With the continuing tight credit markets and potential buyers still having difficulty obtaining financing, sellers of property in the Virgin Islands may consider providing financing to the buyer. This is typically achieved with either an installment sales contract or a traditional note and mortgage.

 

Under the installment sales contract, the buyer takes immediate possession of the property, makes payments towards the purchase price under the terms of the contract, and the seller retains title to the property during the term of the contract. Once all of the payments have been made and the contract terms fulfilled, the seller will convey the title to the property to the buyer. This is generally done with a warranty deed. If the terms of the contract are not fulfilled the seller will not convey the property to the buyer.

When a note and mortgage is utilized, the seller is taking on the role of a bank. The seller will actually convey the title to the buyer as if the sale is being done with a bank. However, instead of a bank providing the financing to the buyer the seller will provide the financing. At closing, the seller will convey the property to the buyer and the buyer will sign a note payable to the seller for the amount being financed. Monthly payments under the note are then made to the seller rather than a bank. The seller will also take back a mortgage on the property just as a bank would. This will allow the seller to foreclose and take the property back in the event of a default under the terms of the note and mortgage.

These tools to sell property can be advantageous to seller and buyer since they can facilitate a sale when traditional bank financing is not available. However, both methods carry their own unique risks to both buyer and seller and should be considered carefully and with the counsel of your real estate professional.

Ron Pennington is Chair of the Real Estate & Financial Services Practice Group at BoltNagi PC, a full service business law firm located on St. Thomas, Virgin Islands.  Attorney Pennington concentrates his practice in commercial and residential real estate, acquisition, development and financing. To contact Attorney Pennington, please email: rpennington@vilaw.com or visit www.vilaw.com

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Discussing your estate plan with heirs can be a very difficult conversation to have, but no matter how uncomfortable it may be, it can be quite effective in reducing potential conflicts among family members and make sure your heirs understand the choices you have made. If your children will not receive equal amounts of inheritance, it would be helpful to explain why. Maybe you previously helped one child buy a house, so the other is receiving a larger percentage of your estate. Maybe one child will require medical care, so you wish to make sure they are taken care of into the future.

 

Talking about these things with beneficiaries is the caring thing to do. It will ensure that there are no hard feelings after you are gone and no longer able to explain your choices. It will also prevent friction among family members.

If you find this conversation too difficult or distressing, you may want to leave a personal note with your estate planning documents explaining the reasons for the distribution of your estate. In addition, it is extremely helpful to specify where your important documents are located, such as tax returns, investment and banking information, property deeds and titles, insurance policies, and loan documents.

Your family will no doubt be devastated when you are no longer with them, but having this difficult conversation now will give them peace of mind into the future.

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Buying a home in the U.S. Virgin Islands can be a time-consuming process. However, home ownership can also be very rewarding. The purchase of a new home is often times the largest single purchase that an individual will make in their lifetime. Consequently, the right amount of planning and preparation can reduce your stress and make for a comfortable transition into your new dream home in the U.S. Virgin Islands. Buyers, especially first time buyers, need to be sure to ask the right questions about potential properties and make careful financial decisions leading up to the home purchase. Most importantly, buyers should obtain professional assistance from the outset to make for a smooth transaction.

 

Tip#1: Professional Assistance

Select an experienced real estate agent and a lawyer that is experienced in real estate.

An experienced real estate agent is invaluable in showing you multiple properties, explaining options, listing the pros and cons of each property, and providing valuable insight into the various areas where you may be considering a home.

A real estate lawyer can help you through the home buying process by preparing or reviewing the purchase contract, advising you about financing and title insurance, answering your legal and tax questions and arranging for the documents necessary to complete your purchase. When you first contact the lawyer, you can request an estimate of legal fees and costs.

You should consult a lawyer before you sign a contract to buy a home. Although a printed form may be used for the purchase contract, your attorney can make changes that protect you and your family.

Tip #2: Be an Informed Consumer

Reading the available real estate information materials, talking to friends and experts, and investing your time wisely by viewing a variety of homes on the market and researching the neighborhoods is the best way to be armed with as much information as possible about a potential purchase.

Tip #3: Make A Plan And Get Pre-Qualified

Carefully examine each important decision and think it through. Develop a well organized plan for making your home purchase. Focus on the most important factors. Create file folders on house hunting, home financing and service providers such as property and title insurers, as well as home inspectors.

 

Get yourself pre-qualified for a loan so you can determine the type of home you can afford. Getting pre-qualified also increases your chances of closing a deal as a seller is more likely to accept pre-qualified buyer’s offer than one from a home buyer who still needs to initiate the loan process.

Lenders usually employ the 30% formula in approving your loan. Your monthly mortgage should not exceed 30% of your monthly income. Plan your actions and get pre-qualified, this reduces the chance of panic situation and allows you seize opportunity when it is presented.

Taking the time up front to formulate a plan will save both time and money in the long run.

Tip #4: Value

The classic rule of buying the worst house in the best neighborhood still applies. If you buy with an eye towards improvement, you can customize the home to fit your needs. The saying, "make money buying a home, not selling one," should keep you focused on the long-term importance of the purchase price. When buying a home view the purchase for the long term, not with the idea you will be selling it in a few years.

Tip #5: Create A Top 10 List of Amenities

List the features that are most important to you in deciding on which home to purchase. Be sure to include items like a generator, new appliances, access, location, a swimming pool, etc. Establishing your criteria early will save time shopping for inappropriate homes and may keep you from buying a home on a whim. As detailed in Tip #4, your top reason for buying a home should be the value you are getting. Some of your top 10 amenities may need to be sacrificed if an incredible value is available.

Tip #6: Fixed vs. Adjustable Rate Mortgages

Which type of loan fits your particular needs? Are you a first home buyer or are you moving to a larger home? If you know you will own your home for a short time due to work relocation or other factors, an adjustable rate mortgage may be the best type of loan. If you're shopping for your dream home or you plan to raise a family, a fixed rate mortgage is most probably more suitable for you.

Whichever loan you choose, make sure that you scrutinize all the closing costs. If you are required to have a mortgage escrow account and private mortgage insurance, make sure you understand the terms and cancellation procedures. Under Virgin Islands law there can be no prepayment penalties on residential loans. A good mortgage reduction plan can save you tens of thousands in interest costs, and shorten your loan term, with only small extra principal payments. If you experience negative changes in your job, health, or marital status, you can revert to the standard payments in your mortgage contract.

 

 

Tip #7: Develop A Mortgage Shopping Chart

One of the biggest decisions to make before submitting a contract on a home is how to finance the purchase. There are many Virgin Islands as well as off-island lenders competing for your mortgage business. You can apply for a loan over the internet or use a mortgage broker to shop for your loan with various lenders.

When choosing a lender, you want to avoid apples to oranges contrasts by comparing fixed rates to fixed rates, not fixed rate to adjustable rate mortgages. Create a chart that lists different types of loans, fees, and discount points charged for at least three mortgage providers (including a mortgage broker).

 

Tip #8: Evaluate The Seller's Motivation

Take time to understand the reasons the seller bought the home, their reasons for selling, and the improvements they have or have not made, and you'll be in a better position to evaluate the home and negotiate a better deal. You are about to make one of the most important decisions that will affect both your life and the life of the seller. In the end, the real estate process comes down to the individuals buying and selling the home. A closer look at the seller may help you in deciding whether to buy a particular home and for how much.

Tip #9: Sign A Contract That Protects You

Make sure that the contract you submit on a house allows you to arrange financing, inspect the home, and negotiate any problems that you uncover. Ensuring that the contract you sign will minimize potential legal battles and will let you enjoy your new home with your family and neighbors instead of wasting time with disputes. Don’t sign a contract and then go to a professional for assistance. It is too late at that point as you have already committed to whatever terms are in the contract. See Tip #1.

Tip #10: Get A Quality Home Inspection

Paying for a qualified home inspection before you buy a home is not just spending "a little extra" for peace of mind. Utilizing a qualified home inspector is absolutely essential for anyone who does not want to spend thousands of dollars for repairs. As mentioned earlier, buying a home is a huge financial commitment so you want to spend a comparatively small amount to be informed about what you are purchasing. More often than not, the money a buyer spends on a home inspection they will save on the purchase price or in future problems.

Your new home in America’s Paradise, the United States Virgin Islands, can be a valuable investment and provide you and your family years of enjoyment. You can protect yourself against expensive mistakes if you proceed carefully before signing a purchase contract and closing the deal by becoming an informed consumer.

Ron Pennington is Chair of the Real Estate & Financial Services Practice Group at BoltNagi PC, a full service business law firm located on St. Thomas, Virgin Islands.  Attorney Pennington concentrates his practice in commercial and residential real estate, acquisition, development and financing. To contact Attorney Pennington, please email: rpennington@vilaw.com or visit www.vilaw.com

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The St. Thomas law firm of BoltNagi PC is pleased to announce that Attorney Ronald R. Pennington has joined the firm and serves  as Chair of the Real Estate & Financial Practice Group, he specializes in commercial real estate, real estate development, corporate transactions, finance and banking.

 

He previously served as an attorney with Tom Bolt & Associates, P.C., the predecessor of BoltNagi PC.  Prior to rejoining the firm, Mr. Pennington was a partner at Davis, Pickren & Seydel in Atlanta, Georgia, where his practice consisted of commercial real estate, corporate transactions, finance and banking.  His lending practice includes acquisitions and development projects, conventional loans, construction loans, SBA 7(a) loans, SBA 504 loans (Mr. Pennington is a designated 504 Closing Attorney), Rural Development loans, and New Market Tax Credit financing.  He also assists numerous corporations and other business organizations in matters of general representation and corporate structuring, including all aspects of negotiations for the acquisition or sale of businesses and commercial property, commercial leasing, and liquor licensing.  Mr. Pennington also facilitates the negotiation and implementation of conservation programs and for endangered species and their habitats.

Mr. Pennington is a graduate of Walter F. George-Mercer University School of Law and was admitted into the U.S. Virgin Islands Bar in 1995, is a member of the Virgin Islands Bar Association, State Bar of Georgia, and the American Bar Association.

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As we all know, questions concerning death and disability are sometimes difficult for many families to discuss. However, individuals must address these issues in advance to ensure that their family members are in a strong position to deal with illness and death. Consider these vital questions, for starters:

 

What will happen to my assets upon my death? If I suffer an untimely death, how will I provide for my spouse and children? Who do I wish to handle my financial and business affairs if I become mentally or physically incapacitated? Who do I wish to make my healthcare decisions if I am unable to do so?

            While many people choose to ignore issues related to death and incompetence until it is too late, planning can ensure that an individual’s wishes are properly carried out – while avoiding disputes and administrative and decision-making dilemmas – at a time when there is an illness or death in the family.

Why Draft a Will?

            Why should an individual endure the time and expense involved in having an estate planning attorney draft their will? First, if an individual wishes to have any control over the final distribution of their assets upon death, those decisions should be expressed in a properly drafted will. Without a valid will, the Virgin Islands law of intestacy provides a specific order of distribution. Consider this common example which illustrates several of the issues that can arise.

            Assume John Doe, who was married to his second wife and had two children from a prior marriage, suffered an untimely death. If John did not have a valid will at the time of his death, Virgin Islands law requires that his wife receive one-third of his probate assets (which include all assets except assets held jointly with right of survivorship and life insurance and retirement plans passing to named beneficiaries), and that his two young children split the remaining two-thirds equally. How does this scenario potentially cause problems? First, John’s wife is only entitled to one-third of John’s inheritance, all of which may be necessary for the wife to live comfortably after John’s untimely death. Moreover, John’s current spouse and the children from the prior marriage will often disagree regarding the division and distribution of John’s assets. Such disagreements often lead to a contested hearing before the Family Division of the Superior Court. These issues could have been easily avoided if John had properly drafted a will.

Consider Your Children’s Best Interests

            A question that should be addressed by parents is “Who will take care of minors if the parent or parents suffer an untimely death?” Without a properly drafted will, the Superior Court of the Virgin Islands, rather than the parents, will appoint a guardian to take care of any children and handle the assets passing to the children until they reach the age of 18. The Superior Court judge will make a decision based upon the testimony of other family members and friends, many of whom may have different thoughts regarding the best interests of the children. Additionally, the children will be able to receive their entire inheritance without any limitations when they reach the age of 18. However, by having a properly drafted will, the parent or parents can determine in advance who will care for their children and manage their children’s inheritance in the event of their untimely death, while also controlling the age at which each child will have unlimited access to their share of the inheritance.

Preparation for Illness or Incapacity

            In addition to planning for death, families should also prepare for the possibility that a family member may become incapacitated, either physically or mentally. By executing a properly drafted Durable Power of Attorney, an individual can appoint the person they wish to handle their business and financial affairs in the event they are unable to do so at any time in the future. One can also appoint a person to make healthcare decisions on their behalf by executing a Healthcare Power of Attorney. This document allows you to provide instructions to your appointed agent regarding basic healthcare decisions such as approval or disapproval of certain medical procedures and treatments, and more difficult decisions such as whether to consent to the donation of tissue and organs and at what point life-sustaining treatment should be removed. Additionally, an individual who wishes to relieve their family of the burden of making life-sustaining treatment decisions in the event of his incapacity should consider making those decisions in advance by executing a Living Will.

Conclusion

            Good estate planning will give you control over your affairs while in good health, continued control over your affairs in the event of physical or mental incapacity, provisions for your dependents in the event of your death or incapacity, and provisions for the efficient distribution of your assets upon your death. With the help of an estate planning attorney, you can ensure that your family is in the best possible position to deal with an untimely illness or death. By addressing such issues in advance, you will avoid both headaches and heartaches for you and your family members.

Daniel J. Gravel is an attorney at BoltNagi PC and Chair of the Firm’s Corporate and Estate Planning and Tax Practice Group. BoltNagi PC is a full service business law firm based in St. Thomas, Virgin Islands.

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