June 21st, 2010
During times of recession and economic downturn many homeowners find themselves in the position of having to decide what to do with real estate that they can no longer afford. According to data gathered by the California Department of Real Estate, in 2009, nearly three-quarters of all sellers in California sold their homes as a result of financial difficulties. And according to the National Association of Realtors, the number of short sales has increased nationwide. Whether it is an investment property, a vacation property, or the family home, understanding your available options and their outcomes is important if you need to decide what to do with real estate for which you worked so hard, but can no longer afford.
What is a Short Sale?
A “short sale” in real estate refers to a sale of real estate that falls short of the loan balance owed on the mortgage. When a property is sold in this manner, the lender allows the property to be sold for an amount less that what is owed to them. Under a short sale the lender may agree to “write-off” the difference between what remained on the loan balance and what the property actually sold for. It does not necessarily guarantee that the difference will be forgiven by the lender; instead, this is something that has to be negotiated with the lender.
What is a Foreclosure?
A “foreclosure” is a proceeding that allows a lender to end all ownership rights when the owner of a property stops making mortgage payments and is in default. Basically it allows the lender to reacquire the property. While each state is different, in California the lender generally has a right to pursue a property owner for the deficiency owing after the foreclosure has taken place. This means that if your property is not sold, or the purchase price was not enough to cover the balance on the loan, the lender can turn the loan over to debt collectors, or sue you for the balance still owing, and/or pursue payment from you even if you file for bankruptcy.
However, there is an important exception to this rule: the lender has no right to collect a deficiency from you if the loan was used for the original purchase of your primary residence, and you still live there. If you refinanced your home, or if the loan was for a second home, commercial property, or investment property, this exception does not apply.
Why a Short Sale May Be a Better Option for a Distressed Homeowner
There are a number of reasons that a short sale may be in the best interest of a seller who needs to let go of a property. One important advantage to a short sale pertains to future home purchases. For example, Fannie-Mae, the Federal National Mortgage Association, adjusted their guidelines in 2008 to allow an individual that successfully completes a short sale to be eligible for a Fannie-Mae baked mortgage package after only two years. In contrast, an individual who loses their home to a foreclosure will not be eligible for a Fannie Mae backed mortgage for five years.
Another advantage to a short sale would be in the area of credit score issues. The impact of a foreclosure can be a downgrade of your credit score anywhere from 200 to over 300 points, and it will affect your score for a minimum of three years. However, the impact of a short sale on your credit score can be as little as 50 points and its effect can be as brief as 12-18 months.
How to Start a Short Sale
If you think you might be interested in short-selling your home or other real estate, it is best to talk to a legal expert about the process and related legal issues, such as potential tax consequences to you when part of your mortgage loan is forgiven. The skilled real estate attorneys at San Diego Law Firm have specialized experience in handling short sales as well as a unique knowledge of the real estate market. To schedule a consultation, please call San Diego Law Firm at 619-794-0243.
Posted in Home Ownership, Real Estate, Selling a Home, Selling a Property
June 21st, 2010
Starting and building a business can provide a way to personal and financial success. Watching your business grow is exciting! While most small business owners strategize and plan for ways to expand their product line, services, and customer base, many small business owners don’t plan for events like the death of a key employee or business partner. The type of small business that is most vulnerable to this kind of loss is a partnership.
What is a Partnership?
Actually, you may very well be conducting your business as a partnership without realizing it. Under California law, a “partnership” is an association of two or more people who agree to carry on a business as co-owners and share the profits. Unlike a corporation, a partnership can be created without legal formalities, although a written partnership contract and the related legal documents can be important to long-term success.
How a Cross-Purchase Plan Protects Your Business if Your Partner Dies
If there are only a small number of owners working every day to provide a product or service, negotiate with vendors and customers, manage shop, and attend business meetings, you can imagine the impact that the unexpected death of one owner would have on the ability of the business to survive. This is especially true when you consider that the business would, at the same time, be legally required to pay out the value of the deceased partner’s share to his or her heirs. This could force the sudden liquidation of the business, or use up its cash cushion and require a sale of business assets.
One way you can protect against the impact of such an unfortunate situation is with a “cross-purchase plan,” drafted by a skilled business attorney and signed by each partner. In a cross-purchase plan, each partner agrees that the remaining partners will have both the duty and the right to purchase a deceased partner’s interest in the business. To fund this purchase, the partnership takes out a life insurance policy on each partner for the benefit of the surviving partners. The cross-purchase plan typically sets the buy-out price at either a pre-determined amount or an amount determined by an independent valuation of the business at the time of death. The surviving partners then use the life insurance money to buy the shares of the deceased partner, and the money goes into the deceased partner’s estate and eventually is distributed to his or her legal heirs.
Purchasing a life insurance policy to benefit you in your role as a surviving business partner is not something that may naturally occur to you when you start or formalize your business. But if your business is the source of your family’s income or the beginning of a legacy you hope to leave behind, a cross-purchase plan with a life insurance policy on your partner(s) can be your best protection. If you are the surviving partner you can not only preserve your business but also satisfy the financial needs and legal rights of your deceased partner’s family, while providing the same sort of protection and peace of mind for your own family if your business partner survives you.
At San Diego Law Firm, our experienced business attorneys understand the passion and work that goes into operating a small business. A cross-purchase plan is just one of the many beneficial strategies available to you when you formalize your partnership, whether it is new or ongoing, with a written partnership contract and other related legal documents. We can prepare every document you’ll need to give your partnership the greatest legal, financial, and tax benefits, and advise you on the wide variety of ways you can protect both your business and your personal finances. We remain available to help you with both minor and serious legal problems whenever you need us. To learn more or set up a consultation, please call San Diego Law Firm at (619) 794-0243.
Posted in Running a Business, Starting a Business
May 14th, 2010
Any buyer or seller of San Diego real estate should look into what a real estate attorney can do to protect you when you decide to buy or sell your home or other property.
Unlike your real estate agent—whose goal is to complete the sale and earn a commission—your real estate lawyer doesn’t work on a commission. What’s more, sometimes a real estate agent represents both the seller and buyer. In these situations, there’s bound to be conflict in representing both sides. After all, sellers want to get the highest price possible, the buyer the lowest, and the real estate agent’s commission is usually greater if the sale price is higher. Read the rest of this entry »
Posted in Business Real Estate, Buying a Home, Buying a Property, Deed Problems, Real Estate, Selling a Property, Views, Zoning
May 14th, 2010
As a San Diego business owner, are you taking any steps to minimize risk of employee lawsuits? One obvious way to help avoid employee lawsuits is simply to have happy employees.
For instance, sometimes tension is created because of a flawed management approach. In ManagingEmployees.net, longtime business manager and blogger Pat Brill explains that effective managing means finding a balance between your focus on employee performance and establishing a connection with employees. Read the rest of this entry »
Posted in Business Disputes & Lawsuits, Running a Business
April 23rd, 2010
If you’re a real estate investor here in San Diego, how much do you know about Limited Liability Companies and corporations? For those who own or will be buying investment properties (e.g. residential or commercial rental properties), you may want to create a California Liability Company (LLC) or corporation. These business structures can be used to hold ownership of your real estate, instead of having title to the property in your own name.
What happens if you keep property titled under your personal name?
If you’re sued and lose the case, then your personal bank accounts and other assets can be used to pay off a judgment. But if you create an LLC or corporation, then typically only the property in the name of the company will be subject to these debts. Read the rest of this entry »
Posted in Business Disputes & Lawsuits, Business Real Estate, Home Ownership, Real Estate
April 23rd, 2010
You may be thinking of growing your San Diego business by adding another co-owner. Maybe this person will bring needed resources to the business, or has the connections, skills, or knowledge to boost or expand your business.
You’re probably cautious about who to bring in as a co-owner, and you might not be sure of what criteria to focus on. Professional consultant Mary Abbajay writes in her blog about “The Partnership Paradox: How to Choose a Business Partner.” She suggests that you first look at yourself, because this will help you identify the things you need in a business partner. This includes examining your own goals, strengths, and weaknesses. Abbajay then suggests a few more questions to ask, including: Read the rest of this entry »
Posted in Business Disputes & Lawsuits, Running a Business, Selling a Business, Starting a Business
March 12th, 2010
For those of you who will be taking advantage of the government’s tax credit for first-time homebuyers, Southern California real estate agent and realtor Carol and Jim Chamberlain recently blogged about “How to Claim Your Home Buyers Tax Credit.”
As prices go up in San Diego, more homeowners will likely put their real estate on the market. San Diego’s North County Times reports that median home prices in our county climbed 8.9 percent in January. If you’re a potential real estate seller or buyer, your focus is probably on the sale/purchase price and financing. These are no doubt essential terms to the property’s sale and purchase. For the long run, also think about what type of deed will be given. If you don’t, you may regret it later. Read the rest of this entry »
Posted in Buying a Property, Deed Problems, Real Estate, Selling a Property
March 12th, 2010
If you’ve started or bought a business here in San Diego with other partners, then you know the value of surrounding yourself with the right people. In his blog, “Drew’s Marketing Minute,” business marketing expert Drew McLellan details five ideas for how you can create a committed team and create an environment that makes your business venture more rewarding. These include letting team members have a voice, loving your team and your work, having a clear and important team goal, celebrating all successes, and thanking your team in large and small ways.
Putting his practices into play can also have the added benefit of promoting a greater sense of loyalty and a stronger relationship among your business’s co-owners. Business partners aren’t always on the same page, and disagreements are to be expected whenever you go into business with someone else. Even so, your actions and that of your partners must always be tied to an underlying goal founded on your business’s shared best interests. Read the rest of this entry »
Posted in Running a Business, Stating a Business, Uncategorized
February 9th, 2010
You may remember hearing stories about the old days in the Wild West when people could take control of someone else’s empty land and have it become theirs. In modern times, possession can still lead to ownership, which means that even the most expensive of San Diego real estate can still fall into the hands of another, and all without paying a penny to the owner on title. The beginnings of adverse possession actually started long before the American Old West even existed, and traces back to old English law during feudal times, when starving peasants cultivated and lived on portions of property that wealthy landowners had left unexploited. In part, adverse possession law survives throughout the country (including California) because of its underlying principle that land should be put to use, and if its owner seems to have abandoned the property, then someone else should develop it. Read the rest of this entry »
Posted in Boundaries, Home Ownership, Real Estate
February 9th, 2010
In his first State of the Union address, President Obama proposed a temporary tax credit that can fuel job growth through small business hiring, and this may prove to be a great incentive for local San Diego businesses that have been thinking about bringing on another employee. The Wall Street Journal’s Elizabeth Williamson reports on more of the details of the President’s plan, as revealed a few days after delivering the State of the Union address. As things stand now, the Small Business Jobs and Wages Tax Cut, one of the White House’s main small business proposals, will provide businesses a $5,000 tax credit for each net new employees hired in 2010, and start-up businesses can receive half the tax credit, all subject to a cap of $500,000 as a way to make sure that most of this tax credit is used by small businesses. Read the rest of this entry »
Posted in Business Disputes & Lawsuits, Current Events, Running a Business, San Diego, Stating a Business, Taxes
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