So you’ve decided to buy property with a friend… May 31, 2007
This is not legal advice. For legal advice, consult an attorney about your specific situation.
Many people find themselves wanting a house, but not being able to afford it by themselves. Some of these people think, “Wait a sec — my good friend ALSO wants to buy, but can’t afford it by herself EITHER. I bet we could buy a house together….” That “good friend” may even be your romantic partner (but not your spouse — that involves different legal issues). It’s a good idea, at least from a practical, “make it happen” perspective. However, you should invest the resources up front to formally establish the rights and obligations of the parties, or ottherwise you may be courting disaster.
When people jointly own property, they either own as joint tenants or as tenants in common. The defining characteristic of a joint tenancy is a right of survivorship. Thus, if one joint tenant dies, the decedent’s interest in the property immediately passes to the survivor. When the property is owned between tenants in common, each person’s ownership can be sold or will pass to the beneficiary upon death. As a general rule, joint tenancy is appropriate only for life partners who are sharing financial resources and building a life together.
Accordingly, if you buy property with a friend, you will probably own the property as tenants in common. Each tenant in common has an undivided percentage interest in the property. In other words, each tenant owns a percentage of the property but has the legal right to the entire property. The law also assumes that each owner has an equal percentage interest. However, these assumed terms can be overcome by an express agreement of the parties, which is called a Tenants in Common Agreement (or “TIC Agreement”)
As an initial matter, if you and your friend put up different amounts towards the down payment, or if you agree to pay different amounts towards the monthly mortgage payments, you may want to agree that you don’t own equal percentages in the property (although there may be other factors, such as whether one party’s credit allowed the transaction to occur in the first place). Moreover, you may want to formally agree on several other issues, such as the exclusive right to possess and use a portion of the house, or whether each party must contribute a certain amount to maintenance, or whether one party has the right to buy the other party out before the other party sells to a third person. If you do not address these issues up front, you are setting the stage for conflict with your co-owner.
If you do not enter into a TIC Agreement that addresses the issue of percentage ownership, you run the risk of losing some portion of your ownership interest that belonged to you based on a larger financial contribution. Your co-owner could file a partition action, which is a lawsuit that seeks the partition of real property among co-owners. Given that a house cannot be “split” between the co-owners, the partition action usually results in a sale of the property, with the proceeds split between the co-owners based on their respective percentage ownership. Absent a TIC Agreement addressing the issue, the court may decide that you own less than what you believe.
Moreover, conflict is an unfortunate fact of life. You should assume that conflict will develop at some point between you and your co-owner (even your romantic partner — although we like to believe otherwise, love is not always forever). If you have both signed a written agreement that addresses many of the issues that may give rise to conflict, you can turn to that document to guide you towards a resolution. This is particularly helpful where the romantic relationship has disintegrated and their are strong emotional feelings involved. So, if you’re buying property with someone else, you should strongly consider entering into a Tenants in Common Agreement.
Sphere: Related ContentMeanwhile, Back In Redmond… May 30, 2007
Yesterday, Google Maps introduced Street View Maps for 5 major cities (alas, Seattle wasn’t one of them). The implementation of the Street View feature rocks even though the image quality isn’t as good as it could be. Jim and Galen have already blogged about Google’s new release, so I’ll avoid repeating what they’ve already said.
What you may not know, is that Microsoft already had their own version of street level maps of Seattle & San Francisco out for about a year now. It’s yet to make it past the interesting technology demo stage. Regardless, compared with the new Google Maps, the user experience was clunky and Google is now clearly ahead of them in the ground level imagery war. It’ll be very interesting to see if Microsoft fights back on the ground or not (or continues to extend its lead in other areas).
However, what Microsoft lacks in ground forces, it makes up for in air superiority. Satellite imagery has gotten major upgrades. For example, an Aerial view of Carnation used to be old black and white tiles, now MS has color tiles up to the 100 yd zoom level. Meanwhile, Google doesn’t have any Aerial imagery of Carnation any closer than 2000 ft.
Better Aerial photography is nice, but the 3-D arena is where Microsoft is really doing killer stuff. 3-D Seattle in Virtual Earth looks like Seattle. 3-D Seattle in Google Earth, looks like bunch of grey boxes and the Columbia Tower. Along the Hudson River, the Statue of Liberty in Virtual Earth looks like the real thing, while in Google Earth you just see Lady Liberty’s shadow and flat photograph. As an added bonus, Virtual Earth has 3-D models of downtown Bellevue and the Redmond/Overlake area (including the Microsoft campus). Put another way, Peter Parker would use Google and Spiderman would use Microsoft.
3-D Seattle in Microsoft Virtual Earth
3-D Seattle in Google Earth
Anyway, I am loving this Google / Microsoft mapping war. Technology hasn’t been this much fun since the browser wars of 10 years ago. It doesn’t matter who wins between Microsoft & Google, because they both have so much engineering talent, vision and money, that this battle may never end. (Wouldn’t that be great for us users)! As I gaze into my crystal ball, here’s what I see….
Thoughts / Predictions:
Google Earth will probably either die or get merged with Google Maps. My experience with Google Earth 4 has been underwhelming compared with the new browser based mapping apps. In the 3-D space, Microsoft is killing Google right now (at least on Windows). Virtual Earth 3-D is cross browser, but not cross platform. It’ll be interesting to see if the Virtual Earth can use Silverlight to help close the gap against the Mac / Linux Google Earth clients or if Google Earth can reclaim some lost ground to Microsoft.
Google Map’s Street View was implemented using Flash (Impressive). If Google can implement Google Earth in the browser via Flash or Java, I’ll be even more impressed.
Virtual Earth Street Level imagery should get better. Remember, part of the Virtual Earth team is former Flight Simulator developers. I’m sure there synergies to be exploited between the VE team and the “Driving Simulator” developers on the Project Gotham Racing / Forza Motorsport teams. Besides, Las Vegas and New York in PGR 3 blow away both Google Maps and MS Virtual Earth right now. Point being, I wouldn’t be surprised if Microsoft catches up to Google in street level mapping (if they ever make a better search engine I’ll be shocked however).
Google’s 2-D maps with building silhouettes and bus routes are currently ahead of Microsoft’s 2-D map renderings. It’ll be interesting to see what minor tweaks and improvements happen next in this area.
Yahoo, despite their best efforts, is looking more and more like MapQuest 2.0. They better do something cool soon, otherwise they’ll fall hopelessly behind Microsoft and Google.
So where do you see the future of mapping going? Can mapping the inside of buildings & homes or real time video be far behind?
Sphere: Related ContentGoogle Maps Cool New Street View Feature
[Editor's Note: I first met Jim Reppond when he moderated the MIT Real Estate Forum (remember that?) when the MIT Alumni Association brought together people from Zillow, Redfin, HouseValues and a prominent local broker, to talk about the future of real estate... It was a fascinating evening that was followed up by some great conversations. When I started researching the characteristics of a successful real estate site in Seattle, Jim's Seattle Real Estate site came up again and again. His team has obviously put a lot of thought and work into maintaining a strong web presence which makes it all the more special that I get to introduce Jim as a contributor to Rain City Guide.]
Google Maps has just released a very cool new feature that lets you actually look around the street. It’s only working in major cities for right now. (New York, Denver, San Francisco, Las Vegas and Miami) But I’m sure they plan to expand this to other major metropolitan cites nationwide soon.
This will be a very handy tool for those relocating or looking at real estate online to get a feel for the neighborhood and traffic virtually. What’s next? Real-time video of very corner of the planet?
FYI: You need the newest FlashPlayer 9.0 to view this, but it’s worth the time to update just for this! Click-n-drag on the picture for a virtual 360 and you and actually go up and down the streets by clicking on the arrows – big WOW factor. Any place there is a blue line can be seen.
Applications for this seem endless.
Sphere: Related ContentMore updates from Google real estate May 29, 2007
Maplets now let you search for real estate via the traditional Google maps interface. More from Google on the subject. (Get your listings into Google Base to be included). Joel has wondered aloud about Google Real Estate in the past.
If you’re a developer, you can build your own maplet on Google maps, but you’re giving up some freedom you get with the normal maps interface.
Sphere: Related ContentBefore the Sun Goes Down This Memorial Day May 28, 2007
People often ask what we as agents do for our clients. Often they are things quite out of the ordinary, that involve going in someone’s home for them. We have the access.
One of those times I received an emergency call. The owner of the house was on a business trip when someone from his Fire Team passed away. He lived alone and I was the only one he knew who had a key to his house. He didn’t have time to go home before flying to the funeral.
I had to go into his closet and open a very special box that had his green beret that he needed for the funeral. There were other things he needed and I lined them all up on his bed, and packed them up and shipped them by overnight mail, so he would have them at his hotel when he arrived for the funeral.
On Memorial Day I remember those who died in service to our Country. But mostly I remember those who lived, after seeing things they never wanted to see and doing things they never wanted to do and cried tears over the bodies of those we remember today, that they never wanted to shed. I have been fortunate in my life to be close to some of these men that we pass on the street everyday who carry a sadness deep in their heart. A sadness that never really goes away.
So on this Memorial Day I bow my head and pray for those who died…and even more for those who lived and carried those who died.
Sphere: Related ContentRedpin and Leslie Stool on 16 Minutes
Robbie is that you? Ummm…we GET the listings…and then we uh USE them… Seriously,that sounds like your voice.
The Problem with Good Faith Estimates May 27, 2007
The document that savvy shoppers use to determine which loan originator they will work with is called a Good 
Faith Estimate. It is supposed to be just that an Estimate of the rate and closing costs associated with the loan provided in Good Faith by the Mortgage Professional. (You are not a savvy shopper if your just get your quotes over the phone and do not obtain a GFE or if you depend solely on APR). Sounds pretty rosy, doesn’t it? The Mortgage Professional is promising you a nice rate with low closing cost and you’re going to select this person based on rate and cost alone. Relying on the Good Faith Estimate to get you the best deal on a mortgage could leave you the same feeling as the “where’s the beef” lady from the Wendy’s commercial.
Here’s why:
- The rate being quoted at the moment the borrower is shopping is not the rate they will be getting unless they are willing to lock in at that moment. If the shopper called one lender Thursday and another on Friday of this past week, the rates would be entirely different (even if they were calling the same Mortgage Professional). Rates change and the Good Faith Estimate is not a guarantee of rate.
- Unless the borrower is actually approved, meaning they have supplied all of the supporting loan documents required from underwriting, it is not 100% certain what program the borrower will be using for their mortgage. For example, if the buyer winds up not qualifying for a conventional program and the Mortgage Professional has to broker the loan, there may be more cost involved. The Good Faith Estimate alone is not a guarantee of cost.
- The Good Faith Estimate is easily manipulated by Loan Originators. Some LOs might use short term rate locks for their quotes (shorter term cost less than a longer term lock) or they go skinny on the prepaid items without having an estimated closing date from the borrower.
- Some LOs may hide a prepayment penalty on the Federal Truth in Lending (a prepayment penalty does not show the Good Faith Estimate).
- The LO does not know what the exact third party cost will be. Title and escrow are dictated on the purchase and sale agreement and the appraisal type will not be formally established until the property address and the transaction has been re-submitted to underwriting. All of these fees may vary.
- The Good Faith Estimate may be revised during the transaction. Once a purchase and sale is obtained, the rate is locked and the third party closing costs come in, the GFE is updated and reproduced for the borrower.
Back in my past life in the title and escrow industry, when a borrower would bring their GFE to closing and would catch a significant discrepancy between the estimate and the actual closing costs reflected on the HUD-1 Settlement Statement, I would recommend that the borrower contact their LO…more often than not, the LO would state “hey, it’s just an estimate!” Ouch. Stick ‘em to it.
What’s a borrower to do?
- Ask your Mortgage Professional to guarantee the Good Faith Estimate in writing. Some LOs will run in fear or balk at doing this. Currently this is not standard practice in our industry. I have no problem guaranteeing my GFE…if it is before a client is approved, then the guarantee would have to be subject to the loan approval. You’ll weed out many LO’s right off the bat just asking for this.
- Request to receive a copy of your estimated HUD-1 Settlement Statement prior to your signing appointment at the escrow company. This will give you time to compare your Good Faith Estimate to the HUD and to contact your Mortgage Professional should you have any questions or see any discrepancies. This is not the standard practice in our industry either. Sometimes it is difficult for me to get an estimated HUD from the escrow company to review before my clients see it (I like to make certain that the borrowers I’m working with are seeing a HUD that reflects my GFE).
- Bring your Good Faith Estimate with you to your signing appointment at the escrow company to compare. (It’s possible the escrow company may not have received loan documents in time to provide you with the estimated HUD as mentioned in step 2 above).
This is why a borrower should work with a Mortgage Professional they trust, or who has been referred to them from someone they respect, over the lowest rate and cost shown on a piece of paper without a guarantee. Plus, there is so much more that goes on with a transaction besides obtaining a Good Faith Estimate and making sure the cost match up to the HUD. That’s just the beginning and the end…like buns with no hamburger. What’s equally (if not more) important is all the steps in the middle and the planning that was used to develop a specific mortgage plan.
Is it the Memorial Day Weekend, or the fact that I started a serious diet two days ago that I have hamburgers on my brain? 
Don’t be left at the closing table wondering why the cost or rates are different than your Good Faith Estimate. Do “beef up” your good faith esitmate by getting a guarantee from your Mortgage Professional. Any LO can do this, they don’t need to belong to a club or have a special designation…most won’t. Avoid having to ask “Where’s the beef?” at the closing table.
A tip of the hat to Vern for requesting this topic. 
Sphere: Related Content
It’s a Holiday Weekend - Getting Those Houses Ready For Market May 26, 2007
Often Real Estate Agents work most, when most people have off. Why? Because our Clients are Available!
This holiday weekend I am working with three separate sets of sellers in varying stages of Getting Their Homes Ready for Market. One is supposed to get on market next weekend, one was supposed to be ready last week or in a few days and who knows when it really will be ready, and the other may not sell at all but we’re getting it ready just in case.
For the benefit of one or more of those three people, I wrote this article this morning about Getting Your House Ready to Sell. In case lots of you are out there doing exactly what I’m doing this weekend, there’s volumes of info in that post to help you. Some others wrote, and there’s the part where I disagree with almost everything others wrote.
All in all, there should be something in there that helps you get your home ready for market.
Sphere: Related ContentFriday’s Rates…conforming is up 0.25% from last Friday May 25, 2007
Conforming Mortgage Rates (loan amounts up to $417,000 for 1-unit properties). Conforming rate quote below based on sales price of $500,000 with 20% down payment, owner occupied with minimum credit scores of 680. Rates quoted are priced based on a 45 day lock with 1 point and there are no prepayment penalties on any of the rates quoted below.
30 Year Fixed: 6.250% (APR 6.389%). Payment per $1000 = $6.16
30 Year Fixed with 10 Year Interest Only: 6.375% (APR 6.389%). Payment per $1000 = $5.31
40 Year Fixed: 6.250% (APR 6.368% ). Payment per $1000 = $5.68
7/1 ARM: 5.875% (APR 6.011%). Payment per $1000 = $5.92
5/1 ARM: 5.750% (APR 5.885%). Payment per $1000 = $5.84
5/1 ARM with 10 Year Interest Only: 5.875% (APR 6.011%). Payment per $1000 = $5.92
JUMBO (Non-Conforming) Rates. Pricing is based on the same criteria above, with the exception that the loan amount is $417,001-$650,000 (20% down).
30 Year Fixed: 6.250% (APR 6.380%). Payment per $1000 = $6.16
30 Year Fixed with interest only payments: 6.250% (APR 6.386%). Payment per $1000 = $5.21
40 Year Fixed: 6.250% (APR 6.386%). Payment per $1000 = $5.68
5/1 ARM: 6.000% (APR 6.128%). Payment per $1000 = $6.00
5/1 ARM with 10 Year interest only payments: 6.00% (APR 6.134%). Payment per $1000 = $5.00
Please do not select your Mortgage Professional by interest rates alone and do not shop rates by APR. This is just a small sample available of rates and products. For a specific strategy for your mortgage needs, contact a qualifed Mortgage Professional.
Rates quoted are as of 11:00 a.m. PST and may change at any time.
Sphere: Related ContentLatent Landmine Survey: Due On Transfer Clauses? May 24, 2007
(This article is NOT legal advice. Consult an attorney for any specific legal issues you may have.)
I’ve created my “Latent Landmine” series to highlight items that are often unnoticed, and may not affect some people; but nonetheless could cause misery to others if they run afoul of them. Caveat Emptor, “Buyer Beware” is alive and well today as it’s ever been. However, the way to fight this is by building on the concept that “knowledge is power”. Hopefully, if all goes well, my series will help someone identify a potential problem, if not avoid it altogether…that’s the goal anyway.
I’m working on a new post that deals with the problems that can be caused by Due on Transfer clauses in mortgages (promissory notes, to be more precise). My legal practice doesn’t necessarily expose me to EVERYTHING going on in the real estate world (gasp…yes Virginia, I know that’s shocking to hear; but it’s true; so in the interests of getting a broader perspective, I’m hoping RCG readers can help with a little informal survey…pretty please?
Although Due on Transfer clauses may come in a variety of specific terms, they all are trying to get at pretty much the same thing… in the event of any subsequent transfer of the collateral (real estate), the unpaid balance of the loan shall become immediately due and payable.
The Due on Transfer clause has a “kissin’ cousin”, a Due on Sale clause, which is trying to get at a similar; but slightly different matter…in the event of any subsequent sale of the collateral (real estate), the unpaid balance shall become immediately due and payable. NOTE: The difference is that the due on transfer clause is the broader term, and the due on sale is the narrower term (i.e. all “sales” are “transfers”; but not all “transfers” are “sales”). I’m not really concerned about the Due on Sale clause…it’s the Due on Transfer clause that I’m concerned about (hopefully, “why” I’m saying this will be clear in my follow-up post).
Here’s a real world example: Here in WA State, Paragraph #8 in both LPB standard form promissory notes, 28A-05 and 28A-05(1), have a hybrid due on sale and transfer clause as follows:
- LPB Form 28A-05: http://www.wsba.org/info/28a05note.pdf
- LPB Form 28A-05(1): http://www.wsba.org/info/28a05lnote.pdf
OK, so here’s the question again: Are you seeing very many Due on Transfer clauses in promissory notes on new loans?
Thanks for your help RCG readers!!
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