Sunday, March 21, 2010

Tax Lien Certificates

When a property stops paying property tax counties will issue a tax lien which in many states are sold at an auction. Rather than waiting for the property to be auctioned to collect the taxes due, tax liens themselves can be auctioned off called tax lien certificates.

The objective in selling these certificates is to allow an investor (rather than the property owner) to pay the property tax on a delinquent property. This benefits the county with immediate revenue and benefits the investor with a low-risk certificate that has a high-yield interest rate — which could be from 10% all the way to 50%.

The basis of our tax system dates back to the foundation of our country. The system was brought over from England. The basis of a person’s wealth was land holdings. Consequently the land provided the tax assessor a method of attach­ing the property owner’s wealth. Real property cannot be hidden and it’s easy to assess.

Reverse Mortgages

A Reverse Mortgage is a special type of loan that allows the homeowner to convert a portion of the equity in their home into cash that they can access. This cash is not taxable to the homeowner and typically doesn't interfere with eligibility for Social Security or Medicare benefits. The homeowner retains title to the home as well as right to any appreciation in home value when the loan terminates or after it is paid off. The loan remains in force until the last titleholder dies, permanently leaves the home or sells the property; the borrower can’t be forced to sell or move by the lender. The loan may be repaid at any time. But unlike a traditional home equity loan or second mortgage, no monthly payments are required. Instead of putting further pressure on an already stretched budget, a Reverse Mortgage can free a senior homeowner of monthly debt obligations.

RESPA Law

RESPA stands for Real Estate Settlement Procedures Act and was designed to give home buyers and sellers better disclosure of settlement costs and to eliminate the use of kickbacks or referral fees that tend to increase unnecessarily the costs of certain settlement services.

It may be possible that an illegal kickback was performed if a fee paid by a mortgage lender to a mortgage broker for arranging a loan with an interest rate at a higher amount than that of the par rate. This is known as a YSP (Yield-spread premiums). First you have to determine if there was any actual service being paid for and if there was, was it charged fairly.

The bottom line is that any payment by the lender to the broker is illegal if it is not for the reasonable value of services actually performed. So if you see a high up-front broker’s fee plus a yield-spread premium or other broker fee paid by the lender, there’s a good chance the lender-paid is fee is “unearned gravy” and constitutes a violation.

Property Liens

A lien is a legal claim or hold on some type of property that is used as collateral against monies from a lender. So if you took out an equity loan, your lender has placed a lien on your house to use as collateral. Property liens have to be cleared before the title of the property can be signed over to a new buyer.

Also, if you don't pay on your equity loan, it is possible for a lender to force a foreclosure on your house in order to get their money back.

As a buyer for a resale property it is important to hire a title company to research if there are any existing liens on the property you wish to buy.

Abandonment and Surrender

The process for which a lease is broken is called "Abandonment and Surrender". If the renter keeps paying the rent, but has vacated there is little else a landlord can do. The landlord can not lease to a new tenant until the lease has expired. There has to be a good reason to break the lease. For example, not paying the rent, will ultimately break the lease.

Types of Easements

Ultimately you will need to hire a surveyor to research and document your true property borders. When you do find out where your land is, there are areas that are called easements where you have to share your land for special purposes. One such purpose is for utilities, not only for you but also for your neighbors. This is usually near the road where you are not expected or permitted to build on.

If you have a private drive that crosses your property to terminate to a neighbor's house, you have a right-of-way easement. You may never obstruct passage to your neighbor's house.

Government can take private property for public use

This is what they call Eminent Domain. The government can take your property for public use. They will compensate you through a process known as Condemnation. That is right they will condemn your house. The problem is that it may take years for an offer settlement to be reached. So much time that interest may accrue on that original offer called prejudgment interest.

It will be inconvenient to say the least. So make sure that you are not buying property that the government is also interested. You may never know on that speculation.