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Trust This.
By Joseph E. Seagle, Esq. ● Feb 10, 2023
Smart Brevity® count: 5 mins...1295 words
👋 Happy Friday! It’s National 🏠#HomeWarrantyDay. In ☀️ Florida, real estate agents may sell buyers and sellers home warranties that protect sellers during the listing and buyers after the sale. Not all home warranties are the same, so research home warranties carefully before buying.
Clarification of last week’s edition about the Orange County Tenant Bill of Rights: The post generated a lot of e-mail responses to me. I failed to clarify that the new ordinance applies only to residential rental properties in unincorporated Orange County, Florida. If your rental is located inside city limits, the new rules will not apply. Also, the Florida Legislature is considering a bill that would outlaw rent control ordinances and could encompass “tenant bill of rights” ordinances. So much for “home rule” under Florida’s Constitution.
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1 big thing: Comeback of assumable mortgages?
At least one mortgage lender is trying to bring back assumable mortgages to keep the pipeline of real estate sales open.
Why it matters: Assuming an existing mortgage allows a buyer to get into a property at the seller’s interest rate, which is much lower than the current rates and can yield a higher sales price for the seller.
Unfortunately, not all mortgage loans are assumable. Only government-backed mortgages like FHA, VA, or USDA loans are assumable.
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Around two-thirds of mortgage loans are not assumable because they are held by Fannie Mae, Freddie Mac, or servicers of non-conforming loans.
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However, the niche of loans eligible for assumption is often found on properties typically considered starter homes for first-time homebuyers.
State of play: Assumptions were most popular in the late 1980s when interest rates soared, and the real estate market ground to a halt. They aren’t used more often because the procedures and technology have been neglected over the past 40 years while they weren’t used.
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Fees payable to servicers to process assumptions are only $900.
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Mortgage loan officers make nothing on a buyer’s assumption of a loan.
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Buyers and sellers are on their own to wade through the paperwork and bureaucracy to apply for and process an assumption.
What they’re saying: The Mortgage Banker’s Association suggests a fee of 1.3% of the balance being assumed and a $500 underwriting fee would be fair to the borrower and the loan servicer to process an assumption.
Buyers must qualify for the assumption and often take out a second “piggyback” loan to complete the purchase. Underwriting guidelines for such second mortgages must also be streamlined when assuming the first mortgage.
The bottom line: The real estate industry should advocate for updates in the system to assume mortgages. It could become a great way to help first-time homebuyers and generate more commissions for mortgage originators and real estate agents.
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2. Where to file your new LLC
With all the talk about ChatGPT’s artificial intelligence, I wanted to see what it had to say on this topic. Below is its answer, which is accurate but dry. I’ve formatted it for HQ style and edited it for brevity.
Why it matters: AI is a lot more advanced than I knew. It will replace many white-collar jobs over the next 40 years, like robots replaced blue-collar jobs over the past 40 years. Here’s what the AI had to say:
When deciding which jurisdiction to file a new Limited Liability Company (LLC), you should consider several factors. Here are some of the most important factors to consider:
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Location of the company's physical presence: If your LLC has a physical presence, such as a store or office, in a particular state, it may make sense to incorporate there.
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State tax implications: Some states have more favorable tax laws for LLCs than others. You may want to research the tax implications of forming an LLC in each state you are considering.
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Ease of formation: Some states have more complex and time-consuming formation processes than others. Make sure you understand the formation requirements of each state you are considering.
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Cost of formation: Forming an LLC can vary from state to state, so ensure you understand the fees associated with each state you are considering.
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Future plans: If you plan to expand your business into other states, you may want to consider incorporating in a state with a more favorable regulatory environment for LLCs.
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Personal considerations: You may have personal ties to a particular state, making it a more attractive choice for your LLC.
Yes, but: Other questions posed to the AI asking whether a Wyoming LLC is better than a Nevada LLC or where real estate investors should file led to answers that — as an attorney — I found to be ambiguous or downright worthless.
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It’s not “there,” but it’s getting there.
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The AI’s performance will come down to how well the query is written (a new cottage industry?) and the amount of data the AI has accessed beyond 2021.
Go deeper: See how to use ChatGPT in your real estate business.
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Microsoft unveiled its new Bing search engine powered by OpenAI, giving deeper answers to search queries rather than lists of websites and news stories. CNBC
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Not to be outdone, Google unveiled its AI-powered search engine soon thereafter, but it was a dud compared to Bing (you read that right), causing Google’s shares to drop by over 7% in one day. Bloomberg
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Disney, the country’s largest single-site employer located right here in Central Florida, is laying off 7,000 employees and slashing $5.5 billion in expenses to return dividends to shareholders. CNN
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In a sign that a) tech companies overstaffed themselves, and b) workers are returning to in-person work, Zoom announced that it’s laying off 15% of its employees, and the CEO is taking a 98% pay cut. NPR
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The Fed is predicting an economic slowdown vis-a-vis higher unemployment numbers. This will help justify slowing or stopping interest rate increases since inflation typically cools along with the job market. Barrons (subscription)
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Payments on a $400,000 mortgage drop to $2,500 for the first time in four months thanks to the latest mortgages interest rate decreases. Redfin via The Title Report
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Has the BnB craze gone BnBust? Bigger Pockets
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On Monday evening, I took this long-exposure picture from my backyard as a Falcon 9 launched toward Spain from Cape Canaveral.
I thought I’d ask ChatGPT to write a song about it in the style of a Broadway tune. Here’s what it “composed.”
Verse 1: Up in the sky, the colors fly, A show like no other, A trail of fire, taking us higher, It's a launch like no other.
Chorus: It's a fireworks show, In the sky so bright, SpaceX rockets go, With colors that ignite.
Verse 2: The engines roar, and off it soars, Into the stratosphere, The colors dance, a celestial dance, It's a sight beyond compare.
Chorus: It's a fireworks show, In the sky so bright, SpaceX rockets go, With colors that ignite.
Bridge: A symphony of sound, As the rocket takes flight, It's a show that astounds, A spectacular sight.
Chorus: It's a fireworks show, In the sky so bright, SpaceX rockets go, With colors that ignite.
Outro: So watch in awe, as the rocket crawls, Into the great unknown, For a show like this, will be a bliss, In the sky, all alone.
I still I prefer Katy Perry’s pop version.
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We hope you found this helpful — any feedback is appreciated and can be shared by hitting reply or using the feedback feature below.
Be on the lookout for our next issue! 👋
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