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Annapolis Real Estate Law Blog

A short sale poses risks for the unwary buyer

Many real estate agents have seen the joy their buyers feel at finally finding the home of their dreams quickly change when they are told the property is a short sale. There are homeowners throughout Maryland who are selling property for less than the amount owed on the mortgage. As in other parts of the country, real estate professionals refer to these types of real estate transactions as short sales.

Declining home values that followed years of homeowners pulling equity out of their properties through mortgage refinancing offered by lenders have resulted in homes being offered for sale at prices that leave the homeowner with the inability to repay their debt. A short sale can be an alternative to foreclosure, but the lien holder must agree to accept less than the full amount that is owed in order for the property to be sold. Although the price of a home sold as a short sale might appear to a bargain, buyers must be wary of what problems these types of real estate transactions might present.

Superintendents may be prevented from making personal appeals

Each year, Maryland school superintendents travel to the state capital in order to make personal appeals for needed funds for school construction projects. The annual event, colloquially known as the "beg-a-thon", has been criticized by some as being overly politicized by members of the Board of Public Works for their own agendas.

Gov. Hogan indicated that among a list of bills he would not be signing this year is the capital budget proposal. Within it, there is language included in an amendment that would end the annual day for superintendents to make their appeals for funds that are not included in the capital budget for construction projects.

Contract for Purple Line signed by Maryland officials

On April 6, Maryland officials approved a contract allowing Purple Line Transit Partners to build its Purple Line, a light-rail system that will run through Prince George's and Montgomery counties. Total expenditures will be in the billions of dollars.

The rail system will run between New Carrolton and Bethesda and will connect to multiple other rail systems in the area. The new line will help people who work in Bethesda and other locations by providing them with a direct connection, making commuting easier. There will be several stops near or on the College Park campus of the University of Maryland, and rides will be free for students there.

Property market might benefit from MetLife's new status

U.S. insurer MetLife plays a significant role in commercial real estate lending, and according to experts, the firm's redesignation by a district court could see it becoming even more involved. As part of the 2010 Dodd-Frank Act, MetLife was deemed a systemically important financial institution, or SIFI, along with companies like GE and AIG. In the spring of 2016, courts decided that the company is no longer important enough to qualify as an SIFI under the too-big-to-fail legislation. Maryland developers could see their chances at receiving financing increase as a result.

News sources say that losing the designation frees the company of requirements that it maintain certain levels of capital in reserve. The change could also make MetLife less strictly bound by regulatory oversight. Although experts say the government's Financial Stability Oversight Council might appeal the decision, they predict the ruling will eventually leave the company with more available funds to lend.

The current dilemma in the real estate market

People who are wanting to sell their homes in Maryland are facing a bit of a dilemma. While real estate agents indicate they believe now is a great time to sell a residence, many also think that now is a bad time to purchase one.

Some people who are thinking about putting their homes on the market are concerned because of how competitive the market is at the moment. While 89 percent of real estate agents surveyed said that now is a good time to sell, only 34 percent said the same about purchasing a new one. Potential sellers may be worried they will have a hard time finding a new home to replace the one that they sell, thus leading them to wait.

Wind farm project stalled because of zoning issues

A county zoning board in western Maryland rejected a real estate developer's application for a zoning variance. The owner of Dan's Mountain Wind Force was planning to build 17 wind-power turbines on Dan's Mountain near Cumberland. After the project was rejected in 2015, the developer filed for a Certificate of Public Convenience and Necessity. On March 7, Allegany County filed an objection to the developer's plan with the state Public Service Commission.

The first proposal for the wind-turbine project on Dan's Mountain came in 2001. Originally, the proposed project included 25 wind turbines. Allegany County has no other wind farms. In order for the project to proceed, county regulators would have to determine that existing land use rules do not apply to the wind farm project.

2016 could mark commercial real estate lender hesitation

Commercial property developers in Maryland and other states may be affected by fiscal trends that prompt lenders to shy away from more speculative developments. According to news sources, a combination of decreased fossil fuel prices, reduced Chinese growth and other factors have worked together to create a climate that could leave developers unable to secure funding quite as readily.

One notable lending trend is that the issuance of commercial mortgage backed securities has slacked off significantly. Some analysts even predict that 2016 will see the creation of new CMBS drop by almost a third. Other factors, like the first Federal Reserve interest rate hike to occur in almost a decade, are reputedly making lenders more wary, and so is an overabundance of properties such as condos and hotels following years of high-volume construction.

Commercial real estate risks

Maryland investors in commercial properties may be pleased with the results achieved in 2015, a year during which there was great demand accompanied by minimal vacancies. This has caused rental costs to increase, which benefits those owning the types of properties that have been in demand. Unfortunately, there could be a downturn in this industry as financing issues become a serious consideration.

Early commercial real estate statistics for 2016 may reflect the challenges that could be ahead. The market did not move much during January and February. Experts indicate that commercial mortgage backed securities play a crucial role in the situation. These bonds represent one of the largest areas of debt for commercial real estate. However, the investors that are needed to purchase these bonds are now opting for other avenues of investment because of low yield factors.

2016 marked for commercial real estate stagnation

If Morgan Stanley analysts are right, some Maryland investors may be hindered by a year of flat commercial property growth. Others say the forecast, which was released in late February, could also be accompanied by increasing division between different kinds of properties and the types of funding they receive. External events such as fossil fuel price decreases have been known to contribute to reduced sales of certain financial vehicles, like the commercial mortgage-backed bonds that fund around 20 percent of commercial property investments.

The analysts' market prediction was contrary to earlier outlooks that called for as much as 5 percent growth. The low-growth prediction was unexpected because the value of many commercial real estate types had grown for years and continued to exceed levels seen prior to 2007.

Beer garden plans may benefit from council zoning

Maryland residents in search of new ways to enjoy alcohol may be pleased to learn that farmers in the state have been working for legislation that could permit some farms to also operate breweries. One such bill was proposed at the state level by a Harford County executive during his time in the Maryland General Assembly. The same official subsequently moved to institute a municipal rule that would also permit the commercial consumption and sale of alcoholic beverages at the farms that produced them.

One family farm in Harford County has planned to open a beer garden. The farm partnered with a creamery to provide dairy products like sandwiches, and it also announced its intentions to have attractions like a petting zoo on its premises. The owner admits he has been officially brewing beers since the business received a federal license in October 2015, and he notes that he eventually hopes to grow all of his ingredients himself.