Written Contracts for Home Improvement Projects

Projects Over $500 Require  Written Contracts

In California, all residential home improvement contracts must be in writing for all home improvement projects over $500. A contract constitutes a legal agreement between two or more people and is strictly defined by California Business and Professions Code Section 7159. This written agreement is one of the most important communication tools for both the contractor and consumer. A well written contract will accurately define what is to be accomplished by the contractor and will prevent any misunderstandings about what a job will entail. Details of the contract should delineate how the work will be done, when it will be done, what materials will be used, and how much it will cost.

All home improvement contract and subsequent changes should be legible, easy to understand, and inform the consumer of their rights. Generally speaking, homeowners who enter into contracts with contractors to improve, remodel or repair their homes almost always have a right to cancel the contract, without any penalty or obligation, within three business days after signing the contract. The most common grounds for cancelling (rescinding) a contract are fraud, mistake, undue influence, breach of contract, illegality and unconscionability. If you are promised something verbally make sure that it is included in writing. Don’t sign anything until you understand the contract and agree to the terms.

Oral Home Improvement Contracts

There have been a few cases in California where oral home improvement contracts have been enforced by a court. These cases usually involve situations in which the contractor has performed all or substantially all of the work agreed upon. Parties contracting for the work refused to pay for it on the basis that there was no written contract as required by law. The courts usually uphold the position of the contractor in these cases and cite the sophistication of the persons contracting for the work as a factor.

DiJulio Law Group
https://www.dijuliolawgroup.com

STRATEGIC FORECLOSURE, IS IT RIGHT FOR YOU?

What Happens if You Abandon Your Home and Let it Foreclose?

When you are facing foreclosure, it can be tempting to just give up and walk away from the home. Before abandoning your mortgage, you should consider the possible consequences of letting your home foreclose. Sometimes abandoning a house might seem like the best option, but not always.

Besides losing your home and possibly having no place to live, allowing your home to be foreclosed will dramatically affect your credit rating and make it more difficult for you to qualify for a new loan in the future. There are also tax consequences of foreclosure that you should be aware of before you make the decision to let your home go into foreclosure.

So what happens if you abandon your home and let it foreclose? This article will help you understand what the consequences will be if your home ends up being foreclosed. It will also give you an idea of what to expect and offer some options for those who want to try to save their homes and avoid foreclosure.
The Effect of Foreclosure on Your Credit Rating
You may be wondering what happens to your credit with a foreclosure. You are probably aware that a foreclosure will hurt your credit score. How much it affects your score can vary, but keep in mind that every late payment will show up on your credit report. Also, when your home does go through foreclosure, an entry will be made in the section of your credit report that covers legal actions.

A foreclosure tends to affect your credit score more if you have very little other debts. If you have credit cards and car payments that are all up to date, this can help buffer the effect of the foreclosure on your credit rating. However, if you have few other items on your credit report, or those bills are also falling behind, the effect will usually be much greater.

The foreclosure and late payment record can remain on your credit report for up to seven years, but that doesn’t mean that you will be unable to get a loan for seven years. As soon as your financial situation improves, you should start making an effort to pay every bill you have on time. Many people find that after as little as two years of doing this, they are able to qualify for a new loan.

After going through a foreclosure, it is likely that you will need a large down payment next time you borrow money to buy a home. Your interest rate is also likely to be higher. Keep in mind that government programs such as Fannie Mae and Freddie Mac are unavailable to people who have had a home foreclosed within the past two years.

 

Deficiency Judgments

One question that is asked often is, “If my house is foreclosed, can they make me pay?” In many states, the answer is yes. This is happening much more often now that it used to. The reason is that real estate prices have fallen, so it is much more likely that your home will be sold for less than the amount of the loan. If your state allows deficiency judgments, the lender can come after you for the difference between the amount you owed on your mortgage and the price the house sold for at the foreclosure auction.

Deficiency Judgments Are Unlikely in California

Under California law Deficiency Judgments are generally not available. If the loan was made as part of the purchase then there is no possibility of a deficiency judgment. If the loan was part of a refinancing and the bank forecloses without going to court, then there is no possibility of a deficiency judgment.

However, if there is more than one loan, then the picture is more complicated. If the second forecloses first then the above rules apply. If the first foreclose first, then the second can file a lawsuit to try to collect on the second loan. In these situation, you should consult with us.DiJuloLawGroup.com

The Tax Consequences of Foreclosure

One thing many people don’t realize is that there is often a tax penalty that goes along with foreclosure. What happens is, if the house sells for less than the amount owed, the rest of the loan balance is considered “forgiven.”

The IRS looks at this as income because it is something you would have had to paid but are getting out of. As a result, you may be taxed on the difference between the amount you owed and the amount the house sold for.

However, due to the number of foreclosuress, Congress has adpoted legisltation to forgive this “income.” It appears that until the end of 2012, there are no tax consequences.

But it is a good idea to talk to an accountant or tax lawyer about the possible tax consequences before you allow your home to foreclose.

 
Other Real Estate and Property
One thing people often worry about when facing foreclosure is whether the lender will be able to take other property and real estate that they own as well. Because real estate loans are secured by the property that is being financed, that property is usually all that the lender can take. However, if you specifically listed another piece of real estate as additional security when you applied for the loan, that property can also be taken.

When your lender forecloses on your home, your personal property is not included in the foreclosure. The lender has no claim on any property that is not permanently attached to the house.
Options for Avoiding Foreclosure
Instead of walking away from the house, it’s a good idea to contact your lender as soon as you start to have trouble making your payments to try to work something out. Many lenders have programs available to help homeowners who are going through short-term financial difficulties.

Deed in Lieu of Foreclosure

If it looks like you will not be able to work out a way to keep your home, some lenders will offer a “deed in lieu of foreclosure” or “cash for keys.” If you can get your lender to pay you to move out quickly and leave the home in good condition, that could help you pay the cost of moving into a new home. However, a deed in lieu of foreclosure usually has about the same effect on your credit rating as an actual foreclosure.

Short Sale

One alternative to abandoning your home is a short sale. When you sell your house in a short sale, the bank agrees to accept the amount that the house is selling for as full payment on the mortgage. Some banks will make you jump through a lot of hoops and fill out tons of paperwork to get the sale approved. But most Banks are doing short sales to avoid the costs and time involved with foreclosures. If you can do it, a short sale is better that letting your house go into foreclosure. A short sale will have less effect on your for a shorter time.

Loan Modification

A loan modification is an agreement between you and the bank that changes the terms of the loan. It is just about as hard to convince a bank to enter into a loan modification agreement as a short sale, maybe harder. If you pursue this option, it is a good idea to have an experienced attorney or loan modification company help you through the process.

As of 2012, there is a new program for houses where the loan is owned by the government- Fannie Mae or Freddie Mac. If so, you can refinance at the current value of your house at a below 4% rate. See our blog on this issue. You can check to see if your has qualifies on the links there.

REFI UPSIDE DOWN HOUSE WITH Fannie Mae and Freddie Mac

On March 2009, the government executed one of the most ambitious mortgage bailout projects, ever witnessed in the history of the United States. The bailout project was coined as the Home Affordable Refinance Program or HARP. The target of this refinance plan was to provide relief to the underwater mortgage borrowers and prevent their home from impending foreclosures. However, the HARP was ineffective to meet the expectations of the majority of the masses.

As per the government forecasts, HARP was expected to benefit around 5 million struggling mortgage borrowers. However, only a million and a half people were able to take advantage of the refinance program. This is because the eligibility criteria set for the above program was restraining. As a result, majority of the underwater borrowers were left out of the HARP.

Advent of the HARP 2.0

The failure of the HARP compelled the government to revisit its maiden program and come up with yet another improved version of the HARP on 24th October, 2011. It came to be known as HARP 2.0. It has been officially put to effect on 1st December, 2011. The renewed HARP was developed to cater to the needs of those borrowers with a 135% lesser loan-to-value ratio. Moreover, HARP 2.0 was slated to bring under its fold people with 135% higher loan-to-value ratio.

HARP 2.0: Its eligibility criteria

According to the new HARP rules people must meet the following specifications to take advantage of the HARP 2.0:

•1. A borrower should not be late in payment for more than once during the past 12 months.

•2. Only those borrowers who make timely loan payments will be eligible for the refinance program. Moreover, a person should not fall back in payments for more than 6 months. As per the HARP rule, a payment that is due for more than 30 days is marked as due payment.

•3. Either Fannie Mae or Freddie Mac should have bought the mortgage loan of a borrower earlier than 1st June, 2009.

•4. Only fresh and first-time HARP applicants will be inducted into the program and not those people who had applied for the older version of the HARP.

Review of HARP 2.0

As soon as the HARP 2.0 was officially announced, there was a gamut of mixed feelings amongst the people. Many financial analysts are of the view that it has got much better and may become successful in meeting everyone’s expectations. The shortcomings in the previous HARP were meted out and thus it is expected to bless hundreds of thousands of borrowers with underwater properties.

HARP 2.0 has been designed in such a way that it encourages more and more mortgage lenders to embrace the refinance programs. Basically, the government reduced the responsibility of the lenders and the three largest mortgage lenders viz., BOA or Bank of America, Wells Fargo and Chase have dropped the cap of 135% of home value so that larger number people could take advantage of HARP 2.0.

Another HARP on the anvil

HARP 2.0 was no doubt an improved version of the first HARP and performed better to save a good number of people from going homeless as a result of large scale foreclosures. However, because of HARP 2.0, people’s expectations rose.

The Senate Banking Committee is working on a new bill that is tentatively named as the Responsible Refinancing Act of 2012. As per the draft bill, a loan originator can refinance an underwater mortgage of another originator without inviting any lawsuit against him or the borrower. However, refinancing can be an uphill task if the original lender refuses to refinance any particular mortgage.

by Gaberial Knight for DiJulio Law Group

0

REFI UPSIDE DOWN HOUSE WITH Fannie Mae and Freddie Mac

On March 2009, the government executed one of the most ambitious mortgage bailout projects, ever witnessed in the history of the United States. The bailout project was coined as the Home Affordable Refinance Program or HARP. The target of this refinance plan was to provide relief to the underwater mortgage borrowers and prevent their home from impending foreclosures. However, the HARP was ineffective to meet the expectations of the majority of the masses.

As per the government forecasts, HARP was expected to benefit around 5 million struggling mortgage borrowers. However, only a million and a half people were able to take advantage of the refinance program. This is because the eligibility criteria set for the above program was restraining. As a result, majority of the underwater borrowers were left out of the HARP.

Advent of the HARP 2.0

The failure of the HARP compelled the government to revisit its maiden program and come up with yet another improved version of the HARP on 24th October, 2011. It came to be known as HARP 2.0. It has been officially put to effect on 1st December, 2011. The renewed HARP was developed to cater to the needs of those borrowers with a 135% lesser loan-to-value ratio. Moreover, HARP 2.0 was slated to bring under its fold people with 135% higher loan-to-value ratio.

HARP 2.0: Its eligibility criteria

According to the new HARP rules people must meet the following specifications to take advantage of the HARP 2.0:

•1. A borrower should not be late in payment for more than once during the past 12 months.

•2. Only those borrowers who make timely loan payments will be eligible for the refinance program. Moreover, a person should not fall back in payments for more than 6 months. As per the HARP rule, a payment that is due for more than 30 days is marked as due payment.

•3. Either Fannie Mae or Freddie Mac should have bought the mortgage loan of a borrower earlier than 1st June, 2009.

•4. Only fresh and first-time HARP applicants will be inducted into the program and not those people who had applied for the older version of the HARP.

Review of HARP 2.0

As soon as the HARP 2.0 was officially announced, there was a gamut of mixed feelings amongst the people. Many financial analysts are of the view that it has got much better and may become successful in meeting everyone’s expectations. The shortcomings in the previous HARP were meted out and thus it is expected to bless hundreds of thousands of borrowers with underwater properties.

HARP 2.0 has been designed in such a way that it encourages more and more mortgage lenders to embrace the refinance programs. Basically, the government reduced the responsibility of the lenders and the three largest mortgage lenders viz., BOA or Bank of America, Wells Fargo and Chase have dropped the cap of 135% of home value so that larger number people could take advantage of HARP 2.0.

Another HARP on the anvil

HARP 2.0 was no doubt an improved version of the first HARP and performed better to save a good number of people from going homeless as a result of large scale foreclosures. However, because of HARP 2.0, people’s expectations rose.

The Senate Banking Committee is working on a new bill that is tentatively named as the Responsible Refinancing Act of 2012. As per the draft bill, a loan originator can refinance an underwater mortgage of another originator without inviting any lawsuit against him or the borrower. However, refinancing can be an uphill task if the original lender refuses to refinance any particular mortgage.

by Gaberial Knight for DiJulio Law Group

Welcome to Our Los Angeles Real Estate Law Blog

Residential and commercial real estate purchases are often the largest purchases someone will make. Often, the accompanying legal issues that can be created by such situations are equally as complex. When you are faced with legal matters related real estate, an experienced real estate lawyer can be of great assistance and protect your interests. California’s legal system can be confusing and intimidating, with a unique set of rules and a language of its own. An attorney who understands the law and the process can help you evaluate your options and make the right decisions.

At DiJulio Law Group, we assist clients throughout Los Angeles and Southern California facing complex real estate legal issues. We know how to quickly determine the next step in your real estate law case.

Contact our office by e-mail or call us at 818-502-1700 or toll free at 888-519-1613 to discuss your situation with an attorney.

Our Real Estate Law Blog

We established this blog to provide valuable information to individuals throughout Los Angeles who are interested in issues related to real estate law. We will regularly update this blog, posting on a wide range of real estate law topics, including foreclosure, purchase agreements, zoning and land use issues, failure to disclose defects, and easement and boundary disputes.

We welcome your participation in the discussions on this blog. Feel free to comment on posts that interest you.

It’s important to note that the stories and cases reported on this blog are not meant to implicitly or explicitly depict cases actively handled by our firm. In most cases, the blog will simply be covering cases similar to those we are interested in handling.

Contact Our Office

Contact us online or call us at 818-502-1700 or toll free at 888-519-1613 for more information.

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