One good deed deserves another… in deed it does

Author: Bill McAfee; owner of Empire Title

Article Published in March 2014 Edition of The Colorado Real Estate Journal

Bill McAfee, Owner and President of Empire Title

Bill McAfee, Owner and President of Empire Title

In real estate transactions buyers and sellers see many legal documents.  The documents we are going to talk about today show ownership in varying degrees.  We will discuss 3 types of conveyance deeds.  The three types of deeds are: General Warranty Deed aka Warranty Deed, Special Warranty Deed, and Quitclaim Deed.  These deeds differ only in the amount of protection that the grantor (seller) warrants to the grantee (buyer).  All three of these deeds do transfer title to real estate; they just vary in the degree of liability and protection that the seller gives to the buyer.

The definition of a Warranty Deed according to the Colorado Real Estate Manual is a deed in which the seller warrants or guarantees title against defects that existed before the seller acquired title or that arose during the sellers’ ownership.  It does not warrant against encumbrances or defects arising from the buyers own acts. There are certain covenants for warranty’s that are contained in general warranty deeds.  The usual covenants are A) Covenant of seizin, this means the seller has ownership and has the right to convey it.  In addition, the fact that the property is mortgage or has certain restrictions would not breech this covenant.    B) Covenant against encumbrances, this means seller has no liens or claims against the property except those specifically excluded in the deed.  C) covenant of quiet enjoyment, this means the sellers guarantees the buyer will not be evicted or disturbed while possessing the property.  Claims by third parties do not breech this covenant.    D) Covenant of further assurance, this guarantees that the seller will produce and deliver any other documents that are subsequently necessary to make a good title.  E) Covenant of warrant forever, seller guarantee that the buyer will have title and possession to the property (sometimes a part of quiet enjoyment).  Covenant of seizing and covenant against encumbrances will generally relate to the past and usually do not “run with land”.  This means that the current buyer can sue the seller for any breech.  Covenant of quiet enjoyment, covenant of further assurance, and covenant of warrant forever protect against any future defect and are considered to “run with the land”.  This allows any subsequent buyer to sue for breech against any previous seller.  Colorado Statute states that covenant of seizin, peaceable possession, freedom from encumbrances, and warranty contained in any conveyance of real estate or any interest there in, shall “run with the land”, and will be to the benefit of all subsequent buyers and lienors.  To sum up a warranty deed will give the most amount of protection to a purchaser of real estate, definitely a good deed.  One good deed leads to another.

Another deed to discuss is the Special Warranty Deed.  Special Warranty Deeds warrant only against defects arising after the seller bought the property and not against defects arising before that time.  This means a buyer purchasing real estate with a special warranty deed would only have guarantees and protection against those things that the seller created against the property.  Any title issues created prior to our seller acquiring the property would not be warrantied.  In simple terms, the buyer is only protected against the liens or defects which the last seller created.  Buyer has no protections from any previous owners or encumbrancers.  Sometimes one good deed does not lead to another.

A Quitclaim Deed warrants absolutely nothing.  A quitclaim deed conveys the sellers’ present interest in the land, if any.  A quitclaim deed is frequently used to clear up a technical defect in the chain of title or to release lien claims against the property.  Examples of such deeds are corrections deeds and deeds of release.  Simply put, buyer does not receive any protection or warranties from the seller.  If warranties or protection is important to you as a buyer, quitclaim deeds may not be the deed for you.

The type of deed that a buyer desires should always be based on good fundamental judgment and the advice from a real estate agent or attorney.  If the buyer desires maximum protection against past events then the warranty deed is for you.  If the buyer is ok with a warranty and protection from the current seller only then the special warranty is the deed for you.  If no warranties or protection are desired by the buyer then the quitclaim deed will satisfy your need.  As strange as it may seem the title insurance policy that a buyer receives in a typical real estate transaction is not affected by the type of deed that the seller conveys to the buyer.  Buyers may always desire a warranty deed however sellers, such as banks, asset managers, and certain other government agencies may not be willing to issue one.  In this case title insurance is very important as the buyer may not be able to get the warranties and guarantees that they want from the seller.  Title insurance can step in to the shortfalls that special warranty deed or quitclaim deeds or even general warranty deeds may not provide.  One good deed deserves another.


Colorado Real Estate Journal

Let’s Play Monopoly & How To Win at Real Estate Monopoly

family-playing-monopoly-vintageIf everything you know about residential real estate comes from playing Monopoly, this week’s show is for you. As a game, Monopoly contains illustrative parallels with the real estate market, even though the game itself has little practical relevance to the real world—although I did once win second place in a beauty contest. The first hour of today’s show uses Monopoly to explore the world of residential real estate, and the second hour explores how you can win in the real world playing Real Estate Monopoly.

First, consider what a Colorado Springs Edition of Monopoly might look like. You have the Broadmoor instead of Boardwalk, Powers instead of Indiana Avenue. I won’t risk offending anyone in the audience by renaming Mediterranean and Baltic Avenues, but you get the point.

The first thing to consider is why Oriental Avenue is so cheap while one night in a hotel at the Broadmoor might bankrupt most people. Disparities in price are largely driven by demographics: As people mature, they work their ways from Baltic Avenue to St. Charles Place to Pacific Avenue and so on. The younger generations with less disposable income will cluster at the start of the board, while the established generations will cluster toward the end.

On a city level, this has subtle but noticeable affects. Certain qualities or amenities offered by certain neighborhoods will appeal to different demographics at different times, and real estate prices will adjust accordingly. In the 1960s, when families were large, neighborhoods with an abundance of split-level homes and nearby schools were in far higher demand. Today, with people having fewer children, and having them later in life, these formerly hot neighborhoods are seeing prices drop while older neighborhoods with more spacious floor plans and fewer rooms are in higher demand.

On a national level, this has stark and profound effects. Localized real estate bubbles in San Francisco, Washington D.C., and Seattle reflect an influx of young, wealthy professionals, causing formerly lower-middle and middle class neighborhoods to gentrify into high-income neighborhood and house values to skyrocket. You can think of the national real estate market is a bag of popcorn: each kernel, or local market, heats and pops independently of all others. Different factors cause different kernels to expand and explode quickly, slowly, or not at all.

There is a strong correlation between the demographic composition of a market and its general health. Places like Utah and Texas have very young populations and generally healthy real estate markets; Florida, on the other hand, is home to the oldest population in America and, as a result, has found it difficult to recover from its turbulent housing collapse.

These and other factors show how real estate is like Monopoly. Now the question is: How do you win? I offered three suggestions on this week’s show to help you get started and ultimately succeed.

To win at Real Estate Monopoly, you have to understand how it differs from the game, which is what Rule #1 concerns. The key difference between the two is this: Life isn’t about luck. In the real world, people don’t start out with exactly $1,500 a piece; they don’t take turns; they don’t roll dice. Each individual chooses when to move, where to stop, what to buy, how many amenities to add, and so on. Everyone starts with the exact same credit score, which is a great indicator of their general access to credit, and the choices they make in life determine whether they will continue to have this access. With credit, nobody is forced out into the cold, but plenty of people choose to end up there.

The second rule is, incidentally, my approach to both Real Estate Monopoly and regular Monopoly: start the purchase process as soon as you can. I got into real estate early and have bought higher-value homes as I go along. Few people start by buying Park Place; more often they start on Oriental Avenue and work their way up. But the key is to purchase early and stop renting! That’s why I encourage everyone to get the purchasing process started as soon as possible. And understand this: Beginning the purchasing process does not mean you’ll be purchasing soon. For some, they may be ready to by instantly; for others, they may not be ready for a few years. But the key is to start preparing now.

And finally, for rule #3, get a written plan for what you want to do and accomplish for this year. This is your strategy for Real Estate Monopoly and will force you to prioritize your wants, budget your $1,500 in monopoly money, take inventory of the opportunities out there, and ultimately act to accomplish your goals.

This week’s show was stuffed with other parallels and insights. I encourage everyone to listen and re-listen to the show, which, as always, is available in the archives. Over the coming weeks and months, as we enter the spring and summer home-buying seasons, we’ll see hundreds of new players enter the game. While they’re praying for a decent “Chance” card, you’ll be better prepared to make sound, strategic decisions.

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Beyond the Numbers: Owning versus Renting


Beyond the Numbers: Owning versus Renting

Beyond the Numbers: Owning versus Renting

We’re four days into the New Year, and by now almost a quarter of individuals who made New Year’s resolutions have abandoned them. The odds on New Year’s resolutions are in nobody’s favor; just 8% will see them through the year. For most resolutions, I can’t offer any more advice than you might find on a motivational poster: “Hang in there, kitty,” and such. But for finance-related resolutions, I’m your go-to source for structuring, pursuing, and achieving your goals.

2013 was a gratifying year for both my radio show and mortgage company. After crunching the numbers, we found that we had helped over 175 households—most of them listeners of the show—achieve their financial goals by saving them over $450 each month through a lower mortgage interest rate and paying off high-interest debt. And we’re determined to help even more people this year.

Of course, the historically low interest rates of 2013 are going away, and I believe rates will climb throughout 2014 to settle above 5% by 2015. So the benefits of refinancing or paying off debt through a cash-out refinance are steadily diminishing. But there is one class of people who can benefit regardless of where interest rates are: Renters. If Ambrose Bierce’s The Devil’s Dictionary had an entry for “renter” it might read: “An individual who works diligently for many years to achieve his landlord’s financial goals.”

A common misconception about renting is that it’s less expensive than owning a home. Poppycock, I say, and balderdash to boot! Renting, on average, is seldom less expensive than owning, and the Bureau of Labor and Statistics has evidence to support this claim. In 2010, the average cost of home ownership was $8,000 a year; for renting, it was $12,800. Worse is the rate at which renting costs are inflating versus ownership costs: in 1986, the average cost of renting was $6,800 in 2010 dollars versus $7,800 for owning. And the same factors contributing to this inflationary trend—absurd zoning laws, a shrinking middle class, stricter lending standards—will only accelerate over the coming decades.

Further, people tend to confuse costs with opportunity costs. An opportunity cost is what you forfeit when you make a choice. The cost of coffee is $1; the opportunity cost is a newspaper or candy bar or any other item you could have gotten with that dollar. Similarly, the cost of renting is, say, $800 a month. The opportunity cost is equity. By renting instead of owning, you are forfeiting the opportunity to build equity. (Owning, too, has opportunity costs: you forfeit the leisure of having someone else mow your lawn, make any repairs, etc. Everything has both a cost and an opportunity cost.)

The confusion between cost and opportunity cost was on display in an article I read from In it, the author listed six reasons why renting is better than owning. They are:


  1. You never truly own your home. Even after your mortgage is paid off, you still have HOA dues and taxes
  2. If you lose your job, you can lose your home
  3. Buying a home locks you in for as long as you’re in the home
  4. You need 20% down to buy a home (This, by the way, is not true.)
  5. Home ownership is no longer an investment
  6. Homeowners are responsible for the cost of repairs and upgrades, while renters aren’t.


You can check out the archived show for my full reaction to this list. Suffice it to say, most of these items ignore the opportunity cost of renting versus owning. Yes, even after you own your home you will still be liable for HOA dues and property taxes. But renters pay HOA dues and property taxes, too; it’s rolled into the rent. As are the costs of repairs and upgrades. But the biggest divergence in opportunity costs is equity. After thirty years of paying either a mortgage or rent, the owner will have possession of a large asset—their home—while the renter won’t. At its worst, homeownership is merely forced savings with an interest penalty. At its best, the equity builds faster than interest compounds and the homeowner is left with an asset worth much more than he paid for it.

So even if you missed the recent period of historically low interest rates because you were renting, you can still benefit from the far-lower-than-average rates we’ll see this year by buying a home. And if you own your home but aren’t achieving your financial goals because of high-interest debt, it’s still not too late to benefit from a lower rate. And, finally, if your resolution is health, weight, or alcohol related…well, hang in there, kitty.

Real Estate Realities

Let’s be frank. Real estate brings out the stupid in everyone. Six years ago, for the first time in most of our lifetimes, our economy was nearly destroyed because of the dumb practices and stupid decisions of a lot of people. Yes, most of those decisions were made by government officials and bankers. But the worst were made by Main Street consumers.

This isn’t because most people are stupid or incompetent or greedy. It’s because the real estate world has its own reality.

Why isn’t your town-home appreciating at the 7 to 14% rate everyone else is seeing? I don’t know—it’s just a real estate reality.

How come an individual who goes bankrupt and forecloses on a conventional loan can’t find new financing for four years after the face, but the same bankruptcy and foreclosure only limits him to three years on FHA loans and two years on VA loans? I don’t know—it’s just a real estate reality.

Noticing a pattern?

If you have trouble following the rules of real estate, it’s not because you’re stupid. It’s because you’re unfamiliar with the unique and twisted reality of real estate. And we have a word for individuals like that: real-tards!

If that sounds harsh, or you’re not sure how we got to that word, do me a favor and listen to this broadcast over in the archives. For now, we’re just going to run with it. Which takes us to (drum roll please)…

The Top Five Reasons You Might be a Real-tard

Reason #5. If you make double payments on your mortgage just to get ahead, then you lose your job and become late on your mortgage—you just might be a real-tard.

I hear this situation almost weekly from radio callers. Some individual is being overly diligent and throws extra money at their mortgage to pay it off quicker, then loses his job and ends up being delinquent on his loan or foreclosing entirely.

Why is this indicative of a real-tard? Because only a real-tard could be so diligent in one aspect of his life and completely careless in another. If there is any chance you could lose your job in the near-to-medium term, reducing the term on your mortgage through extra payments is not a priority.

4. If you go to consumer credit counseling to consolidate and pay your bills so your credit gets better—you just might be a real-tard.

These services not only leaves you with debt to pay off, but report on your credit like a chapter 13 bankruptcy.

There are alternatives for dealing with bad financial situations and a lot of debt. For example, you can use the equity in your home to pay off your debt. But before doing anything, give me a call, let me walk you through your options, and even if I can’t help you I can put you in touch with people who can.

3. If you use a USAA or Navy Federal Credit Union real estate agent just to get the rebate they offer—you just might be a real-tard.

The only reason to choose one agent over another is to get the best real estate value possible. You shouldn’t choose an agent because they’re your friend or relative or their company offers rebates. You should choose an agent for their competence. And to be frank, that ain’t the agents at USAA or NFCU.

But if the rebate is just that important, many local real estate agents—four that I know personally—offer USAA and NFCU-type rebates.

2. If you feel compelled to initiate, and feel justified in doing, a loan modification just because your neighbor has a lower rate that you—your just might be a real-tard.

Imagine buying a car, then three years later finding you’re neighbor bought the same car for a cheaper price, then going to the dealership and demanding a rebate. Sound stupid? It is! So why is it any less stupid doing this with your mortgage?

Loan modifications are not there to lower your payment just because lower payments are nice. That’s why God made refinances. Loan modifications are drastic options to be used only if you’re suffering severe financial hardship that makes paying your mortgage impossible.

1. If you purchase multiple single wide trailers on separate properties using hard money at 18%–you just might be a real-tard.

Since 2009, nobody lens on single-wide trailers anymore. You have to have a double-wide and good credit to get financing. A single-wide trailer is nothing but a depreciating asset. It makes no sense getting conventional financing to ‘invest’ in these trailers, let alone financing at 18%. But it happens. Frequently. And often to people new to investing in real estate.

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