Recent Blog Posts

Why it is important to look at the property taxes when purchasing a property

Andrew Roth, Esq. — Thu, 19 Apr 2012 12:44:00 GMT

Too often when people look to purchase a property they focus on the purchase price, and (if it is not an all cash deal) on the interest rate of their loan. However, often times a prospective purchaser will overlook the property's real estate taxes. This is a mistake especially in New Jersey, where the real property taxes are amoung the highest in the country. This is significnat as in many instances the real property taxes for a property amount to more than one half (1/2) of, or in some instances higher, than the purchaser's monthly loan amount. Moreover unlike a fixed rate loan, real property taxes will change over time, and more often than not the change results in an increase as opposed to a decrease in taxes. In the event the property taxes increase, depending upon the amount of such increase, a purchaser's "monthly nut" (mortgage, taxes, home insurance) that was deemed affordable prior to closing, may not longer be after closing. This can result in a whole host of other issues, but we will save this discussion for another post.

In light of the above, a purchaser needs to be aware of the ways that a property's taxes can increase. A property's taxes increase generally when there is an increase in the assessment value of the subject property or an increase in the overall tax rate. With regard to the latter, a prospective purchaser when inquiring about a poperty should inquire with the municipality if the tax rate is subject to change and if so, how (e.g., an increase or decrease in the tax rate and by how much).

With regard to a potential reassessment of the property should inquire (i) when the property was last assessed, (ii) whether the municipality is going to do an entire re-evaluation of the municipality, and (iii) whether any improvements were preformed after the last reassessment. (The prospective purchaser also needs to think about whether he/she is planning on making any improvements to the property after the closing, as – depending on the improvements made – can also increase the property's assessed value. In the event the property taxes are increased due to an increase in the property's assessment value, the purchaser can file a tax appeal, but that is an issue for another post.

If you are thinking of buying a home and want more information regarding real property tax issues you should speak to a realtor or a real estate attorney.

Andy Roth, New Jersey Real Estate Lawyer

*The information in this blog posting is for general information purposes only. Nothing in this blog or associated pages, documents, comments, answers, emails, or other communications should be taken as legal advice for any individual case or situation. The information in this blog is not intended to create, and receipt or viewing of this information does not constitute, an attorney-client relationship.

Dealing with inspection issues in today's market

Andrew S. Roth, Esq. — Tue, 17 Apr 2012 15:25:00 GMT

As a New Jersey real estate attorney, I talk to many realtors as well as some fellow real estate attorneys about the market. There has been a lot of discussion on how the market has changed significantly in the past five (5) years. Our discussion was not focused on the reduction in property values or demand, as those topics have been discussed at nauseam. Rather the discussion pertained to the buyer’s inspection of the property.

Years ago, when the market was “hot”, a buyer’s inspection of the property was usually a comfort factor (meaning, can I live with the property and all of its issues or should I walk away from the deal). This was due in part to the fact that properties were moving so quickly, and banks seemed to be handing out money like it was “candy”, there always seemed to be another buyer waiting in the wings. Thus a buyer was hesitant to ask for any changes for fear of killing the deal.

However, over the past few years, with the market doing a complete 180 degree turn-around, many buyers view the inspection period as an opportunity to renegotiate the deal, whether it is by reducing the purchase price or having the seller rectify insignificant issues. As a result, many buyers are providing inspection letters to the sellers citing as many issues with the property as possible, as opposed to listing significant issues with the property. The reason being is buyers (especially strong ones) understand that unlike five (5) years ago, there are not a slew of buyers waiting in the wings to buy the property. While this is true it also becomes a problem as many sellers – as well as realtors – are turned off by the insignificant issue demands believing that the buyer is not negotiating in good faith. In turn, the seller out of principal will refuse to fix anything or provide a credit, even where such a credit or repair is justified (e.g., a hole in the roof). Thus, with two (2) parties digging in their heels, the deal will most likely terminate when it really should not. How do you then deal with inspection issues in today’s market?

One of the things that we try to advise our clients who are purchasing a property (that is not new construction), is that an inspection report will provide a litany of issues that are wrong with the property. After all, the buyer is not purchasing a brand new home, so it will most likely need to be repaired to some extent. The thing that a buyer must understand is the differences between a significant issue and reasonable wear and tear (e.g., a hole in the roof or the replacement of a door stopper. The buyer must then decide what it can and cannot live with and push back with a list of only those items that are very important to it (e.g., fixing the roof, removing mold, etc).[i] The reason being is the seller will most likely (i) see that the buyer is acting in good faith by not wanting every little item corrected and (ii) recognize that it will most likely have to fix these problems or provide a credit regarding the same for another potential buyer if this transaction falls through. Thus, the seller would most likely be inclined to work with the buyer by either rectifying the issues or crediting the seller for the same. However, please note that if such issues were disclosed in the seller’s disclosure statement, they were most likely taken into account when the listing price was set and the purchase price was accepted, and thus the seller may not be inclined to work with the buyer regarding those issues. As such, when providing a list of inspection issues a buyer needs to make sure that the same was not provided on the seller’s disclosure statement, unless the said issue is so bad that the buyer is willing to walk away from the deal in the event the seller does not rectify the issues or credit the buyer for the same. If you are thinking of buying or selling a home and want more information regarding inspection issues you should speak to a realtor or a real estate attorney.

[i] Please note that there will be issues that a buyer feel’s it cannot live with despite a repair or credit from the seller (e.g., a poor foundation) and thus to avoid wasting anymore time, may decide to terminate the transaction.

Andy Roth, New Jersey Real Estate Lawyer

Forgiveness of Debt Being Construed as Income in a NJ Short Sale

Andrew S. Roth, Esq. — Mon, 12 Mar 2012 23:39:00 GMT

One of the goals of a seller in a short-sale, as well as the seller's attorney, is to have any outstanding debt forgiven as part of the transaction. The rational is that the seller is already losing any money it had in the property as a result of the short-sale, that last thing it wants to do is pay money as a consequence of the same. However, what many sellers do not realize is that forgiven debt can be construed as income, which can be taxed by the government.

The Mortgage Forgiveness Debt Relief Act (the "MFDRA"), is an exception to forgiven debt being construed as income. The MFDRA holds that debt that is forgiven by a lien-holder is not considered income when the (i) debt is used to acquire, construct, or substantially improve a home, and (ii) home is the debtor's primary residence. (See I.R.C. Sections 108(a)(1)(E), 108(h), and 163(h)(3)(B)). As such, under the MFDRA not only is it possible for forgiven debt from a primary mortgage not to be construed as income, but forgiven debt from a home equity line of credit (the "he-loc") also may not be considered income, provided the proceeds were used to substantially improve the borrower's home. (See I.R.C. 163(h)(3)(B)). However, if the proceeds from the he-loc were used to pay off credit cards or student loans, the said debt - regardless if it secured by the debtor's (seller) primary residence - would most likely not be dischargeable. (Id).

Although MFDRA does not apply to investment properties, it is possible that the debt forgiven on such properties would not be deemed income? However, whether such debt would or would not be considered income depends on how the debt was reported. For example, if the property was referenced on a debtor's (seller) tax returns as an investment property that was being rented out, there is a possibility that any gain in income would be off-set by any loss that the debtor (seller) incurred as a result of the short-sale. Alternatively if the property was a vacation home or not listed as an investment property where the rents were listed as income, there is a possibility that the debt forgiven would be construed as income. I raise these issues because a seller in a short-sale needs to be prepared as to the potential tax ramifications or benefits that may pertain to the transaction. However, to better understand the tax consequences of forgiven debt under a short-sale a short-sale seller should really speak with an accountant or tax attorney.

Andy Roth, New Jersey Real Estate Lawyer

*The information in this blog posting is for general information purposes only. Nothing in this blog or associated pages, documents, comments, answers, emails, or other communications should be taken as legal or tax advice for any individual case or situation. The information in this blog is not intended to create, and receipt or viewing of this information does not constitute an attorney-client relationship.

THE EFFECTS OF LIENS AGAINST THE PROPERTY IN A SHORT-SALE (FINAL PART)

Andrew S. Roth, Esq. — Mon, 05 Mar 2012 01:12:00 GMT

As you may recall from our previous post regarding the effects of liens against the property in a short-sale transaction, this article will focus on the buyer's perspective regarding the same.

Buyers engaged in a short-sale transaction need to be aware – if they are not already – that their transaction is contingent on a seller's lien-holder(s) willingness to receive a lesser amount than it is entitled to, in order to release its lien. The approval process can take a long time, as a lien-holder needs to conduct its own due diligence to see whether or not the amount of money that it will be getting - should this transaction go through – make sense in light of the condition of the property, its fair market value, the lien-holder's overall profits and losses as a whole, etc. This is important as a buyer can conduct its due diligence (property inspection, title search, survey, etc) in a manner consistent with traditional residential real estate transactions (i.e., a few weeks or a month after the conclusion of the attorney review period)[1] only to find that the necessary lien-holder(s) has declined to release its lien for the amount necessary to make this transaction go through under the current purchase price. Consequently, the buyer will have lost money on conducting its due diligence, unless somehow the lien-holder(s) reconsiders its declination. This is significant because, although a buyer will obtain the benefit of (i) knowing how many liens encumber the property and (ii) giving the seller more time to either (a) come up with the money to release the liens or (b) negotiate a reduced amount with a creditor to release the creditor's lien, more often than not most buyers – in order to avoid potentially losing money – will want to wait until after the short-sale has been approved by the seller's lien-holder.

Notwithstanding the foregoing, as mentioned in our previous post, a buyer in some cases (though not very often) will order a title search of the property prior to a lien-holder(s) approval being obtained. A lot of what drives a buyer's decision is how (i) badly it wants the house and (ii) how much interest in the house there is from other potential buyers. As previously mentioned in our prior post, a seller will want the title search to be done as soon as possible, preferably at the buyer's expense. In the event there is a lot of interest in the home, and the buyer really wants the property, the buyer may be willing to take the risk of losing money if the lien-holder(s) withholds its approval, and capitulate to the seller's demand. Again this is clearly not the norm, but in each transaction is different so nothing should be ruled out.

Andy Roth, New Jersey Real Estate Lawyer

[1] Please note that there are different theories as to when a title search and survey are ordered in a traditional residential real estate transaction. However, we will save this topic for another post.

THE EFFECTS OF LIENS AGAINST THE PROPERTY IN A SHORT-SALE (PART II)

Andrew S. Roth, Esq. — Sun, 04 Mar 2012 19:00:00 GMT

After discussing how liens can affect the short-sale of a property in our last post, we now want to focus our attention on how each side deals with the potential discovery of the liens encumbering the property as well as well as their discharge. For consistency purposes we will focus on the seller's perspective in this post and then focus on the buyer's perspective in our next post.

From a seller's point of view, it wants to see what liens are encumbering the property as soon as possible. The reason being is many sellers involved in a short-sale are facing other financial difficulties aside from the subject property. Moreover, many of these sellers have been sued or are in the process of being sued by other creditors.[1] As such, discovering whether any liens exist as early as possible is significant as the more time the seller has to come up with the necessary funds or negotiate a reduced release amount with the judgment lien-holder(s), the better.

With that said title searches (including judgments, taxes, patriot, etc (hereinafter collectively known as "title search")) are traditionally ordered and paid for by the buyer. The reason being is the buyer (and its lender if there is a mortgage) is the one obtaining the benefit of such insurance. The problem is the buyer (not incorrectly) usually does not want to spend any money until it knows the transaction has been approved by the seller's mortgage lien-holder(s). The reason being is if the buyer obtains a title report and the title – with the exception of the mortgage liens – is clean, and the deal is not approved by the seller's lender for whatever reason, than the buyer has wasted its money. Notwithstanding the foregoing, depending on how many potential buyers are interested in the property and/or how badly the buyer wants the property can also determine whether or not a buyer will order title insurance prior to obtaining the approval letters from the mortgage lien-holders. However, for purposes of this article, let's assume that there is not a lot of interest in the property and/or the buyer likes the house, but does not want to take the risk of obtaining a title search prior to the approval letters from the mortgage lien-holders, what are the seller's options?

One (1) option the seller has is to write a list of all of the potential creditors it is aware of, and provide as much documentation (e.g., complaints, judgments, bills, etc) that it has in its possession regarding the same. This way the seller can check with these creditors to see what the status of their collection effort is (e.g., a complaint has been filed or a judgment rendered). The problem is what happens if the seller did not keep all of the documentation it received from its creditors? A judgment lien might exist on the property that the seller either forgot about or did not know about, which would not be discovered by the seller until a title search was actually ordered.

A more concrete solution to the problem is for the seller to order and pay for a title search as well as a credit report for itself. This way the seller will know what liens are encumbering the property (via title search) and what judgments there currently are against the seller that may turn into liens (via credit report). By knowing this the seller can (i) agree to pay the judgment lien-holders the necessary amount to release the liens, (ii) negotiate a reduced amount for the release of the liens with the judgment lien-holder, or (iii) see if the purchaser would be willing to pay for these amounts on behalf of the seller. (Please note that the latter is by far the least common, and will depend on how badly the buyer wants the house). The drawback of the seller obtaining the search, is it costs money (e.g., $350 - $600), which an already financially distressed seller may or may not have.

This leaves the seller in a dilemma as to whether or not to order a title search, etc on its own, so it knows what liens are encumbering the property. There really is no right and wrong answer as each transaction is different. Accordingly, the seller needs to assess the situation and decide what approach (whether or not to order a title search on its own) is right for it.

[1] As mentioned in our previous post, if a judgment has been rendered and the judgment creditor seeks to docket the judgment with the state, the judgment (once docketed) becomes a lien on the property – which then as part of the short-sale will almost always needs to be removed.

Andy Roth, New Jersey Real Estate Lawyer

THE EFFECTS OF LIENS AGAINST THE PROPERTY IN A SHORT-SALE (PART I)

Andrew S. Roth, Esq. — Sun, 26 Feb 2012 19:10:00 GMT

In furtherance of our discussions of short-sales on this blog, one of the key elements both sides need to seriously investigate is the liens against the property (e.g., how many there are, the value of each of them, who is the lien-holder, etc). The reason being is if a lien-holder refuses to consent to the release of a lien and the transaction is completed, the buyer will take the property subject to the lien. This can be problematic for several reasons, one of which is the lien-holder can foreclose - or continue to foreclose - on the property.[1] Another reason is that is extremely unlikely that a buyer's lender will lend any money to purchase a property unless all liens encumbering the property are released. The reason being is those remaining liens will have priority to the new lender's lien, which is very important in terms of foreclosure.

There are several ways in New Jersey that a lien can attach to a piece of property. The most common example is when a person applies for a loan to purchase a property. In exchange for the loan, the entity or person lending the money will take a mortgage against the property back in return. The mortgage is then recorded and becomes a lien against the property. Another example is when a judgment is rendered against the borrower and is docketed in the state. The judgment then becomes a lien against the property. The latter example is particularly significant in short-sales, because unlike traditional sales – where mortgages are usually the only liens against the property – most sellers in a short-sale transaction are having financial difficulty all around; so much so that it is not unlikely for them to have judgments debts unrelated to the property rendered against them, which have subsequently been docketed with the state – which in turn creates a lien against the property. The discovery of such liens and how they will be dealt with from both the buyer's and seller's perspective will be the subject of future parts of this article.

[1] Please note that the position of a lien-holder's lien in terms of its priority to the other liens encumbering the property – as well as the amount of those liens compared to the value of the property - will significantly impact whether or not a lien-holder decides to institute a complaint for foreclosure. However, we will save this discussion for another day.

Andy Roth, New Jersey Real Estate Lawyer

Religion and Bankruptcy

Andrew S. Roth, Esq. — Thu, 23 Feb 2012 01:08:00 GMT

As a New Jersey bankruptcy attorney, I understand the decision to file bankruptcy can be one of the most emotional decisions a person has to deal with. Clients will often tell me, "I've worked so hard, for so long, and up until now I paid all my bills on time; but now because of the economy I have been laid off or my business has dried up and I am scared I am going to lose everything. I see bankruptcy as a way to salvage some of my possessions, but I am scared about how it will look to my friends, family, and community overall. Will they look down on me and view me as reckless, careless, and untrustworthy".

This often becomes more emotional when the person is religious, and is concerned about how they will be viewed in the eyes of their maker. This is a difficult question for me to answer as I am not a religious theologian nor do I profess to have all the answers. However, I do point out that bankruptcy has been accounted for in the Old Testament (Torah). Specifically, Deuteronomy 15:1-2 in essence states that every seven years a person's debts are wiped clean. The rational for this passage (some believe) was that debt can be canceled to save something more sacred (e.g., the preservation of the family unit). Some clients will then tell me that knowing this makes them feel better about having to file bankruptcy. Again, I am not professing to know the answers to the great beyond, nor am I professing to be a religious theologian. What I am conveying is that the Old Testament (Torah) does account for the wiping away debts after seven years, which is analogous to some extent to the modern day filing of a Chapter 7 Bankruptcy.

The Significance of a Letter of Intent:

Andrew S. Roth, Esq. — Tue, 21 Feb 2012 01:32:00 GMT

In almost any negotiations for the conveyance of property (e.g., a purchase, sale, or lease), prior to drafting the contract or lease, the parties will come to terms regarding the business points as well as legal issues. More often than not - especially in commercial transactions - the terms will be reduced to writing although there are instances where the parties will agree to the terms orally and not set anything down on paper prior to drafting the agreement (contract or lease). As a course of practice - and (again) especially in a commercial real estate transaction - we would suggest the former over the latter, as it avoids any ambiguity as to what the terms are at a later date. This is generally done through what is known as letter of intent between the parties (the "LOI"). Essentially the LOI sets forth what the business terms are (purchase price or rent), who the transaction will be between, the location of the property or space, whether financing will be a part of the transaction, transferability of the document, as well as other provisions that are important to the parties.

The LOI can be either binding or non-binding. The former construes that there can be legal consequences if the LOI is not adhered to, as it may be construed to be a legal and binding document (agreement) between the parties. While the same can be said about the latter, it is less likely as the parties are agreeing in the LOI itself that the LOI is non-binding.

Some would argue why would anyone want to enter into a non-binding agreement when there may not be any teeth behind it? The reason being is, even if the LOI is non-binding, the parties may try to adhere to it as that is what the spirit of the agreement calls for. Accordingly, if one (1) party see's that another party is deviating away from the LOI, it can always call the other party out on the same.

While the LOI will not cover all of the terms of the agreement, it will cover many which are deemed important to the parties, and thus should be something that is considered being entered into prior to any transaction, especially when the transaction is commercial. For more information regarding letters of intent and the importance of it in a transaction, please contact us.

Andrew Roth, New Jersey Real Estate Lawyer

Commercial Leasing: Do Not be "Penny Wise, Pound Foolish"

Andrew S. Roth, Esq. — Sun, 12 Feb 2012 19:59:00 GMT

Commercial Leases Are Crucially Important to the Success of Your Business

As a New Jersey real estate lawyer, I actually enjoy negotiating and reviewing commercial leases and not because I love legalese, but because I know how crucially important the terms of a lease are to the success of my business clients. A commercial lease is one (1) of the most important factors to the success of any business, and also one of the most litigated areas of the law. This is due in part to the fact that too often a tenant is willing to sign a bad lease if the business terms look right (e.g. below market rent). It is also due to the fact that most tenants are not able to understand the wording of the lease, and are afraid of the costs of having an attorney review and negotiate the lease for them.

Don't Be Penny Wise and Pound Foolish When It Comes to Negotiating a Lease

This rational - as referenced in a previous post, and a recurring theme throughout this blog - falls under the old saying "penny wise, pound foolish". The reason being is the majority of the time it is much better to have an attorney experienced in commercial leasing review the lease prior to signing it. This is due to the fact that an experienced leasing attorney will understand how the wording can effect the value of a tenant's business. For example, depending upon how the wording is structured in the assignment section of the lease may impact whether or not the landlord's consent is required for the sale of shares in a corporate tenant, as it may be deemed an assignment under the lease.

If such consent is required, it can devalue the worth of the business, because it creates an additional hoop that the parties (the business owner and purchaser) need to jump through (i.e., the landlord's consent). Depending on what the lease says, if the landlord withhold's its consent as permitted under the verbiage of the lease, the deal can die and there is nothing the parties can do about it. Understanding this risk, many potential purchaser's do not want to risk bidding on a business and spending money on diligence, when they not only have to obtain the tenant's consent, but also the consent of the tenant's landlord; which thus, devalues the business.

An experienced leasing attorney would know how to deal with the above issue (e.g., craft it in a way that is more favorable to the tenant) or at least make the tenant aware of the risk, prior to entering into the lease. As such, by spending a little bit of money up front to hire such an attorney, may save the business owner (tenant) thousands of dollars in the long-run if at a later date it decides to sell its business.

Over the next several weeks/months, this blog will try and address other issues in commercial leasing that a business onwner needs to be aware of, and why it is important to have an experienced leasing attorney review and negotiate your lease.

NJ Real Estate: Improvements Before Sale Can be a Risk to Buyers and Sellers

Andrew S. Roth — Tue, 07 Feb 2012 15:04:00 GMT

Risks to Consider When Buying or Selling Property in NJ

Buying and selling property can be a cumbersome process filled with many potential pitfalls. While most buyers and sellers understand some of the risks (e.g., whether the buyers can qualify for a mortgage), many other pitfalls are not dealt with or even thought about until the transaction is ready to close.

As a New Jersey real estate lawyer, one issue (pitfall) I see that is often overlooked until right before the closing date is whether the seller did any work to the property, and if so, whether the proper permits were obtained.

While it is true that many attorneys allow the buyer to cancel the contract if the seller is unable to obtain a certificate of occupancy or if all proper building permits have not been obtained (if a certificate of occupancy is not required), this is often left to the end of the transaction, when both time and money have been spent. This is due in part because (i) many certificate of occupancies have a thirty (30) day expiration date, so a seller will wait until right before closing to avoid having to pay for the same inspection twice, and (ii) in today's market where getting a mortgage is not as easy as it used to be, making sure that the seller obtained all of the proper permits for the property can seem like a small issue.

Don't Take Permitting Issues Lightly, They Can Throw Off the Entire Sale

While this rational is not incorrect, it is sometimes the smallest issues that cause the most problems; so you need to flush them out as soon as possible. For example, in today's economy people are often looking to save money by doing home improvement themselves. After all there are plenty of television shows as well as books on home improvement. This is problematic because often times a home owner is more concerned about the quality of work, than it is whether or not he/she needs a permit for the work being performed. Consequently, when the inspection for the certificate of occupancy takes place, the municipality often cites these as violations whereby not only will a permit be required, but a fine can be rendered. This can result in hundreds or thousands of dollars. It can also take time to obtain the permits, which can result in the buyer having to incur a rate-lock extension, which costs money. Often times, there is an issue as to who will pay for the extension the seller or the buyer. The seller will say it is the buyer's responsibility as closing dates in the state of New Jersey are not firm unless the contract states the closing date is "time of the essence" or a letter stating the same is sent after the date written in the contract has passed. A buyer will say it is the seller's responsibility as it caused this delay.

Notwithstanding the foregoing, there is also an issue as to whether or not a seller can afford to obtain the proper permits or pay the fines. This is especially true in a short-sale where many times a seller is incurring a financial hardship. Many buyers, who are also putting the majority of their savings into the transaction, may not have the time to pay such monies on such short notice.

Conclusion

As mentioned above, even though many contracts allow for the buyer to cancel the contract if a certificate of occupancy is not obtained or all building permits are not obtained (if a certificate of occupancy is not required), it does not account for the time and monies spent by both sides up until this point of the transaction. A way to mitigate the seller's work issue, aside from the protection language in the contract, is to flush it out in the very beginning. Sellers need to try and remember if they did or had any work done to the property. For example, was the bathroom redone, was the basement finished, was a patio added, etc. If so, the Seller then needs to find out if all of the proper permits were obtained for such work. If it is unsure the seller may want to check with the town. While this may seem like it is "opening up a can of worms", if there are problems as a result of the work performed, they will most likely come to light during the certificate of occupancy inspection anyway, so it is better to deal with them early on, so the parties can decide how they will be remedied or terminate the transaction before any more time and money are spent.

Purchasing a Home in New Jersey? You Need an Attorney

Andrew Roth — Tue, 31 Jan 2012 21:26:00 GMT

Why it is important to hire an attorney when purchasing a home.

As a New Jersey real estate lawyer, I represent both buyers and sellers in real estate transactions. Buying a home is one of the most significant investments a person can make. So much so, that the majority of people purchasing their home use the bulk of their savings and incur debt (borrow money) to come up with the purchase price. This is significant as a person may have now gone from being in the black (a good financial situation) "cash wise", to in most cases being in the red (not in a good financial situation) cash wise. Consequently, if the purchased property has problems, the purchaser may or may not have the means to rectify them if the sale goes through.

In light of the above, it is extremely important to flush out as many of the problems prior to closing, so that a person can accurately assess as to whether or not it is worth going forward with the transaction. Many times purchasers rely on the boiler plate contracts that are given to them by their realtor, believing that it adequately protects their interest. The problem is that the majority of transactions are different, and while the boiler-plate contract has some protections it is not a "one size fits all". As such, it is extremely important to have an attorney experienced in residential real estate review the contract, and make amendments that are in your favor. Otherwise, should a problem arise and you failed to hire an attorney experienced in residential real estate, you may be stuck with the problem under the boiler-plate contract.

Many times clients are fearful that they are already spending so much money on the transaction (e.g., the purchase price, lender's fees, title insurance, survey, etc) that they do not want to spend any additional sums hiring an attorney; especially when it appears the boiler-plate contract covers many potential diligence issues. However, have you ever heard the line "Penny-wise, Pound Foolish"? It means saving a little today may costs you a lot in the future. This is applicable to a real estate transaction. By saving a little today and not hiring an attorney, you may be spending a lot at a later date on items that an experienced attorney would have protected in a rider to the contract by (i) having the seller pay for them, (ii) having the seller reduce the purchase price to compensate the purchaser for this expense, or (iii) allowing the purchaser to cancel the transaction.

Additionally while the initial cost (legal fee) may seem a lot (e.g., Nine Hundred Dollars ($900)), in the scheme of a Three Hundred Thousand Dollar ($300,000.00) purchase of a property, it is approximately one third of a percent (.33%) of the entire transaction. Alternatively, not being able to get out of a transaction as a result of (i) a title issue due to the automatic passage of a time period and (ii) the failure to properly negotiate a liquidated damage clause, may end up costing you thousands of dollars. Again, it is better to spend a little money to hire an experienced residential real estate attorney then it is to deal with expensive issues that could have been avoided by hiring such an attorney at a later date.

In New Jersey, Short Sales Are Anything But Short...

Andrew Roth — Tue, 31 Jan 2012 21:11:00 GMT

A SHORT SALE IS ANYTHING BUT SHORT

As a New Jersey real estate lawyer, I frequently represent clients in short sale negotiations. Many clients view the short sale as an easy process, however, there can be quite a few hoops to jump through. Most short-sales are anything but short, so unless you understand what a short-sale means, the name can be misleading. A short-sale is essentially a sale of a property for less than the value of the lien(s) (e.g., mortgage(s)) encumbering it.

In order to make a short-sale happen, all lien-holder(s) having a lien against the property will most likely have to agree to release their lien for less money than they are entitled to under the said lien. Having a lien-holder(s) agree to do this is one (1) of the main reasons a short-sale takes so much time. The reason being is the lien-holder(s) has to do its due diligence to make sure that the property is being sold at or close to the fair market value, as it wants to make sure that it is getting as much of the amount it is entitled to under the lien as possible. The lien-holder(s) also wants to see whether it is feasible to pursue the amount it is forgiving from the borrower (i.e., seller). As a result, the lien-holder(s) needs to investigate both the property and the financial situation of the borrower/seller, which takes time.

It is important to make sure that you have an attorney who understands the law with regards to foreclosure, bankruptcy creditor's rights, etc, as well as the real estate market. The reason being is an attorney who understands the foregoing, will be better able to explain to a lien-holder(s) why it should release its lien for a lesser amount than it is entitled to receive. If an attorney does not understand these areas of the law and how they interact with one another, it can be the difference between obtaining the short-sale approval of the lien-holder(s) or having an offer rejected.

The above are all things that need to be considered if you are contemplating selling or buying a property via short-sale.

Andrew Roth

The information in this blog is for general information purposes only. Nothing in this blog or associated pages, documents, comments, answers, emails, or other communications should be taken as legal advice for any individual case or situation. The information in this blog is not intended to create, and receipt or viewing of this information does not constitute, an attorney-client relationship.

Gary Giannantonio quoted in the Bergen Record on Short-sales

Hackensack Bankruptcy Attorney — Mon, 18 Apr 2011 20:29:00 GMT

Gary Giannantonio quoted in the Bergen Record on Short-sales. Click the link below to read more.

http://www.northjersey.com/realestate/119994709_
Short_sales_come_with_long_waits.html

Gov. Christie Pledges to Veto Bill That Would Abolish COAH

Andrew S. Roth, Esq. — Sat, 11 Dec 2010 22:15:00 GMT

A Trenton committee on November 8 discussed a bill that would abolish the Council on Affordable Housing (COAH), according to Matt Friedman . COAH’s official website states that the council was created in 1985 with a goal “to establish a realistic opportunity for the provision of fair share low and moderate income housing obligations, generally through land use and zoning power.” Provided as an alternative to the Fair Housing Act, the council consists of twelve (12) members who are “appointed by the Governor on the advice and consent to the Senate.”

Terry Hurlbut , however, wrote back in June that “the attempt to guarantee affordable housing everywhere has provoked dozens of lawsuits.” In addition, the COAH’s system has created “a ‘byzantine maze’ of rules that create confusion rather affordable-housing units,” according to Senator Lesniak .

According to The Star Ledger , the proposed bill would require towns in New Jersey to make ten (10) percent of their new development affordable. Friedman stated that one of these exceptions would include municipalities that had over fifty (50) percent of their students who were able to have free or reduced lunch.

He additionally reported that developers who were not able to do this would be required to pay a 3.5 percent fee that would be used to build affordable housing in the same town. This would be an alternative to the formulas of COAH that Department of Community Affairs Commissioner Lori Grifa has called “rigid, arcane and virtually unintelligible,” according Friedman’s article.

Governor Chris Christie also believes that COAH should be abolished, cited earlier in his campaign trail last year that he planned to “gut COAH.” The Examiner , in fact, reported that all gubernatorial candidates pledged to abolish COAH, although Christie’s reason to do so is unclear. Nevertheless, Friedman wrote that the New Jersey governor plans on vetoing the bill because he disagrees with the 2.5 percent fee on commercial development, calling it “the stupidest idea [has has] heard in a week.” Assemblyman Jerry Green, however posed the question, “If we eliminate the fee, where will we find the money (to pay for housing?)”

Ultimately, the bill was passed by the committed with a vote of 4-1 and moves on to be voted in the full Assembly.

*Any information on all blog entries should not be construed as legal advice. If you have any legal issues, please consult an attorney.

“A Disappointingly Slow” Economic Progress

Andrew S. Roth, Esq. — Tue, 07 Dec 2010 22:13:00 GMT

According to Neil Irwin , the Federal Reserve projected that the unemployment rate will go down to 9 percent from 9.6 percent by the end of next year, although the article took on a more pessimistic tone due to the fact that a greater decline was expected earlier in June. Irwin writes that other statistics show that companies are making 28 percent more profit than last year, an all-time high, while GDP rose to 2.5 percent annual rate since September. He additionally writes that economic recovery “is now increasingly fueled by demand from consumers and businesses,” and Reuters reports that consumer sentiment has rose to its highest since June.

At the same time, the Federal Reserve were cited to believe that progress is “disappointingly slow” and “members generally thought that progress was likely to remain slow.” Because of this outlook, they have decided to buy $600 billion in Treasury bonds. Bloomberg reports that proponents expect the bonds to “help promote a somewhat stronger recovery in output and employment while also helping return inflation, over time, to levels consistent with [the Fed’s legislative mandate].”

Controversy is prominent for this action, with politicians, economics, and media personalities arguing that that the bonds could lower the dollar’s value, increase inflation, and simply have a “limited” effect on economic recovery.

This “limited” effect could especially be the case for the housing market. Reuters reported that “single-family sales of new homes fell 8.1 percent in October, suggesting that recovery is still not helping the housing market.” The unit annual rate fell from 308,000 in September to 283,000 in October, showcasing a weak market especially at the end of the home-buyer tax credit. “Housing data is still coming in weak,” said Brain Battle, Vice President of Trading at Performance Trust Capital Partners. “It’ll take years until we get some life in that market.”

Dana Johnson, chief Economic of Commercia, agrees with Battle and additionally states, “[T]he only thing takes away from the incredible weakness is that there are hardly any homes for sales.”

*Any information on all blog entries should not be construed as legal advice. If you have any legal issues, please consult an attorney.