In addition, Fannie Mae is putting in place policies to monitor and then pursue borrows who are in default. This was stated in the announcement – “Fannie Mae will also take legal action to recoup the outstanding mortgage debt from borrowers who strategically default on their loans in jurisdictions that allow for deficiency judgments. In an announcement next month, the company will be instructing its servicers to monitor delinquent loans facing foreclosure and put forth recommendations for cases that warrant the pursuit of deficiency judgments.” 

So what option does an owner who needs to sell but can’t have? They are going to think long and hard about the ramifications of their decisions. If they can work with their mortgage holders through a loan modification, a short sale, or even deed-in-lieu, they may be able to reduce the time down to three years instead of seven.   

The question then becomes how does Fannie Mae determine who has the capacity to pay? It will be interesting to see how this plays out in the marketplace over the next couple of years. I would be interested to know your thoughts on this new development and how you think it will impact the current housing crises, so add a comment and I will publish them. 

To read the full announcement, you can go to Fannie Mae’s site.

This morning, something in particular (not sure what exactly, probably a skink or maybe a chipmunk) had crawled in a hole under the sidewalk in the backyard. I had gone out to check on her and her brother Mason and heard a really strange sound. I found her with her snout all the way under the sidewalk and she was creating a blow horn noise to scare whatever it was out of hiding. I thought she was choking only to find that she was fine as her tail was just going a mile a minute in her pursuit of a conquest.

Summer is a busy time for property management companies. Most tenants relocate this time of year due to school being out. So we find ourselves very busy with move in and move out evaluations, scheduling contractors for work, coordinating HVAC repairs due to the hot weather, coordinating pool access for tenants, evaluating lawn maintenance, advising owners & tenants of potential issues in regards to lawn, and many more things as well. We are BUSY and at times feel a little crazy.

It is easy to get carried away with all the tasks and responsibilities, but here is what I learned this morning from my dog.

1. Have a laser focus. Don’t try to do too much all at one time & don’t allow another person or dog sway you from your goal. Lexie completely ignores me in her pursuit.
2. Enjoy each task as you are working on it.
3. Be persistent. If you run across a stumbling block, go to the other side of the sidewalk and try from another angle.
4. Know that there will be time for fun later.
5. Don’t allow others to tell you that you shouldn’t pursue your goals.

So live life all out and don’t forget to enjoy the process!

It has gotten to the point that we have to spend so much time policing our ads rather than finding people actually interested in renting our homes. It is such a shame that people take a good thing and use it destructively to the point that it ruins it for others. 

If you are not aware of how the scam works, we have explained it below. In addition, we are going to share tips for tenants who are looking for quality rentals and how to avoid the scams. 

THE SCAM: 

We post a legitimate advertisement on Craigslist. We make it nice with pictures, showing instructions, our brokerage information, and information about how to apply. 

The scammer takes our ad and copies the whole thing. They change the price and place their contact information in place of ours. Sometimes they add in additional incentives like all utilities included, second month free rent, etc. Typically there is only an e-mail address and no phone number. 

A prospective tenant finds the ad and is amazed at the great price that it is listed for and also the nice owners have decided to include all the utilities. How awesome is that? 

Since the tenant can’t call to find out more details, they e-mail the “owner” and the “owner responds. Great love to have you rent it, send me $XX.00 to apply for the property. Believe it or not there are people who because it is a great deal, will send the money. Of course they never hear from them again and the money is now gone. 

VARIATIONS: 

We have seen where scammers are also taking vacant homes/ bank foreclosures and doing a similar scam. 

RED FLAGS: 

Don’t Proceed if – 

• There is not a number to speak with someone.
• The number that they give you is out of the country.
• You can’t find out information about the person or company.
• They ask for money before you even view the property. 

MYTHS: 

There are a lot of people who share with you to never send money before you meet someone. At SSPM, we don’t meet our tenants at the property. We don’t meet tenants to collect applications/ application fees. We require money to be in the form of a money order or cashier’s check. We are a legitimate property management company. We have established these policies in order to maximize our time and resources. 

So, what can you do to make sure that you are dealing with a reputable firm? 

TIPS:

In today’s information age, there are plenty of ways to verify information: 

Search Craigslist for the address of the property to see if there are multiple ads. If there is one with a higher rent amount – it is a scam. 

Google the address of the property. Are there other ads for the same address for more money? Is there another contact listed? If so, you may want to contact those people and ask about the rental. 

Google the contact phone number of the advertiser. What comes up? If it is a legitimate business, you will see other ads or information about the company. 

In Georgia, there are real estate license laws that need to be followed. If a company manages more than 1 owner’s rentals, they need to be licensed by the real estate commission. Go to the site for the real estate commission and look for the firm – http://www.grec.state.ga.us/clsweb/company.aspx 

If a company, is there are professional website with information about the company and the company executives? 

Most experienced landlords have written applications process and guidelines. Ask for a copy of them before your apply. 

First and foremost, trust your instincts. If something sounds too good to be true, it probably is.

In the movie there is a scene where Leigh Ann Tuohy (Michaels’ adoptive mother) is watching Michael learn to play football. You see even though Michael was over 6 feet and more than 300 pounds, no one had really taught him how to play football and he was against any type of violence since he saw that all his life. 

Michael has afraid to block and really didn’t understand how to play the game and do what the coach wanted him to do. Seeing that the coach wasn’t able to get through to Michael, Leigh Ann goes onto the field takes Michael aside and tells him – “protect him”, dragging the quarterback in front of Michael, “as if he were me. Don’t let anyone get near him or hurt him.” She then pulled another player in front of Michael and said, “this is Collins (Leigh Ann’s daughter) protect him as you would Collins.” 

The point Leigh Ann was making was to do well in the game, you had to protect those in your family, your team.  You protect the quaterback’s blind side which is where the name of the movie came from. 

So what does this have to do with real estate and property management? Glad you asked. As a property manager, we are your Michael Oher. We are there to protect you against things you don’t even know are coming. When I speak with an owner about what a property manager does, I share with the owner that we do all kinds of tasks – over 100 of them to take care of the day to day, but I also talk about protection. 

Protection comes into play in the form of insurance, HOA disclosures, legal documents, how to interact with the tenant, forms, etc. 

Sometimes that means protecting the owner from themselves. You see we know more about the possibilities and pitfalls of owning rental properties than most owners.  When we advise an owner about something, it is usually from the experience of a decade of experience. In addition to having managed hundreds of homes over a long period of time. 

So when you are considering a property management firm, ask them – Do you personally own rental properties & how many? Have you ever used a property management firm for any of your rentals? Are you a member of NARPM to gain insight from other property managers across the country so that you can learn from their experiences? At Solid Source Property Management, we can answer YES to all of these questions.

Click here to view the embedded video.

Here are the things to consider. 

Most tenants are not planners. I can’t tell you how many times we move people days after they apply for a property. They want immediate move in times. Rarely do we have a tenant who looks at a property and is able to wait more than 2 weeks. Most owners don’t want to move that fast. So that actually reduces our chances of being able to place tenants. So we end up wasting our marketing dollars and then the owner isn’t happy because the tenant won’t work on their time schedule. 

Most tenants in Atlanta want to view a property on their own time schedule and have the freedom to visit without an agent. We accommodate them with a lockbox and have a system in place for them to self show. If an owner has personal property in the home, we can only show via an agent. While there are more agents now showing rental property, it is because we are in a down market. Once the market turns, agents won’t want to spend their time showing rentals when they can be working with buyers for commissions that pay 10 times the amount of commission. This significantly reduces the number of people who can see the property and therefore, significantly reduces the chances that it will be rented. 

There isn’t enough time to make repairs in between the owner’s vacating the property and when a tenant needs to move in. While most owners believe that their homes are rent ready, inevitably, there are items that need to be done prior to occupancy. Cleaning and carpet cleaning are among the typical, but it might also require some touch up paint and other minor repairs. A tenant is not going to overlook minor items. They have high expectations especially in a down market. 

So when you add all of those factors together, we have made the decision that it is best for everyone to only market vacant properties. This will allow us to quickly find a suitable tenant, protect the interests of the owner, all the while being able to provide the tenant with a guaranteed date of occupancy.

Quite frankly, I think there is going to be a cottage industry that will emerge in about 3-5 years for debt collectors to pursue people for the bad debt on mortgages.  Mortgage companies who “took it in the shorts” with foreclosures and short sales will start hiring debt collectors to make good on the deficits we are seeing. We are already seeing where second mortgage holders are pursuing individuals for their loans after foreclosure as an unsecured debt. 

For now, there is some relief, but I don’t expect that it will continue. See if your situation may qualify. Please read more below on mortgage forgiveness as share with us by Kim Kline & Associates. 

Mortgage Forgiveness 

If you owe a debt to an entity and they cancel or forgive that debt, the canceled amount may be taxable.  But in 2007, the Mortgage Debt Relief Act was passed to help homeowners avoid the double-edged sword of losing their house and having to pay taxes on the forgiven debt amount. The Act is in effect for mortgage debts cancelled from 2007 through 2012. The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.

Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.   

Is Cancellation of Debt income always taxable? 

• Not always. There are some exceptions. The most common situations when cancellation of debt income is not taxable involve:
• Qualified principal residence indebtedness.
• Bankruptcy: Debts discharged through bankruptcy are not considered taxable income.
• Insolvency: If you are insolvent when the debt is cancelled, some or all of the cancelled debt may not be taxable to you. You are insolvent when your total debts are more than the fair market value of your total assets.
• Certain farm debts
• Non-recourse loans: A non-recourse loan is a loan for which the lender’s only remedy in case of default is to repossess the property being financed or used as collateral. That is, the lender cannot pursue you personally in case of default. 

Contact Kim Kline & Associates or your accountant for more information regarding the Mortgage Debt Relief Act – http://www.kimklinelaw.com/home.html

In Atlanta recently, there have been a couple of dog attacks which raises the question again – should owners allow pets. My answer has not changed. We have a strict policy about dogs who are known to be vicious. Our insurance won’t cover any incidents with the following breeds:

• Alaskan Malamutes
• Akitas
• Chow Chows
• Doberman Pinschers
• German Shepherds
• Pit Bulls
• Rottweilers
• Staffordshire Bull Terrier
• Siberian Huskies

As of today, we are adding Presa Canarios. I have never been asked about one, but we are adding to the list to be proactive. I just read in the local newspaper on-line – The Atlanta Journal & Constitution in an article written by Alexis Stevens which stated that:

“According to the Clifton study, pit bulls, Rottweilers, Presa Canarios and their mixes are responsible for 74 percent of attacks and 68 percent of the attacks upon children. In more than two-thirds of the cases included in the study, the life-threatening or fatal attack was apparently the first known dangerous behavior by the animal in question.”

I am still amazed at the number of people who try to convince me that we should allow these dangerous dogs in our rental properties. To which I reply, “I love dogs and am a true dog lover. I understand that there are exceptions, but we have to manage for the rule.” With the statistic above, I can now clearly state that there is a first time for everything and I can’t risk my livelihood on the basis that your dog might be the exception.

This happened to be the day of the infamous Atlanta snowstorm, but we still made it to New York. When we arrived at the airport, we waited in a nice long line and then went to check a bag. Another $15.00. We finally got on the plane. They had wireless internet – pretty awesome – $9.95. We did get a free soda each, but were not offered any headphones for the XM radio. By the time we arrived at our destination, I felt like I had been nickled and dimed to death. When I added up all the additional costs for the services that I would have thought to be standard, I actually ended up spending more than I would have if I would have chosen the next level priced option.

So what does this have to do with you or property management? We are getting ready to celebrate 5 years in April. I am blessed to have clients that have been with me since the beginning. When we started we made a decision that we would provide full service property management all inclusive for a fair price. I am so glad that we did that.

I certainly don’t want our clients to feel like the have to pay extra for the basic services and yet a lot of  property management companies are going to a deconstructed pricing structure – charging low monthly fees and then adding additional costs for things that we believe should be included. They charge more for sending a check or for direct deposit. They don’t mail invoices to the tenants nor provide monthly reports via e-mail never-the-less have a 24/7 web portal. They charge for advertising on the best sites like rentals.com and others. So in the end, the owner ends up paying more for the basics just like we did on our trip.

So when you are comparing property management companies, make sure that you get all the facts. Understand the charges and what they include. Ask how many times they visit the property while vacant. Make sure that they are actually managing the property even when it is not occupied.

If you are looking for a new management company, we would love the opportunity to speak with you. Call us at 770-416-1444 x 310. Also, you can watch this short video that we prepared to educate owners about selecting a property management company.

So, let me explain the tenant’s right to quiet enjoyment. When you receive compensation for someone living in a property, Georgia Law clearly states: 

OCG 44-7-1.
(a) The relationship of landlord and tenant is created when the owner of real estate grants to another person, who accepts such grant, the right simply to possess and enjoy the use of such real estate either for a fixed time or at the will of the grantor. In such a case, no estate passes out of the landlord and the tenant has only a usufruct which may not be conveyed except by the landlord’s consent and which is not subject to levy and sale.
(b) All renting or leasing of real estate for a period of time less than five years shall be held to convey only the right to possess and enjoy such real estate, to pass no estate out of the landlord, and to give only the usufruct unless the contrary is agreed upon by the parties to the contract and is so stated in the contract.  

So what is quiet enjoyment? It is the right of the tenant to possess and enjoy as the tenant deems fit. They have the right to be undisturbed. The Department of Community Affairs (DCA) clearly states in their Georgia Landlord Handbook when discussing right of entry into a property that the law has been interpreted as “If the lease does not state that the landlord can enter the apartment, a tenant could legally refuse the landlord access except in case of an emergency.” Now at Solid Source Property Management as well as most leases does state a provision for entry for reasonable timeframes Monday through Saturday with 24 hour written notice. 

But here is the bigger issue. What happens if we get inside and find that they aren’t maintaining the inside? Maybe they have not cleaned, or maybe they have broken something. What can we legally do? The answer is nothing. They have the right to live in any manner that they seem appropriate. 

What I feel is appropriate and what you feel is appropriate is subjective. As long as at the end of the lease term, they return the home in the same condition that it was when they were given possession – less normal wear and tear, they will receive their security deposit back. If they don’t leave in a clean rent ready condition, then we by law can deduct the amount to repair from their deposit as compensation to the owner for the damage. If damages exceed the security deposit, then we can pursue them in collections. But really until they move out, we can’t do anything.

We have had instances where a tenant lived in a manner that I wouldn’t live in, but when they moved out, the property was returned in immaculate condition and received their full security deposit back. This is why it is so important to establish the proper condition of the property at move in with detailed notes and pictures. Then it is really easy to compare the move in and out check sheets and determine the deductions. 

So in reality, unless we have cause to believe that there is an unlawful activity or a known lease violation (unauthorized pet for example) in the property, we allow the tenant to have full use of the property without intrusion. 

We do perform a quarterly drive by of the property and will notate anything that is not being handled properly which is the lawn maintenance or any infraction of the HOA rules & regulations. Remember however, that owners are responsible for the exterior structure of the house which includes – gutter cleaning, yearly shrubbery maintenance, pine straw/mulch refreshing, pressure washing, etc. These items are not the tenant’s responsibility. Tenants only have to maintain the mowing of the lawn and keep the beds free from weeds. Weeds in the lawn are also the owner’s responsibility so some owner’s elect to pay a weed treatment company to assist in the weed control. 

Since the tenant is paying rent, they have rights to the property and these rights must be respected. At Solid Source Property Management, we take great care to act in the best interest of our owners while abiding by the law set forth. We do believe strongly that proper screening typically saves us from a lot of problems in the future.