According to the latest FBI report, criminals are becoming more secretive and agile at committing wire fraud schemes. With the amount of wire fraud incidents growing each year, being aware…
Read More
We’ve had a lot of questions about TOPA lately. Some of them listed below.
The new TOPA statute for a single-family home, condominium unit and single-family home with an appurtenant unit is finally in place.
Did you know TOPA was amended as of July 3?
The DC Department of Housing and Community Development will hold a workshop to provide an overview of the newly enacted Single-Family Home Exemption Amendment Act of 2018 (Bill 22-0315, Act 22-339). today from 1 to 3 pm.
For those who cannot attend in person, the DHCD Facebook page will also broadcast the workshop live.
The workshop will cover a variety of topics including:
- Types of single family properties that are exempt
- Criteria that an elderly or disabled tenant must meet to still have a limited opportunity to purchase
- Notice and documentation requirements
If you wish to attend today’s workshop in person, you must register. The workshop is free and will take place from 1 to 3 p.m. at One Judiciary Square, located at 441 4th Street NW, Old Council Chamber Room, Washington, DC 20002.
In the process of purchasing a property, it is hard to keep track of all of the elements involved.
Such elements can even include things that could be beneficial to the homebuyer. Therefore, we here at Federal Title do our best to keep homebuyers informed about their options in the homebuying process, like the DC Homestead Deduction, so that they can make the best decisions.
What is there to gain?
The DC Homestead Deduction provides valuable savings when it comes to what amount of the assessed value for your property is taxable.
Currently, the property tax rate is $0.85 per $100 in DC which means that .0085 of your property’s assessed value must be paid as a tax. However, if you are eligible for the DC Homestead Deduction, your property’s assessed value is reduced by $73,350.
Therefore, because the amount the government can tax is less, the money you must pay for the real property tax is less. However, the value by which your property is reduced changes annually and so it is important to stay up to date on that number.
Qualifications
In order to be eligible for the DC Homestead Deduction, there are four qualifications a homebuyer must meet.
First, a Homestead Deduction application must be filled out and on file with the Office of Tax and Revenue (link for DC Homestead Deduction application: https://otr.cfo.dc.gov/node/1299251).
In addition, the property, which cannot include more than five dwelling units, must be the principal residence of the owner/applicant.
Principal residency can be determined by where you pay your taxes, where you vote, what address is on you driver’s license, etc.
Finally, you must be domiciled in DC which means that you have a DC government issued ID, you are registered to vote in DC, and you file DC Personal Income taxes.
If these conditions are met, then you are eligible for the DC Homestead Deduction.
When do you begin receiving the benefits of the DC Homestead Deduction?
When the DC Homestead Deduction goes into effect depends on when the application for it was filed. If an approved application was filed between October 1 and March 31, then the DC Homestead Deduction will go into effect for that entire tax year and every tax year after that.
If an approved application was filed between April 1 and September 30, then the property will receive half of the deduction amount and then the following years after that it will receive the full deduction.
When should you cancel your DC Homestead Deduction?
There are several instances in which you must cancel your DC Homestead Deduction.
It is important that you can recognize the situations so that you don’t fall victim to the District of Columbia’s Homestead Deduction Audit Program.
Essentially, if the property is no longer your principal residence then you must fill out a Cancellation of Homestead Benefit form.
This means that if you moved off the property and are renting it out you must fill out the form. If you purchased another property in DC and filed for a Homestead Deduction on the property then you must fill out the form.
Are you still eligible if you are only a co-owner of a property?
If you are only a co-owner of a property and the other owners will not be living with said property as their principal residence then you are still eligible for the DC Homestead Deduction.
All that is required is that you meet the three qualifications which are that you are a principal resident, your property only includes five or fewer dwelling units, and you are domiciled in DC.
Did you know TOPA was amended as of July 3?
The DC Department of Housing and Community Development will hold a workshop in a couple weeks to provide an overview of the newly enacted Single-Family Home Exemption Amendment Act of 2018 (Bill 22-0315, Act 22-339).
The workshop will take place Wednesday, July 25 from 1 to 3 p.m. at One Judiciary Square, located at 441 4th Street NW, Old Council Chamber Room, Washington, DC 20002. The workshop is free but you must register to attend.
For those who cannot attend in person, the DHCD Facebook page will also broadcast the workshop live.
The workshop will cover a variety of topics including:
- Types of single family properties that are exempt
- Criteria that an elderly or disabled tenant must meet to still have a limited opportunity to purchase
- Notice and documentation requirements
HERE’S A LOOK AT WHAT’S HAPPENING IN REAL ESTATE IN THE DISTRICT OF COLOMBIA AND BEYOND.
Tiny house movement makes its way to DC
The Independent model single-family manufactured by Kasita is coming to DC to be available for touring. –Washington Post
Rosslyn shares its corner of the sky
Rosslyn’s Observation Deck at CEB Towers will be available to the public for no cost, offering flawless views of the skyline. –Curbed DC
Architect David Adjaye’s first skyscraper makes its debut
Designs for David Adjaye’s 66 story skyscraper are revealed drawing inspiration from New York’s past. –Wallpaper
Dispute over plans for Anacostia’s Big K site
Residents of Anacostia disagree with DHCD over the development of the Big K lot in Anacostia. –Washington City Paper
Alexa making an entrance into the hotel industry
Amazon’s Alexa is to be introduced to the Hotel Marriott chain and is expected to be seen in every Marriott location late summer. –Washington Business Journal
It’s about time. The title insurance industry is catching up and rapidly integrating technology into all aspects of the real estate transaction.
The ESIGN Act was federally passed in 2000 to enforce the viability of electronically signed documents, but ironically, an industry that thirsts for more efficiency has been slow in adapting to technology.
Eighteen years on, homebuyers and refinancing homeowners still come to our closing table every day to sign their closing documents, some 50+ pages, with pen in hand. But that all may be changing in the very near future.
With the emergence of online mortgage solutions and the increasing availability of technology to simplify the process of finding a home for purchase, the title insurance industry may be next on the fast track to online integration.
In the next year there will be a major shift toward electronic closings, or e-closings, as legislation is being proposed and adopted all over the country to make way for a faster and more secure way to close real estate transactions.
In 1996, Federal Title became one the first companies in the nation to offer an online service to shop and compare closing costs, and more importantly, order title and settlement services.
We are now positioned to be among the first in the country to offer e-closings in Virginia, Maryland and the District of Columbia. We’re still waiting for clearer legislation in Maryland and DC to make e-closings viable, and not all lenders have a system in place yet for tracking them.
How does an e-closing work?
Once the parties have a ratified contract, any party in the transaction may order settlement services at https://federaltitle.com/order. The title company and lender will work to finalize a closing disclosure and coordinate a settlement date with the borrower.
The closing documents from the title company and the loan documents from the lender will then be uploaded to an online portal where the borrower, lender, agent and seller (if a purchase), will have the ability to review and sign their documents in front of a video notary.
Can I close remotely now via e-closing?
Federal Title is up to date with the latest software to provide an online closing for our clients. However, there a few caveats to be ironed out this year.
Legislation in DC and Maryland does not yet explicitly state that the use of a video notary is acceptable, although no legislation against it has been passed.
Meanwhile, Virginia was the first state in the United States to allow the use of video notary and thus is a viable option for e-closing.
The second caveat is on the lending side. The Note and Deed of Trust are essentially the two most important mortgage documents that the borrower signs.
Some mortgage lenders have already established an “E-Note” and “E-Vault” platform and are capable of closing your entire loan electronically. Essentially, the E-Note allows for the Note to be enforceable when electronically signed, and the E-Vault stores the E-Note.
Many mortgage lenders are diligently working to transition to e-closings, and it will be no surprise to see a major influx of e-closings in the very near future. We’re also keeping an eye on e-closing legislation in DC and Maryland.
To see if you qualify for a remote closing or have more questions regarding the e-closing process, please contact us at services@federaltitle.com.
You would be surprised at how many people I meet at the settlement table who have never opted out of their information being shared with their bank’s or lending institution’s affiliates.
People often complain about solicitations via mail, email and phone. If you have a credit card, bank account or mortgage with a lending institution, they are often allowed to share your information with their affiliates unless you specifically ask them not to share.
I hear, “I don’t want to be on the phone for hours waiting to opt out.”
Most of the institutions allow you to set up an account online to handle payment and inquiries. Usually there are privacy settings in the same online account you can set up – opt out of their marketing to affiliates, sharing credit information, etc.
If you would rather be on the phone, you can certainly call and opt out of your information being shared with affiliates or used for marketing. Just a few minutes of your time may save you hours sorting mail and/or emails.
Q: Can TOPA rights be assigned without a contract?
A: With our without a contract, TOPA rights can be assigned.
Q: How much (consideration) does the landlord/owner need to pay the Tenant to make the assignment valid?
A: Most title insurance underwriters agree that there must be at least $300.00 of consideration which can be in the form of rent abatement/waiver, moving expenses, or cash payment.
Q: What forms must be provided to the tenant prior to the existence of a contract?
A: The landlord/owner must provide TOPA Form B by certified mail before tenant signs the agreement to assign. Because the rights of first refusal will be assigned concurrently with the rights to purchase, it is not necessary to provide Form C.
Q: What forms must be provided to the tenant with the existence of a contract?
A: The landlord/owner must provide TOPA Form A by certified mail before tenant signs the agreement to assign.
Q: Once the Assignment is signed by both landlord/owner and tenant, is there a waiting period before settlement can occur?
A: No. However, do note that either Form A or Form B must be sent by certified mail in order to satisfy the legal requirements such that the rights become legally assignable.
What’s the Benefit?
The Maryland First-Time Homebuyer Credit exempts the buyer from paying the State Transfer Tax.
Qualifications*
- All homebuyers must be individuals (cannot be a trust or other entity) who have never owned in the state of Maryland residential real property that has been the individual(s) principal residence; and
- The residence will be occupied as the homebuyer’s principal residence.
* There is an exemption that will allow a homebuyer to qualify if a co-buyer is on title solely for the loan qualification and will not occupy the property as a principal residence.
Question from an Agent: My client, a seller of a DC property, has recently purchased a property and has never occupied it. Is the seller still required to complete the property disclosure form or is the seller exempt?
Answer from an attorney: There is no statutory exemption that would preclude the above seller from providing the property disclosure statement. DC Code § 42-1301 (b), provides guidance and lists certain types of property transfers that are exempt from anyone having to fill out the Disclosure statement. Some, but not all of these include: transfers between co-tenants; foreclosure sales; court ordered transfers such as probate, bankruptcy, divorce; and transfers made by a person of a newly constructed residential property that has not been inhabited.
I am often asked which is preferable – Assignment of TOPA Rights or a TOPA Affidavit?
The answer is it depends on multiple factors i.e. is Owner/Seller/Landlord willing to pay consideration to a tenant; is there a ratified contract; how much time is there before settlement; etc.
Assignment
TOPA rights can be assigned with or without a contract – there must be consideration of at least $300 per current underwriting guidelines and this consideration can be in the form of cash, forgiven rent, waiver of rent, moving expenses, etc. If the rights are to be assigned before there is a contract, the agent must send out TOPA Form B via certified mail prior to the tenant signing the Assignment. Form C will not be necessary, as the rights of first refusal will be assigned at the same time as the rights to purchase. If there is a contract, the agent must send out TOPA Form A via certified mail prior to the tenant signing the Assignment.
Please note NOTICE either FORM A or FORM B MUST BE SENT VIA CERTIFIED MAIL TO MEET THE STATUTORY GUIDELINES AND TRIGGER THE RIGHTS SO THEY ARE ASSIGNABLE. Once the Assignment is fully executed, settlement can happen immediately – no waiting period.
Affidavit
If the agent wants to use the Affidavit, the appropriate TOPA forms must be sent via certified mail. Ideally, the Affidavit should be signed after the 45 day period (30 days right to purchase plus 15 days right of first refusal). In most cases, the tenant will sign the Affidavit prior to the conclusion of the waiting period, but the 45 day period must pass. The reason an underwriter requires the 45 day period to pass is the affidavit is “retractable”; in other words, the tenant is allowed to change his or her mind making the affidavit no good.
In addition, when an affidavit is used; the title company will need to get a Review of File Letter issued from the District (DCHD) prior to settlement. The Review of File letter will confirm there was not Notice of Intent to Purchase filed with the District and solidifies tenant’s intent – to purchase or not purchase. This closes the underwriting loop and allows settlement to happen.
Listing Agent Question: I have a client with a judgment creditor lien – arising from credit card debt – that has attached to the property we are trying to sell in the District of Columbia. The judgment creditor lien arose from a judgment issued in December, 2005. The judgment was issued in the amount of ~$10,000.00 at a rate of 15.50% per annum – that judgment has ballooned to over $55,000.00 courtesy of the power of compounding interest. This amount would force a short sale and cause major delays for closing. What do we do?
The Listing Agent’s question essentially boils down to this: When do judgment creditor liens automatically release in the District of Columbia?
A judgment creditor is a person or entity that has obtained a valid judgment for the payment of money from a court of competent jurisdiction. Once a valid judgment has been issued, the judgement creditor must perfect the lien by filing the judgment in the land records – this puts the world on notice that the judgment creditor has a lien against the property. Judgment creditor liens encumber the property and prevent debtors from selling the property without paying off the lien.
DC Code §15-101, titled “Enforceable Period of Judgments; Expiration” states:
(a) Except as provided in subsection (b) of this section, every final judgment or final decree for the payment of money rendered in the – (1) United States District Court for the District of Columbia; or (2) Superior Court for the District of Columbia, when filed and recorded in the office of the Recorder of Deeds of the District of Columbia, is enforceable, by execution issued thereon, for the period of twelve years only from the date when an execution might first be issued thereon, or from the date of the last order of revival thereof.
(b) At the expiration of the twelve-year period provided by subsection (a), the judgment or decree shall cease to have any operation or effect. Thereafter, except in the case of a proceeding that may be then pending for the enforcement of the judgment or decreed, action may not be brought on it, nor may it be revived, and execution may not issue on it.
The ultimate answer to the Listing Agent’s question was that they needed to do nothing! In this particular case, the judgment was issued over twelve years ago. Federal Title & Escrow was able to verify that the judgment creditor had failed to renew their judgment creditor lien prior to expiration. The lien automatically discharged pursuant to DC Code §15-101, and the settlement closed without a hitch.
A common misconception of the VA Loan Program is that once you take out a VA loan to purchase a home, it is a one-time benefit that cannot be used again. However, that is simply not the case. According to the U.S. Department of Veterans Affairs, once a member of the military has met the eligibility requirements and earned the benefit, it can be utilized for the remainder of their lifetime. This re-use of the benefit is what is referred to as “restored entitlement.” In order for a veteran or servicemember to restore their VA loan entitlement, the following must occur:
- The property is sold, and
- The VA loan is paid in full
However, there are exceptions to this rule. If the veteran or servicemember pays off their VA loan, but elects to keep the property, they can receive a one-time restoration. Examples of this would be if the veteran or servicemember refinances their VA loan with a non-VA loan, or if they purchased the home decades ago and paid off the loan in full but still live in the property. This one-time restoration would allow the veteran or servicemember to keep the home they are currently in and still be able to purchase another home while utilizing their VA home loan benefit.
A VA home loan is a valuable resource for retired and current members of the military to utilize. To obtain more information on VA Home Loans, you can explore the U.S. Department of Veterans Affairs website at this link.
I often get asked at the settlement table – Why are 5 different lender documents required if the borrower is going to occupy the property?
The answer is the interest rate and the type of loan offered by the lender may be directly related to owner occupancy. If the property will be owner-occupied, the client usually gets a better deal on the interest rate and fees. The theory being owner occupants typically take better care of the property, are more likely to protect the lender’s interest in the property and are less likely to walk away from the property. At closing, the borrower will sign a Deed of Trust to secure the loan against the property and the Deed of Trust says the following:
“Borrower shall occupy, establish and use the Property as Borrower’s principal residency within 60 days after the execution of this Security Instrument and shall continue to occupy the property as Borrower’s principal residence for at least one year after the date of occupancy, unless Lender otherwise agrees in writing, which consent shall not be unreasonably withheld, or unless extenuating circumstances exist which are beyond Borrower’s control.”
The lender wants to be sure that it is your intention on the day of signing is you will be living in the property as your principal residence for at least a year and within 60 days.
The terms “marketable” title and “insurable” title are very common real estate terms that come up in every contract for sale of real property. They are frequently used but commonly misunderstood. First, “marketable” title is generally defined as title that is free from encumbrances or defects that would legally or physically restrict the property owner’s use of the property. Some examples would be: outstanding mortgages/liens; restrictive covenants; easements on the property; zoning restriction violations; and building setbacks. In addition, “marketable” title is free from any reasonable doubt as to its validity. Some examples would be variations in the chain of title; variations in the names of the grantors and grantees; outstanding heir issues after an estate conveyed title; and unrecorded leases.
So what happens when unmarketable title presents itself? It is at this stage that you turn to a reputable title insurance company. “Insurable” title is title that a reasonably prudent title insurance company is willing to insure at normal market rates. Here, the title does have a known defect or defects in the chain in title. The determination to insure a property may differ between title insurance companies. Their decision to insure title is made after marketability issues have either been resolved or it has been determined that these issues present a low risk of turning into claims in the future. It is important to note that there are some marketability issues that title companies cannot insure over and these issues, such as easements and building setback lines, are commonly excepted from the title policy.
It is fair to say that unmarketable title presents itself quite often and there exists some form of defect or encumbrance on virtually every property that is sold. It is important to obtain as much information from the seller beforehand as possible, information such as copies of prior title insurance policies or copies of existing surveys. Such documentation and information is helpful and assists in addressing any potential issues early on. Understanding the difference between “marketable” and “insurable” can help facilitate a smooth transaction.
Note: For those unfamiliar with the DC Tax Abatement program or in need of a refresher, Federal Title & Escrow covers the basics of the program in the following blog post – How to Qualify for the DC Tax Abatement Program. As always, you can find the most up-to-date Tax Abatement Application on the Office of Tax and Revenue’s website.
I recently had a question from one of our agents regarding the income threshold for the DC Tax Abatement Program. The question was prompted because the buyer’s salary was below the income limit; however, the buyer planned to liquidate assets (specifically stocks) in order to make the down payment. The issue boiled down to this – how would the liquidation of assets affect qualifying income for the DC Tax Abatement Program?
The answer is relatively straightforward. Part III of the Tax Abatement application requires that an applicant disclose his or her household gross income. This includes but is not limited to the following:
(a) wages and salary,
(b) dividends & interest,
(c) business income,
(d) pensions & annuities,
(e) capital gains & profits,
(f) alimony,
(g) social security,
(h) unemployment insurance and/or workman’s compensation,
(i) support money and/or public assistance grants,
(j) sick pay excluded from home,
(k) military compensation,
(l) fellowship awards and grants,
(m) life insurance proceeds,
(n) veteran’s pension and disability benefits,
(o) GI bill benefits,
(p) loss time insurance,
(q) income subject to Unincorporated Business Tax,
(r) cash distributions, and
(s) other [the District’s catchall].
In the aforementioned situation, the liquidation of assets – specifically the capital gains/profits from those assets – would have counted towards the buyer’s gross income and resulted in the buyer’s disqualification from the DC Tax Abatement program.
Interestingly, the timing of the liquidation of assets matters less than you may suspect. The tax abatement program instills a duty to report when a homebuyer ceases to qualify for the program. If the homebuyer liquidates assets after the initial application – thereby increasing his or her household gross income over the threshold, the homeowner must alert DC as to the disqualification. The Office of Tax and Revenue’s Special Programs Unit audits every application every year, and a homeowner who improperly avails themselves of the program potentially faces removal from the tax abatement program, recoupment of real property taxes with penalties and interest, and recoupment of the previously exempted transfer and recordation taxes.
Fortunately, our buyer was able secure additional financing and avoid potential disqualification since the issue addressed in a timely manner.
If you have any questions regarding the calculation of gross income for the DC Tax Abatement application, contact us! Federal Title & Escrow is here to help you throughout the settlement process – including any potential questions with the DC Tax Abatement application.
The numbers in this article may be out of date. Visit our guide how to qualify for DC Tax Abatement for the most current information.
For Immediate Release
Media Contact: Nikki Lyon
Main Line: 202.362.1500
Federal Title & Escrow Company Partners with eClosing Provider Pavaso to serve Washington, D.C., Maryland, and Northern Virginia Settlements
Washington, D.C., December 22, 2017 – Federal Title and Escrow Company has partnered with eClosing service provider Pavaso to bring cutting-edge technology to real estate settlements in the Washington D.C., Maryland, and Virginia area. Pavaso created the industry’s only end-to-end digital closing platform to improve communication, efficiency, and process management in the real estate settlement arena and is continuing to focus on the improvement of the consumer experience.
Federal Title and Escrow Company’s main initiative is to be at the forefront of innovation to make the closing process simpler and smarter for the consumer. We are constantly striving to utilize technology to streamline the closing process without sacrificing the personal relationship we build with our clients. The real estate settlement market has been rapidly moving toward online closings. Pavaso provides us with a secure platform to link all parties in the transaction so that we may conduct both hybrid and fully online closings.
Pavaso’s technology empowers lenders and title companies to deliver the speed and ease of a modern transaction without neglecting the human touch. As today’s consumers increasingly demand the simplicity and convenience of an online transaction, Pavaso is bridging the gap between the archaic paper mortgage process and the digital world. Its technology is both flexible and “future-proof,” enabling users to conduct digital transactions ranging from hybrid closings to complete eNotes.
“The D.C. metropolitan area consists of millions of hardworking individuals that may not have the time for the traditional settlement,” said Todd Ewing, CEO, Federal Title and Escrow Company. “Pavaso allows the consumer to review documents, sign, and securely complete closing from their own preferred venue.”
“We pledge to provide the best experience for the consumer and seek to refine and continually improve the end to end borrower experience,” added Mark McElroy, CEO, Pavaso. “Each and every day closings are happening across the country with consumers who don’t fully understand the process and there is less room today for a cumbersome, inconvenient experience. Consumers have choices now and want a better experience. By moving to a digital closing process, Federal Title is providing that experience, allowing borrowers to benefit from a significantly more informed, transparent and convenient process.”
###
About Federal Title & Escrow Company
Established in 1996, Federal Title & Escrow Company, the largest independently owned and operated title company in Washington, D.C., is known for its top-notch customer service and streamlined closing process. Federal Title has D.C. office locations in Friendship Heights and in Logan Circle. For more information, please visit www.federaltitle.com or contact Nikki Lyon directly for media inquiries.
About Pavaso
Texas-based Pavaso is transforming the mortgage process with radically innovative digital mortgage closing technology facilitating fast, consistent, accurate and compliant closings every time. Pavaso offers a single, collaborative, secure portal promoting transparency, efficiency, consumer education and communication in a seamless format delivering value to every stakeholder involved in the transaction. For more information on how you can streamline your process and digitally transform your organization, call us at 866.288.7051 or visit www.pavaso.com.
Understanding the property tax assessment process can be a bit tricky. Specifically, it can be difficult to understand the difference between an assessed value and a taxable assessed value. Part of the confusion has to do with the Assessment Cap Credit. Here is an example of a recent question on this topic:
Question: On my DC Tax bill, the assessed value is listed as $388,500, but my taxable assessment was only $291,200, a difference of $97,300. What accounts for this difference?
Answer: The bulk of the difference has to do with the Homestead Deduction, which reduces the real property taxable assessment by $72,450. However, there is a second benefit to the Homestead Deduction that receives a lot less attention, the Assessment Cap Credit. This credit provides that the taxable assessment cannot increase more than 10% per year. The credit is not applied against the assessed value, but it is used to reduce the taxable assessed value. In the above question, the additional credit that reduces the taxable assessment by a further $24,850 is the assessed cap credit. Further, based on the above numbers, next year’s taxable assessment cannot exceed $320,320 ($291,200 plus 10%), regardless of the assessed value (assuming of course that the property is still registered as a homestead).
The District of Columbia Office of Tax and Revenue has great information on their website that explains in detail the real property process and the credits available.
