successful house closing.

 

 For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442. Email - [email protected] or visit their web site at www.SummitRealEstate.com. Allison is a long time local in Summit County. Summit Real Estate – The Simson/Nenninger Team is located at the Dillon Ridge Marketplace. Allison’s long-time residency and years of real estate experience can help you make the most of any buying or selling situation. She’s a Certified Residential Specialist (CRS), the highest designation awarded to a Realtor in the residential sales field.  Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.   

New twist on popular reverse mortgage

by Allison Simson & Joyce Nenninger

Question:  Allison, what do you know about reverse mortgages?  I this just a gimmick?

Answer: Reverse mortgages definitely are on the rise. Senior homeowners are taking equity out of their longtime residences to make ends meet during their retirement years, and to remodel their homes and help their children and grandchildren with the financial challenges of higher education.

In fact, the Home Equity Conversion Mortgage, which is insured by the federal government and is the nation's most popular reverse mortgage, jumped from 43,081 closings in fiscal-year 2005 to 76,276 in fiscal 2006.

As reverse-mortgage funds are spent and the interest on these mortgages accrues, the lender gains a greater piece of the home. But let's consider another possibility. What if a family member or a close friend received that equity instead of the lender?

Circle Lending, an aptly named, Waltham, Mass.-based company specializing in the organization of family and small-business loans, has introduced Family Advantage, a sort of reverse mortgage that keeps the home in the family -- or with a friend or associate -- once the senior homeowner moves out or dies.

"It's not for everybody, but it has filled a niche, especially for some adult children who are already supporting their parents," said Jim Smith, vice president of marketing and sales for Circle Lending. "It puts the arrangement into a business deal where all family members can see that it's all documented and very clear."

Conventional reverse mortgages allow senior homeowners, with a minimum age of 62, to receive proceeds from a lender -- either in a lump sum, regular monthly payments, a line of credit or in a combination of those options. When the house is sold, or the last remaining borrower dies or moves out of the home, the loan amount plus the accrued interest is repaid. The borrower can't owe more than the value of the home. The HECM program has insured more than 240,000 reverse mortgages since 1990, while private "jumbo" reverse plans also have been available.

The Family Advantage concept requires a family member or friend to write a check every month -- or make a lump-sum payment -- to the parent or homeowner. In return, the person writing the check earns an equity interest in the home, plus interest, when the homeowner moves out. It's basically a home-equity loan funded by a family member or friend, secured by real estate. Hence, payments are received tax-free.

The challenge is locating a family member or friend with the means to play the bank. According to Circle Lending, the average rate negotiated between the two participating parties has been about 6 percent because the lending (related) party is not looking to maximize the return.

"A lot of times, at least one of the kids is already supporting the parents with some sort of monthly income," Smith said. "But none of these payments are documented, or other siblings have no idea that one of their brothers or sisters is even helping the folks at all. Family Advantage documents all of these payments and creates a lien on the home that is repaid before other family members receive their interest in the home -- which makes up a great deal of the average person's estate."

The cost to set up the Family Advantage loan averages $2,499 (includes documentation, lien recording, ongoing service, upfront consultation and distribution of the repayment) plus $9 for each payment made, typically a monthly check to the folks. However, lump-sum payments can be substituted at any time, allowing the lender-child to earmark expected bonuses to the program or other funds that could be coming from stock sales, home sales or potential big-ticket windfalls.

"We have one client who is a widow with no children," Smith said. "She owns her home and contacted an acquaintance -- somebody who has significant assets. They are obviously unrelated but they worked out an arrangement where the acquaintance will slowly accumulate equity in the property by making monthly payments to the homeowner. They worked out an acceptable interest rate for both sides."

The upside of the concept is that there is no age restriction; the property secured could be a principal residence, second home or investment property; and the upfront closing costs are less than the standard reverse mortgage. In addition, borrower and lender are free to negotiate a reasonable interest rate yet one that clearly reflects a genuine business deal.

The downside of the deal is that the homeowners have no immediate recourse if the payments cease.

"We were simply looking for a way for people to annuitize their home and have the relinquished equity go to somebody they knew," Smith said. "We provide a professional, third party to oversee the deal. We've found it's simply a vehicle some families and friends can use."

 

For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442. Email - [email protected] or visit their web site at www.SummitRealEstate.com. Allison is a long time local in Summit County. Summit Real Estate – The Simson/Nenninger Team is located at the Dillon Ridge Marketplace. Allison’s long-time residency and years of real estate experience can help you make the most of any buying or selling situation. She’s a Certified Residential Specialist (CRS), the highest designation awarded to a Realtor in the residential sales field.  Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.  

 

Surprising things happen when owners are ignorant of land-use laws

by Allison Simson & Joyce Nenninger

Question: We are selling our property in Frisco and just found out that the neighbor’s deck ”encroaches” on our property.  Is this a big problem?

Answer: That’s a good question.   Second-home getaways often are used only during specific times of the year. For example, a riverfront cabin may go months -- sometimes even years -- without any occupants while other popular escapes in popular locations are jammed-packed every weekend with city folks fleeing the craziness of downtown.

Even though a second home may be placed on your mental "back burner," make sure you stay current on all zoning, land-use and legal guidelines. If you wait too long to build or improve, the building environment may have changed dramatically.

According to Tom Kelly, from Inman News, for example, in Shelton v. Strickland, a landowner (Shelton) filed a lawsuit against his neighbor (Strickland) to have Strickland's shed removed on one of the popular San Juan Islands in Washington state. The shed encroached onto Shelton's property. The Stricklands countered by claiming adverse possession on the land. The trial court granted Strickland's adverse possession claim, and the appeals court affirmed the claim. According to attorneys familiar with land-use cases, a person claiming adverse possession will prevail if he or she can show that the usage was open and notorious, actual and uninterrupted, exclusive, hostile under a claim of right, and for a period of 10 years.

The court held that these elements had been met and granted Strickland the land that the shed was on as well as an easement to maintain the shed. Here's how it happened:

According to court documents, Mabel Hitching acquired title to the land -- now owned by Edward and Margaret Strickland -- from her parents in November 1933. The Hitching lot was improved with a single-family cabin and a shed. Cement work for the shed had a number "59" inscribed on it, indicated the cement work had been completed in 1959.

The shed was shown to encroach upon the Shelton parcel in a survey recorded in April 1975. Mabel used the structure, built by her companion, Arthur Hedman, as a potting shed and painting studio until her death in 1982. Through her will, Mabel granted Hedman a life estate in the premises and he continued to live there until his death in 1985.

The property was left to Jack Ridley, Mabel's nephew who recorded a conveyance from the estate to himself in 1986. In 1993, Ridley, a California resident who never used nor occupied the house, sold the property to the Stricklands.

The Stricklands used the shed as an office during construction of their new home. They made some repairs to the shed, but did not change its location. They continued to use the shed and were not aware of any evidence to suggest that anyone other than the previous owners of their property had ever used the encroaching structure.

Shelton purchased his property, overgrown and unimproved, from Peter and Jenny Wangoe in 1978. Even though Wangoe owned the property for more than seven years, he rarely visited and was not necessarily aware that the shed extended over the property line onto his land. The shed was visible from the street, court papers stated.

Shelton filed a complaint to quiet title to the property and moved for a summary judgment. The Stricklands countered with a summary judgment alleging adverse possession of the area encumbered by the structure.

According to Seattle attorney Scott Henderson, the court found that all of the elements -- the usage was open and notorious, actual and uninterrupted, exclusive, hostile under a claim of right, and for a period of 10 years -- were met for adverse possession.

"The case may have turned out differently if the shed was hidden or of a temporary nature," Henderson said. "The court also finds that since there was no evidence that the Stricklands or any previous owners had abandoned or allowed another to occupy the shed (which would normally stop the 10-year timeframe from continuing) that the second and third elements were met as well.

According to Henderson, the court made quick work of the fourth element (hostility) by focusing on the precedent that "subjective beliefs are not relevant."

"In other words, the fact that the Stricklands or their predecessors may not have known that they were encroaching does not endanger their claim so long as they held themselves in a manner consistent with ownership," Henderson said. "Building a permanent shed and using it seems to fit the court's bill."

The court devoted most of its opinion to the final element -- that an owner's use of the claimed land must be for 10 years. In this case, the Stricklands themselves owned the land for fewer than 10 years. The court held that state law (Washington) provides "tacking" of a previous owner's rights -- that a current owner may take the period of possession of such previous owner as their own so long as there is a connection "or privity" between each owner.

In the end, the shed stayed.

Holding on to a family getaway property? Make sure you know what you actually have.

 

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Summit Real Estate
The Bright Choice
330 Dillon Ridge Way, Suite 10
Dillon CO 80435
970-468-6800
800-262-8442
Fax: 970-468-2195

Allison Simson, Owner/Broker, is a licensed Colorado Real Estate Broker