Did you see the Real Estate section in the Globe yesterday? If not, you missed an interesting story on the legal pitfalls of buying a home that is in any stage of the foreclosure process. As correspondent Dave Copeland reports, buying a home that has been foreclosed, is in the process of being foreclosed, or being sold in a short sale involves exponentially more paperwork than a routine sale. And closing can take up to six months longer.

Obviously, it’s not the type of deal one should go into blindly.

Some agents interviewed for the story say they are avoiding certain types of listings because of red flags that could drag out a sale. One agent said he avoids short sales where there is more than one lender involved and he also avoids any foreclosure listing that has a clause giving buyers only 48 hours to decide on the lender’s offer.

But even home purchases involving non-foreclosure properties can turn into legal nightmares. I know of a case where a couple unwittingly agreed to purchase a house that was tied up in a very messy divorce – it took almost a year for them to get into the house.

What other possible legal hazards should buyers be on the lookout for? And what advice do you have for approaching a possible legal tie-up?

I can’t seem to get away from real estate, no matter where I go. I played hooky one Saturday in June to attend a family event. There my cousin Bernice bent my ear about the two “McMansions” across the street from her on the north shore of Long Island. Across from Bernice, two houses sold at about the same time. Both ended up being torn down, replaced by houses that dwarfed the lot.

A young professional couple rented an apartment recently. It was in a two-family house in or near Boston. The landlords were long-time local residents who need their rental income to make ends meet. The tenants earned 6-figures. The landlords verified the tenants’ income and checked their references, as a good landlord should. Then tenants moved in. Everyone was happy.

A few weeks later, the tenants informed the landlords that they were expecting, due five months from that day. This means the landlords will be obligated to make the apartment lead-safe.

A reader asked me a question about lead paint and condos. What happens if a unit is lead-safe, but the common area is not? How does the liability work? Since IANAL, I asked a legal colleague. She told me this:

Last week, a landlord asked me to address the impact of the lead paint law on landlords.

The Massachusetts lead paint law is very clear: the owner of the property is responsible for making the property lead-safe if a child under six lives there. Once a child is born, that child has the right to a lead-safe environment. It is a health and safety law, just like a landlord must maintain a working toilet in a rental unit.
As a landlord, you must present this form to prospective tenants. Landlords may not discriminate against families with children. They cannot ask pregnant women or children to leave.

I am starting a series on bad behavior on both sides of the landlord-tenant relationship. Please write me an email if you have stories and want an opinion. If you comment here, please remember no naming names, no identifying properties.
Recently, I got this first-hand account of a landlord who tried to get a little more money before falling into foreclosure:

Real estate agents are required to show consumers the agency disclosure before discussing a specific property with a prospective client. Have you seen it?

.... the real estate agent represents the buyer. The agent owes the buyer undivided loyalty, reasonable care, disclosure, obedience to lawful instruction, confidentiality and accountability, provided, however, that the agent must disclose known material defects in the real estate. The agent must put the buyer's interests first and negotiate for the best price and terms for their client, the buyer.

Read about what happens when so-called “buyer’s agents” are in the pocket of builders. It led to “buyer’s agents” making it seem easy for a renter to turn homeowner. “Buyer’s agents” offered one-stop shopping for a loan; so easy. This led to buyers with a 17% default rate.

Not to get too political, but I do not think that “Don’t ask; don’t tell” is a good policy. It does not work in the military; it does not work in home buying.

The place where home buyers get hit with “Don’t ask, don’t tell” is in regard to lead paint. Lead paint was used in housing for a long time. Why? Because it lasts longer; it was the good stuff! It stopped being made in 1978 for housing. However, some of the paint was still around for years to come. Lead paint shows up on the exterior, the windows and on painted stairs and floors. Most disclosures presented to buyers at the point of Offer say the seller does not know if there is lead paint because the house was never tested. “Don’t ask; don’t tell.” The nicer the old house, the more likely there will be lead paint someplace.

The most successful foreclosure prevention program in the state of Massachusetts may be the rolling blockade orchestrated by City Life/Vida Urbana. Starting last fall, the Jamaica Plain activist group has undertaken the protection of a growing number of Bostonians living in foreclosed buildings, pledging to physically inhibit any attempted eviction.

With growing regularity, the group has sounded its trumpets, alerting supporters and the media that an eviction is scheduled. People and cameras muster outside the house in the early morning hours. And the eviction is canceled. The mortgage company backs down.

City Life's most recent victory came Tuesday, when city officials announced that Wells Fargo had indefinitely postponed an eviction of tenants from a foreclosed building on Norfolk Street in Dorchester.

Sometimes the cancellation happens the night before, and the blockade becomes a rally. Sometimes it's only clear when no constable comes to carry residents and possessions across the threshold.

What doesn't seem to vary is the result.

It has become increasingly clear that City Life/Vida Urbana -- and probably any other activist group -- effectively can prevent a given eviction simply by announcing that they plan to be in attendance.

It's the rare practical application of Heisenberg's uncertainty principle: Evictions apparently don't happen in the presence of spectators.

How do you choose a neighborhood when you don’t live there yet? As a licensed real estate broker, I can’t tell you where to live. Because if I told Italians to live in the Italian neighborhood and people in wheelchairs to only look at condos, I would be discriminating based on who you are. Therefore, I give the same advice to everyone:

If you do not know the area, spend some time there. Do what you normally do: Go grocery shopping, go to a playground, go to a movie, walk through town, and/or go out to dinner. If parks are important to you, then go to the parks, same for libraries, community centers, senior centers, schools, and little league games. If you do not like being there, you are in the wrong place.

When I wrote about local parking behaviors after snowfall, the discussion went to the inevitable “townies” do it this way and “newcomers” do it the other way. Well, the snow is falling again, so the cultural divide will soon be apparent at a curb near you.

Many years back, one of my buyers told a home-seller that he went to the local high school. After the offer was accepted and we were there for the inspection, we found a stack of high school year books on the kitchen table. The seller had checked to see if he really was a “townie.”

So who is a “townie”? Do you need to be born here? Go to elementary school here? Graduate high school here? Can a “newcomer” assimilate enough to be accepted as a “townie”? I moved here in the early eighties; what can I do the overcome my “newcomer” status?

I assume cheering for the Patriots is not enough; they are too easy to love!

Almost every time that the Massachusetts Association of Realtors takes a political stand, I find myself on the other side of the issue. Today, I got a “MAR Call to Action” to oppose mandatory energy scoring for single and multifamily homes at the time of sale that is included in energy legislation before the State Legislature.

As a buyer’s agent, I think having an energy efficiency score is a good thing for buyers (and owners.) The only thing I oppose is the “time of sale” part. I would much rather see that information required before advertising the home for sale (and if never advertised, then before closing.)

Those of you who have followed this blog since its beginning know that my father taught me how to understand the use of numbers found in newspaper articles.

In the Sunday Boston Globe, Trey Skehan explained the use (and misuse) of averages, medians and means in discussions of income.

A friendly competitor of mine spoke to me yesterday about a disturbing trend. Consumers do not realize that a contract with their agent protects them, as well as the agent. The practice of doing buyer agency without a contract has become common-place and it runs contrary to Realtor Code of Ethics.

He's a member of the Professional Standards Hearing Committee---which hears ethics complaints from the public and other Realtors, says that it seems as if many Realtors have never read the Realtor Code of Ethics and that, of those who have read it, far fewer keep up with its revisions.

It is a case in point that many buyer’s agents do not sign professional contracts with their clients. (Nearly all seller’s agents do.) There seems to be a perception that the relationship with a buyer client is somehow less important than one with a seller client.

The US Department of Justice, which has aggressively brought several high profile anti-trust actions against the real estate industry, has launched a new web site to educate consumers about competitive measures that could save them money.

The site contains a wealth of background material, pointers and encouragements for consumer. For example, one section has tables and a calculator to show how much consumers could save from some measures, such as getting rebates or selling the home without a broker.

The foreclosure auction was this morning. A third party was the high bidder. What happens next?

In a typical transaction, the buyer gets 30 days to finalize the deal. At that closing, the lender delivers a foreclosure deed to the buyer who then becomes the owner of the property.

Through all this time and beyond, the original homeowner-borrower is able to remain in the house. Technically, it takes an eviction order from a court to force the holdover owner out of the property.

Besides finding a new residence, the old homeowner is also likely to become a defendant in a deficiency lawsuit. In this proceeding, the lender seeks to recover the difference between the total owed on the mortgage and the amount realized at the auction. For example, if the balance owed on the mortgage was $350,000 but the winning bid at the auction was only $300,000, the borrower would still owe the lender $50,000. In some cases, these deficiencies might be written off immediately, but more likely, the lender will use the appropriate judicial process to scrutinize the borrower’s remaining assets and ability to pay on the judgment into the future.

The Federal Reserve Bank and other US lending regulators today issued a proposed disclosure form that would better explain to borrowers of adjustable-rate subprime mortgages the terms and conditions of these loans.

Coming amidst a enormous increase in the number of foreclosures of subprime mortgages, the regulators hope the new disclosure form will prompt potential borrowers to have a more realistic, clear-eyed understanding of the debt they're about to shoulder.

I think taxes are a good thing. Taxes pay for schools, police, fire safety, and infrastructure -- all these things make a community a good place to live. And, Lord knows, we need infrastructure! On August 8th, U.S. Rep. John Dingell revealed a plan to cut global warming by ending the mortgage tax deduction on homes larger than 3,000 square feet.

I say, “Bring it on!”

Michigan Democratic Congressman John Dingell is best known for his positions on the home-town auto industry, but his lastest suggestion to curb global warming and conserve energy is likely to roil the housing industry.

Dingell said he will proposed ending the mortgage interest tax deduction, an enormous bounty for homeowners, for properties larger than 3,000 square feet.

The federal Office of Thrift Supervision is soliciting public comment on what would constitute unfair and deceptive practices in lending and other activities. Though the words "subprime mortgage" are not mentioned in the OTS release, it's probably not an unfair inference to draw that the blowup in that end of the lending market is weighing on regulators.

Thursday, July 26, is the 17th anniversary of the Americans with Disabilities Act. This Thursday, the ADA Restoration Act of 2007 will be rolled out to the House of Representatives to help make the ADA more enforceable. Despite 17 years with a law to help disabled people have access to all aspects of American life, unfairness still reigns in our country. I see it here in the Greater Boston area real estate market.

A bill aimed at preventing foreclosures and cracking down on mortgage fraud is expected to fly through the Massachusetts Senate today.

The bill includes everything from making mortgage fraud a felony -- and tossing those convicted of it in prison for up to five years -- to creating a state system to rate mortgage companies on their lending practices, and a database to track foreclosure activity.

A recent edition of Massachusetts Lawyers Weekly (subscription only) contains an opinion piece by attorney Michael Collora who predicts that the collapse of the subprime market is likely to lead to state and federal criminal investigations of a number of attorneys, mortgage brokers, buyers and sellers.

Anyone who was around during the real estate collapse of the early 1990s is familiar with what can happen.

A story in today’s paper reports that a compromise bill that will give Massachusetts one of the most “proconsumer” statutes in the country regarding the prevention of identity theft will soon be enacted on Beacon Hill. While I haven't seen the final version of this bill, legislation of this type is of particular interest at the registry of deeds since our records contain thousands of social security numbers, a prime ingredient in identity theft. Social security numbers are contained in every state and federal tax lien and release, in many death certificates and in more than a few mortgages. As long as those document remain in a dusty book on a shelf in the courthouse, they're not much of a threat. But digitize those same documents and place them on the Internet as we have done with millions of records and they create much more exposure. To curtail this exposure, we’ve already made one pass through our records here in Lowell, redacting more than 65,000 social security numbers thus far. To protect the identities of innocent persons, government agencies should begin the task of removing social security numbers from online records, but such a project is a complex, costly and time-consuming task. In the meantime, if you discover that your social security number appears in an online record at your local registry of deeds, you should call that office, identify the document where the SSN is located, and ask that it be removed.

Financially stressed buyers often look to their brokers and mortgage professionals to help them make a deal happen. When they can't scrape enough cash together, creative solutions are often proposed. Here's a common scenario:

Buyer agrees to buy and seller agrees to sell. The purchase price is $300,000. Buyer has a down payment of $15,000, can get a loan with a 95 percent loan-to-value ratio, but can’t afford the additional closing costs. Buyer and seller agree to increase the purchase price by $5,000 and seller will give the buyer back a credit of up to $5,000.

The buyer can now borrow an extra $4,750 to cover closing costs at 95 percent LTV. Buyer gets house, seller gets money and the bank is fully informed. Creative financing, right?

Maybe not. Maybe, it’s fraud.

As quoted by Alison O'Leary Murray in her article on communities resisting Chapter 40B affordable housing projects, the Chairman of the Milford Board of Selectman, William Buckley, complained that "communities are being disproportionately challenged with 40B projects simply because of their proximity to . . . water, sewer, or access to a major highway."

Globe Correspondent Alison O'Leary Murray had an interesting story about growing community resistance to the state's affordable law, known as Chapter 40B.

Though these housing projects have never been wildly popular at the local level because the law allows developers to bypass some community oversight, the story had a neat bit of info about which towns are more likely to be targeted for such developments. Check it out.

Massachusetts law allows a homeowner to file a Declaration of Homestead at the registry of deeds to protect the family home from a forced sale by a creditor.

Many who already have homesteads often ask if they must record a new one after refinancing. The answer is unclear.

Technically, a mortgage is a deed and in homestead law, a new deed voids an existing homestead. So logically, if a mortgage is a deed and a deed voids a homestead, then a mortgage voids a homestead.

But logic doesn’t always work with property law. Many in the legal community contend that a mortgage is just a security interest and not a deed, so it has no effect on an existing homestead.

Why not record a new homestead, just to be safe? A homestead protects against debts that come into existence after the homestead is recorded, so you might have an unknown debt lurking about that would be covered by the old homestead but that would predate and fall outside the protection of the new one.

Since every case is different, the best thing to do is to ask the lawyer who is handling the closing for you before you leave the closing.

A provision of the pending Municipal Partnership Act would abolish an 80-year old law that exempts the phone company from paying an excise tax on the equipment it owns on the pole in front of your house.

Intended to promote the statewide deployment of the telephone in that technology’s infancy, the law’s objective was accomplished long ago. The electric company and your cable provider already pay this tax.

Proponents argue that repealing this exemption will help shift the burden of funding local government away from homeowners. Opponents contend that any increase will just be passed on to consumers.

I’m not sure that’s the case. Each month I pay two phone bills: one landline and one cell. I do that out of habit, I believe, because my cell phone seems to duplicate all of the functionality of my landline. Old habits die hard, but they do eventually die, so the next time my bill goes up, it might just be enough for me to forsake my landline phone and switch entirely to cell. I suspect the phone company realizes it has reached this tipping point and it will be very hesitant to raise its rates for any reason.

As an occasional conveyancing lawyer, I was intrigued by Richard Howe’s post The Paperless Real Estate Transaction .

Don’t get me wrong, the ability to file registry documents electronically will be a huge boon. But electronic filing does not a paperless transaction make.

Contractual documents between the parties to a sale will continue to be paper and pen, as will all of the typical closing documents. As Mr. Howe says, we will need to “transmit to the registry of deeds the scanned image of a document.” The document will need to exist and be executed before it can be scanned.

During the next real estate boom, perhaps this innovation will prevent the long lines at the recording desk, provide buyers instant gratification at closings, and save time and money on couriers and overnight mail.

I applaud and encourage the innovation. The paper, unfortunately, will continue to pile up around me.

In a recent article, Christine McConville cited an MIT study released last week shows that almost half of the so-called 40B housing developments proposed in Greater Boston has not been built because of community opposition, combined with a softer housing market.

Rona Fischman, in her blog entry, makes some notable suggestions about staying out of trouble, and staying out of foreclosure.

If “life happens” to you or someone you know, however, negotiating the foreclosure onslaught can be overwhelming. The most important advice I give clients to whom life happens is to deal with it – do not ignore it and hope it goes away.

After much debate, the townspeople of Hopkinton recently voted down the opportunity to purchase 708 acres from the bankrupt owners of Weston Nurseries. The land was protected under Massachusetts state law, Chapter 61A, as agricultural land and was paying lower taxes as a result.

Boulder Capital, a developer, will purchase the land and has presented plans to develop 940 houses and apartments, and 450,000 square feet of commercial space.

As anyone who recently borrowed money to buy a house or refinanced their mortgage can tell you, the stack of paperwork required by the banks is staggering. The “closing package” is so complete (and I use that term loosely), even the loan processors rarely understand what it all means. How then can regulators insure that borrowers understand the trouble they are getting into?