August 3rd, 2012 at 7:07 pm
As you know, we unfortunately live in a world with bad people. As a result, in the past we have had a number of thefts at open houses. Additionally, we have heard of brokers being assaulted when showing a house by themselves. Both things have happened in our markets in the past few months, so I wanted to emphasize the steps you can take to protect yourself and your client’s property.
First, when holding an Open House, please consider taking someone with you. Especially for larger properties, it is impossible for one person to see everyone who enters your property and watch them as they go through the home. At a minimum, you should try to have one person near each exit to make sure no one is taking anything large. Additionally, you should try to accompany visitors as much as possible, walking through the house with them, or keep someone in the bedrooms and master bath where valuables (jewelry) and medications are most often kept.
Furthermore, even when showing the property to an individual buyer, you should try to take someone with you. People are less likely to enter the property illegally if there are multiple people present. Next, lock the door behind you when showing the property and, more importantly, when closing up after the potential buyers have left. While I understand that there is no way to protect against every eventuality, by locking the door when you are in the home alone, you make it harder for a burglar to get in and assault you and may cause them to go look for another target. Any amount of safety and protection is better than doing nothing. Of course, your safety is our first priority, so we want to make sure you think about it and take whatever reasonable steps are available to you.
So, try not to go to a home alone, either for a showing or to hold an Open House. And lock doors whenever possible, especially if you are in a property by yourself. Those things will minimize the chance that you ever encounter an intruder. Thanks
July 25th, 2012 at 7:06 pm
As you know, in today’s market, leases have become a much larger part of our business. It seems that every office I visit is doing more leases than ever and, as a result, has a lot more questions about how to handle those transactions. While most of these questions relate to things like the security deposit and commission, one thing we need to think about is the disclosures that we make to potential tenants. After all, despite the fact that the Civil Code does not require a Transfer Disclosure Statement (“TDS”) in a lease transaction, it seems logical that a prospective tenant would want to know about the physical condition of the property they may move into. With that in mind, what should you do as the agent, and how should you handle this issue.
First, you should always remember that more that 90% of our lawsuits relate to non-disclosure issues and the condition of the subject property. With that truth in mind, it is easy to see that the better our disclosure is, the less likely it is that we or our client gets sued. It is for that reason that we are required to disclose all material facts and we tell you to disclose everything you know. It is also the reason we recommend that you tell your client that making full disclosure is actually like buying insurance against a lawsuit. If you disclose everything, you will probably not get sued. And that is as true in a lease as it is in a sale.
As a result, even though the law does not require it, we should strongly recommend to our landlords that they fill out a TDS and give it to the tenant. If they refuse, which they are within their rights to do, you should still treat the transaction as a sale, do your visual inspection of the property and disclose everything you know to the tenant. In my mind, your disclosures should be exactly what they would have been had the transaction been a sale. That way, you will at least make sure the tenant knows what you know about the property and protect everyone from claims regarding those issues.
Furthermore, without the normal disclosure forms, there are other items or facts that your tenant should know but doesn’t. For example, and as you know, there is a relatively new law requiring carbon monoxide detectors in all homes in California. Since the seller is asked about that issue in the TDS, this disclosure is covered in most sale transactions. In a lease without a TDS, however, it is not. As a result, you need to check on that issue or, at least, give the tenant a Carbon Monoxide Detector Notice (Form CMD) in every deal.
In short, even though the law does not require a TDS in leases, there is information about the property that the tenant needs to know. So do not rely on the Civil Code and ignore disclosure. Doing so is only asking for trouble. Rather, get yourself and your client insurance: Treat the deal like a sale, do your inspection and make full disclosure. That way, everyone will be happy and, when the tenant buys a house, they may hire you because of the good job you did in their lease.
As always, let us know if you have any questions.
July 6th, 2012 at 7:05 pm
As you know, our legal department spends a lot of time communicating with our agents, providing training and information on this blog, in office meetings and in e-mails. At times when we talk to agents, it is hard not to get the feeling that some of you think we are overly cautious, or too grave and alarmist in our warnings. In truth, we work hard to avoid those things, and always do our best to understand your issues and consider our legal advice in light of the realities of your business. However, despite those attempts, it is necessary to warn you against certain conduct or prohibit you from doing certain things because to act otherwise would put you in legal jeopardy. Today I wanted to share a story illustrating what I mean.
Last week I received a News Release from the Department of Real Estate entitled “Real Estate Agent Pleads Guilty to Conspiracy to Commit Real Estate Fraud in Connection with Short Sale Transaction.” In the Release, the DRE tells of a licensee who handled two short sales where the bank stated that the commission could not exceed 7%. Despite that limitation, the licensee required the buyers to pay a “short sale negotiation fee” that was not disclosed to the lender. That fee, when combined with the commission actually paid, exceeded 7%. As a result, in his guilty plea, the licensee admitted that he “fraudulently collected two short sale fees to which he was not lawfully entitled…” As part of his sentence, the agent surrendered his real estate license, served 90 days in jail, paid restitution of approximately $25,000 and was placed on 3 years probation.
Of course, as you all know, we have been saying for years that nothing can happen in a short sale that is not disclosed to and approved by the lender and doesn’t appear on the HUD. We have also consistently told you that since short sale negotiation is licensed activity, any “short sale fee” is really a commission and must be handled as such, with a commission agreement, an agency disclosure, etc. In other words, we have told you that the conduct which resulted in this criminal prosecution should never occur. And, of course, we tell you those things to keep you away from the DRE and District Attorney and make sure you can keep your license and keep selling real estate. Please remember that and that, at all times, we have your best interests at heart.
As always, please contact us with any questions you may have
June 29th, 2012 at 7:05 pm
I spent yesterday in a commission claim mediation that reminded me of one of the great truths that I consistently share with you: YOUR CLIENTS WILL LIE if it is their best interests to do so. In this case, we had a listing agreement that ran from October, 2010 through December 31, 2011. In March, 2011, our clients told us that they were trying to refinance the property and asked us to give them a “cancellation” of the listing to provide to their lender. The sellers assured us that the cancellation was merely for the refi and that they would put the property back on the market as soon as the loan closed. (As an aside, we should not do this and help our client lie to their lender.) In an attempt to help our client, we agreed and gave them the cancellation. Of course, after failing to get a new loan, the client never put the house back on the market and instead sold the property themselves during the term of our “cancelled” listing.
At mediation yesterday, the sellers claimed that the cancellation had nothing to do with a loan and was instead a real cancellation. They claimed they never promised to put the house back on the market with us and that they always intended the cancellation to be final and forever. Our agents were angry and surprised and could not believe, despite our constant warnings, that the client would lie like this.
That being said, in the course of the mediation, and because the sellers lied, the question became what we did after March to show that we believed the listing was still valid and that we had been promised that the house would still be sold. Of course, our agents described many conversations with the sellers, and the excuses they gave us to keep from marketing the property. When the sellers denied that these conversations ever took place, the mediator asked us for the obvious thing: writings to show what we did. Where were the e-mails, he said, that showed that we acted consistently with our story? Where were the e-mails or writings asking to market the property after the refi was done? Where was the proof that we contacted the seller like an agent with a listing would do? In response, our agents found only two e-mails from March through December. They claimed to have had many phone conversations in that period, but only had two writings. When the seller lied and denied these conversations, unfortunately, we were left in a liar’s contest with the seller, had a weaker legal position than we would have otherwise had and probably got less money than we would have otherwise received.
So, what is the lesson of this story? In truth, there are two lessons. First, as we tell you all the time, when you get the feeling that you may have a problem with a client or transaction, begin to put things in writing. E-mail has actually made this very easy for us. After talking to your client about the issue you are concerned with, confirm it in an e-mail. It is a very non-threatening way to create a written record. You don’t need a signature or have to confront the client in person. You just send a casual e-mail. And, of course, if a problem arises in the future, and your client lies, you have the writing to establish the truth. Remember, in a liar’s contest, the party with a writing from the time of the deal will always win. So please, protect yourself and your commissions by putting things in writing.
Next, with regard to this specific story, we would first like you to avoid assisting a client when they ask for this type of cancellation. However, if you have no choice, and your manager has told you to cooperate, use the Cancellation of Listing Form (COL) and check paragraph no. 1. That way, if the seller then sells the house during our listing period, we are expressly owed a commission. As always, let us know if you have any questions.
June 22nd, 2012 at 7:03 pm
In April of this year, the Federal Housing Finance Agency (FHFA) set out new guidelines to Fannie Mae and Freddie Mac in order to streamline short sales in the hopes of helping borrowers and communities hard hit by the housing market decline. These guidelines take effect in June.
The FHFA has directed Fannie Mae and Freddie Mac to develop enhanced and aligned strategies for facilitating short sales, deeds-in-lieu and deeds-for-lease in order to help more homeowners avoid foreclosure. The changes coming in June set out new timelines for actions by mortgage servicers with regard to short sales.
The new requirements require a mortgage servicer to:
1. Acknowledge receipt of a short sale offer within 3 day business days
2. Notify a borrower within five business days if the information packet provided by the borrower is incomplete.
3. Review and respond to requests for short sales within 30 calendar days from receipt of a short sale offer.
4. Provide weekly status updates to the borrower if the short sale offer is still under review after 30 calendar days
5. Make and communicate final decision to the borrower within 60 calendar days of receipt of the offer and complete borrower response package.
It is anticipated that additional enhancements regarding borrower eligibility and evaluation, documentation simplification, property valuation, fraud mitigation, payments to subordinate lien holders, and mortgage insurance will be out by the end of 2012.
As always, feel free to contact us with any questions you may have.
