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How to Create a Legal Homeowners’ Association

Homeowners’ associations come with numerous benefits for both the homeowners and the property managers, the biggest of which include protection against neighborhood degradation, preservation of community values and integrity, and a reduced need for government oversight of housing conditions. For these reasons and several others, community residents and managers may institute a mandatory HOA. However, like with all good things in life, the creation of an HOA may be met with adversary, which can be effectively overcome with the right campaign and strategic planning.

If you are considering creating a mandatory homeowners’ association in your community, work with the Birmingham real estate attorneys at Cloud Willis & Ellis for guidance. Our team can help you plan and bring to life an HOA that will preserve the integrity of your neighborhood.

Legal Considerations

For formation purposes, homeowners’ associations are considered non-profits in the state of Alabama (HB241), and therefore must adhere to the same standards as a non-profit, which are outlined in Chapter 3, Title 10A, Alabama Business and Nonprofit Entities Code. As such, individuals must do the following prior to forming an HOA:

Define terms;
File certain documents with the Secretary of State;
Allow the Secretary of State to maintain a public and searchable database of all association records;
Elect a board of directors; and
Adopt and enforce a set of rules.

Each step must be done with careful consideration and deliberation, and decisions must be made only after a receiving a majority approval.

Purpose

If you hope to garner support for developing an HOA, you must define the purpose for establishing one in the first place. Your purpose may be very specific, or it may be multi-faceted. For instance, you may want to establish an HOA in order to enforce restrictive covenants and to main common areas, or maybe you want to enforce architectural standards of the homes within the community. Maybe you have noticed a significant decline in resident participation of neighborhood upkeep and want to establish a mandatory association that makes it so residents have to actively participate in the maintenance of common areas.

Whatever your reasons are for wanting a homeowners’ association, you need to be sure that the benefits of establishing one are clear and that they are benefits that the whole community can enjoy, otherwise you may have trouble garnering support. You cannot force members of an existing community to join an HOA (the rules are different for neighborhoods still in the design and development stages), so it is up to you to sell your purpose. Once you receive residents’ approval, put whatever agreement is reached into a written declaration, which is essentially a binding contract that all parties must adhere to.

Let a Birmingham Real Estate Attorney be Your Guide

Establishing an HOA is not as simple as putting together a list of rules and regulations you would like community members to adhere to and charging fees. If you want community members to take the HOA seriously and to respect the community in which they live, you need to develop a mandatory HOA. Though doing so many involve considerable legalities and effort, it will all be well worth it once the benefits of your efforts begin to get realized.

For help establishing a mandatory HOA in your neighborhood, reach out to the Birmingham real estate attorneys at Cloud Willis & Ellis for legal guidance today. Call our office or schedule an appointment online to get started.

Resource:

arec.alabama.gov/arec/docs/forms/general/act2015-292-hoa.pdf

Interested in Real Estate Investment with Minimal Risk? Consider Real Estate Wholesaling.

Flipping houses continues to entice many people as a great way to earn a supplemental income through real estate investment. However, lacking funds to back this financial venture deters many people from investing. Real estate wholesaling makes it possible to invest in real estate with minimal upfront costs. This option is appealing because it can be done with little or no money out of pocket. Work with a real estate attorney at our office to learn more about real estate wholesaling and to guide you through all your legal needs.

What is Real Estate Wholesaling?

A real estate wholesaler locates properties that are priced under current market value and finds investors to purchase the properties. Once the wholesaler finds a property, they can find an interested investor and act as an intermediary between the seller and investor. Wholesale real estate investors can purchase the property directly or the wholesaler can get the house under contract for well below market value and then sell the house to the investor. The focus here is on the latter scenario.

How do Wholesalers Make a Profit?

The best way to illustrate the wholesaler’s profits for a house they have under contract is through an example. The wholesaler has a property under contract for $80,000 and estimates the property will need $30,000 in repairs. However, once the repairs are made the house will sell for $160,000. The wholesaler finds an investor who is willing to pay $95,000 for the property. The wholesaler then assigns the contract to the buyer (the investor) and makes $15,000 profit which is the difference between the seller contract price and the price the investor agreed to pay. The buyer now has a profitable investment property and the wholesaler made a profit without ever having to own the house.

What Makes a Wholesaler Successful?

The use of assignment contracts allows the wholesaler to control the property through the closing period. The investor will need to make an earnest money deposit with the seller to show good faith. In order to limit risk, the wholesaler needs to make sure the purchase contract includes a contingency that allows the wholesaler to back out of the deal if a buyer is not ascertained by the expected closing date. The key skills required to be successful in real estate wholesaling are a complete understanding of property evaluation, renovation and repair costs, direct marketing, and negotiating. The wholesaler needs to develop a plan to locate both sellers and cash investors looking for a great investment. Cash investors are preferable because wholesale real estate transactions are performed quickly leaving no time available to secure a loan. In order to be successful, the wholesaler must have knowledge of the local real estate market and establish strong connections with investors to ensure quick sales.

Contact a Real Estate Attorney Today

A dedicated and hardworking wholesaler can establish a lucrative business with the proper foundation. Learning and understanding the real estate process is essential. Work with a Birmingham or Mobile real estate attorney to ensure all the legal groundwork is properly established. Entering into real estate contracts, understanding assignments, and enforcing contingency terms require the assistance of an experienced attorney. Contact Cloud, Willis & Ellis to guide you as you establish your real estate wholesale business. We use our invaluable knowledge of real estate law to help our clients’ flourish. Let us anticipate your legal needs so that you can focus on growing your thriving business.

Title Disputes over Properties with Co-Owners

These days, many individuals interested in purchasing real estate find that they have to co-own their home with someone else, whether that person is a spouse, family member, business partner, or friend.

But what happens when a dispute arises and the two co-owning parties have to go their separate ways? Can one party evict the other? And what if the co-ownership of the property involves a business dispute?

Ownership Contract Governs

When circumstances like these arise, you need to discuss your options with an experienced real estate attorney in order to ensure that your rights are protected. The first step is understanding how you and the other co-owner own title to the property. If you and the other co-owner are unable to manage the property as co-owners, one owner can buyout the other owner’s interest, although all of this depends upon how the property was purchased and/or titled. While some co-owners may have purchased the property together, in other instances, one owner may have been placed on the title for estate planning purposes, etc. All of this affects the specific circumstances under which two co-owners can go their separate ways while preserving their ownership interests and rights.

The Law in Alabama

In Alabama, people can share title to property as tenants in common or joint tenants. When people speak of “the right of survivorship,” they are referring to what happens to the shares of a deceased co-owner in terms of distribution of those shares amongst the surviving owners (without those shares/that property first having to go through probate). However, in Alabama, joint tenancy operates more like a tenancy in common (unless the deed clear states the intent for survivorship). Overall, it is crucial that owners maintain a clear chain of title so as to simplify any issues in the future that may arise.

An Attorney Can Help

If you were placed on the title by the other owner, you may not have financially invested enough into the property to be on the same level as two people who are joint tenants with right of survivorship on the title to the home. Your attorney can sit down with you and help you figure out what is best for you and your living situation, the relationship with the other co-owner in moving forward, your finances, and any other particular circumstances involved in your situation.

The experienced attorneys of Cloud Willis & Ellis practice in business, real estate, and estate planning. We can represent you and your interests in any complex real estate, commercial litigation, business and/or title disputes, estate planning, and/or related issue. Cloud Willis & Ellis will provide you with counsel and guidance, and help maximize your quality of life and asset protection. Our attorneys will vigorously defend you and your wishes. Contact us today to schedule a consultation.

Resource:

washingtonpost.com/news/where-we-live/wp/2017/05/01/how-to-resolve-a-title-dispute-over-a-home-with-a-co-owner-who-happens-to-be-your-mother/?utm_term=.b995e5b4be0f

HUD Foreclosures

Most people who purchase property take out some kind of loan with a lender and pay a mortgage each month. If they fail to pay the mortgage, the lender attempts to obtain that balance by going through foreclosure.

While many of these lenders are banks, in many cases, the lender is the Federal Housing Administration (FHA), as managed by the Department of Housing and Urban Development (HUD). Thus, an HUD foreclosure describes foreclosure actions on FHA loans and, in fact, given that the FHA is the world’s largest insurer of mortgages, many foreclosures are thus HUD foreclosures.

Special Benefits

As the new de facto owner of the property, in order to recoup financial losses, HUD naturally places these properties on the market, and typically below market value (and without any liens). In fact, certain programs within the HUD allow individuals who work in specific professions (such as teachers, firefighters, etc.) to sometimes obtain these properties under certain conditions, such as in revitalization areas.

A Different Type of Foreclosure

However, it is also important to note that HUD does not warrant the condition of its properties, nor does it correct defects. The new owners are 100 percent responsible for making any necessary repairs; thus they will want to ensure that a licensed, professional home inspector performs an inspection prior to purchasing the property. However, FHA does offer a 203(k) Rehabilitation Loan, which is designed to allow the borrower to simply obtain one mortgage loan at a long-term fixed or adjustable rate to finance the acquisition and rehabilitation of the property.

Working with a real estate attorney who understands all of the applicable laws and procedures is advisable if you are dealing with HUD foreclosure. This is because the foreclosures aren’t sold in accordance with typical procedures, but are instead sold as part of a bidding process that favors individuals who want to reside in the home versus investors or companies who want to improve the property and flip it. Your attorney will not only ensure that the foreclosure was done in the proper legal manner, but will work with you to submit bids. Experienced real estate attorneys can also work with investors if the property fails to sell to owner-occupants (as well as other entities such as brokers, governments, nonprofit organizations, and others).

Birmingham & Mobile Foreclosure & Real Estate Attorneys

Cloud Willis & Ellis’ experienced Birmingham foreclosure and real estate attorneys work to ensure that any foreclosure and real estate transaction is in compliance with all the applicable laws and procedures. Our attorneys can assist the lender with renegotiation of loan and mortgage modifications, short sales, deeds in lieu of foreclosure, deficiency judgments, and other important processes involving property and real estate. We can save you time and money in this challenging process. Contact us today to set up a consultation.

Resources:

portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/203k

realtor.com/advice/buy/what-is-a-hud-foreclosure/

Real Estate Closings under the CFPB

Anyone who has bought or sold property knows that mortgages and deeds of trusts are complex, to say the least. It is crucial that all real estate transactions involve an experienced attorney who can oversee the transaction and ensure that everything is in compliance with state and federal law.

The Consumer Financial Protection Bureau (CFPB) oversees new rules that govern these transactions, such as what is required in terms of loan disclosures and activities within the mortgage process. Federal laws such as the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Truth in Lending Act, and the Real Estate Settlement Procedures Act govern the rules and forms related to disclosures that consumers receive in connection with applying for and closing on a mortgage loan.

The TILA-RESPA Integrated Disclosure Rule

Recently, the CFPB sought to consolidate the various different forms associated with real estate closings into two in order to reconcile differences between the forms and comply with various mandated disclosures; these forms include:

The Loan Estimate form: provided to consumers within three days after they submit a loan application. This is designed to help with understanding the key features, costs, and risks of the mortgage. This form combines the previous Good Faith Estimate and initial Truth-in-Lending disclosure; and
The Closing Disclosure form: provided to consumers three business days before they close on the loan. This is designed to provide disclosures that will be helpful in understanding the costs of the transaction. This form combines the HUD-1 and final Truth-in-Lending disclosure.

While this applies to closed-end consumer mortgages, it does not apply to reverse mortgages, mortgages secured by a dwelling that is not attached to real property, or to home equity lines of credit. However, any credit extended to trusts for tax or estate planning purposes is not exempt from the rule.

In addition, under the Rule, the creditor must retain copies of the Closing Disclosure for five years after consummation, and the Post-Consummation Escrow Cancellation Notice and Partial Payment Policy disclosure for two years. All other evidence of compliance with the provisions must be maintained for three years after the transaction has been completed.

Birmingham, Hoover, and Mobile Real Estate Lawyers

The real estate attorneys of Cloud Willis & Ellis are prepared to assist you with a variety of needs when it comes to residential, commercial, foreclosure, and/or eviction services. We work in all areas of real estate law, including but not limited to leasing, acquisition, financing, development, management and sales of real property, and multi-tenant properties. Contact us today to find out how we can help you with any questions you might have.

Resource:

files.consumerfinance.gov/f/201311_cfpb_final-rule_integrated-mortgage-disclosures.pdf

Land Sale Contracts

Put simply, a land sale contract is very similar to making payments on your mortgage (or on a piece of real estate property in another capacity), except that, instead of borrowing money up front from a financial institution such as a bank, payments are made directly to the seller until the property is completely paid off.

While many home buyers at one point or another will interact with a real estate attorney when they sign paperwork, land sale contracts should involve experienced real estate attorneys more extensively and up front during the process, as it is crucial that both buyer and seller understand and are satisfied with all of the contract terms and conditions before they sign the land contract. Some of these keys terms relate to the terms of payment, transfer of legal title, whether the transaction will involve a warranty deed or some other deed to convey title, and other related, important terms.

Unique Benefits

Why would a buyer and/or seller want to set up terms like these, where they directly make payments to the seller as opposed to a bank? These types of contracts do offer some unique benefits, such as the buyer avoiding having to pass a particular credit check requirement, or a seller having more options when it comes to potential buyers. These contracts can also provide more options for both the buyer and seller to uniquely craft an agreement outside the traditional mortgage, such as the seller requiring a larger cash down payment or negotiating a higher price for the property, or the buyer being able to have more control over their monthly payments.

“Ownership” Interests

However, as with any contracts that step outside the conventional way of conveying property, other terms can be unique as well. For example, the buyer has what’s called “equitable title” to the property in question while they are making their payments to the seller. This means that they have an interest in the property and the seller cannot sell that property to another party, or interfere with the buyer’s interests in other ways, such as subjecting the property to a lien.

However, the buyer does not technically possess legal title to the property until the final payment is made to the seller. Once this occurs, the deed is filed with the county naming the buyer as the technical property owner. If the buyer fails to make their payments, the seller reserves the right to file an ejectment action, which results in the buyer essentially forfeiting all of the funds paid to the seller pursuant to the land contract. That makes these types of transactions risky (to say the least), and thus working with an attorney who understands state real estate laws to help draft the terms of the contract such that they are both fair and enforceable is very important.

Birmingham & Mobile Real Estate Attorneys

If you are buying, selling, or managing a residential or commercial property, it is crucial that you work with experienced real estate attorney services in order to ensure that the transaction is successful.

At Cloud Willis & Ellis our experienced Birmingham real estate attorneys provide the very best services in the field of real estate law. Contact us today to find out how we can help with any contract questions you might have.

Quiet Title Actions – Removing Doubt About Property Ownership

Buying a piece of property nearly always involves a title search to ensure there are no unsettled issues with the property. The title search entails gathering documents showing the property’s history to determine several key issues including whether the seller has interest in the property that they are able to sell, whether there are any restrictions on the use of the land such as covenants or easements, and whether there are any liens on the property such as mortgages or taxes that would need to be satisfied. If all goes well, the title search turns up nothing unexpected and no issues are present that would prevent the sale from occurring. What if, however, there is uncertainty regarding one of these issues?

Following The Procedure

When uncertainty exists about any of these important issues, a lawsuit may be filed within the court to settle the issue. Known as a quiet title lawsuit, the action does exactly that – it quiets any issues about the title and the ownership of the property. To begin this process, notice is required to be recorded within the legal system, which sets forth information including the name of the taxpayer affected by the tax sale, the names of anyone else who could claim an interest in the property, the property’s legal description and street address, contact information of the authority, and statements regarding the quiet title proceedings.

Common Scenarios Requiring Quiet Title Action

There are any number of situations in which it makes legal sense to file a quiet title lawsuit. One is in the case in which there is some cloud over the title, such as when the ownership is unknown or not well established, or when there is a question of tax delinquency associated with the property. Other reasons may include when you want to dispute someone’s claim that the property is subject to a mortgage or lien, or when there is uncertain about the property’s boundaries, or if there is an easement on the property that is being used but was never properly recorded. Essentially, any time there is a question about ownership of, debt on, or usage of a piece of property, filing a quiet title action is the best way to prevent the chance that someone will dispute the legality of your ownership of the property in the future.

Are You Considering Filing A Quiet Title Lawsuit? Cloud & Willis, LLC Can Help

If you are looking at buying a piece of property, you will want to ensure you are making a wise investment. An experienced real estate attorney can help you accomplish this by reviewing the transaction from the beginning and handling any legal issues that need to be resolved as a part of the process. The Birmingham real estate attorneys at the office of Cloud Willis & Ellis have helped clients with a wide range of real estate matters including quiet title actions and can help to make sure your transaction is a smooth one. Contact the office of Cloud Willis & Ellis today and let us help you with your real estate needs.

Good Deeds – A Primer

Whenever property is transferred, a deed is required. What some people may not realize, however, is that not all deeds are the same – in fact, there are several different types of deeds, all of which have very different functions. What may be considered sufficient in one transaction may not meet the requirements of another real estate transaction and, therefore, it is very important to understand what the different types of deeds are and what functions they serve – and, even more importantly, what functions they do not.

Types Of Deeds Allowed In Alabama

Most types of deeds can be used in Alabama. With the exception of the Beneficiary Deed, the following are allowed in Alabama real estate transactions:

Warranty Deeds – there are two types of deeds that fall into this broader category of warranty deeds. In each, the seller or grantor of the property makes certain covenants regarding the property. With a General Warranty Deed, the seller makes covenants that he or she owns the property and has the right to convey it, that the property is free of any encumbrances unless otherwise noted, and that they will defend title against any claims. The Special Warranty Deed is a similar document, and also conveys interest in property with specific covenants made by the seller with respect to encumbrances and defending title, but only against claims made under the seller.
Quit Claim Deeds – these deeds are deeds that simply transfer any interest one party has in a piece of real estate to another party. With this type of deed, the party transferring its interest in the property makes no claim that they actually have any interest in the property itself. Quit Claim Deeds are typically useful only in certain circumstances such as transferring property between family members or to remove one spouse’s name from a deed during a divorce and property settlement process.
Deed of Trust/Deed of Release – Part of the lending process, the Deed of Release cancels out the Deed of Trust. The Deed of Trust is used to give a lender a security interest in a piece of property. If the borrower does not meet payment requirements, the Deed of Trust gives the lender the authority to foreclose and sell the property to recoup their money. This document is usually used along with a loan and promissory note. Once the loan is paid off, the lien holder signs a Deed of Release to cancel the Deed of Trust.

Do I Need An Attorney?

Using a knowledgeable and experienced real estate attorney is not only a wise step to protect your interests, but in Alabama, real estate attorneys are the only ones who can write deeds or documents between sellers and buyers that are actually legally binding. Speaking with an experienced real estate attorney from the beginning steps of your transaction is the best way to ensure your protection.

Cloud Willis & Ellis – Your Real Estate Attorneys

When you need an attorney to handle your real estate transactions, turn to the office of Cloud Willis & Ellis, LLC. Our attorneys have helped buyers and sellers protect their interests with their legal needs during real estate negotiations and transactions and will ensure you are protected as well. Contact Cloud Willis & Ellis, LLC today to meet with our legal professionals.

Quiet Title Actions: Legal Proof That Property Belongs To You

Imagine that you buy a house, you move into that house, and you’ve been living in that house for a few years when someone knocks on the door (or more likely writes you a letter) and informs you that they own the house that you bought and paid for. What do you do? Given the circumstances described in this hypothetical you would likely want to file a quiet title action in order to legally establish that you own the property in question.

What Is A Quiet Title Action?

A quiet title action is a lawsuit that is designed to establish ownership of real property (aka land and any buildings attached to that land). This type of lawsuit is filed when there are two or more parties that claim to own a particular parcel of land. This actually happens more often than you might imagine. For example, multiple parties may claim ownership if a new possessor claims that they have acquired ownership over the land via adverse possession, if a seller fraudulently sold a parcel to two different buyers by using a forged deed, or if a bank failed to clear title after the mortgage on the property was paid off. There are many diverse situations in which it may be advantageous to file a quiet title action, but the idea is always to have a court determine who legally owns the property in order to ‘quiet’ all other claims.

While many states have their own quiet title statutes, most require the claimant to show the same two things. First, the claimant must be able to show that they have a legitimate claim to the property. Second, they must prove that they took possession of the property in good faith. If the claimant is able to show that their claim to the property is valid, then the court will grant an action to quiet title announcing that the claimant’s claim to the property supersedes anyone else’s claim of ownership.

The Notice Requirement

When someone files a quiet title action how are parties with potentially adverse claims of ownership notified about the lawsuit? Generally, states require parties who may have an adverse claim to be notified of the quiet title action. For example, Alabama’s quiet title action statute for tax delinquent properties, contained in section 24-9-8 of the Code of Alabama, outlines a very strict notice requirement. The notice required for these actions for must include:

The name of the taxpayer whose interest was affected by the tax sale,
The name of any other party that a title search reveals may claim an interest in the property,
A legal description of the property,
The street address of the property,
The name and number of the authority,
A statement that the property is subject to quiet title proceedings, and
A statement that any legal interest in the property may be extinguished during the proceeding.

In order to ensure that you comply with your state’s quiet title action notice requirements it is always a good idea to consult with a competent attorney for legal counsel.

Need Legal Advice?

If you live in Alabama and would like to file a quiet title action so that you have a legal proof that a particular parcel of land belongs to you, contact Cloud Willis & Ellis, LLC today. Our experienced real estate attorneys are located in both Birmingham and Mobile and are happy to discuss your legal options with you.

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