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Baton Rouge Real Estate Lawyers Blog

2014 U.S. foreclosure update

Debtors in Louisiana who have been struggling with the foreclosure process should not feel alone. The June 2014 U.S. Foreclosure report published by RealtyTrac indicated that 68 percent of the number of current foreclosures come from loans originated between 2004 and 2008. The predatory and haphazard lending from this timeframe is often attributed to the housing crisis that contributed to the financial crash of 2008. The recent data shows an improvement from the 75 percent proportion registered during 2013.

The June 2014 report showed that 11 percent of the foreclosures stemmed from loans originated during 2003 or earlier while 21 percent dated back to 2009. From 2011 to 2014, the percentage of loans in foreclosure has been at the lowest levels since before 2000. However, the rate of distressed sales is around 14.3 percent, significantly higher than before the housing-crisis when levels averaged lower than 5 percent. Distressed sales includes selling bank-owned properties, selling property at foreclosure auctions and short sales.

How are escrow funds handled?

When buying their first home, many Louisiana residents discover that they need to know more about how escrow accounts are handled. The Louisiana Real Estate Commission outlines the rules and regulations concerning escrow and trust accounts on its website. Brokers who receive funds on a client's behalf for a real estate sales transaction are required to hold it in a sales escrow checking account in its resident state.

Sales escrow accounts are titled with the broker's license information, while all checks and bank statements related to the account will be imprinted with 'Sales Escrow Account." Any funds received by the broker in connection with a real estate sale that has been fully executed are to be deposited into this account. It's worth noting that associate brokers are not permitted to open or maintain a sales escrow checking account. These funds become the responsibility of the sponsoring broker.

What are contingencies in a home purchase contract?

When buying a home in Louisiana, a person might consider including contingencies in the purchase contract. These contingencies are conditions for the completion of the sale and can range from relatively standardized language, which is included in a majority of agreements, to uncommon requests that might be negotiable.

One of the more common contingencies included in the contracts involves home inspections. This condition might require that the buyer is allowed to conduct at least one inspection of the property. Generally, the buyer is able to choose the parties that make the inspection, and if the buyer is not satisfied with the results, he or she is able to demand repairs or exit the contract.

Homeowners need sufficient cash, good credit

Louisiana residents who are hoping to buy homes may not be aware that the National Association of Home Builders has issued a new report saying that many people are priced out of the market by as little as $1,000. Other factors that affect the ability of an individual to purchase a home include reliable employment, good credit and sufficient down payments. The $1,000 figure refers to the point at which a certain number of potential home buyers are priced out of the market. For every $1,000 price increase, more than 200,000 buyers are forced out.

Younger people are facing particularly big struggles in buying homes. A weak economy and student loan debts are among the reasons more individuals of the millennial generation are forced to rent rather than buy. For potential home buyers of all ages, wages are simply not keeping up with the increase in home prices. Investors are buying more homes on the coasts while throughout the country there is a shortage of homes for sale because their owners are waiting for prices to rise further before putting them on the market.

Overview of title insurance

Louisiana residents who are buying a home might wonder why they need title insurance, especially if they are buying a residence from an owner who has been there for decades. The title is the owner's right to the property. In some cases, the title could be granted to joint tenants, a survivor or even as a life estate. Other people or businesses might have additional interests in the property, such as utility, mineral or air rights. The lending institution also holds an interest in the residence, and other parties, including the government, might have a lien against the residence as well.

When a new owner buys a property, a title search shows possible issues and looks for problems. The title search reviews public records and should be conducted by a third party who looks for the restrictions previously listed as well as liens against the land.

Louisiana industrial real estate spending leads nation

According to a report released by the Commercial Real Estate Development Association on July 22, industrial construction spending in Louisiana led the nation in 2013. The NAIOP report also ranked Louisiana second in overall commercial real estate construction. Industrial construction in the state amounted to $4.9 billion during 2013. This was more than double the amount spent in Iowa, which was the second state on the list.

Overall commercial construction in Louisiana amounted to $5.5 billion in 2013, narrowly beaten by the $5.8 billion spent in Texas. New York came in third with $4.8 billion. Commercial construction figures include investment in warehouse, office and industrial projects as well as retail and entertainment ventures. The bulk of the Louisiana commercial real estate investment was in the industrial sector. Retail and entertainment ranked 12th in the nation, office construction ranked 23rd, and warehouse projects came in 26th.

Foreclosures in Louisiana

Although the real estate market is improving in Louisiana and around the country, many homeowners who purchased their properties before values started to plummet in 2007 have found themselves unable to keep up with their mortgage payments. As a result, some are facing the prospect of, or already find themselves in, foreclosure proceedings.

As is the case in most states, Louisiana provides for foreclosure by judicial sale, commonly known as "judicial foreclosure". This process, which is required in many states but not in Louisiana, provides for the sale of the mortgaged property to take place under the supervision of a court, with the proceeds applied first to the senior lien holder and then to any other secured creditors, if any. All parties must be notified.

Homebuyers can structure purchase agreement to their advantage

Louisiana homebuyers have several options when it comes to preparing an offer to purchase real estate. By carefully structuring the purchase agreement, buyers may be able to save a significant amount of money. Sellers sometimes set an unrealistically high asking price. When this is the case, a buyer may want to offer a lower purchase price and include information on comparables in order to justify the lower offer.

Another strategy would be to offer the full asking price but ask for concessions in other areas. For example, the buyer might ask the seller to pay a portion of the buyer's closing costs, provide partial financing or make certain improvements to the property. This could include a new coat of paint, replacing some of the appliances or refinishing a floor.

Questions swirl around state's handling of real estate

The state government of Louisiana is reportedly leasing a parking garage in an effort to equalize the state budget, but the $2 million lease is apparently a loss. The lease appears to be the latest in what many perceive to be shortsighted moves by the Jindal administration designed to rake in more funds upfront while leaving less revenue for future successors to the governor's post. While the Jindal administration claims that it has been selling some properties and renting out others in order to address budget deficits, many of these privatization deals yield sizable advance payments.

A representative with the Division of Administration reported that it no longer needs the parking space because the building that accommodated the employees who used it had been sold to a developer. She explained that the rent payments on the commercial real estate would help with financial responsibilities.

Low foreclosure rates benefit all homeowners

A CoreLogic National Foreclosure Report published in May of 2014 indicates that 1.4 percent of homes in Louisiana are in foreclosure. This is under the national average and is good news for home buyers. Additionally, 4.7 percent of mortgages are in serious delinquency, which is slightly higher than the national average but lower than other states that use the same judicial foreclosure proceedings.

How is a low rate of foreclosure good for homeowners who aren't experiencing any type of financial difficulty? The reason why a low foreclosure rate is important is because foreclosed homes may be sold for less than what they are worth. Homes may be sold for less than their market value because the bank that holds the title to a foreclosed home is looking to get back as much of its money as possible while getting a potentially toxic asset off of its balance sheet.

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