October, 2007

According to Realty Trac, an online real estate and foreclosure listing service, foreclosures of homes have increased by 19% from December 2006 to January 2007 and foreclosure filings have increased 27% during the first three months of the year. Owners of homes are not the only ones who have found themselves in the midst of the foreclosure process. Condominium and multi-family property owners have also found themselves in the center of the foreclosure process.
The increase in foreclosures has caused active trade in foreclosed properties and caused people to try and become successful foreclosure investors. However, there are risks associated with investing in foreclosed properties that every investor should be aware of.
By the time a property enters the foreclosure process it is usually in pretty bad shape due to years of neglect. You must understand that you’ll likely be investing thousands of dollars to repair the results of such neglect and to make the property saleable. Therefore, you must make sure to add to the purchase price the cost of necessary and most likely significant repairs.
Another risk is that there might be liens on the property, often from unpaid taxes. In order to gain a clear title, any and all mortgages will have to be paid and tax liens released. Without a clear title, you could be prevented from mortgaging or selling the property. You must make sure that there is enough value on the property to cover outstanding debts.
To avoid liens and a number of other hassles, you can buy bank-owned foreclosed properties which often include title insurance, which is your certification that the property does not have liens or unpaid taxes.
Another option is to find pre-foreclosures: properties at risk of going into foreclosure. During pre-foreclosures owners are often willing to sell at a bargain price in order not to have his or her credit rating damaged. You can find listings of pre-foreclosed homes at www.preforeclosure.com and www.preforeclosure.biz.
It is often expensive or inappropriate financing that leads property owners to foreclosure. If you use due diligence, have affordable financing in place and remember to calculate ever-present hidden costs, you can often reap significant profits from foreclosed properties and avoid foreclosure yourself.

Q. The basement of our prewar co-op is undergoing renovation to enlarge the laundry room and storage space. In the process the building has become riddled with mice. The building’s exterminator first sprayed poison in our kitchen, to no effect. He then put out baited glue traps, and I bought some spring-loaded traps and put cheese in them. No luck. These mice must have their Ph.D.’s in avoidance techniques.We’re wondering if we bring in an outside exterminator, can we expect the building to pay for the services?
A. “The state’s Real Property Law provides that a warranty of habitability is implied in all residential leases,” said David A. Kaminsky, a Manhattan real estate lawyer. What this means in essence, is that the place is guaranteed to be fit for human habitation and that occupants will not be subjected to conditions that are dangerous, hazardous or detrimental to health of safety.
Mr. Kaminsky said that courts have applied this law to co-op apartments because proprietary leases create the requisite landlord-tenant relationship to invoke the statute.
So the co-op must provide an exterminator to get rid of the mice, he said. If the co-op fails to take care of the situation, then yes, the letter writers can hire their own exterminator service and demand reimbursement from the co-op for the cost.
If the co-op refuses to pay Mr. Kaminsky said, the apartment owners could withhold maintenance charges and seek a credit for the exterminator’s bill, or begin a small-claims case to recover the amount spent on the exterminator.
A practical problem is that the writers will not be able to have their exterminator treat the common areas of the building like the basement, where the mice are probably coming from, Mr. Kaminsky said. “Pressure must be put on the co-op to be more aggressive about the ‘Ph.D. mice,'” he added.
According to the Wall Street Journal, some 50 million Americans do not have enough credit activity to qualify for a credit score which is often looked at to determine who qualifies for a loan, at what interest rate and what the credit limit would be.
There are three major credit bureaus that maintain credit reports: Equifax, Experian and Transunion. The most common scoring methodology is the FICO score, which ranges from 300-850. The average score is 723. Having a score of 750 or higher lets you borrow easily at the best rates available. Scoring below 700 will make it tough for you to get the best available rates and scoring 620 or lower will make it close to impossible to get approved for credit according to John Ulzheimer, President of credit.com.
High credit card balances, bankruptcy and paying bills late hurts your FICO score. However, if you think you would be safer not using a credit card at all — think again. This inactivity can deem your credit report unscorable causing your interest rates to be higher or not allowing you to borrow at all. Not only is it important to be responsible with credit card usage, it is also important to take a look at your credit report at least once a year to check for fraudulent activity and identity theft and to keep an eye on your score.
According to the Wall Street Journal, by law, you are entitled to a free credit report from the three major credit bureaus once a year. You can obtain same by going to www.annualcreditreport.com. For a fee, you can obtain your FICO score or you can go to www.myfico.com to obtain a FICO score and an explanation as to why your score is not higher.
We can help you understand your credit report and help you remove negative items from your credit report. If your credit report is causing you problems please call and we will advise you of the best actions to take.
We would like to welcome Anna Pechersky to our firm. Anna is a Brooklyn Law School Graduate, year of 2007, and is awaiting admission to the Bar.
We would like to highlight our friend and fellow attorney Alan Chorne, Esq. Mr. Chorne is a longtime friend and colleague who has successfully handled cases for us over the past twenty years. We are pleased to be able to work with him on select personal injury, medical malpractice and similar matters. If you would like to get in contact with Mr. Chorne, you can reach him at 212 349-9100. Please mention that you learned about him through our newsletter.