Q & A with Dottie Herman

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Q1 - What are discount points ?

A - Discount points allow you to lower your interest rate. They are essentially prepaid interest, with each point equaling 1% of the total loan amount. Generally, for each point paid on a 30-year mortgage, the interest rate is reduced by 1/8 (or.125) of a percentage point. When shopping for loans ask lenders for an interest rate with 0 points and then see how much the rate decreases with each point paid. Discount points are smart if you plan to stay in a home for some time since they can lower the monthly loan payment. Points can be tax deductible when you purchase a home (check with a professional tax advisor) and you may be able to negotiate for the seller to pay for some of them.

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Q2 - I showed myself a rental and wasn't represented by a broker. I worked directly with the broker who had the listing and who represents the building. Do I owe a 7.5% fee or a 15% fee?

A - Thank you for your question. The general rule is that unless it is otherwise negotiated, the listing agent's fee is due and owed if that is how the listing was offered. Unless you are a licensed real estate agent acting in a co-brokerage capacity, you cannot collect a commission or receive a reduction.  However, as always, be sure to have your attorney review all documents to ensure that you are properly protected and that the fees due are accurate.

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Q3 - What is a short sale and how long does the process take?

A - A short sale occurs when the seller owes more to creditors on the property than the fair market value. .  As such, the seller is "short" and does not have enough to pay all expenses, including the bank's lien (the mortgage).  The contract of sale will include a provision that the deal is conditioned on bank approval, and all parties must be advised that this approval is necessary.  Typically, the seller is given 60 days to complete the approval process, and seller's counsel must work with the seller to provide the necessary forms to the bank to seek the bank's approval.  .  Be sure to use an experienced attorney when attempting a short sale.  There will be a negative impact on the seller's  credit score if the short sale is approved. There are also potential tax consequences so you want to make sure to speak to an accountant.

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Q4 - I want to transfer my home into my children's name; however, I still have a large mortgage that they will now pay. Is there a way to do this?

A - The first thing to consider is that just about all mortgages have a clause that states if you remove any person from the deed that is on the mortgage, then you must pay off the mortgage. This is called an acceleration clause.  The most common process to accomplish this is to transfer the property to the Children and they refinance the mortgage  in their name.  Some banks will allow you to transfer the mortgage as well but it is best to  contact them and then retain an attorney to oversee the process.

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If you have a real estate question for Dottie, please send it to; Reporters@WorldPropertyChannel.com

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