Massachusetts Real Estate Lawyer Blog

Designated Flood Zones May Cause Additional Problems When Purchasing Real Estate in Massachusetts

Published on: June 13, 2012 | by Pulgini & Norton, LLP

In a recent Massachusetts case, Witkowski v. Endlar Ins. Agency & First American Title Ins. Co., the judge reversed a previous summary judgment decision for Endlar regarding a certificate of insurance for the plaintiff’s condominium unit.

Plaintiff, Witkowski, purchased a basement unit of a residential condominium in Andover, MA. The condominium is located in a floodplain area designated by the Federal Emergency Management Agency (FEMA) as an area of special flood hazard. Federal law, 42 U.S.C. § 4012a(b)(1) (2006), states that any lending officer or agency shall not approve any financial assistance for acquisition or construction purposes in any area that has been deemed as having special flood hazards, unless the building is covered by flood insurance.

Witkowski discovered that the building was located in a special flood hazard area and that in order to obtain a mortgage he would need to provide proof of flood insurance for the unit as a condition of closing. Endlar provided a certificate including the plaintiff’s name and unit number, as well as the two flood insurance policies in the amounts of $2.5 million and $9.8 million, with a signature confirming the information.

Commercial Real Estate Development Spending in Massachusetts Increased in 2011

Published on: May 14, 2012 | by Pulgini & Norton, LLP

Last year, Massachusetts ranked ninth in the nation for direct commercial property development spending. According to commercial real estate development association NAIOP, approximately $3 billion was spent on commercial property construction in the state in 2011. The increase in commercial development bumped the state up to the top ten from its 2010 nationwide expenditure ranking of 21st in the nation. In Massachusetts, more than 41,000 jobs were reportedly supported by the 2011 increase in commercial development.

In Boston alone, ground was broken on 26 new projects in 2011 which included a $220 million residential tower downtown, Avalon Exeter residences in the Back Bay, a new dorm and educational facility at the Berklee College of Music, and a new headquarters for Vertex Pharmaceuticals at Fan Pier. The Director of Government Affairs at NAIOP Massachusetts, Tamara Small, stated 2011 development spending signaled the beginning of a state-wide commercial real estate recovery. She also cautioned that policies designed to encourage continued sector growth must remain in place.

According to an NAIOP Research Foundation study entitled How Office, Industrial and Retail Development and Construction Contributed to the U.S. Economy in 2011, commercial property construction expenditures throughout the nation totaled about $92.3 billion last year. In 2011, more than 238 million square feet of commercial real estate space was added nationwide. The NAIOP research report stated approximately 2 million jobs were created throughout the country to support building the additional space. The additional commercial space reportedly has the potential to house an estimated 610,000 employees. Nationwide, commercial real estate development spending was up about 13 percent over 2010 and added approximately $261.6 billion to the nation’s GDP. 2011 was the first year in which overall gains in commercial development spending were reported since the so-called Great Recession began in 2007.

Mortgage Rates Reach Historic New Lows in Massachusetts, Nationwide

Published on: May 14, 2012 | by Pulgini & Norton, LLP

The average interest rate on mortgages in the United States has hit a new record low. According to mortgage purchaser Freddie Mac, the interest rate on 30-year home loans is now 3.84 percent. The rate on 15-year fixed-rate home loans is only 3.07 percent. The interest rates are the lowest on record since long-term mortgage loans began being sold in the 1950′s.

Additional fees, or points, are also normally required by lenders in order to receive the lowest interest rates. One point is one percent of the amount borrowed. On average, lenders are currently charging about 0.8 points for a fixed-rate 30-year loan and .07 points for a fixed-rate 15-year loan. The interest rate for one-year adjustable rate mortgages is currently down to 2.7 percent with a fee of 0.6 points.

Since December 2011, fixed mortgage interest rates were under four percent every week except one. The historically low rates are likely to drive up home sales and also encourage current homeowners to refinance. Although Boston has experienced increasing sales in the residential real estate market, this is not necessarily the case in many cities as home prices continue to fall in some markets. In fact, homeownership across the nation recently reached a 15-year low. Currently, only 65.4 percent of U.S. households own the home they reside in. The nationwide housing market still appears to be looking up, however, as homeowner and rental vacancies dropped during the first three months of 2012. During the first quarter of this year, foreclosure filings were also at their lowest rate since 2007.

Bidding Wars on the Rise in Greater Boston Residential Real Estate Market

Published on: April 27, 2012 | by Pulgini & Norton, LLP

Multiple offers on residential real estate in the Greater Boston area may yet again be the norm. According to Redfin Real Estate, more than half of the real estate contracts written by the company’s agents last month wound up in some sort of a bidding war. For homes that were attractive to buyers, the prices rose steadily in March.

Right now, the Greater Boston area’s residential real estate market offers buyers essentially two groups of homes. The first includes older homes that could use some TLC and updating. Often, such houses are priced high. They also tend to remain on the market for longer periods of time. The second group includes recently renovated houses that are priced to sell. It is this market that has seen an increasing number of multiple offer scenarios in recent months. For example, a Redfin agent recently delivered a bid of $16,000 over the asking price on a home in Jamaica Plain during an open house. Three other buyers also submitted bids on the home.

The upswing in Greater Boston residential real estate prices is wonderful news for sellers. Quickly climbing prices can also can create headaches for both parties to a real estate transaction. In order to receive financing, a home with a high selling price must also receive a corresponding appraisal. This can be difficult when prices are rising quickly following a period of depressed market conditions. Because the Boston area generally has a longer closing cycle than many other parts of the nation, appraisers may have more difficulty tracking market conditions. This is due in part to the fact that any comparable home sales the appraiser may be reviewing are already at least two months old. Unfortunately, if a home doesn’t appraise for the agreed upon purchase price following a bidding war, a buyer is often left scrambling to come up with the difference in cash. If the buyer cannot make the deal happen, the seller knows another buyer who offered a similar price likely will.

Massachusetts Attorney General Calls for More Loan Modifications for Distressed Homeowners

Published on: April 19, 2012 | by Pulgini & Norton, LLP

A recently released federal report says distressed homeowners in the United States were more likely to stay in their residences after their mortgages were modified. In fact, the Office of the Comptroller of the Currency found nearly three-fourths of homeowners who received a loan modification in 2011 are currently in good standing on their new mortgage. In 2009, only 37 percent of distressed borrowers held onto their homes after a loan adjustment. According to the study, lenders were increasingly willing to reduce the monthly payments for borrowers who were behind on their loans in 2011. This reportedly played a significant role in the higher success rate for mortgage modifications made last year.

The Attorney General of Massachusetts, Martha Coakley, believes the study demonstrates why the Commonwealth of Massachusetts should impose a loan modification requirement on mortgage lenders who attempt to foreclose on residences in the state. Coakley believes loan modifications are good for both borrowers and lenders. She has sponsored Massachusetts legislation that would require mortgage lenders to offer alternatives to homeowners if it would be more profitable for the lender than foreclosing. The requirement would also extend to borrowers with risky subprime loans.

House Bill 1219 is now pending in the Joint Committee on Financial Services. Coakley stated the proposed legislation would halt unnecessary foreclosures in the state and provide a boost to the nation’s faltering economy. According to the Massachusetts Bankers Association, lender requirements included in the bill are too broad. The organization’s Executive Vice President, Kevin Kiley, stated the Bankers Association has strong objections to the bill as it is written. The proposed legislation would purportedly financially punish lenders if they did not achieve a positive outcome.

Office Space on Boston’s Waterfront is in High Demand

Published on: April 13, 2012 | by Pulgini & Norton, LLP

According to a recent survey published by Marcus & Millichap, Boston’s local economy is well on the road to recovery. The company’s 2012 National Office Report states Boston employment growth will likely be centered on or near the city’s waterfront. Employers are increasingly moving into the area as the $3 billion Seaport Square development nears completion. Also, the relocation of the federal courthouse to the waterfront is reportedly attracting a number of businesses away from the city’s Financial District.

The Boston Convention and Exhibition Center is expected to generate more than $625 million in 2012. According to the report, a return to higher revenue levels such as those that existed prior to the Great Recession will likely allow Boston officials to green light a planned $2 billion Convention Center expansion. Construction was also recently completed on the Seaport Center, a 465,000-square-foot office building in the Seaport District.

According to Jones Lang LaSalle, office rents are rising near Boston’s waterfront and space is becoming more difficult to obtain. In January 2012, vacancies in the area were down nearly ten percent and rents were up 15 percent from the previous March. Although office vacancy rates remain high in the Financial District, construction has now begun on the new Alexandria Center located in Kendall Square. Both the Massachusetts Institute of Technology and Harvard University are expected to begin expanding their research arms and several biotech companies are now fixed to move into Cambridge. Institutional investors are also expected to begin purchasing more commercial assets within the city’s core.

Pending Home Sales See Increase in Boston Metro

Published on: April 3, 2012 | by Pulgini & Norton, LLP

Although housing prices are still falling nationally, pending home sales are up in Eastern Massachusetts. Real Estate experts believe the threat of rising interest rates coupled with higher rent in the Boston Metro has brought more buyers into the market. Enough buyers are writing earnest money checks in some area communities, the housing supply is now considered low.

According to Brighton real estate broker Mike Brasco, his office has had more than 12 properties go under contract within the past 60 days. He also stated some properties entertained multiple offers. One Brighton home recently sold in one day and received eight offers. Brasco said Brighton housing prices are now on the rise.

The Massachusetts Realtor’s Association has stated single family home sales have risen for ten straight months. According to Banker and Tradesmen, pending single-family home sales in Massachusetts were up 44 percent in February. During the same time period, condo sales were up 30 percent. March home sales are expected to be just as vigorous.

Experts Are Not Concerned by Rise in Massachusetts Foreclosure Rate

Published on: March 21, 2012 | by Pulgini & Norton, LLP

Last month, the number of Massachusetts borrowers who lost their home to foreclosure rose by approximately 41 percent over the previous year. In February 2012, 1,394 properties entered into foreclosure and 736 properties were foreclosed upon. Both numbers rose significantly from February 2011. In January 2012, mortgage petitions rose by about 68 percent over the previous year.

The rise in foreclosure rates may not be as alarming as they initially appear, however. According to a spokesperson for the Warren Group, a Boston firm that tracks activity in the real estate market, foreclosure activity stalled dramatically in early 2011 in response to alleged mortgage industry fraud. Many banks simply stopped processing foreclosures in 2011. The Warren Group’s Chief Executive Officer, Timothy M. Warren Jr., stated the rise in foreclosure numbers do not necessarily indicate a new wave of defaulting homeowners in the state. According to the Warren Group, because the number of deeds filed has dropped and that is the last step in the foreclosure process, banks are likely simply moving through their foreclosure backlog.

Last year, Attorney General Martha Coakley’s office received almost 1,000 mortgage and foreclosure related complaints. According to Coakley, addressing the mortgage foreclosure crisis is a critical step to restoring the Massachusetts economy. Last month, Massachusetts joined in a $25 billion foreclosure settlement with five major banks. The settlement is designed to provide homeowners who lost their homes through improper foreclosures with approximately $2,000 in compensation. Under the settlement terms, the Attorney General also maintained the ability to pursue claims against the banks for unlawful foreclosure practices in Massachusetts.

Prices Rise as Boston Housing Inventory Declines to New Low

Published on: February 26, 2012 | by Pulgini & Norton, LLP

Approximately 17 percent fewer homes are for sale in the Boston Metro than at this time last year. In fact, housing inventory in the city is currently at an all-time low. Housing inventories on the waterfront and in Beacon Hill are down a whopping 36 percent. Many believe the limited available housing inventory is a good sign that the Boston real estate market has recovered from the nation’s recent economic downturn. Homes in the Boston area are also selling more quickly and prices are on the rise.

According to real estate experts like Yanni Tsipis, Senior Vice-President at Colliers International and a Lecturer at MIT’s Center for Real Estate, a lack of new residential condominium projects in downtown Boston is fueling the current market trend. Tsipis believes would-be sellers in Boston’s downtown market want to buy their next homes in new developments. A lack of new residential building projects over the last five years keeps this from happening.

The Boston suburbs have also experienced a decline in saleable housing inventory. For example, the number of homes for sale in Cambridge is down 43 percent from last year. Cambridge homes are now on the market an average of 110 days. In Arlington, houses are selling in about 79 days and inventory is down 21 percent. Meanwhile, in Quincy the housing inventory has dropped by 6 percent and most homes are selling within 150 days.

Most in U.S. Are Satisfied With Homeownership

Published on: February 12, 2012 | by Pulgini & Norton, LLP

Despite regular news reports of a depressed housing market and underwater mortgages, most homeowners in the United States are happy with their purchase. According to a recent survey conducted by HomeGain, about three out of four homeowners in the country are happy to be an owner. The Northeast, including Massachusetts, enjoys the highest level of homeowner happiness in the nation at 77 percent. Meanwhile, in the sunny Southwest, only about 73 percent of homeowners are satisfied with their purchase.

According to some homeowners, their levels of satisfaction felt have less to do with the price of their homes than with the control they have over upgrades and other housing-related matters. Additionally, pride of ownership also purportedly factors into the level of joy felt by most owners. About 66 percent of unhappy homeowners were dissatisfied largely due to the low prices associated with the country’s current real estate market.

According to the survey, money does play a factor in homeowner satisfaction. Those who spent more than $800,000 are the least satisfied homeowners in the nation. Meanwhile, individuals whose home cost less than $75,000 enjoy the highest level of ownership satisfaction. Also, those homeowners who that felt they purchased a bargain via a foreclosure or short sale appeared to be more satisfied than those who closed on their property during the height of the housing bubble.