Category Archives: Real Estate

Receive Greater Scrutiny

Much has been written — and rightly so — about the plight of homeowners who have made energy-conserving improvements to their homes using financing provided through a PACE (Property Assessed Clean Energy) program. Frequently, the loans are not understood by the borrowers, and they may represent a loan burden for which the borrower would not traditionally qualify.

What has been needed is adequate disclosure requirements in the PACE loan programs. As hard as it is to imagine, in what many might consider an over-regulated universe, PACE loans — loans based on home equity and secured by senior liens — have had no regulatory body overseeing their originations and no disclosure requirements explaining how they worked.

As a result of Assembly Bill 2693 (Dababneh), which the Governor signed Sept. 25, 2016, and became effective January 1, 2017, California should see some significant changes in this regard.

First of all, AB 2693 imposes specific disclosure requirements on the purveyors of PACE loans. Added to California Streets and Highway Code [don’t ask me why it is there] is section 5898.17. It contains a form for disclosure that covers almost two full pages. It includes the following:

  1. Costs of the products obtained, including labor and installation.
  2. Financing costs, including application fees, prepaid interest, and other costs totaled as Amount Financed.
  3. Annual percentage rate, simple interest rate, total amount of principal, interest, and administrative fees.
  4. Total amount you will have paid over the life of the financing.
  5. Other costs, such as appraisal fees, bond-related costs, annual administrative fees, estimated closing costs, credit reporting fees, and recording fees.
  6. Total financing costs and closing costs, and cash estimated to close.
  7. For purposes of comparison with any other financing: the total the borrower will have paid in principal, interest, and financing costs.

To be sure, the legislation does not require that the exact disclosure format, as spelled out in the Code, be used. It allows that “a substantially equivalent document that displays the same information in a substantially similar form” may be used. Who will want to develop their own form?

Also included in the legislation is a buyer’s right to cancel. It is spelled out that the property owner shall receive the following document (or one substantially similar):

“You are entering into a contractual assessment with [loan provider] for financing that will result in a lien on the property at [address]. You may cancel the transaction, without cost, on or before midnight on the third business day after whichever of the following events occurs last:

(1) The date on which you signed the contractual assessment.
(2) TThe date you received your Financing Estimate and Disclosure.
(3) TThe date you received this notice of your right to cancel.”

It goes on to explain that, if the loan provider has already recorded the debt, he must within twenty days “take the steps necessary to reflect the fact that, if recorded, the lien on your property has been discharged and removed from the tax rolls…”

There is, then, yet another form for providing notice of cancellation to the lender.

So, there you have it. With these new regulations in place, there shouldn’t be any more problem with consumer misunderstanding of PACE loans, right? Well, maybe.

We note that there is still no regulatory body overseeing those who are selling these loans; and we wonder how much training the loan agents are receiving. Remember, there is nothing going on here like obtaining an MLO (mortgage loan originator) license endorsement. There is no licensing, no certification, nor any oversight by an entity like the Bureau of Real Estate. Suppose, for example, that the right to cancel is not explained to the consumer. “Who you gonna’ call?”

Financing Down Payments and Renovations

Whether you’re a professional property developer or a single homeowner, financing your property ambitions comes above all else. Even professional property developers with a proven system of acquiring and renovating homes, condominiums and business properties can run into financing issues.

We’ve examined the benefits of financing a higher down payment, purchasing renovations and the cash financing options available for those of you looking to buy and upgrade your home.

Banks and lenders want low risk scenarios and that ultimately comes down to meeting the required down payment for your mortgage deal, and they’ll give you a better deal if you offer a lower risk scenario. Paying an increased down payment comes with a number of fantastic benefits for your financial future. Here’s a few key benefits, according to Investopedia;

Reduced Mortgage Payments – Because you’ve put more cash up front, your monthly payments will be smaller and more manageable

Lower Interest Rates – Lenders will give you a far improved rate since you’re deemed a lower risk. Expect interest rates to lower significantly upon 20% down payment.

No Mortgage Insurance Fees – If you can’t afford a significant deposit, most mortgage deals will require you to take out mortgage insurance, which will add another 0.5 – 1% interest on top of your existing deal.

Ability to Ride Out Financial Crises – When it comes to a financial crisis, those in most danger of ruin are the ones who have taken out the maximum loan available on the lowest down payment. They have a high interest rate deal and may even face foreclosure.

Why Save For Renovations?

Renovations and upgrades obviously provide that wonderful ability of allowing you to transform your new home into your own dream living space. But aside from that, they can also allow you to significantly improve your home’s resale value. Investopedia strongly advise making wise additions to your homethat will ultimately boost your bottom line.

According to US News Money, these are the renovations and replacements that will bring the greatest % return on investment;

Renovations that bring the greatest percentage return on investment:

  • Entry door replacement: 96.6%
  • Deck addition (wood): 87.4%
  • Attic bedroom: 84.3%
  • Garage door replacement: 83.7%
  • Minor kitchen remodel: 82.7%

Renovations that yield the smallest return:

  • Home office remodel: 48.9%
  • Sunroom addition: 51.7%
  • Bathroom addition: 60.1%
  • Backup power generation: 67.5%
  • Master suite addition: 67.5%

Financing Options

So now you understand some of the reasons for actually spending more cash on your home! But if you don’t have a large disposable income, you may need to find a means of financing your purchases.

Saving – Of course, the glaringly obvious method for saving a down payment isn’t so straight forward. That’s especially true if you’ve got student debt, rental payments and bills to pay, with very little disposable income to go towards your downpayment. The internet is a wonderful place however, and fortunately there’s a number of down payment saving strategiesto help you!

Help from your parents & family – It’s the go to option for many first time home buyers. Loving parents are willing and often able to give you that extra boost in disposable income necessary to make that all important down payment on your first home. Even if you can agree a repayment plan with them, that’s going to be far more favourable than turning to a personal loan for financial assistance.

Personal loans – There’s a number of reasonable options for taking out a personal loan – Peer-to-peer lending platforms, car title loans (see how car title loans work) and credit cards are just some of your options for accessing cash.

Tap your IRA – There’s an exemption for withdrawing up to $10,000from your IRA for the purpose funding your first home. It’s an initiative you should consider if you’ve got money built up!

Hustle – Whether it’s getting a second job or selling off your unwanted possessions on Ebay and Craigslist, there’s nothing like a bit of hustle to increase your bank balance and put you in a more financially secure situation.

Which One Is Right for You

When you’re ready to get a mortgage, you face a dizzying array of choices: Fixed rate or variable? Points or no points? Mortgage broker or mortgage lender?

That last decision – mortgage broker or mortgage lender – involves a simple but easily misunderstood distinction.

Simply put, a mortgage broker is an independent professional who can shop around to find deals from a variety of lenders. A mortgage lender is represented by a loan officer who can speak only for that institution’s product line.

What does that mean for the borrower? As a practical matter, a mortgage broker can present you loan packages from multiple lenders – for instance, Wells Fargo, Chase and Quicken Loans. The loan officer from Wells Fargo, on the other hand, can pitch only Wells Fargo mortgages.

The advantages of dealing with a lender include reliability and reputation. With a broker, you have greater flexibility. Based on your financial profile, the broker may also line you up with a lender where you’re most likely to qualify for the loan.

When in doubt, comparison shop

So, which one should you use? There’s no clear answer, says Eric Tyson, author of Personal Finance for Dummies and co-author of Mortgages for Dummies.

“I’ve seen people be happy using either option,” Tyson says. “The important thing is to shop around.”

Tyson suggests soliciting loan packages from a mortgage broker and a couple of mortgage lenders, then judging which proposal offers the best deal based on rates and fees.

In the end, whether to use a mortgage broker or mortgage lender depends in part on your finances. If you have stellar credit and steady income and you’re shopping for a plain-vanilla loan, mortgage rates and loan fees are unlikely to vary much from one lender to the next.

If, on the other hand, you have spotty credit, you’re self-employed or you have an otherwise-tricky profile as a borrower, you may find the number of mortgage lenders willing to do business with you is more limited. In that case, it can be more convenient to use a mortgage broker. After all, they make a living from their knowledge of various loan products.

Laws offer protection

Unfortunately, the image of both mortgage brokers and mortgage lenders was tarred by a minority of unethical practitioners who built an unsavory reputation for themselves during the housing bubble. The movie The Big Short, based on author Michael Lewis’s expose on the U.S. mortgage meltdown of 2005, portrayed greedy mortgage brokers going so far as to target exotic dancers with bad loans. In another example, The Miami Herald reported in 2008 that thousands of convicted criminals were given mortgage broker licenses by the state of Florida. Not to be outdone, many mortgage lenders offered a menu of high-fee, high-risk loans.

Those excesses have largely gone away, however. The Consumer Financial Protection Bureau, created in 2010 to ride herd on the mortgage industry, released guidelines in 2014 that included a ban on “steering” – that is, on financial incentives for loan officers to push you into a loan you can’t afford. Lenders have stopped offering some of the risky loans that drove the housing bubble, and mortgage lenders and brokers operate under heightened levels of scrutiny and disclosure.

Tipping the negotiation in your favor

Whether you opt for a mortgage broker or a mortgage lender, the paperwork burden will be similar. Both will run a credit check, and both will ask for tax returns, pay stubs, bank balances and other information required for the lender’s underwriting process.

A Rare Breed Managers

Homeowner association management is one of the most challenging forms of property management there is. In residential, commercial and industrial rental management, there is a revocable agreement that allows the property owner a fair amount of control over the tenant. If the tenant doesn’t live up to the agreement, the owner can terminate the agreement (and vice versa). This is not the case in HOAs which are controlled by the board, governing documents, HOA statutes and property rights.

HOA managers are called on to do everything that a rental property manager is supposed to do plus be an expert at diplomacy, mediation and human psychology. They are often called on to work a full day and then attend night meetings. It is demanding work and those that are good at it are a rare breed indeed.

HOA management companies typically work by contract for a monthly fee. But how is that amount computed? It generally is based on the estimated time it takes to accomplish the tasks outlined in the Management Agreement. There is often an hourly charge for tasks not deemed to be routine.

So what goes into the management fee? There are fixed costs like rent, phones, copier, insurance, computers and internet. Labor charges are based on the estimated time it will take to accomplish the prescribed work. Total fixed and labor costs plus profit margin equal the monthly management fee. It is common to divide this number by the total number of units/lots to derive the charge “per door”. Size matters. Smaller HOAs pay more and larger ones pay less per door.

Typically, an HOA management company will assign a manager, a bookkeeper, a maintenance supervisor and possibly an administrative assistant to the account. All will handle multiple HOAs. The manager may handle 10-15 accounts.

The salary levels of the staff can have a major impact on the management fees. If an HOA wants experienced professionals, there is a price to pay. This is one of the most challenging forms of management there is and a jack-of-all-trades just won’t do. A qualified HOA manager attends seminars, has professional designations and credentials and focuses exclusively on HOA management. The HOA will benefit from this training and experience so expect to pay accordingly.

Managers spend a great deal of their time preparing for and following up on board meetings. For a typical board meeting, the manager gathers information and prepares a management report, reviews the financial statement, attaches relevant correspondence, puts board packets together and emails or mails them to individual directors.

Most board meetings are held on weekday evenings at the HOA so the manager is required to work after hours and travel, both of which costs the HOA money since it’s built into the contract. After the meeting, the manager usually has a laundry list to follow up on that occupies most the following week. A manager can easily spend many hours on board meeting related business.

What can you do to reduce management costs? Keep board meetings to two hours maximum and consider daytime meetings. Move the board meeting to the management office and hold them during normal business hours. Reduce monthly to quarterly meetings. With an approved budget, proper policies in place and a management planning calendar, the manager should be able to handle most issues with only occasional input from the president. Letting the manager manage without micro-management from the board may be the single biggest cost saver.

Another cost saving involves manager administration of insurance claims and damage reconstruction. Insurance matters can take many hours of a manager’s time. If the management agreement specifically states that insurance claim work is an extra cost to the HOA, the management company can bill the insurance claim for the time it takes to administrate a claim and renovation work. A similar principle involves time spent on collections or legal action against an owner. This management time should be billed to the delinquent owner.

How about the manager providing sale disclosure statements to owners who are selling their homes and buyers’ lenders? The management company should bill owners and buyers separately not have the homeowner association bear the cost.

Bring Eco Friendliness Into Your Home

Living green is on the minds of many, but bring up the idea of grey water and composting toilets, and, well, never mind. The great news is there are tons of products and ideas you can use to be kind to the universe without a big compromise.

“According to the United Nations Environment Program, the world generates twenty to fifty million metric tons of electronic waste each year and most of the wastage is caused due to heavy use of electronic appliances,” said Geeknaut. “Wouldn’t it be great if we could replace our gadgets with solar powered counterparts? You can, with this Freeloader Solar Charger.

A portable charge powered by the sun, the Freeloader “is an advanced portable charging system that can power any hand held device anywhere. Once charged, Freeloaders internal battery can power an iPod for 18 hours, a mobile phone for 44 hours, PSP for 2.5 hours and a PDA for 22 hours.”

Outdoor Furniture

A stylish, outdoor dining set that’s eco-friendly? Yep. Bambeco’s “recycled post-consumer HDPE outdoor chairs are constructed with the material from 300 salvaged plastic bottles.”

Cooktops

If you’ve been thinking about an induction cooktop anyway, it pays to take a look at the Nuwave Precision Induction Cooktop. “The NuWave Precision Induction Cooktop (PIC) uses induction technology to reduce the amount of electricity required to cook foods traditionally prepared on electric stove,” said Conserve Energy Future. “The secret is an internal copper coil. This coil generates a magnetic field within your steel and iron-based pots and pans. The magnetic field causes molecules in the pots and pans to begin vibrating rapidly, creating heat, so the cookware itself heats the food. In this way, heat is generated in the cookware and not on the cooktop surface, a process which is much more energy-efficient than cooking with traditional gas or electric ranges.”

Low-flow showerhead

The problem with low-flow showerheads is that they feel like low-flow showerheads. But if you still want to make a dent in your water usage, try the Whedon, ShowerChamp’s choice and “a longtime customer favorite,” they said. “It’s compact, solidly built, and provides a strong, steady spray. Reviewers complimented the strength of the water output – even in homes with low pressure.”

Lawn mower

Think of it as a Roomba for your lawn. The Husqvarna Automower® is a robotic lawn mower, so “the grass gets mowed automatically—around the clock without your supervision. It’s electrical, so there are no emissions.

Create A Great Accent Wall

Bringing color into your space doesn’t require you to splash paint up everywhere. Sometimes, focusing on just one wall can have even greater impact, or at least allow you to slowly get used to the idea of color before you take the four-wall plunge.

“An accent wall can be a perfect way to break up a large room, to emphasize a particularly great architectural feature, or to instill a sense of the extraordinary in an otherwise completely ordinary space,” said homedit.

So how do you choose a color? And how do you know where to put it? Will it go with your existing stuff, or do you need to redecorate?

“To change only one wall in your room, a good first step is to choose a color that will pair well with your existing wall color,” said Behr. “For instance, if you have soft mocha walls, paint an accent wall in chocolate brown. If your room is painted a neutral color, add a bold color to highlight that area. Opposing colors in the color spectrum work well together, for example a classic combination of cool blue with a warm orange. Adjacent colors on the color wheel also mix well together, such as shades of green and blue. There is an endless combination of colors to choose from; you will find your perfect match with a little experimentation.”

Here are a few ideas to get you started.

The color: A strong jewel tone, like peacock blue.

Where to paint it: Looks great on a wall that draws the eye across the room

Goes with: Bright white for contrast, and layered with other strong colors as pops

Additional considerations: Dark colors will suck up the light in a space, which is why an accent wall is sometimes preferable to painting all the walls in a space. If you’re doing it yourself, you may need several coats to create an even finish. Be sure to use sufficient light when painting so you can see all the imperfections.

Painting the wall right next to the dining table might make it feel like the wall is closing in. Using the dark blue paint across the room creates a focal wall against the white chest and collection of mirrors.

The bright pink desk and red chairs shine against the bright blue wall – a great way to bring in primary colors and unexpected pops in a unique way.

Easily Create That Plush Hotel Bed At Home

We’ve all been there. You come back from vacation all nice and rested only to return to a bed that seemed fine before you left, and now is just a sad reminder of reality. The good news is, while you probably can’t live your life on vacation, you can have a bed that makes you feel like you’re permanently on one. And it’s actually it’s pretty easy to pull off.

 

1. Go white

When was the last time you saw any color on a hotel room bed? That’s not a coincidence. “Color scheme is of utmost importance,” said Huffington Post. “When Westin hotel designers trial tested their now-famous Heavenly Bed, they noticed a peculiar trend: “The all-white bed created this halo effect,” says Erin Hoover, vice president of design for Westin and Sheraton. “People thought a room had been renovated, even if it was just the bed that had been changed. It had a huge impact.” Hilton and Park Hyatt feature all-white beds in their rooms as well – stick to their color scheme (or lack thereof) to connote ultimate luxury in your bedroom.”

2. Focus on thread count

The sheets on hotel beds feel so sumptuous because the thread count generally starts at about 300. They manage to feel both soft and crisp because they are always cotton -“specifically Egyptian cotton,” said Apartment Therapy. That makes them “breathable and help you stay cool.”

If you’re trying to replicate the hotel bed feel when buying sheets, stay away from microfiber. The fabric doesn’t breathe, which makes temperature control difficult. It’s also a lint and hair magnet, which is problematic for many reasons, especially if you have animals.

3. Buy lots of flat sheets

Once you’ve identified the type of sheets to buy, you may want to get them in bulk. You may not have noticed that hotels don’t use a fitted sheet, but you probably noticed that how nicely tailored the bed is. That’s because they place a flat sheet on the bottom instead of a fitted sheet, and get it nice and tight against the mattress by using hospital corners.

To get the full hotel bed experience, you’ll need a couple more flat sheets – one to go against your skin, and one on top of the down comforter.

4. Add a down comforter

Speaking of down comforters…”Part of achieving the look and feel of luxury bedding includes multiple layers,” said The Balance. “Because of this, you may prefer choosing a lightweight down blanket for year round comfort. The Westin Hotel queen size down blanket has a 100% cotton baffle-boxed stitched cover and is filled with European goose down and it sells for $200.”

You can find them for less – We Googled “European goose down comforter” and found this one for $137 on Amazon. If you’re going to be using a duvet cover over your comforter (look for Egyptian cotton here, too, for the softness and breathability), it doesn’t matter what color your comforter is, and you might find a deal on one that is something other than white.

5. Address the pillows

Part of what makes the hotel bed so luxurious are the pillows. Buy one of the Westin Hotel “Heavenly Bed” feather and down king-size pillows, and you’ll pay $85 each, said The Balance. “The pillows have 50 percent goose feathers and 50 percent down. We found good alternatives for as low as $28 on Overstock.

To get the plush look of the hotel bed when it comes to pillows, alternate sizes and shapes – a couple of Queen or King-sized pillows, depending on the size of your bed, a few European pillows with shams, and maybe a boudoir or bolster pillow.

Home Projects For Your Specific Budget

Going green has been a trending topic over the last decade and will continue to be one of the real estate industry’s most talked about subjects moving forward. Unfortunately, many homeowners feel that improving the environmental friendliness of their home is an expensive and unattainable goal. The reality is that most green improvements actually save you money in the long run. So, as good weather returns and extra money from tax returns arrives, it’s the perfect time to take a fresh look at green home projects you can do now–at different price points that will meet your specific budget.

1. Replace your traditional light bulbs with LED bulbs

The price of LED bulbs has fallen drastically in the last few years, but homeowners can still get sticker-shock at seeing the upfront cost of replacing all their light bulbs (anywhere from $2 to upwards of $30 each). That being said, due to their long life and significantly lower energy use, LED lights have the potential to save homeowners a significant amount of money over the course of their lifespan as well as decrease the overall amount of greenhouse emissions. Energy.gov states that “widespread use of LED lighting has the greatest potential impact on energy savings in the United States.” This is a simple step that any homeowner can take to make their home more green and save money. Depending on your budget, you can replace several of your most used bulbs at once or simply replace one at a time.

2. Seal your ducts

Experts estimate that air leakage from ducting in homes can reduce heating and cooling efficiency by 20-30%. Sealing ducts is a very inexpensive solution that can save you up to $100 per year in energy bills as well as decrease the burning of fossil fuels. Sealing ductwork can be a DIY project that anyone willing to put in a little work can do successfully. For less than $40 and a few hours of time, you can make your home more efficient and save money on cooling costs during the hot summer months that will soon follow.

3. Replace fixtures with low-flow options

Water heating is the 2nd largest energy expense, so those long showers can really add up. Not only does it cost you more on your monthly bill, it increases water usage, and burns fossil fuels to heat the water. Swap out your showerhead with a low flow option for as low as $20 and you will see immediate savings. You can also move to low-flow faucets to further improve your water and energy use.

4. Landscape using water-saving methods

Spring is the perfect time to update your landscaping. If conserving water and lowering your bill is important to you, seek out ways to make your yard more environmentally friendly too. Use drip systems to water flower beds or gardens rather than over the top irrigation, which uses considerably more water. Look into swapping out that grass parking strip for bark and plants, which conserves water and provides curb appeal. In dry climates, ditch some or all of the grass in favor of drought-resistant plants or xeriscaping. Depending on the size of lawn, these changes can save tens of thousands of gallons of water yearly.

5. Find a Green Builder

If you are truly committed to going green with your home and you are looking to move in the near future, building a new home might make the most sense for you. Green home builders are in high-demand because they can seal, insulate, and use the right products so that your home is as air-tight and energy efficient as possible. Doing this during the building process is usually more cost-effective than trying to do it later as a remodel. A Boise home builder recently stated, “Green Building means two things: homes that are easier on the planet, and easier on your wallet.” If this is your philosophy and you have the means available, green home building might be the right option for you.

Helps First Time Buyers Drive Market

Despite rising price houses across Canada and much concern about affordability in hot Ontario and British Columbia markets, young people are still buying homes. The Toronto Real Estate Board reports that just over half of the buyers in the Greater Toronto Area in 2016 were first-timers. The board predicts that percentage will rise this year, even though the price for an average property rose by more than 17 per cent last year.

A new global survey by HSBC says 82 per cent of Canadian millennials expect to buy their first home within the next five years.

“This study challenges the myth that the home ownership dream is dead for millennials — be it in Canada or around the world,” says Larry Tomei, executive vice president at HSBC Canada. “In fact, more than three in 10 Canadian millennials already own their home.”

The HSBC survey found that 37 per cent of millennials homeowners in Canada got financial help from their family — “the Bank of Mom and Dad” — to fund their purchase. Another 21 per cent moved back in with their parents so they could save money for a down payment. Some also admitted that they needed help from family after buying a home and exceeding their budget.

Several organizations have recently tried to quantify how much first-time buyers are counting on family to help out with their first home purchase. A report by ratehub.ca says that 44 per cent of millennial homeowners had financial help from family.

“Millennials get all the attention when it comes to saving up for a down payment on a first home, but our research reveals generation Xers may have the most to complain about,” says Ratehub.ca’s Jordan Lavin, referencing the company’s 2016 Digital Money Trends Report. “Canadians in the 35-54 cohort were most likely to have put down only five per cent on their first home. Thirty-five per cent of generation Xers made the minimum down payment, compared to just 18 per cent of millennials.

“When it comes to surpassing the magical 20 per cent mark, after which CMHC insurance goes away and qualification becomes easier, generation Xers also scored last with less than one-third making a standard down payment on their first home. That could be because the Bank of Mom and Dad is favouring the younger generation. Millennials are 47 per cent more likely than generation Xers to have help from family when buying a first home.”

However, Mortgage Professionals Canada’s Annual State of the Residential Mortgage Market in Canadahas a different take.

“The data indicates that there is truth to the suggestion that parents are providing more help, but it also shows that this help is less significant than may be imagined,” says report author Will Dunning. In the most recent survey, 15 per cent of first-timers reported receiving a gift from parents or family, while another three per cent received a loan from family to help with the down payment. The total of 18 per cent is not much more than the long-term average of 14 per cent for family gifts and loans, says Dunning.

“Even at this recently elevated share, we cannot say that this source of funds has become an important driver of home buying, contrary to some often-heard opinions,” he says.

Dunning’s report concludes that rising house prices in Canada mean that it now takes about twice as long to save for a down payment as it did 15 years ago.

“Down payments by first-time buyers have been consistent over a long period of time, at about 20 per cent of purchase prices,” he says. “Given the greatly increased burden of down payments relative to incomes, that stability is surprising. It implies that it is now taking longer for first-time buyers to get ready to buy than it did in the past.”

The Seller Remains In a Property

In a residential real estate transaction, it is not unusual for the seller to want to remain in the property for a few days to a couple of weeks after the closing occurs. This is in no small part due to the fact that savvy sellers (or their savvy agents) know that closing dates are frequently delayed, and that sellers who schedule the movers and the next possession on the basis of a projected closing date, do so at their own peril.

The situation is common enough that, for some years, the California Association of REALTORS® (CAR) has produced a form (Seller in Possession Addendum) to facilitate the arrangement. (Writing up such an agreement is not something you would want to leave to an agent.) The form is intended for a short-term occupancy (i.e. less than thirty days). For any longer period, CAR has a more elaborate agreement called Residential Lease After Sale.

The short-term occupancy agreement specifies its term either as a number of calendar days or until a specific date. It also indicates the amount to be charged and provides for a late charge if an outside-of-escrow payment is not timely.

It is specified who shall pay for utilities and the maintenance responsibilities of the occupant. No assignment of the agreement or subletting is permitted. The new owner is to be allowed entry for a variety of purposes, as is typical of most lease/rental agreement. 24 hour notice is stipulated, unless there is an emergency. A security deposit is called for, and the seller/occupant is advised to obtain insurance for personal property.

In all, this one-page agreement might be called a Rental Agreement Lite. It is not as thorough as most lease/rental agreements (the CAR standard lease/rental agreement is 6 pages), but it covers the major issues.

Recently (December, 2016), CAR published a revision of the Seller in Possession form. Most notably, it is titled Seller License To Remain in Possession Addendum (my emphasis).It begins, “This Addendum is intended to grant Seller a license to remain in possession of, and use, the Property after the Close of Escrow.” In the section specifying the length of term it says, “Seller is granted a license to remain in possession of Property for ___ calendar days After Close of Escrow (or to ____ (date) until _____AM / PM.”

In the Consideration (formerly, Compensation) section, instead of the seller agreeing to pay for the term, “Seller agrees to pay Buyer (i) a non-refundable License Fee for the term…” There is no longer a security deposit, but there is a “delivery of Possession Fee” which is to be returned to the seller if the property is maintained as agreed — just like a security deposit.

Aside from the differences just noted, the former and revised versions are the same. It would seem, then, that the differences are more semantic than they are substantive.

But, if there really is no substantive difference, why introduce licensing language — which is relatively unfamiliar — into a document that everyone had found to be quite understandable?

The purpose is to (attempt to) make it clear that allowing the seller to remain for a short period is not creating a tenancy. A person who occupies a location by virtue of being granted a license to do so is not a tenant. (Think of having a ticket to a football game.) They may have the right to use a certain space under certain conditions, but they do not have an interest in that space. They can be removed for violating the terms of the license, but they are not evicted.

Now, as a matter of probable fact (different from a made-up one) it seems most likely that a court would treat the new Seller in Possession form as a rental agreement just like the old one. It walks like a duck, sounds like a duck … etc. A court would probably treat the seller/occupant like a tenant who has the rights of a tenant. To remove him would require a standard eviction.

But there is another “audience” who, hopefully, might find that the new license agreement makes a significant difference: mortgage underwriters.

Many residential lenders have strict guidelines (or, guidelines that are interpreted strictly) that require that the property be occupied by the borrower and that it not be rented to another party. Reportedly, more than a few loan problems have occurred because a seller-in-possession agreement was deemed to violate such a no-rental provision.