Pull Permits. (Pretty Please)

14Mar 2012

Recently we have seen a few situations where lenders have reviewed the appraisal and in the appraisal report the appraiser has addressed a recent addition or renovation of the home. The lenders are then in turn asking for a copy of the permits. We have been fortunate that all homeowners have pulled permits, but the question then arises – what if the homeowner did not pull a permit. It could jeopardize getting the loan and the borrower might have to pull a permit after the fact. There can be insurance ramifications and affect the ability to sell a home.

To understand the issue fully, the building departments for Unincorporated Arapahoe County, Denver, Greenwood Village and Cherry Hills were contacted. All building departments had the same advice and a few stories.

Good reasons to pull permits:

Lenders are looking harder at the appraisals to see if the appraiser mentions recent improvements or additions to the property. If permits are requested and cannot be produced, this will jeopardize the loan.
Relocation issues – sellers relocating and looking at a corporate buy-out. Corporations will not buy out homes that do not have permits pulled for work that has been done.
A buyer for your home may request that permits be produced and if not, this could jeopardize a sale.
Sellers filling out property disclosures might feel better knowing that permits were pulled and if a question arises they can provide the documentation that shows that the building department signed off on the work. There is always trepidation in filling out these disclosures and this could help.
Possible insurance issues. Arapahoe County mentioned a situation where a fire occurred in a basement and the insurance company did not honor the claim due to the work that was done was not permitted.
Trying to rectify the situation and pull a permit and get counties to sign off on the work is expensive due to double permitting.
Trying to rectify the situation could also mean tearing out walls or taking off a roof.
The Cherry Hills building department mentioned that the modification of an outbuilding may not be allowed if permits were not pulled when the building was constructed – this could mean tearing down the outbuilding and starting over.

All municipalities stated that it is possible to get a permit pulled after the work has been done:

It is a similar process as far as getting a permit prior to work being done. One would go to the building department and request a permit.
The municipality would send out an inspector to inspect the work. If the inspector needs to see some electrical work or see something that is covered, they may need to have walls opened up or corrections made.
There is a double permitting fee that is charged for this service.All of the building departments were very helpful and easy to reach. If you have clients who are remodeling or constructing an addition it is not a bad idea to remind them to pull permits or ask their contractor to see the permits that have been pulled and ask to see that the work was approved by the city.

While this does not cover the entire state, these are the numbers that we called to research the issue.

Arapahoe County Unincorporated 720-874-6500

Cherry Hills Village 303-789-2541

Denver 720-865-2982
Greenwood Village 303-773-0252

Ann Heinz
Senior Loan Officer
(303) 263-4003
License #100027008 NMLS#360599
AnnHeinzMortgageLoans.com

Mo Robinson
Senior Loan Officer
(303) 478-2136
NMLS #360601 Co MB100033009
MoRobinsonMortgageLoans.com

Show Me The Money – Tracking the Down Payment and Large Deposits

27Feb 2012

As real estate professionals, the amount of information that you have to impart to your buyers is staggering. If it is a first time homebuyer or someone who has owned ten homes, people do not buy a home every day and there is so much to know.

One aspect of the loan process that we are trying to educate buyers on is the tracking of the funds for the down payment and any large deposits. Over the last six months it seems that the tracking has taken on a life of its own. We are touching on this topic due to recent loan applications where people are constantly transferring money from one account to another or there are large deposits that we have to explain. Sometimes when one account is asked for, we see a large deposit from another account and that leads to getting the statement on that account which has another large deposit. This is a part of lending these days; however, if you have clients out looking to buy, it might make it easier on them if they knew about the tracking that goes on and if there is enough time to possibly gather all funds in one place. We mention this in an attempt to make the process easier for the buyer.

The background behind the tracking stems from rules that Fannie Mae and Freddie Mac have regarding the source of funds for the down payment. Fannie and Freddie want to make sure that the down payment and the reserves after closing did not come from an unsecured loan. They want to make sure that there is no additional debt that we are not counting in the debt to income ratio as the result of a loan and they want to make sure if there is a loan it is secured by an asset.

Due to these rules, we have to show that the funds for the down payment are verified in the borrower’s account. Here are a few things we look at:

We ask for 2 consecutive months of bank, brokerage and retirement statements to verify the down payment and reserves after closing. Any large deposits that are not clearly marked as payroll require that we get a copy of the check that the borrower deposited and an explanation on the deposit.
If the statements become stale, underwriters like to see a current statement 30 days prior to closing, we have to get a statement prior to closing and if there are large deposits on the current statement, we have to track them.
The down payment cannot be an unsecured loan. If it is a gift, we need to know up front as we have to have a gift letter for the file.
If funds are being moved from one account to another we have to show all accounts involved in the transferring of funds – this can lead to multiple requests if the borrower has a lot of non-payroll activity on one of the accounts. It is as if one door opens another.

This week, one lender has actually come out with a definition of “large deposits” as this has been a guessing game with some lenders asking for copies of checks as small as $50.

“Any deposit or aggregate of deposits in any one month greater than 10% of borrower’s gross monthly salary (excluding regular and consistent deposits for payroll, Social Security, retirement or other documented income).”

Having a hint as to what a large deposit is will be helpful.

Buying a home is a very exciting and can be a stressful time. We want to do anything we can to prepare your buyers.

Ann Heinz
Senior Loan Officer
(303) 263-4003
License #100027008 NMLS#360599
AnnHeinzMortgageLoans.com

Mo Robinson
Senior Loan Officer
(303) 478-2136
NMLS #360601 Co MB100033009
MoRobinsonMortgageLoans.com

Remember the insurance deadline in the contract

8Feb 2012

So Many Lines So Little Time

Buyers need to remember the insurance deadline in the contract.

The Colorado Real Estate contract is probably one of the most detailed contracts in the United States. The dates and deadlines are very specific and we actually find this to be very helpful.

One deadline that is not highlighted as much as it maybe should be is line 25, Section 10.5 of the contract – Property Insurance. With the hail damage that has occurred in Colorado over the years, we are seeing roofs that have suffered damage and not been replaced.

“Insurability. Buyer shall have the right to review and object to the availability, terms and conditions of premium for property insurance (Property Insurance). Buyer shall have the Right to Terminate under § 25.1, on or before Property Insurance Objection Deadline (§ 3), based on any unsatisfactory provision of the Property Insurance, in Buyer’s sole subjective discretion.”

A recent scenario -
The buyer had a roof inspection. Two inspectors said that the roof was acceptable. The buyer had waited to get insurance and the insurance deadline had passed. The chosen insurance company along with 15 other insurance companies declined to insure the home due to the roof.

There was some back and forth between buyer and seller questioning if the buyer get out of the contract as the insurance deadline had passed. Loan conditions had also passed. This created quite a stir that could have been avoided had the buyer looked into obtaining insurance prior to the insurance deadline. The buyer hired an attorney and the attorney said that the buyer could get out of the contract on loan conditions even though the date had passed.

After many hours of work by all parties involved, the transaction did close with a new roof on the property prior to closing. Having insurance lined up in advance would have been a “heads-up” to everyone involved in the transaction that there was a problem and while it may not have been easy, it would have made for an easier situation.

Ann Heinz
Senior Loan Officer
(303) 263-4003
License #100027008 NMLS#360599

englewoodmortgage.com