Mortgage Fraud Quiz

Mortgage Fraud Quiz

Mortgage fraud is a material misstatement, misrepresentation or omission relied upon by an underwriter or lender to fund, purchase or insure a loan. It continues to evolve as lenders and fraudsters alike adapt to changing economic conditions and government regulations. How much do you know about it? Take the quiz to find out.

1.  A title policy insures against:

    1. Fraud and forgery
    2. Principal and interest
    3. Madness and mayhem
    4. Metes and bounds

2.  A straw buyer is:

    1. Someone who purchases straws in bulk
    2. Someone with good credit who agrees to help someone with bad credit obtain a loan
    3. A first time home buyer
    4. Someone who is over 65

3.  Which of the following items are commonly fabricated in order to induce a lender to approve a loan:

    1. Employment verifications
    2. Mortgage loan applications
    3. Bank statements
    4. All of the above

4.  What document is the most forged document in a real estate transaction:

    1. Deed
    2. Power of Attorney
    3. Mortgage
    4. Purchase Contract

5.  Flopping occurs in what type of transaction:

    1. Refinance
    2. Deed in Lieu
    3. Bulk Sale
    4. Short Sale

6.  Which of the following steps can a settlement agent follow to assist in preventing fraud from occurring in one of their transactions:

    1. Disclose all receipts and disbursements on the HUD-1 Settlement Statement
    2. Make sure the funding lender has everything the settlement agent has
    3. Trust their escrow gut
    4. All of the above

7.  Proper identification should be issued by a governmental entity and include a physical description and (select all that apply):

    1. Include the bearer’s signature
    2. Include the expiration date
    3. Include the bearer’s weight
    4. Include the bearer’s photograph

8.  Which of the following is a red-flag warning of a possible fraudulent transaction (select all that apply):

    1. Purchase offer is more than the list price
    2. Unusual expenses paid by the seller
    3. Silent second mortgages
    4. Transactions not recorded on the HUD-1 Settlement Statement

9.  What are the two classifications mortgage fraud schemes are put into:

    1. Fraud for profit and fraud for housing
    2. Tit for tat
    3. Civil and criminal charges
    4. Tax evasion and wire fraud

10.  Who are usually the perpetrators in a fraud for housing scheme:

    1. Cops
    2. Industry professionals
    3. Drug dealers
    4. Ex-cons

 

Quiz Answers:

  1. A title policy insures against:
    Answer: Fraud and forgery
    The Covered Risks section of both an Owner’s and Lender’s title policy state the insured is covered for, “a defect in the title caused by…forgery, fraud…” Since this coverage is offered in all of the title polices available, fraud and forgery is of major concern to the title industry as well as our Company.
  2. A straw buyer is:
    Answer: Someone with good credit who agrees to help someone with bad credit obtain a loan
    Generally, a straw buyer is someone recruited by a perpetrator to take out a mortgage and purchase a house in their name. The straw buyer normally does not live in the house or have the intent to reside at the house. They often receive cash in exchange for the use of their credit and name.
  3. Which of the following items are commonly fabricated in order to induce a lender to approve a loan:
    Answer: All of the above
    Mortgage fraud schemes involve falsifying a borrower’s financial status by including material misstatements on documents the lender’s underwriter relies on, when evaluating the eligibility of a borrower. This is done by supplying fictitious employment verifications, mortgage loan applications and bank statements
  4. What document is the most forged document in a real estate transaction?
    Answer: Power of Attorney
    A Power of Attorney is written authorization to represent or act on another’s behalf in private affairs, business or some other legal matter. As a result, perpetrators sometimes forge the names of property owners in order to sell a property out from under the rightful owner or use the Power of Attorney to get a loan to strip all the equity from a property unbeknownst to the property owner.
  5. Flopping occurs in what type of transaction:
    Answer: Short Sale
    A flopping scheme requires the perpetrator to conceal or provide falsified information to the loan servicer. This is information the servicer needs to make informed short sale decisions. These concealments might include hiding the true parties to transaction, any contingent transactions or the true value of property.
  6. Which of the following steps can a settlement agent follow to assist in preventing fraud from occurring in one of their transactions:
    Answer: All of the above
    The settlement agent is often the best defense against mortgage fraud. Without them, the fraud might never be prevented. It is important the settlement agent fully disclose all receipts and disbursements on the HUD-1 Settlement Statement and material facts to the funding lender.
  7. Proper identification should be issued by a governmental entity and include a physical description and:
    Answer: Include the bearer’s signature and photograph
    Forged documents are often one of the many elements included in a mortgage fraud scheme. It is important to the lender and title company the borrower is property identified. Although the identification requirements for the purpose of notarizing vary from one state to the next, it is often the lender who requires the borrower present identification which contains all of these elements.
  8. Which of the following is a red-flag warning of a possible fraudulent transaction:
    Answer: A, B, C and D
    Although any one of these items alone might not be an indicator – combined they definitely have the makings of a scheme.
  9. What are the two classifications mortgage fraud schemes are put into:
    Answer: Fraud for profit and fraud for housing
    The FBI defines these two classifications. They state fraud for housing entails misrepresentations by the applicant for the purpose of purchasing a property for a primary residence. This scheme usually involves a single loan. Fraud for profit often involves multiple loans and elaborate schemes perpetrated to gain illicit proceeds from property sales.
  10. Who are usually the perpetrators in a fraud for housing scheme:
    Answer: Industry professionals
    Industry professionals are the ones most familiar with the ins and outs of the loan process – and most often the perpetrators involved in a fraud for housing scheme. The scheme could never occur without the cooperation of the real estate agents, loan officers, appraiser and settlement agent assisting in all the material misrepresentations which must be provided.

How did you do?  Please share your comments below!

 

Why Altered Checks for Earnest Money are Unacceptable

Altered Earnest Money Check

Settlement agents are regularly pressured into accepting altered checks (which they should not) for earnest money. This usually occurs when the buyer’s original offer to the seller indicates one escrow company and then, somewhere in the negotiations, the principals agree on another escrow company. Real estate agents do not want to go back and ask their buyer for a new check, so instead the check is altered and the buyer initials the changes. Accepting the check is done at the sole risk of the operation. In this story, our office accepted an altered check which proved to be risky.

The original check is altered

One of our sister offices received a fully executed Purchase and Sale Agreement, along with a personal check representing the earnest money. Per the agreement, the amount of earnest money due was $1,000. The check was originally written to Old Republic Title Co., but during negotiations the principals agreed to change the escrow and title company to ours. Rather than obtain a new check for $1,000, the buyer simply crossed through the original payee, wrote in our company name and initialed the change.

Transaction is cancelled
Earnest Money refund is requested

The settlement agent receipted-in the funds and began to process the transaction. About a month later the buyer decided he wanted to cancel the transaction. His real estate agent instructed the settlement agent to prepare cancellation instructions reflecting the earnest money as being refunded to the buyer. The settlement agent prepared the cancellation instructions and sent them to the listing agent.

At first, the seller was not sure they were willing to give the money back to the buyer. The real estate agents began negotiating for their respective clients. In the meantime, the buyer went to his bank, Wells Fargo, and tried to place a stop payment on his earnest money check. When the request was denied, he filed an Affidavit of Forgery, claiming the check was altered and cashed without his approval.

Earnest Money “refunded” twice

Simultaneously, the sellers signed mutual cancellation instructions agreeing to return the earnest money to the buyer. The settlement agent cut a check from the trust account to the buyer, representing the refund of the earnest money. The buyer deposited the refund into his account at Wells Fargo.

Shortly thereafter, our Operational Accounting Center (OAC) received notice from Bank of America that our trust account was debited $1,000 based on the fact the original earnest money check was altered. When a fraud report is filed, banks act quickly to freeze the amounts in question while they determine the merits of the report. Wells Fargo immediately contacted our bank, Bank of America, who reviewed the affidavit.

The risk of accepting altered checks

Anytime a settlement agent accepts an altered check, he or she subjects the instrument to questioning. As a matter of fact, accepting an altered or endorsed check is done solely at the operation’s own risk, since the banking agreements Our Company enters into offer no protection for these checks. The operation is on their own to prove they were entitled to negotiate the check.

Accepting an altered or endorsed check is done solely at the operation’s own risk…

The OAC quickly found this out. They contacted Bank of America upon receipt of the notice our account was debited. Bank of America referred back to the banking agreement. Neither Bank of America nor Wells Fargo would provide assistance since the office accepted and negotiated an altered check – even though they had already refunded the buyer their earnest money deposit.

The OAC filed an Affidavit of Claimant on the refund check disbursed to the buyer. The basis for the affidavit was the fact that the borrower had already collected the original earnest money deposit. The claim was denied.

The Borrower withdraws Affidavit of Forgery

Next the settlement agent contacted the buyer’s real estate agent. She explained the borrower needed to withdraw their Affidavit of Forgery since he had received his refund. The borrower finally withdrew it and their account received credit for the original deposit. Whew! All of this work for a $1,000 deposit on a cancelled transaction for which we will never be paid!

The Moral of the Story

When Our Company opens a trust account, a banking agreement is signed which outlines the bank’s and Our Company’s responsibilities. One of our responsibilities is to accept checks made payable to Our Company only. If an office deviates from the agreement and accepts a third-party-endorsed or altered check, the bank has no obligation to assist or defend them; which is exactly what occurred in this instance. Settlement agents should be aware of the risks when accepting personal checks which have been altered or endorsed, and request a replacement check.

Have you encountered a situation where an altered check was either used or not accepted? Please share your comments below!

What is bankruptcy? What options are available to the debtor and the creditors?

bankruptcy options
The purpose of bankruptcy is two-fold: (1) to give the debtor (the party filing bankruptcy) a fresh start and (2) to
pay creditors in an orderly fashion. Bankruptcy is governed by federal law which usually trumps state law when it comes to the actions of both the debtor and creditors.

Liquidation vs. Reorganization

There are essentially two types of bankruptcy – liquidation and reorganization. In a liquidation the debtor gives up trying to pay debts, and assets are turned over to a trustee who sells them to pay creditors. Reorganization offers the opportunity to pay off (usually in installments) or restructure debts based on a plan approved by the creditors and the court. Business entities can continue to operate and come out of bankruptcy in better shape.

Ultimately, no matter which type of bankruptcy it is, the individual debtor is discharged from personal obligation to pay most existing debts, which will not be liens on property acquired in the future.

The Life Cycle of Bankruptcy

Click the image below to view an article and infographic of the life cycle of bankruptcy.  The life cycle of bankruptcy
Click here to view a printable version of the lifecycle of bankruptcy infographic

The most common bankruptcy plans are:

Chapter 7

Chapter 7 is a liquidation, where a trustee is appointed. Certain assets (i.e. your personal residence) can be exempted. Unsecured creditors (for example, a creditor that does not have a mortgage on real property) may end up with nothing, and secured creditors may get less than what they are owed. Real estate transactions require court approval.

Chapter 11

Chapter 11 is a reorganization available to businesses and certain qualifying individuals. It results in a plan allowing for continuing operation of a business, and usually most secured creditors get paid in full and unsecured creditors may get something. There may or may not be a trustee, but if not, the debtor is usually allowed flexibility to do what a trustee would do if it was in the “normal (e.g., ordinary) course of business.” Real estate transactions usually require inclusion in the plan or a special court order. An exception to this rule might be a developer who can usually sell individual lots or houses without special approval.

Chapter 12

Chapter 12 is also a reorganization available to farmers and fishermen. This is shorter than a Chapter 11, and unsecured creditors get less protection.

Chapter 13

Chapter 13 is a “wage earner” reorganization available only to individuals, with a plan and a trustee. Creditors usually get partial payment, but can challenge the plan. The individual has to wait until the plan is completed (usually 3 years or less) for a discharge of debts, except in limited “hardship” situations.

Any type of bankruptcy can be converted to another type. It is important to remember that the bankruptcy court retains jurisdiction until it is closed. In some cases, the court can actually go back and void transactions that occurred even before the bankruptcy was filed. In a reorganization, the plan has to be completed and the case formally closed before the debtor is free from the bankruptcy.

Download

Click the image below to download a printable version of this article.  What is bankruptcy and what options are available?
Bankruptcy Options

The automatic “stay”

One important effect of bankruptcy is an automatic “stay” of any actions of the debtor or creditors, including selling real property or foreclosing any liens. The court obtains immediate jurisdiction over all property, wherever located and no matter where the bankruptcy is filed. Whatever might have been in the works comes to a halt, and no one can proceed without court approval. Some debtors will attempt to file bankruptcy merely to forestall a foreclosure, but a creditor can request that the stay be lifted in order to proceed with a foreclosure, and if the property wouldn’t generate funds for the other creditors, then the court will usually lift the stay, allowing the lender to proceed.

Future blogs will address elements of a bankruptcy, including exemptions, abandoned property, sales “free and clear” and the effect of a discharge, some of which involve common misconceptions about bankruptcy.

Click the following link for a flow chart of the bankruptcy process.

Questions or comments? Please share below!

Condo, Townhome, PUD, or Plat? What they are, how they’re different, and how they’re identified.

Condo, Townome, PUD, or Plat.  How to tell the difference - http://www.flickr.com/photos/52847686@N07/5082458589/

Sometimes questions arise as to the exact nature of certain residential properties: It looks like a house but is it a condo, a townhome, built on a lot in a plat or what? Should I use a Residential Purchase & Sale Agreement or a Condominium Purchase & Sale Agreement form when I write up an offer?  No worries! Your Ticor Customer Service team is happy to help you clear up this sometimes murky issue.  Below are some tips to help you identify which type of residential parcel you’re working with.

Download

Click the image below to download a printable version of this article.
How to tell the difference between a condo, plat, townhome, or PUD

Look at how it was recorded:

In the same way that you can’t judge a book by its cover, you can’t simply look at a home and know whether it’s part of a condo or some other form of subdivision (a/k/a “plat”). The answer may be found with how it was first recorded.

Look for land ownership differences:

The primary difference between a condo and other forms of development is the ownership of the land.

Condo:  An owner of a condo “unit” owns their dwelling but not the land it’s built on. In fact, condo owners typically don’t even own the walls, just the surface of them. Unit owners collectively share interests in the  “common elements”.  Typical common elements include interior hallways, building exteriors, elevators, landscaping, and recreational amenities like swimming pools. Parking may be assigned to specific units, may be held as separate tax parcels, may be common elements, or may be a combination. In Washington State condominiums are created under the provisions of the Washington Condominium Act (or the earlier Horizontal Property Regimes Act).

Plat: 1.) Generic term meaning any type of recorded subdivision.  2.) Specifically a recorded division of detached, single family homes.  Homeowners in a plat own the parcel of land and the structure(s) built on it, and may or may not also have an interest in common areas.  Common areas may be owned in percentage by some or all of the homeowners, or may be held by the Homeowners Association as a separate entity.

A PUD (Planned Unit Development – not to be confused with Public Utility District) is a type of subdivision where the homeowners individually own their lots, plus jointly belong to an association which owns and maintains significant common areas like streets and sidewalks.

Look at covenants and recorded plat documents

In each case, recorded plat documents and covenants typically specify the terms of  what is owned by the individual homeowners and what are common areas.

Your Ticor Customer Service team will be happy to provide legal descriptions, property profiles, or plat documents for you.

Sample legal descriptions

  • Lot 45, Hawthorn Park, according to the plat thereof recorded under Recording Number 200208285002, in Snohomish County, Washington.
  • Unit 422, Building 1, Queen Anne High School Condominium, Survey Map and Plans recorded in Volume 211 of Condominiums, page(s) 13 through 31, inclusive; Condominium Declaration recorded under Recording Number(s) 20051115002874 and amendments thereto, in King County, Washington.
  • Lot 13 and South 2.67 feet of lot 14, Marsh Commons PUD. according to the plat thereof recorded in Volume 144 of plats, page(s) 9 through 11, in King County, Washington;

Townhouses can be any of the above!

Townhomes (common-wall or zero-lot-line homes) can be recorded as a condominium, a regular plat, or a PUD.  It is also common in urban areas to see a residential lot short platted into several separate lots with a townhouse on each lot and perhaps a shared driveway. Townhome short plats include specific language about maintenance of the shared elements.

Here are some sample legal descriptions that can give a clue about how the townhomes were recorded:

  • Unit 11704, Silvercrest Townhouses Condominiums, a Condominium according to Declaration recorded under Auditor’s No. 9105310689 and amendment thereto recorded under Auditor’s No. 9110210556, and Survey Map and Plans recorded under Auditor’s No. 9105310690, in Pierce County, Washington.
  • Lot(s) 165, Silver Firs Townhouses, according to the plat thereof recorded in Volume 59 of Plats, page(s) 109 through 114, in Snohomish County, Washington.
  • Unit Lot B, Seattle Short Subdivision No. 3006904, recorded under Recording Number 20080205900009, in King County, Washington.

Quiz:

See if you can spot which of these photos is in a Condo, Plat, or PUD? (Three question quiz inserted below shows a picture and a multiple choice answer)

Enter your name and hit the ‘start’ button to take the 3-question quiz!

 
 

10 Tips for Saving Resources

Tips for saving energy and becoming more green

Every year on Earth Day we’re all reminded to look for ways to become more efficient, less wasteful, and more considerate of how our actions impact our environment.

If you’re looking for ways to become a little greener, check out the tips below:

Did you know?

Ticor has taken the steps necessary to earn a Green Certification for each of our Title & Escrow locations in the Puget Sound region.

We’re proud to be the first operation in the FNF family of companies to achieve complete green certification in our marketplace.

  1. Don’t print e-mail attachments! Save important files in an organized file structure on your computer hard drive for easy future reference. You’ll save paper and office space!
  2. Check your printer settings. Some studies have reported that resetting basic printer settings can save the average user 1,400 pages of wasted paper a year. You can also set the printer to print on both sides by default, further reducing paper usage. Check the manufacturer website on your user manual for details on changing your printer settings. Also, always use “print preview” before printing to avoid printing unusable pages.
  3. Send faxes directly to E-mail boxes. Faxing directly to a recipient’s inbox as opposed to their fax machine is an easy way to eliminate wasted paper.
  4. Recycle your office paper. If you have sheets of paper printed in error or no longer necessary, consider running them through your printer on the unprinted side for proofs and personal use.
  5. Turn off the lights when you leave a room if you’re going to be gone for more than 30 seconds. Put timers on lights if you have kids who forget to turn them off.
  6. Recycle! Some cities do, but if your city doesn’t, consider separating cans, glass, plastic, and paper and take it to a recycling center every month so that it is not such a chore. Have the kids help so they get used to the idea.
  7. Try to buy local foods whenever possible. Food that has to travel a long distance is not “green”. If you don’t have access to much local produce, or if you’re not sure, try to buy from a local Farmer’s Market if you can. It will be green as well as fresh.
  8. Go with rechargeable batteries when possible. Be sure to properly dispose of your used batteries – they must be recycled.
  9. Close your curtains! Heat and cool air loss from older windows can be substantial and the sun beating in the windows will warm the house causing the A/C to come on and work harder.
  10. Don’t leave the water running while brushing your teeth.

Do you have tips or suggestions on conserving energy or reducing waste?  Please share below!

Download tips for becoming more green

Click the image above to download the energy conservation tips.

HELOC Spending Spree – Was it Fraud or Ignorance?

Honest Mistake?

During a refinance transaction, a home equity line of credit was paid off – but not closed. Later the refinance lender foreclosed and sold the REO (bank owned) property to a new owner. One of our underwriters insured the refinance, issued the trustee’s sale guarantee and insured the new owner on the sale out.

The former property owner then ran up $172,622 in debt against his home equity line of credit, which was secured by a house he didn’t own. He made no payments, and the home equity lender started foreclosure!

HELOC fraudAs part of a refinance transaction the settlement agent paid, in full, a home equity line of credit (HELOC) in the amount of $149,392.71.

The lender’s payoff statement required the borrower, Mr. Gonzalez, to check either box:
[] Payoff Only
[] Payoff, Terminate and Satisfy/Discharge Mortgage

The payoff statement also provided:
If neither box is checked, the account will remain open and no satisfaction of mortgage will be filed.

The payoff statement further provided:
Notice to Borrower and Closing Agent: A Request to terminate/close your home equity line of credit account to satisfy the mortgage will be processed if (1) the second block is checked; (2) all amounts owed are paid in full; and (3) at least one borrower on the account signs this payoff request.

A Very Small Oversight

Gonzalez signed the payoff request, but due to an oversight on the settlement agent’s part, neither box was checked. As a result the payoff check and request were sent, but the HELOC was not frozen and no reconveyance of the deed of trust securing the loan was ever recorded.

Fast forward two years later: Gonzalez fell behind on his payments, and the refinance lender foreclosed, obtaining a Trustee’s Deed upon sale. Subsequently the lender re-sold the property to a new buyer. The sale transaction was handled by one of our offices. The preliminary report showed the HELOC still of record in first lien position as well as a recorded Notice of Default. A claims attorney allowed the title office to insure around the outstanding HELOC, since Our Company had insured the previous transactions involving the refinance lender, the trustee sale guarantee to the refinance lender, and now the ultimate re-sale to the new owner. An endorsement was issued to the final policy of title insurance deleting the exception of the HELOC loan.

The New Owner Files a Claim

The HELOC lender moved forward with its Notice of Default and set a date for Trustee’s Sale. When the new owner received the notices of an impending foreclosure, she opened a claim with Our Company, as she was about to lose her home. The claims department contacted the HELOC lender for a new payoff statement. When the payoff statement was received, the claims attorney noticed Gonzalez (the former owner) had run up $172,622 against his line of credit!

In order to protect the insured’s interest in the property, the Company paid the HELOC lender off again and this time demanded the HELOC be closed and the lien released. The claim was deemed an escrow loss and charged back to the operation dollar-for-dollar!

In an attempt to recoup our losses, the claims attorney sent a written demand to Gonzalez for reimbursement of the amount paid on his behalf to the HELOC lender. Gonzalez called in response to the letter and was friendly, but confused about what was happening. The claims attorney explained to him that Our Company expected full reimbursement for our losses. Gonzalez made it clear that he did not have the resources to pay back the Company. He stated he would retain an attorney.

Moral Of The Story

Does Gonzalez’s decision to run up the HELOC after he lost the property to foreclosure constitute fraud? Yes! Gonzalez intentionally charged $172,622 against a mortgage on a property he no longer owned.

It can be argued that many borrowers are oblivious and don’t understand that they can’t continue to draw on a line of credit after he/she has paid it off and/or no longer live at the property. The issue is that the bank continues to solicit the borrower to spend against the line of credit by providing debit cards and checks that enable more spending!

It is imperative that our settlement agents ensure the HELOC closure letter is signed and, more importantly, delivered to the payoff lender.

It is imperative that our settlement agents ensure the HELOC closure letter is signed and, more importantly, delivered to the payoff lender. There are plenty of instances where the payoff funds are transmitted via wire transfer and the payoff closure letter is not sent to the payoff lender at all, but rather left in the file. There are also plenty of instances where the HELOC payoff statement reflects a zero balance and, subsequently, the signed closure letter is not sent to the payoff lender.

When either instance happens, one of two things eventually occurs later – the lender never closes the line of credit and continues to solicit the borrower to charge against the available balance (which many borrowers do); or the lender continues to accrue annual fees. Either way, once the property is further conveyed, encumbered or foreclosed upon – the HELOC lender is contacted to release its lien and it insists on payment in full AGAIN! Settlement agents need to do their part to protect the Company from these types of losses by sending the closure letter.

Questions or comments?  Please share below!

Mineral Rights Reservations and Residential Property

Mineral Rights Reservations & Title Insurance

The Smith’s offer has been accepted – a nice home in the suburbs, with schools and shopping nearby. The Realtor® has ordered the title report and it looks good…but what’s this? There is an exception for minerals. What does that mean? Is there gold in them thar hills? Will the Smiths wake up one morning and find an oil derrick next to the swing set in the back yard?

What’s Insured?

The Homeowner’s Policy includes very broad “mineral” rights coverage, as follows:

“This Policy insures You against actual loss… resulting from…:

“Your existing improvements (or a replacement or modification made to them after the Policy Date), including lawns, shrubbery or trees, are damaged because of the future exercise of a right to use the surface of the Land for the extraction or development of minerals, water or any other substance, even if those rights are excepted or reserved from the description of the Land or excepted in Schedule B.”

What exactly are minerals, and what can happen because of the reservation?

Ownership of land extends to the center of the earth, and that includes every substance under the surface. And of course, it’s not all just plain “dirt.” It can include many types of valuable substances. Technically oil, gas and similar substances (including natural gas, helium and nitrogen) are not minerals, but can be treated as such under some definitions – in other words, for most people, the definition probably is inclusive of anything that might be considered a mineral, unless the reservation language is explicit.

Ownership of land extends to the center of the earth,

There is a history of mining coal in some parts of western Washington, and with the price of gold at or near record highs, gold mining might make a comeback. More recent activities involve sand and gravel as well as vermiculite, gypsum and perlite.  But these areas are not widespread and residential areas are not necessarily built around them.

Ways mineral reservations might be used

A mineral reservation is a severed “subsurface” parcel in separate ownership from the rest of the land. Prior owners could have sold minerals to a third party or leased it for the purpose of extracting something and collecting rent and royalties. A former owner could have reserved minerals without expecting anything to come of it. Clearly, the owner of minerals would own them, but what that owner might want to take out of the ground could be difficult to determine, to say nothing of the right of access – the ability to actually start digging.

How title companies view mineral reservations

Mineral Rights Residential PropertiesMany mineral reservations are old and have never been actively enforced. Washington has a “dormant mineral” statute (RCW 78.22, et seq.) that allows the surface owner to attempt to terminate unused mineral rights after 20 years of nonuse. Because of the potential for constitutional challenges (and prior case law that said the surface owner can’t claim adverse possession against the mineral owner) title companies typically will not rely on the recorded affidavit to ignore the mineral reservation, but will show it along with the exception for the mineral reservation.

But, a reservation of “minerals” shouldn’t impact most residential transactions. Usually there is nothing valuable in the area. Even if that’s possible, the area probably is subject to stringent environmental, zoning and other land use laws that would preclude anyone from trying to look for or extract minerals. For this reason, title policy endorsements that provide both the owner and the lender coverage against loss due to the exercise of mineral rights are commonly offered in residential transactions. In commercial transactions or some rural areas the risk will be more carefully weighed, including reviewing whether the reservation precludes access from the surface (promising lateral access under the land only) or offers compensation for surface damage, particularly to improvements on the land.

Download

To download a printable version of this article, click here or click the image below.

Mineral rights reservations and real estate

Click the image above to download a printable version of this article.

Questions or comments?  Please share below!

REO Fixer Fiasco

Before and after REO fixer

Buyers are taking full advantage of a down market by purchasing homes at low, low prices after foreclosure or through short sales. The problem is most of the homes have either been neglected or damaged and no longer qualify for government financing, such as an FHA Loan. As a result, some real estate agents are requiring the buyer to pay for repairs up-front.

In one recent transaction the buyer paid $8,500 up-front to have termite damage and other items repaired in anticipation of qualifying for FHA financing.

In some markets the listing agents are advising potential buyers to pay for up-front repairs to abandoned REO and short sale properties during the offer and closing process to ensure the property will qualify for government financing. As a result, the buyer pays for repairs to get the home ready for appraisal. In one recent transaction the buyer paid $8,500 up-front to have termite damage and other items repaired in anticipation of qualifying for FHA financing.

Foreclosure Do-Over

The property was an REO property owned by a bank – post foreclosure. During repair to the property a contract was presented and accepted by the bank. An escrow was opened and a title report ordered that uncovered a defective trustee’s sale. The bank ultimately had to re-start the noticing period and the entire foreclosure process!

The REO bank had to pull out of the contract, since it could not deliver free and clear marketable title to the buyer. The buyer received a full refund of her earnest money deposit, but not the $8,500 spent repairing the home.

Advice from Title

The buyer asked the title company what she could do to collect her up-front cost of repairing a home she ultimately could not purchase. Our response was to consult an attorney, since she might have the ability to file a mechanics’ lien in order to recoup her costs.

More articles relating to REO Transactions:

The REO Transaction Process
Setting expectations on an REO Transaction
4 Hot tips for working with Escrow on an REO Transaction

Questions or comments?  Please share below!

How One Single Initial Unraveled a Real Estate Transaction…

Verifying ID at escrow signing

A small piece of Lucerne Valley was being sold for $41,000 in an all-cash transaction. The buyer and seller lived out of the area, necessitating the closing documents be mailed out for signature. The vacant land sale went sideways when the escrow officer mailed the documents to the seller and demanded they be signed in the presence of an approved notary.

Closing documents mailed to principals

Tiffany V., an escrow officer with our sister branch in Victorville, was handling a simple all-cash sale transaction. All the closing documents were mailed out to the principals for signing. The buyer sent in his completed paperwork and closing funds. All Tiffany was waiting for, was the seller to send in his completed documents and signed grant deed.

An approved notary must be used

When the seller returned the documents to Tiffany, she discovered the seller had not followed her direction to sign them in the presence of a Company-approved notary. She advised him he would have to re-sign with an approved notary. The seller complained our offices were, “…too far and too inconvenient to get to.” and “This is ridiculous; a notary is a notary.” The seller’s real estate agent even gave Tiffany flack about the seller having to re-sign the conveyance deed. Finally the seller agreed to have a Company-approved notary come to him. The owner of record is Charles S. Calloway and the person the notary was meeting with only had identification for Charles E. Calloway. The seller insisted the notary notarize him just as Charles Calloway and that it would be fine with no middle initial.

The man who signed the documents is not the owner

The notary immediately called Tiffany after meeting with the seller. He informed her that he went ahead and notarized the signer as Charles Calloway without the middle initial to avoid getting into the legalities with him. The notary wanted to make sure, however, that Tiffany knew the Charles Calloway he met with was not the Charles S. Calloway on title, but Charles E. Calloway – the grandson of the owner of record.

The property had been in the same family since 1938, passed down from father (deceased owner of record) to son (deceased 20+ years) to grandson. The family members apparently never felt they had to transfer title, since they all had the same name of Charles Calloway.Tiffany promptly notified the real estate agents that the seller did not actually own the property. The seller’s agent quickly apologized about the hard time she gave Tiffany over the approved notary requirement and thanked her for catching the situation before it was too late.

…the Charles Calloway he met with was not the Charles S. Calloway on title, but Charles E. Calloway – the grandson of the owner of record.

The agent has put her client in contact with a probate attorney and it appears the buyer is still very interested in the property and is willing to wait for him to go through probate.

The moral of the story

The deed could have been invalidated by the heirs of the estate of Charles Calloway (senior). Since the new owners were purchasing an owner’s title insurance policy, the company would have had to defend them against any claim or loss resulting from the heirs of the estate laying claim to the property or the proceeds from the sale of the property

Questions or comments? Please share below!

Property Tax Appeals and Exemptions

property tax appeals and exemptions

This time of year usually brings a renewed interest in property taxes. We’ve written about the property tax annual cycle before.  Today we’re going to address the question of tax appeals and exemptions.

Is it possible to reduce what I pay for property taxes? 

Download

To download a printable version of this article, click here.

For many of us the answer is probably no.  There is an appeals process plus a number of programs where property owners may qualify for exemptions or deferrals.

Property Tax Appeals

Each county provides specific information on appealing your property tax valuation. This information will include instructions on how to appeal, when you may appeal, what evidence you will need to provide, tools for gathering information, and a description of the appeals process.

You may qualify

According to the King County Department of Assessments, there are more than 26,000 senior citizens and disabled persons that qualify for exemption yet they have not enrolled.

One of the more common reasons to appeal is a change in property value.  For this reason each county provides free databases (or online search tools) that you can use for locating sold properties that are comparable to yours. If you can find similar properties that sold for less than the assessed value of your home, it may be worth your time to appeal your valuation.

Comparable Sales – Comparable sales are properties of a similar lot size, quality, living area, age, and added details like view or waterfront. If you are planning on appealing your property tax valuation, you may be required to list comparable sales that support your request on your appeal petition.

Errors in your property description – From time to time the assessor may make errors in the description of a property. Any errors in how your property is described should be noted in your petition. You can also provide other documentation such as pictures, repair bids, or geology reports if there are structural or site problems that would reduce market value.

Property Search tools

It’s the law

State law requires the Assessor to value all taxable property at 100 percent of its true and fair market value in money, according to the highest and best use of the property.

King County Property Search
Pierce County Property Search
Snohomish County Property Search

Information on appeals
King County Property Tax Appeals
Pierce County Property Tax Appeals
Snohomish County Property Tax Appeals

Property Tax Exemption & Deferral Programs

Some taxpayers may qualify for tax exemptions or tax deferrals. Exemptions generally provide a reduction in the amount of taxes due, whereas deferrals provide temporary relief by applying the deferred taxes as a lien against the property.

Below are a few categories of exemptions & deferrals provided by the Washington State Department of Revenue. The county assessor administers these programs and is responsible for determining if applicants meet the qualifications. Questions about these programs should be directed to the county assessor’s office.

Deferrals
Property tax deferral program for senior citizens and disabled persons
Property tax deferral program for homeowners with limited income

Assistance in the form of a Grant
Property tax assistance program for widows or widowers of veterans

Exemptions
Property tax exemption for nonprofit organizations
Property tax exemption program for senior citizens and disabled persons

Finally, there is a large list of other possible deferrals & exemptions available through the county assessor that may be available for a qualifying property depending on it’s condition, historic significance, or how it is used.

Siri Property tax response

What would siri have to say about saving on property taxes?

Some examples are:

  • Homeowner Improvement
  • Flood and Storm Damaged Property
  • Current Use Open Space
  • Current Use Forest Land
  • Historic Property
  • Designated Forest Land
  • Character building benevolent, protective or rehabilitative social services
  • Veterans and relief organizations
  • Libraries
  • Orphanages
  • Day care centers
  • Nursing homes and hospitals
  • Schools and colleges
  • Art, scientific and historical collections
  • Fire companies
  • Humane societies
  • Musical and artistic associations
  • Public assembly halls
  • Certain public authorities
  • Sheltered workshops for the disabled

As a reference, here are some resources for King, Pierce, and Snohomish counties.

King County

Address Department of AssessmentsProperty Tax Advisor Office516 3rd Ave, Room 1236Seattle, WA 98104Toll Free: 1-800-325-6165 ext. 5-6330TTY: 206-205-6338

Fax: 206-296-0948

taxadvisor@kingcounty.gov

Exemption Questions (206) 205-6330
Website Appeals
Comparable Sales Comparable Sales

Pierce County

Address Assessor-TreasurerAnnex (Public Services Building)2401 South 35th Street Room 142Tacoma, WA 98409(253) 798-6111pcatr@co.pierce.wa.us
Exemption Questions (253) 798-6111
Website Appeals
Comparable Sales Comparable Sales

Snohomish County

Address Assessor’s OfficeFirst Floor, Administration Building East3000 Rockefeller Ave, M/S 510Everett, WA 98201425-388-3615contact.assessor@co.snohomish.wa.us
Exemption Questions (425) 388-3540
Website Appeals
Comparable Sales Comparable Sales