Saturday, March 11, 2017

President Trump and Real Estate

   Many people believe that Trump will be good for business and real estate, due to his career which was heavily involved in commercial and real estate.  This is yet to be seen, but right out of the gate Trump had an effect on the real estate market by his issuance of his first Executive Order on inauguration day.

          The issue in question was the action by President Obama, in the waning days of his administration, to reduce the premium for mortgage insurance on mortgages guaranteed by the Federal Housing Administration (FHA).  These loans are usually financed with only three to five percent down, and as such, require mortgage insurance to cover the possibility of a deficiency upon default due to the limited amount of equity in the property.

          The mortgage insurance premium is a monthly fee tied to the loan size, loan term and includes an upfront premium of 1.75% of the loan amount and between 45 and 105 basis points (0.45% to 1.05%) annually on the loan balance, paid in monthly installments with the principal and interest payments.

          Earlier in January, 2017, President Obama directed a 25-basis point (0.25%) cut in the premium which was estimated to save consumers, on average, at least $25.00 per month.  This decision was based, in part, on the belief that the funds that insure these mortgages have sufficient reserves to allow for a premium reduction. However, only four years ago, taxpayers funded a 1.7-billion-dollar bailout of the FHA to fund shortfalls in the insurance fund due to a large number of loan defaults.

          In response to the action by the outgoing President, Trump issued an Executive Order cancelling the reduction.  This action was taken, in part, as a reaction to the Obama administration adopting new policies as it prepared to leave office, but was also taken due to the concern that a premium reduction puts taxpayers at risk due to decrease in the insurance funds available to the FHA to cover defaults.

          Another issue on President Trumps agenda is reducing or eliminating the mortgage interest deduction. Currently married homeowners who itemize their taxes can deduct interest on mortgages of up to one million dollars ($500,000 for single persons).  The deduction is supported by Realtors, home builders and bankers who use it as a selling point to potential home buyers.

          However, the number of home owners who itemize is not as popular as some believe.  At least a third of homeowners have no mortgage, and many lower and middle income homeowners do not itemize their taxes, losing any potential deduction from the interest that they pay on their mortgage.   The Tax Policy Center states that the mortgage interest deduction mostly benefits wealthier Americans.  “Instead of turning renters into homeowners, homeownership tax expenditures encourage middle- and upper-income individuals to purchase more expensive homes, take on more debt, or buy second homes.”

          Trump’s plan is to cap total available deductions at $100,000.  This cap will only affect the wealthiest, since even on a $500,000-dollar loan at five percent, the total interest deduction in year one of the loan would be $25,000.  However, when you consider other deductions that come into play such as property taxes, charity, medical expenses and the like, the cap will affect some homeowners, especially wealthier homeowners who now have deductions that far exceed $100,000.

          The National Association of Realtors will strongly oppose any measure to reduce the mortgage interest rate deduction, as they believe that this will impact home ownership.  With ownership levels continuing to fall, the President of NAR has said that NAR is “adamant about protecting tax deductions for residential mortgage interest and property taxes—for primary and secondary homes.”

          Michael J Posner, Esq., is a partner in Ward Damon a mid-sized real estate and business oriented law firm serving all of South Florida, with offices in Palm Beach County.  They can be reached at 561.594.1452, or at

Binding Arbitration (The Wells Fargo Dilemma)

     Wells Fargo Bank was recently caught opening thousands of unwanted accounts, resulting in millions of fees charged to unsuspecting customers.  After an investigation, Wells admitted its failures and has promised to make things right by its customers.  Since then a number of class action lawsuits have been filed, and Wells has, to-date, successfully stopped the lawsuits, invoking the arbitration clause of the standard Wells Fargo bank account contract, as follows:

You and Wells Fargo Financial National Bank (the “Bank”), including the Bank’s assignees, agents, employees, officers, directors, shareholders, parent companies, subsidiaries, affiliates, predecessors and successors, agree that if a Dispute (as defined below) arises between you and the Bank, upon demand by either you or the Bank, the Dispute shall be resolved by the following arbitration process. However, the Bank shall not initiate an arbitration to collect a consumer debt, but reserves the right to arbitrate all other disputes with its consumer customers. A “Dispute” is any unresolved disagreement between you and the Bank. It includes any disagreement relating in any way to your Credit Card Account (“Account”) or related services. It includes claims based on broken promises or contracts, torts, or other wrongful actions. It also includes statutory, common law and equitable claims. A Dispute also includes any disagreements about the meaning or application of this Arbitration Agreement. This Arbitration Agreement shall survive the payment or closure of your Account. You understand and agree that you and the Bank are waiving the right to a jury trial or trial before a judge in a public court. As the sole exception to this Arbitration Agreement, you and the Bank retain the right to pursue in small claims court any Dispute that is within that court’s jurisdiction. If either you or the Bank fails to submit to binding arbitration following lawful demand, the party so failing bears all costs and expenses incurred by the other in compelling arbitration.

Many consumers and lawyers have fought the use of this provision.  They argue that it unfair due to the cost, privacy, the possible bias of arbitrators and, most importantly, the inability to bring a class action lawsuit (which allows one case to be brought by many consumers who have similar claims).  Instead, the arbitration cases must be brought against the bank one at a time.  Wells argues that the parties agreed to these terms when the accounts were opened. However, lawyers have argued that since the fake accounts were never agreed to by the consumer, the terms of the standard contract they signed to open prior, legitimate accounts, does not apply.  So far Wells has been successful in moving lawsuits to arbitration.  Eventually the issue may be decided by an appellate court, but for now, consumers need to be aware of these clauses in their dealings with large corporations.

While arbitration is generally binding on the parties, mediation is another method of resolving disputes prior to court or trial.  Mediation is non-binding, which means that the mediator cannot rule on the case, and if the parties do not agree to a settlement, the matter continues to litigation.  Mediation either occurs through contract, a pre-suit statutory requirement, or by court order (which occurs in almost all civil cases today).

For example, in the most common real estate contract used in South Florida, all disputes under the contract must be settled by mediation prior to any lawsuit being instituted:

Buyer and Seller shall attempt to settle Disputes in an amicable manner through mediation pursuant to Florida Rules for Certified and Court-Appointed Mediators and Chapter 44, F.S., as amended (the "Mediation Rules").  The mediator must be certified or must have experience in the real estate industry. Injunctive relief may be sought without first complying with this Paragraph 16(b). Disputes not settled pursuant to this Paragraph 16 may be resolved by instituting action in the appropriate court having jurisdiction of the matter

In Homeowner Association disputes, matters may be resolved by either pre-suit mediation or binding arbitration, depending on the nature of the dispute.  Disputes regarding condominium associations can be subject to mandatory nonbinding arbitration depending on the nature of the claim.  This special type of arbitration results in a final decision of the arbitrator, but is subject to all regular appellate rules, making the ability to appeal the arbitration decision no different than a decision by a trial court.

In and of itself, arbitration, as a method to resolve disputes, is not better or worse than court.  It is often faster and cheaper than litigation, and many people prefer the privacy that a public trial does not provide.  It also offers more finality, as the grounds for a trial court appeal do not apply, though under certain limited circumstances, the arbitration decision can be appealed. 

Michael J Posner, Esq., is a partner in Ward Damon a mid-sized real estate and business oriented law firm serving all of South Florida, with offices in Palm Beach County.  They can be reached at 561.594.1452, or at

Wednesday, November 23, 2016

Allowing Pets in Apartments, Homes and Associations

      With the increased level of pet ownership, issues regarding “faux emotional support animals” (a situation where an owner/tenant is bending or breaking the rules to obtain a pet accommodation when pets are banned) and the need to attract more tenants and buyers, many apartments, landlords and condominium associations have started to adopt pet friendly rules.  If you are considering allowing pets as a landlord or association, you should consider adopting special rules and regulations to control the living and activity of any pet allowed in your property.

     The starting point should be the registration of any permitted pet.  This would include an application describing the pet, its weight, color, breed, sex, vaccination status, county registration and spay/neuter information.  Each owner should also be required to provide a current vaccination and rabies certificate from their local veterinarian.

     A set of rules should be provided to each owner with specific limitations and restrictions.  These could include a requirement for annual vaccination, a limitation on the number of pets (and no guest pets), a limitation on certain breeds; a weight limitation (many owners/associations have a twenty to twenty-five pound weight limit); a leash requirement; a specific place for pet defecation; a solid waste removal requirement and provisions to prevent breeding, noise/barking; restrictions on leaving pets on a balcony or outdoors; restrictions on leaving pets alone for long periods; and a removal policy for any violent or aggressive behavior against other owners and guests.  All Rules should be acknowledged that they have been read by a tenant/pet owner.

     A pet deposit is often a special condition of landlords that permit pets.  The deposit should be separate and apart from the security deposit.  The deposit can be either refundable or non-refundable.  Most deposits are in the $200 to $300 range.  For Associations, a common area deposit can be used to include damage caused by owners and their pets to common areas.

     All pet owners should be required to provide appropriate renter’s insurance which should provide coverage for both damage caused by the pet and for any personal injury caused by the pet, be it a simply excited dog knocking someone over or a vicious cat or dog that bites or scratches someone on the property.  Some basic renter policies exclude or limit animal coverage, especially as it relates to certain breeds, so this issue must be reviewed before allowing certain pets.

      For associations and apartment buildings that have had solid waste issues, it is now common to require DNA registration of all approved pets and to adopt a fine for failing to pick up after a pet goes on common areas.  As part of any approval of a pet, the animal’s cheek is swabbed and the dog’s DNA is registered by a company that provides a monitoring service.  If uncollected feces are found, the solid waste is collected and a small sample sent to the testing company.

     Once tested and compared to the DNA information on file, the testing company can determine if any registered dog is the responsible pet.  Once identified, the pet’s owner can then be fined for the violation plus the cost of the test.  The average cost for a service like this is about $50 per pet at the registration phase and $75-150 to test the feces to determine a match.  Combining DNA testing, fines for violations and Poop Bag Stations can eliminate most issues relating to uncollected waste.

     Proper planning, deposits and rules can go a long way to eliminate most issues relating to allowing pets.  This will expand the pool of buyers/tenants and prevent common problems from hidden pets, faux ESA animals or unregulated animals in places where pets are permitted but no procedures have been adopted.

Michael J Posner, Esq., is a partner in Ward Damon a mid-sized real estate and business oriented law firm serving all of South Florida, with offices in Palm Beach County.  They specialize in real estate and can assist landlords and associations in addressing animal issues.  They can be reached at 561.594.1452, or at

Monday, October 31, 2016

Guest Blog: Protect Yourself from a Lawsuit by an Unlicensed Contractor

By Richard Lansing

          Every home owner in the country wants to get as much as they can for as little as possible. That is reasonable, but it can lead people down some risky paths. One of those paths, which is quite commonly utilized by first time buyers especially, is the hiring of an unlicensed contractor.

          Some needed home repairs and a simple web search leads a homeowner to get measurements from a gentleman who shows up at your door. He is dressed reasonably nice for a contractor (jeans and a polo), and all his construction equipment looks right. He takes measurements, provides a quote that is almost too good to be true (1/3rd less than the first contractor you called) and the next week he and his crew are ripping out your kitchen sink or replacing the master bathtub.

          What happens when Mr. Contractor gets injured? It might seem “fair” that he’d have to pay his own medical costs. Businesses should carry insurance, after all. Except that without a license, your contractor cannot apply for a business license. According to construction consultant Lyle Charles, “the reality is that home owners often end up carrying that burden when the contractor is uninsured. It is one of the dirty secrets of low-cost home renovations.”

          In order to become a licensed contractor, there are a few things a person must demonstrate to the state a number of items, and usually take a competency exam. Contractors must pass a contractor’s exam in order to acquire a contractor’s license. A contractor must also carry insurance when you register as an LLC, or other business entity. That insurance protects employees and the job site.  To protect the public, Florida actively pursues unlicensed contractors by performing sting operations in conjunction with local police.

          As you can imagine, all this licensing and exam work takes time and costs money. Contractors who charge more for their work have earned the right to do so through state licensure. They carry liability insurance that protects you, the homeowner, from the consequences of their on-the-job injuries.

          Before you hire that unlicensed contractor, stop and think about the potential hazards:

          Natural Disaster: If your home was recently damaged by a natural disaster, the unlicensed contractor may not be able to perform the work legally. That could limit your insurance settlement.

          Property Value: Someone unlicensed who performs major work, such as adding a room to your home, could reduce the property value because the addition will not have the proper permits or be built to the building code. Plus, homeowners are required to disclose unlicensed/unpermitted work when selling their home.

          Protection from Injury: Not just of the contractor, but the surrounding area. If the contractor drops a heavy tool on a car, for instance, whatever dent or scratch is left behind might end up costing you for the repair. The same goes for personal injury claims if that contractor hurts a neighbor. 

          Damages: If an unlicensed contractor fails to complete the work, does it in a poor manner or causes damage, the unlicensed contractor might disappear entirely, and often cannot be found if you need to sue.

          There is both good news and bad news. Before we continue, it’s best to speak directly with an attorney, as they will provide recommendations more directly related to local laws you must comply with regarding permits and association requirements for repairs. That said, there are some general guidelines you can keep in mind when you’re looking for a contractor and considering going with someone who is unlicensed.   

          You can file a lawsuit against an unlicensed contractor if there are damages to your property, or if he causes injury somehow (either to himself or someone else). Being unlicensed is, in some ways, actually a bigger risk than whatever risks come from the job itself. As a homeowner dissatisfied with a job, you can also stop payment to the contractor or refuse payment altogether. Most unlicensed contractors also do not write up agreements, so there is no contract that details their responsibility. Prices change, homeowners refuse payment, and accidents happen.

          Generally, if you try and sue an unlicensed contractor you will probably have to show the two of you attempted to work out a solution between yourselves. It should not cost you much more than a few thousand dollars in attorney’s fees to get some representation on your side if you need it for a default (if the contractor doesn’t show). You’ll have to wait a few years to collect, but once that default is renewed you can send the bill to collections and hope for your money to arrive.

          If you decide to file a lawsuit, consult an attorney familiar in construction law over someone who is general practice. That expertise will come in handy, as the intricacies of construction law require someone well versed.

          Going with an unlicensed contractor might sound great because you will save on the upfront costs, but it can cost you in the long run. There is simply too much risk with injury lawsuits, property damage and a lack of dispute resolution, to chance hiring a contractor who does not carry a license. 

Sunday, October 9, 2016

Renting or Buying 2016

       The dream of home ownership is as American as hot dogs, baseball and apple pie.  At least that was the theory until the great recession that ruined home ownership for millions.  With the economy mostly recovered, mortgage interest rates at all-time lows and rents rising, is it now better, once again, to own or rent.

          Homeownership levels continue to fall with the level of ownership hitting a 50-year low last quarter.  Currently only 62.9% of households are owner-occupied.  Ownership levels are highest for seniors, and at an all-time low for millennials at 34.1%. The decline is due to several factors

          On strictly financial basis, using a five-year period of ownership and making some basic assumptions (your mileage may vary), renting versus owning is nearly a wash, with homeownership slightly less expensive:

                                                            Renting                            Owning
Monthly Payment                                $1,350.00                        $   954.83         
Taxes/Insurance                                           20.00                             400.00
HOA Assessments                                        0.00                              100.00
Maintenance                                                 0.00                              250.00

Monthly Costs                                     $1,345.00                        $ 1,704.83

Down Payment                                                                            $50,000.00

Five Year Cost                                      $80,700.00                    $152,289.80

Less Interest on Down Payment (2%)   ($5,204.40)                    

Less Increase in Value (3%)                                                        $(39,818.00)

Less Principal Reduction/Equity                                                 $(69,105.00)

Interest Expense/Deduction                      $520.40                      $(7,636.80)

Plus Costs of Purchase/Sale                                                         $28,185.00

          Total Cost                                  $75,495.60                       $63,915.00

          This chart is based on a $250,000 home, a $50,000 down payment, an association payment of $1,200 a year, rent averaging $1,350 a month over five years, maintenance costs of $3,000 per year, a sales price of $278,750 after five years, plus the renter investing the $50,000 at an average of 2% and the homeowner’s home value increasing at a rate of 3% per year.  Given these factors, the savings over five years is approximately $12,000.  This includes costs of purchase of $5,000 and costs of sale (including a real estate commission of $23,185). 
          Longevity: Determining whether to rent or own is dependent on several important factors.  First, how long do you plan to stay in your next home has to be determined, because one of the best benefits of home ownership is tied to longevity of ownership.  Our sample favors renting through year three, with each year thereafter supporting buying.

          One key factor tied to longevity is how mortgage loans are front loaded with mostly interest.  Fixed Rate Mortgages are amortized to provide a fixed monthly payment over the life of the loan.  Initially the payments are mostly interest, with only a small amount going to principal.  A typical $250,000 house with a $200,000 loan will only have principal reduced by $19,000 if sold within the first five years.  It takes nearly 20 years to reach a 50% reduction in the loan balance.

          Tax Deduction:  One benefit of homeownership is the ability to deduct mortgage interest paid on loans to acquire and improve the home. This can be worth thousands in tax savings during the early years of a mortgage.  However, many people do not have enough deductions to make itemizing their taxes worthwhile, and this benefit is lost if the homeowner cannot itemize their taxes.

          Maintenance:  One drawback of homeownership is the requirement of maintenance of the home from lawns, to painting, to repairs and replacements.  Renters mostly rely on the landlord to handle maintenance, repair and replacement costs.  Homeowners have to bear the full cost, which can be very expensive.  A new a/c system costs over $2,000, and a new roof can run from $7,500 to $30,000 depending on whether its shingle, cement or barrel tile roof system. 

          Down Payment:  The down payment is the largest bar to home ownership, especially for younger and first time buyers.  Typically, the down payment is twenty percent of the purchase price.  This is a large sum that may be difficult for many to accrue, and even the three percent down payment on an FHA loan may still act as a bar when coupled with closing costs that easily exceed $5,000.  Renters only usually need first last and security, which is far less than the full down payment, but can be equal to the FHA down payment.  Taking the twenty percent down payment and investing in an indexed fund instead of buying can often result in a substantial gain versus homeownership, which has seen both large value increases and decreases in recent years (the S&P has returned 78% over the last five years).

          Portability.  Renting is for a fixed term, customarily for one year.  Many leases provide a right to terminate early for a two-month rent penalty (an attempt to make this a Florida law did fail).  This ability to move quickly is often better for single and married couples without children.  Having to move for a career opportunity as a homeowner can mean carrying a mortgage and paying rent on two places until the first owned home is sold.

          Given the initial costs, down payment, the burden of maintenance, the loss of the ability to move quickly means that the decision to buy instead of rent can be difficult for many people, especially if they are likely to need to move in less than five years.  Committing to longer term ownership is when the decision becomes in favor of homeownership, ultimately saving money in the long run.

Michael J Posner, Esq., is a partner at Ward Damon, a mid-sized real estate and business oriented law firm serving all of South Florida, with offices throughout Palm Beach County.  Michael specializes in real estate law and business law, and can help sellers, buyers landlords and tenants with their real estate issues.  Michael can be reached at 561.594.1452 or by e-mail at

Wednesday, August 24, 2016

Condo/Coop Retrofitting Fire Sprinklers - The Lowrise Debate Rages

In 2010, the Florida legislature changed Florida Statute Section 718.112(2)(l) to amend the rules regarding the requirement for retrofitting of sprinklers in condominium (and cooperative buildings under 719.1055(5)(a)).  The change removed the following key provisions:

For purposes of this subsection, the term "high-rise building" means a building that is greater than 75 feet in height where the building height is measured from the lowest level of fire department access to the floor of the highest occupiable story. For purposes of this subsection, the term "common areas" means any enclosed hallway, corridor, lobby, stairwell, or entryway. In no event shall the local authority having jurisdiction require completion of retrofitting of common areas with a sprinkler system before the end of 2014.

          This change has sparked a controversy as to whether all condominiums are now required to either retrofit sprinklers or vote to waive retrofitting no later than December 31, 2016.  This change was intentional and by doing so the legislature specifically intended the law to apply to all condominiums, not just high-rises.   As this is state law, it trumps any local limitation or requirement which would limit or not require such installation for condominiums under seventy-five feet in height.        

The starting point for compliance is the Division of Florida Condominiums, Timeshares, and Mobile Homes, the state body that regulates condominiums.  In its written statement on the issue the Division has stated that:

Condominium and cooperative associations are required to report to the division certain information regarding the membership vote to waive retrofitting requirements for fire sprinkler systems and handrails and guardrails. If the association does not waive retrofitting requirements, it must report the per unit cost of retrofitting to the division

The Division makes no distinction between high rise and low rise condominiums.  As a result of the change in the law and the Division not ruling that the law does not apply to condominiums below seventy-five feet in height, it means that absent a change, all condominiums and coops must either vote to waive retrofitting or start the retrofit process by the end of the year and report their actions to the Division.  As late as early July, 2016 Travis Keels, deputy director of communications for the Florida Division of Condominiums stated, “Generally speaking, the fire sprinkler requirement applies to all residential condominiums.”

However, due to contradictory laws relating to low rise sprinklers, there are now many voices asserting claims that the law does not actually require retrofitting for low rise condos/coops.  The Florida State Fire Marshall issued a statement saying that: “The Florida Fire Prevention Code… requires only high-rise buildings that do not have exterior access from each dwelling unit to be protected throughout by an approved, supervised automatic sprinkler system.”  However, the Fire Marshall also recognized that their office “…cannot interpret the provisions of Chapter 718.112, Florida Statutes.”

Senator Jerry Ring, a sponsor of the 2010 legislation that changed the law, has also commented on the issue.  He stated, in a letter dated July 28, 2016, to the Director of the Division of Florida Condominiums:

It is regrettable that the Division’s “interpretation” of a 6 year old statutory amendment comes to light through a newspaper quotation a mere 5 months before the opt out deadline expires, and at a time of year when many communities have difficulty conducting business (let alone owner votes) due to seasonal absences. While I recognize that the comments made were undoubtedly in good faith, they are simply an incorrect interpretation of legislative intent. Due to the amount of concern that this newspaper quote has generated, especially in light of its timing, I am requesting that the Division issue a press release consistent with the intent of the Legislature.

          The problem is while the letter is well meaning, it is not a change in the law, merely one legislator’s interpretation of the intent of the law.  Therefore, we are recommending that all condominiums and coops start the process to waive retrofitting by either a member meeting or a written consent to action. 

The written consent allows for votes to be collected from local and absent owners by signing a written statement voting to waive retrofitting.  Interestingly, the Division allows even Associations that do not have express power to approve matters by written consent to use this process, “Voting by written consents or written agreements may be utilized by an association regardless of whether the bylaws or the declaration specifically permit voting by written consents or written agreements.”  In order to waive the costly installation, the vote must be made by the “affirmative vote of a majority of all voting interests in the affected condominium.”  Now is the time act, as sufficient votes to waive must be received no later than the end of the year.

Michael Posner, Esq., is a partner in Ward Damon a mid-sized real estate and business oriented law firm serving all of South Florida, with offices in Palm Beach County.  They specialize in real estate and can assist community associations in all legal matters including retrofitting votes. They can be reached at 561.594.1452, or at

Wednesday, July 6, 2016

Eight Real Estate Mistakes

1.       Deeds without estate status: So you want to add dad, mom or a brother to your Florida property, so you get a Quit Claim Deed from an out of state lawyer, an office supply store or online, fill it out and mail in to be recorded. Three years later they die, and when you go to sell you discover that in order to clear their interest you will need to file an ancillary administration in Florida.  $3,000 and a few months later you close and get to share the proceeds with their heirs.  This can all be avoided by using the proper language to effectuate what your intent is on that deed.  If you want the property to go to everyone’s heirs, do nothing, but if you want to be sure that the property goes to the surviving grantees, simply add, “joint tenants with full rights of survivorship, and not as tenants in common” after the grantee’s name and upon their death, the title goes to the remaining grantee without probate.

2.       Grandma’s Condo: If you own a second home/condominium in Florida and are a resident of another state, you can avoid two probates by simply deeding your second Florida property to yourself for life with a remainder to your chosen heirs. Then, when you die, no probate is necessary.  You can even keep full control by adding Ladybird Powers to your Life Estate Deed.

3.       Applying for Homestead: Florida’s constitutional homestead is an automatic protection arising as soon as you take residency of your Florida home.  However, the statutory homestead tax break requires that you apply by March 1 of the year after you purchase.  Forgetting to apply will costs you about $500 each year, and you will lose a 3% cap on annual appraisal increases. If you closed last year and did not apply, you can still submit an application and ask for a late filing waiver.

4.       Home Improvements: Getting ready to sell your house but need some work done that requires a contractor?  If it is a short job, you should change the automatic one year life of that Notice of Commencement required for permitted jobs to the actual time needed to complete the work.  Otherwise, when you do sell you will have to hunt down that contractor and possibly some subcontractors to get release of liens, even though the job was done on one week and it has been eleven months since your house improvement was completed.

5.       Loan Payoff Surprise: Many people are surprised at closing when their mortgage payoffs are far higher than their last mortgage statement.  For example, if you borrowed $500,000 at 5% five years ago, and you are closing August 10, (and you were told not to make the August mortgage payment) and your August mortgage statement says you owe $448,866.09 in principal, your closing statement could say you owe almost $3,000 more.  That is because mortgages are paid in arrears, meaning that the July payment you made was for interest in June.  So at that August 10th closing they are collecting interest on the principal balance from July 1 to August 10, plus a week extra to cover mailing in the payment.

6.       Mortgage Insurance: Did you purchase your home with less than 20% down?  Then you probably pay mortgage insurance every month.  The insurance is supposed to stop once the loan amount equals 80% of your home’s appraised value.  However, it is the owner’s responsibility to request this relief.  If you think you have hit 80% mark, contact your lender, because each month you delay could easily costs $83 per month for each $100,000 you borrowed.

7.       Rubber Hoses: Go in your laundry room and look at the hoses connected to your washing machine.  If they are black rubber then (i) confirm you have flood insurance; and (ii) get in the car and go to Lowes or Home Depot and buy braided stainless steel hoses in the same length.  Installation is easy, turn of the water to the washing machine, remove old hoses and install new hoses. Burst rubber hoses are probably the number one cause of flood in homes.  You do have flood insurance too?  Many do not so take the time and do one of the easiest fixes possible to protect your home.

8.       Mortgage Interest: Do you know what interest rate you are paying on your home mortgage?  Many people close on a loan when they buy and then never refinance, throwing away thousands of dollars.  If you borrowed $300,000 ten years ago at 6% you are paying $1,798 a month.  If you refinanced all $300,000, that full amount at today’s rate of 3.75% your payment would drop to $1,389 and after closing costs you would have about $40,000 in your pocket.  The smartest move would be to refinance only what you owe for 15 years.  Your payment would still be lower by $300 a month and you would shave another five years on your existing loan.  

Michael J Posner, Esq., is a partner in Ward Damon a mid-sized real estate and business oriented law firm serving all of South Florida, with offices in Palm Beach County.  They specialize in real estate law and business law, and can with these and other real estate mistakes (except the plumbing tip!).  They can be reached at 561.594.1452 or by e-mail at