April 12th, 2011 at 11:20 pm
Just wanted to let you all know that I will be on vacation from April 13 through April 26, so will not be posting on the Blog during that time. I will speak to you when I get back.
April 12th, 2011 at 11:20 pm
As you are all aware, we have been in a market with significant REO activity for a couple of years now. With that experience, we are now able to see the risks and pitfalls that we have to avoid in REO transactions. Specifically, in today’s world it is not uncommon for a borrower who has lost their home to foreclosure to sue the lender over their conduct. The claims typically relate to the foreclosure itself, alleging that notice was incorrect or the sale was somehow deficient. In fact, we have been named in multiple lawsuits against banks with those types of allegations. On the other hand, we have not received any lawsuits arising from the condition of an REO property or the failure to make disclosure in that kind of deal. As a result, we know that it is most important to be very careful during the pre-list phase of an REO deal and, if possible, to stay out of that part of the transaction altogether if possible.
Of course, we know that almost every REO lender expects its listing agent to do a prelist inspection of the house. That inspection is mainly to determine if the property is occupied, if so by who, and whether that person is willing to vacate the property, for cash or otherwise. While we would prefer that the bank do all this work themselves, we know that is not possible so want to remind you of a few things. First, it is alright to view the property from the outside to see if it is occupied. Avoid going inside without the occupant’s permission since that opens you up for a trespass or theft claim. We have had those claims, where the occupant was away at the time of inspection and claims that our agent stole his belongings. As a result, if the property is full of personal belongings, but no one is home, come back a second time before deciding that the home is vacant. Next, if you find the occupant on the property, we understand you need to have contact with them. It is ok to post a Notice on the door or talk to the occupant and find out if they are willing to vacate. However, once they become combative in any way, you need to leave the property and refer them back to the lender. If the borrower or tenant says that they will not leave, or that the foreclosure was in any way improper, do not argue with them. Do not threaten them. Just thank them for their time and leave. Until any issues regarding ownership and possession are resolved, you need to stay out of it and let the bank handle the occupant. You are an agent being hired to sell the property and, while you can go beyond that in simple transactions, you need to avoid conflict. In one of our cases, our agent is alleged to have threatened the borrower if they didn’t vacate the property. Of course, once the borrower put up a fight, the bank backed down and we didn’t even get the listing. But we did get sued. So remember, you can help with prelisting inspections, or negotiate cash for keys, if the process is peaceful. Once the occupant/borrower gets belligerent, it is no longer your problem. It is the bank’s. You back away and wait for the bank to resolve the problem. Then you can do what you do best, sell the property.
As always, please let us know if you have any questions.
April 6th, 2011 at 11:19 pm
We have received a number of calls recently about scams related to lease listings. Apparently, it is not uncommon for our agents to advertise their leases in both the MLS and on Craigslist. The Craigslist entry often results in a phone call from an alleged tenant, stating that he wants to rent the property and oftentimes purchase the furniture or other personal property in the home. Unfortunately, when the check for the tenant’s deposit, etc., arrives it is often a fraud. In one particular instance, the “tenant” claimed he wanted to buy furniture and sent us a check for $12,500. We called the bank to confirm and learned that while the routing number was real, the account number was not. The Federal Express package we received apparently came from Berkeley, California, despite the fact that the tenant told us he was coming from Wisconsin. It is our understanding that these people are trying to accomplish a few things: 1) Some of these criminals want to move into the property and live for free; and 2) Others hope to get control of the property, rent it out and collect rent while paying nothing to our landlord. Regardless, without extra due diligence on our part, our landlord has given possession of her property to a “tenant” but received nothing in return. As a result, please make sure to be extra careful in lease transactions. Be skeptical of your proposed tenant, and make sure to recommend that your landlord double check everything they are told by the tenant. Most importantly, make sure the landlord takes nothing at face value. After all, a little extra investigation up front can save you months of hassle and expense on the back end. As always, feel free to contact us with any questions you may have.
March 30th, 2011 at 11:19 pm
As you know, paragraph 2 of the RPA now relates to the agency disclosures we are required to give to our clients. These disclosures used to be in the back of the contract, but have recently been moved up to page 1. The reason for that move, according to our people at CAR, is that the disclosures were often ignored or filled out incorrectly when they were on page 8. Given how important agency disclosures are in lawsuits against brokers, CAR thought they might be handled better if they are put up front.
With that in mind, what should you know about paragraph 2? First, section B of that clause makes the same substantive disclosures as CAR Form DA, the Disclosure Regarding the Representation of More Than One Buyer or Seller. As a result, and given the fact that this disclosure is also in the Listing Agreement, we no longer need Form DA for our files.
Most Importantly, section C of this paragraph contains the actual disclosures regarding which broker represents which principal. Remember, this is the only place that this disclosure is made. It is not part of the Agency Disclosure form and, with regard to agency, is really the only important disclosure we make. As importantly, this section is one of the first looked at by plaintiff’s lawyers. As you know, our duties to our client are defined, in large part, by who we represent. Therefore, if this section is filled our incorrectly, it may give the wrong impression to the parties and create extra duties on our part. It may also, as a result, give arguments to a plaintiff’s lawyer that they should not have. For example, if we only represent the buyer, but the RPA says otherwise, or is not clear, the seller’s lawyer can argue that we also represented her client and therefore owed the seller a fiduciary duty. Obviously, that type of mistake would have significant liability consequences. So please recognize the reason that CAR moved this paragraph up front. They did it because the paragraph and its disclosures are real important to your clients and their lawyers. And, with that in mind, please take the time to fill it out carefully and correctly. There is no telling how much future time and money you will ultimately be saving yourself. As always, please let us know if you have any questions.
March 29th, 2011 at 11:21 pm
I received a couple of questions while I was out on vacation. Here they are, along with our responses:
Q: (Gina De Leo) My clients made an offer on a condo, April 17. At that time, the MLS stated the HOA dues are $363. We received a counter offer back stating – “Buyer is aware HOA dues have been increased and are now approx. $450 per month.” My buyers feel they are being duped. Is there anything they can do regarding the difference in HOA amounts?
A: Gina, first this question is really a buyer legal matter, which I cannot technically answer. You should, of course, refer your client to their attorney to determine their legal rights. That being said, while technically a “misrepresentation” was made, I think that the correction of the amount in the counter offer, and therefore before your clients were bound to buy the property, means they never really relied on that representation and therefore they would have a weak claim against the seller. In truth, I think your buyer should decide if they are willing to pay the increased HOA and move forward based on that decision. It doesn’t make sense to buy the condo under the assumption that they are somehow going to be reimbursed by the seller. Getting that reimbursement would be a long, difficult and very unpleasant process.
Q: (Dave Finburgh) I have a client who initially asked me to represent him in a ‘short sale’. Today, this same client informed me that his ‘credit cleaner’ has highly recommended that he not put the property on the market and attempt a ‘short sale–’ instead, he has given my client a company who will acquire his property from him at the full value of the outstanding note and will then turn around and re-negotiate the terms and value of the note, either by filing a lawsuit against the lender for loan issues or by some other unknown negotiation.
This client is ecstatic that this avenue is available to him and now wishes to pursue this asap. My advise to this client was that I believed that this scenario was too good to be true and that there most likely was a potential for fraud on the bank to be committed. The client refuses to believe me and wanted a ‘legal’ opinion.
In his opinion, the fact that he is Selling his property to this entity at an agreed upon price and that he has no control or knowledge of what the Buyer will ultimately do with the property puts him in the clear! Would appreciate your thoughts on this.
A: Dave, while I can’t give your client a “legal opinion” I am as skeptical as you are. First, it doesn’t sound like there will actually be a “sale” from him to this company. After all, if that occurred, they would have to negotiate with the lender at the time this transaction closed and any discount would make the deal a short sale. As you describe the transaction, however, the payoff to the lender would be later, after the buyer takes title. That, of course, means that your client would probably be in breach of the due on sale clause in his loan documents. Further, because the bank did not get paid off at the time of his transfer to the buyer does not necessarily mean that any discount taken by the bank would not show up on his record. After all, the loan being discounted is his. So, while there are a lot of facts that we don’t know which would make this proposed transaction clearer, I don’t understand how it would all work to save your client’s credit. I would recommend that your client see his lawyer because, as you said, this whole thing seems “too good to be true.”
