July 1st, 2011 at 11:35 pm
As most of you know, the limits for conforming loans will change on October 1, 2011, going down from $729,000 to $625,000. Any loan that does not close by September 30 will be governed by the new loan limits, with no exceptions or extensions. This change leads me to two important points. First, if you have a loan/escrow in process where the necessary loan will be conforming under the soon expiring limit, make sure to do everything possible to get that loan approved and ready as early as possible. Most loan problems, like unknown liens, etc, can be solved, but those solutions take time. So give yourself as much time as possible before September 30. Take your client to HSL as early as you can, so they can find out what problems might exist and can solve them. Remember some clients will not be able to get a loan after that date. So work early, avoid those problems and get the loan absolutely ready as early as possible.
Next, use this as an opportunity to get your hesitant buyers to move on a property. Let them understand that a loan above $625,500 will be much harder to get after October 1. Make them understand that until then, they can get much more house for their money. This change should make many of our buyers more serious and allow us to find them a house to buy immediately.
As always, let us know if you have any questions.
June 27th, 2011 at 11:34 pm
As you know, in this market we have seen an increase in our lease business. People are losing their homes in foreclosure or going through short sales, and do not have the credit or money to buy a new property. As a result, there are many more leases in our market place. In that context, we have noticed one issue with our practice that we wanted to address. In most leases where we represent the landlord, we get a Lease Listing Agreement signed. In that Agreement, paragraph 3 deals with compensation and paragraph A(1) covers fixed term leases. Paragraph A(1)(a) is the clause where we should place the percentage commission rate, such as 6% “of the total rent for the term specified…” Our problems have arisen in paragraph A(1)(b), which relates to renewal commissions and provides as follows: “Owner agrees to pay Broker additional compensation of ___________ if a fixed term lease is executed and is extended or renewed.” What we have seen on multiple occasions is that the blank in that clause is not filled in. Of course, in all those cases the lease we originally negotiated was renewed, and we wanted our renewal commission. Unfortunately, given the fact that this is a CAR contract, and we are deemed the experts on the document, a blank where the compensation term is supposed to be will be interpreted against us. In other words, if we do not fill in the blank in that paragraph, we are most likely waiving any renewal commission. The percentage in paragraph (a) does NOT automatically get read into paragraph (b). As a result, please make sure you fill in both blanks, the first relating to a commission for the original lease, and the second for a renewal commission. If you don’t, you will unnecessarily be waiving commission money that you have earned.
As always, please feel free to contact us with any questions you may have.
June 20th, 2011 at 11:33 pm
As you all know, one of the first things an agent needs to do before taking a listing is pull a property profile and check the property’s title. After all, it does no good to get a listing agreement signed if the person signing does not own the subject property and therefore cannot sell it. Most of the time, this is an easy process: the person on title is the person you are dealing with. It is when that is not the case that complications arise and your due diligence becomes more extensive. Of course, if the title and your contact do not match, the first thing you need to do is talk to your contact and see why title is in someone else’s name. Normally, we hear that our client is handling the transaction for their parent or sibling. While that may be true, legally it makes no difference. Without the owner’s signature, or an enforceable power of attorney, the child cannot act for their parent. So, if that is the explanation you hear, ask for the power of attorney and give it to your Cal Title rep to make sure they will insure title based on that document. Again, in most instances, this will be all you need to do.
However, in today’s world of short sales and foreclosures, it is not unusual that the story we hear is much more complicated than above. For example, in one case we represented a client who wanted to sell a short sale, and when we checked title we saw a second owner on title for only 1%. That owner was in bankruptcy and, apparently, he was put on title to stop a foreclosure of the subject property. What that move also did, however, was give that person some control over the sale of the property. After all, since his signature was necessary to sell the property, we needed to determine what he would want to sign a Grant Deed at close of escrow. Obviously, this is something that cannot be ignored and must be dealt with. You will need to contact that owner, find out if they will sign a grant deed, have them actually do so, or perhaps you will need to step away from the property.
In another case, we were told by our contact that he was a hard money lender on the property, had “foreclosed” on it, and had a power of attorney from the prior owner authorizing its sale. When our agent checked title and found it in the name of a woman, we were told that the client always takes title in the name of his “sister.” With that explanation, our agents listed the property and received multiple offers, only to find that title was much more complicated than that. Apparently, when Cal Title reviewed the chain of title they learned that (1) the original foreclosure deed had the wrong legal description and was therefore rescindable; and (2) After the foreclosure, our “client” got numerous additional hard money loans against the property and recorded those Deeds of Trust as “accommodation recordings.” According to Cal Title, accommodation recordings are uninsured and therefore have to be dealt with before the property can be sold. The lender either needs to go back and get title insurance for the recording, or clear it in some other way. Regardless, these recordings and the foreclosure problems created complications making the sale of our listing significantly more difficult.
In short, please remember a couple of things. First, always check title before taking a listing. You need the right signatures to sell a home. Next, don’t just accept your contact’s explanation for a discrepancy. The contact may not be telling you truth about what the property’s owner is saying, but you need either a power of attorney or the actual seller’s signature. Next, be aware that “accommodation recordings” are uninsured and may make your deal very hard to close. And, finally, remember to get your manager and Cal Title involved as these issues become more complicated. Ultimately, the question on title issues is whether your deal can be insured, so Cal Title is your go to resource.
As always, please feel free to contact us with any questions you may have.
June 15th, 2011 at 11:32 pm
Question by George Salizar
While presenting a potential tenant I’ve found a property available that was in KB 13 and had an NOD (both disclosed by Owner and Agent).The potential tenant asked me what could be the potential downside to this situation if they were to rent the place. The place is a Condo and the building is located in Los Angeles. More specifically, the tenant wanted to know if the property were to be taken back by the lender or sold in auction, does the new owner owes the completion of the lease terms to the tenant? And how about the deposit if the deposit is held in Escrow?
Answer:
Do not place your client/tenant in a condo that is at risk of foreclosure WITHOUT obtaining written disclosures and acknowledgement by the tenant of the perils of renting a distressed property. There are many reasons a tenant should not enter into a lease such as this one, including but not limited to: (1) When the Bank obtains title, the lease is no longer enforceable, although the Bank must give the tenant notice (typically 90 days to vacate) they are not required to honor the lease, (2) The tenant’s deposit is almost always at risk, (3) The tenant may be required through an Assignment of Rent to pay rent directly to the new owner/Bank, and the annoyance of the posting of notices on the property and multiple solicitations from vendors, credit companies etc… Bottom line, the tenant should strongly be discouraged from entering into a lease on a distressed property.
Thank you George.
June 6th, 2011 at 11:30 pm
Q: (Rita Erangey) I wrote an offer on a short sale. Despite repeated attempts to speak with the listing agent, I was only directed to an assistant who told me my offer would be presented on at least two occasions. Finally, in speaking with the so called office manager, I was informed my offer had been sent to the bank along with three others for the bank to review. I asked for a copy of my fully executed contract and was told that I would receive it the next day. One week later and nothing. At this point I do not know the disposition of my offer and have asked my manager to call the listing office on my behalf. Any suggestions?
A: Rita, I feel your pain. This problem is very common in short sales. Unfortunately, there is not much you can do besides get your manager involved and continue to call and e-mail the listing agent. Sometimes, in this context, the “squeaky wheel” does get the best results. Of course, it would be inappropriate to go directly to the bank, since the seller has not given you permission to talk to their lender. So, keep calling and have your manager try. Of all the things I have seen, the manager to manager communication seems to be the most effective. Sorry I can’t give you a better answer.
Q: (Mert Guin) If a buyer defaults on a short sale after removing contingencies, who gets the deposit? Seller, bank or broker?
A: Mert, in this context, the short sale is no different than a regular deal. The bank’s involvement only relates to their acceptance of a certain payoff at close of escrow in return for a reconveyance of their deed of trust. In your case, since the buyer breached, there is no close of escrow or payoff and the seller’s lender is therefore uninvolved. As a result, the deposit goes to the seller like in a normal equity sale.
Q: (Phil Morris) I just got a call from a client who wants to short sale her condo which has been a rental. The tenant just vacated and I am about to take the listing. Seller informed me that she has met with an attorney and are about to file for bankruptcy. How will the seller’s bankruptcy affect our listing and ability to sell the condo?
A: Phil, a bankruptcy totally changes the sale of a property. Even if you have a listing, typically the Bankruptcy Court needs to approve both the listing agreement itself and the entire concept of selling the property. Additionally, any purchase agreement will need to be approved by the Court. As a result, if you are at the beginning of this process, I would stop and have the seller consult with her attorney to decide the best way to proceed. The attorney may want to get Court approval before you do anything. Of course, you should follow the attorney’s instructions when they are received and contact us if you have any questions.
