Agency


Dealing With REO as “Asset Managers” in Nevada, as of October 1, 2011.

SB 314

http://www.leg.state.nv.us/Session/76th2011/Bills/SB/SB314_EN.pdf

For those salespersons that have REO clients, this new statute is fun. Look for a Nevada Real Estate Division update very soon.  Here is a sneak preview.

Short Version, to get ahead of the curb get your property management certificate by attending this coursehttp://americanaacademy.com/Default.aspx?pageId=1141702  A list of all schools that provide property management certificate is located here http://red.state.nv.us/forms/502.pdf.  That should render you exempt from most of these new rules.  But as I say above, stay tuned, the real direction from the NRED is on the way.

Long Version, Let’s discuss…

1.) what is an asset manager?

2.) why you should get your Property Management Permit,

3.) what you can and cannot do for your clients? and

4.) the guidance on how to handle abandoned personal property.

What is an Asset Manager and does it apply to me?

An “Asset management company” means a person, for compensation and pursuant to a contractual agreement,
engages in asset management on behalf of a bank.

An “Asset manager” means a person engaged in the business of asset management who is an independent contractor of an asset
management company.

“Asset management” means oversee or direct actions (preserve, restore or improve the value and to lessen the risk of damage to the property) taken to maintain real property on behalf of a client before or in preparation for sale of real property owned by the client pursuant to a foreclosure sale. (This definition would also include any person that buys at a trustee sale, but the definition of client singles out only banks.  Therefore listing homes for trustee sale flippers would not appear to be asset management.)

The statute does not apply to a person or broker who has a current permit to engage in property management pursuant to chapter
645 of NRS.  However, to be exempt the provisions concerning asset management services (see definition above) must be
included in the property management agreement entered into pursuant to NRS 645.6056.  Application will still be required, a fee, etc., reporting and mandatory errors and omissions insurance requirements.

Therefore, if you are directing actions to preserve, restore or improve the value and to lessen the risk of damage to the property which is owned by a client pursuant to a foreclosure sale, you apparently are “asset managing.”

What am I allowed to do?

As an asset manager you are allowed to perform the following on foreclosed properties. (Although the rule says in foreclosure
and it defines “in foreclosure” correctly. Obviously, they meant “after foreclosure” as the lender has no rights to
entre the property until the completed foreclosure sale.  So we will ignore that issue.)

  1. Securing real property in foreclosure once it has been determined to be abandoned and all notice provisions required by law have been complied with;  Providing maintenance for real property, including
    landscape and pool maintenance;
  2. Cleaning the interior or exterior of real property;
  3. Providing repair or improvements for real property;
  4. Removing trash and debris from real property and the surrounding property.
  5. Dispose of personal property abandoned on the premises of a residence in foreclosure or left on the premises after the
    eviction of a homeowner or a tenant of a homeowner only in the following manner:

30 Days – You shall provide a safe storage of the property for 30 days.  You are liable for your negligence
in storing the property.

Disposal – 14 days Notice.  Prior to disposal you must notify the homeowner/tenant in writing of your intention
to dispose of the property and allow 14 days to elapse. It must be mailed to the homeowner/tenant at the present address of the homeowner/tenant and, if that address is unknown, then at the last known address.  After the expiration of the 30-day period, you may dispose of the property.

  • Vehicles must be disposed of in the manner provided in chapter 487 of NRS for abandoned vehicles.

 

What am I not allowed to do?

As an asset manager you are not allowed to perform on foreclosed properties

  1. Evict a real property owner or a tenant of a real property owner until after the time during which the real property owner
    may redeem the real property in foreclosure.
  2. Perform any repair, maintenance or renovation on the real property in foreclosure:* Which is required to be performed by a person holding a license unless such repair, maintenance or renovation is done by a person licensed in this State to perform such repair, maintenance or renovation; or

    * Which requires a permit or inspection by any governmental entity in this State, unless the permit is first obtained and the inspection is performed after completion.

    * Receive, collect, hold or manage any money which belongs to another person, including, without limitation.

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Winter 2011

Winter 2011

UPDATE to the Advance Fee Discussion
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See my earlier blogs on Advance Fees
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Effective December 29, 2010 the Federal Trade Commission (FTC) issued the Final Rule concerning the Mortgage Assistance Relief Services which bars the collection of advance fees to work on behalf of consumers to help them obtain modifications to the terms of mortgage loans or to avoid foreclosure on those loans.
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Does this apply to real estate agents in Nevada?  I do not think so.
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Persons holdings NRS 645 real estate licenses would not appear to be covered by the FTC ruling, taking into consideration the October 2009 NRED position paper.  Provided the Nevada real estate agent is only performing real estate activities and not loan modifications.  Real estate activities are, “assisting, soliciting or negotiating the sale, purchase, option, rental or lease of real property.”  Per the NRED, there can be no advance fees paid to a real estate broker except in accordance with NRS 645.322 – 324, there may be no separate or distinct payment or compensation for performance of activities defined as loan modification, foreclosure consulting or  providing of covered services outside of a real transaction, and should the transaction not close and thus no commission is paid, no separate or other payment is allowed for services that are defined as loan modification, foreclosure consulting or providing covered services.  An advance fee listing in Nevada can only be, “for assisting, soliciting or negotiating the sale, purchase, option, rental or lease of real property, or the sale, exchange, option or purchase of a business…” and “means a fee contracted for … an advance fee listing …to sell …property, issued for the purpose of promoting the sale … of … real estate … to … real estate brokers or salespersons…

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What is not clear in Nevada is what the Advance Fee accounting should look like per NRS 645.322.  For example with
trust accounts in Nevada per NRS 645.310, NAC 645.806, the Nevada Real Estate Division issued form 546, the Trust Account Reconciliation.  NRED also issued Trust Fund Accounting And Record Keeping For Nevada Brokers.
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As stated above, an advance fee can be paid to a real estate broker provided it is in accordance with NRS 645.322 – 324.  The FTC’s 12.29.2010 Rule addresses only mortgage lenders.  The California Department of Real estate on October 11, 2009 ruled that advance fees for Loan Modification and/or similar services are unlawful unless a “no objection” letter has been issued.  Nevada does not yet have such a ruling.  On December 8, 2010 my office asked of the Honorable Nevada Attorney General and Administrator of the Nevada Real Estate Division to issue a position similar to the October 15, 2009 Position Paper further clarifying the NRED’s position as to advanced fees.  Specifically clarifying what the accounting should entail, if the Prudential, Americana Group, REALTORS® suggested form is approved and finally if there is interest in setting up a task force to address this issue, I am willing to volunteer my time to attempt to create a form that can assist the Nevada real estate licensee community to address this issue and/or to assist in preparing the position paper.
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I will keep you posted.
Any comments are appreciated.
Darren J. Welsh cell 702 245 1787 Phone: (702) 733-9310   Cell (702) 245 1787 Fax: (702) 862-4576

Is this half full?

ADVANCE FEES

UPDATE – Notice on December 1, 2010 the Federal Trade Commission issued the Final Rule concerning the Mortgage Assistance Relief Services which bans advanced fees

Short Sales

Can I charge an advanced real estate commission on a short sale?  Yes.

Advance Fee Listings/Buyer Broker Agreements.

NRS 645.004  “Advance fee listing” declares that an advance fee listing is a brokerage agreement promoting the sale of real estate for an advance fee.  An advance fee can be paid to a real estate broker provided it is in accordance with NRS 645.322333324.  All commission payments still go through the broker, Prudential, Americana Group, REALTORS®, in accordance with NRS 645.280.  There may be no separate or distinct payment or compensation for performance of activities defined as loan modification, foreclosure consulting or providing of covered services outside of a real estate transaction.  Remember, a real estate transaction is, “assisting, soliciting or negotiating the sale, purchase, option, rental or lease of real property, or the sale, exchange, option or purchase of a business,” per NRS 645.005.

Can I keep the commission if the short sale does not close?  DEPENDS.  The Nevada Real Estate Division has verbally expressed a desire that funds accepted during the Short Sale processs, should not be retained, but returned.  My interpretation of the law is that an “accounting” must occur and then the monies can be retained.  I have asked the NRED to comment as of December 8, 2010.

Accounting of use of advance fee collected.

If you charge an advance fee you must, within 3 months after the charge or collection, furnish to your client an accounting of the use of that money.

Can I charge a flat fee and a percentage together at the same time?  Yes.

Federal law instructs that a real estate broker’s fees may only be charged if the broker is engaged independently and the fees are reasonable and customary. See HUD Handbook 4155.1 for additional information.  All charges to sellers and buyers by real estate brokers and agents for their services in listing and selling the home (“commission”) must be disclosed on Line 700 of the HUD-1 settlement statement.  Although RESPA regulates how the commission is disclosed, RESPA does not prescribe how a real estate broker or real estate agent determines the charge for his or her services in any contract with a seller or buyer.  The commission may be determined using a flat fee, a percentage of the sale price, or a combination of those methods.  See U.S. Department of Housing and Urban Development. January 22, 2010 Letter.

Is there an advanced fee listing form from the NRED?  Not yet.

Nevada law says that the Nevada Real Estate Division may require a form of brokerage agreements which include provisions for the payment of advance fees to be used.  However, this form has not been written by the NRED.  So, of course, I wrote one.  You can get a copy from your managers as of December 7, 2010.  It will be on Ameriforms and Zip on week of December December 13, 2010.

This is part of my short sale series listed below in alphabetical order:

7 Tips for Short Sale

Addendum to Short Sale Listing

Charging for negotiating short sales/Negotiators

Deficiency Judgments Nevada

Foreclosure and the One Action Rule in Nevada

HAMP the Federal Shortsale Program coming April 2010

Income Taxes & Foreclosures/Shortsales

Lender Short Sale Approval Addendum

Nevada Supreme Court Mandatory Mediation Program and How it Affects Shortsale

Nevada Short Sale Documents

Seller Being Released From Liability Language in Shortsale

Seller Liability After Short Sale

Short Sale Addendum to Purchase Agreement October 2010

Short Sale Wallet Size Answer Sheet

IRS PUBLICATIONS shortsales/foreclosures:

IRS publication on how 1099 taxes are calculated, exempt, etc.

IRS explanation as to taxes resulting from Foreclosure and Debt Cancellation.

Ten Facts about Mortgage Debt Forgiveness

Questions?  Call me. Darren Welsh, Esq. 702 245 1787  email me darren@dwelshlaw.com or drop me a TPS by filling out this form.

Charging for negotiating short sales/Negotiators

As review you can see my blog from March 5, 2010 Short Sale Third Party Coordinators.

Here are some common questions and answers to these questions.

“What can you charge as a Nevada licensee in a short sale?”

ANSWER – A commission.  Period.  You cannot charge negotiating fee, a handling fee, only a commission.  As a Nevada real estate licensee you can earn a real estate commission under NRS 645 for selling real estate.  Specifically the law states that selling real estate means, “… sells, … or negotiates … the sale, … purchase, rental or lease of [real estate] …. the collection of an advance fee … in connection with … the sale … of …. real estate.”  That’s NRS 645.030.  Under NRS 645.323 you have to have a Nevada real estate license, to “accept an advance fee,” for selling.

“But what about all the loan negotiating I do in a short sale, is that OK?”

ANSWER – Well, first, remember, the only thing you can charge is a commission.  You can negotiate with the lender during the Short Sale phase, per the NRED, provided you follow certain rules.  As noted in the Nevada Real Estate Division Position Regarding Short Sales negotiations there may be no “separate or distinct payment or compensation for performance of activities defined as loan modification, … outside of a real estate transaction.”  Activities that by definition might include aspects of “Loan Modification Consultant,” “Foreclosure Consultant,” or “Provider of Covered Services” must be part of a real estate transaction and all commission payments must still go through the broker in accordance with NRS 645.280.  In other words, you can charge a commission for selling real estate and selling a short sale is real estate, so it’s OK.  But you may not offer as an independent menu choice to provide services defined as loan modification or foreclosure consultation.

“And what about getting a negotiating fee?”

ANSWER – No. Only commission.

“But short sales are time consuming, I need to charge extra money.”

ANSWER – Fine.  Charge a larger commission, but it is commission, must be disclosed as commission and paid as commission.  Do not change its name to hide what it is.  You have a real estate license, you have the privilege to charge a commission.  That is it.

“And what about getting paid an advance fee?”

ANSWER – It’s OK, but there can be no advance fees paid to a real estate broker except in accordance with NRS 645.322 – 324 and do not forget to follow all of the requirements of NAC 645.675 which states that the Advance Fee Agreement must declare that, “a full refund will be made to the customer if the services for which the advance fee is being received are not substantially or materially provided to the customer.”

“But what if I set up a separate company and charge for ‘assisting’ in the transaction?”

ANSWER – I would ask back, “if it’s a real business, do you have a business license?”  If you say, “yes I do have a business license.”  Well, “what services are you providing?”  NRS 645F says you are a loan modification consultant if you offer to assist a homeowner in changing the loan amount.  If you negotiate the settlement of the loan down from its current outstanding principal amount, it would appear you are changing the loan amount.  I do not see a legitimate way that such a business can charge a ‘fee’ in a real estate transaction without having an NRS 645F license.  The application for a NRS 645F license is located here.

“Can’t the Seller hire a Negotiating Company?”

ANSWER – Of course.  But, all loan negotiating companies in Nevada need to be licensed under NRS 645F (lawyers doing the actual negotiating are exempt.)  Here is the list of every single licensed loan modification company in Nevada.  There are thirty nine (39).  If you don’t see the company your Seller wants to use…then they are not licensed to conduct loan negotiations in Nevada.  Remember, attorneys are exempt from the provisions of Chapter 645F.  You can confirm if an attorney is licensed in Nevada by searching the individual’s name on the State Bar of Nevada’s Web site through the attorney search option.

“Where should the Negotiating Fee get placed on the HUD1?”

It does not matter what line it is shown on, either in the commission section or the other costs section but not hidden on page 6, for example, of the HUD1.  Remember also, a Listing or Selling Agent cannot typically be the “negotiator” as they can only charge a commission.  If an agent sets up an LLC to divert these negotiation fees they must be licensed under NRS 645F.  A legitimate negotiating company is easily fully disclosed on the HUD1 and they should be able to produce their license (or you can look them up).

Working with Short Sale Third Party Coordinators (Vendor Assistants)

NRS 645F and NRS 645

 

If you are working with a short sale third party coordinator to assist you in short sale listings here are two things to consider:

  • Licensed Real Estate Facilitator/Vendors – Have the licensed real estate agent assisting you sign the Duties Owed By A Nevada Real Estate Licensee  indicating that that they are also representing the Seller.  This renders the scenario in compliance with the applicable laws.  Working on a loan modification, which is what a short sale is, requires a Loan modification consultant license.    A Nevada real estate licensee is exempt from this law and has been since 2007.   However, to be exempt you must do the loan modification as a part of a real estate Transaction.”  The real estate licensee assisting you, after signing the Duties Owed, can have access to the entire real estate transaction folder.  If the licensees are from separate brokerages, each company will have to retain a copy of the transaction folder 5 years

 

  • Third Party Companies – If it is not a real estate licensee as above described, ensure your client is engaged directly with the company.  Be it an attorney such as Black and Lobello , Stout Law Firm  or simply a secretarial styled service, make sure your client is aware this service is being used and best case scenario have your client sign an agreement directly with the third party facilitator allowing for permission for you to have access to confidential information and to share confidential information amongst you and the company.  Whether or not these companies require special permits, licenses etc. is the responsibility of that particular company if your client is in direct contract with them.  But if you are using these companies, paying them yourself, i.e. using them as an assistant you must not share confidential information with them without your client’s written approval and your liability grows as to whether or not these companies should be licensed.

This is part of my short sale series listed below in alphabetical order:

7 Tips for Short Sale

Addendum to Short Sale Listing

Deficiency Judgments Nevada

Foreclosure and the One Action Rule in Nevada

HAMP the Federal Shortsale Program coming April 2010

Income Taxes & Foreclosures/Shortsales

Nevada Supreme Court Mandatory Mediation Program and How it Affects Shortsale

Nevada Short Sale Documents

Seller Being Released From Liability Language in Shortsale

Shortsale Wallet Size Answer Sheet

IRS PUBLICATIONS shortsales/foreclosures:

IRS publication on how 1099 taxes are calculated, exempt, etc.

IRS explanation as to taxes resulting from Foreclosure and Debt Cancellation. 

halloween.jpg Happy Halloween

There is a New Duties Owed Form.  As you know the pursuant to NRS 645.193 our Nevada Real Estate Division prepares the form known as the “DUTIES OWED BY A NEVADA REAL ESTATE LICENSEE.”  This form is not a contract for services nor an agreement to pay compensation, it is a consumer notice setting forth certain duties owed by Nevada real estate licensees. 

The changes are very slight but the new form is required as of October 25, 2007.  If you have a transaction/listing/sale that began prior to October 25, 2007 it is not necessary to go back and have a new form signed.  The new form is located on Prudential, Americana Group, REALTORS®’s website on Ameriforms at Duties Owed and on the Nevada Real Estate Divisions site at http://www.red.state.nv.us/Forms/525.pdf or for you convenience right here  Duties Owed.

For those that just can’t take the suspense the old version declared:

A Nevada real estate licensee shall:

….

3. Promote the interest of the client by:

a. Seeking a sale, lease or property at the price and terms stated in the brokerage agreement or at a price acceptable to the client.

b. Presenting all offers made to, or by the client as soon as practicable.

c. Disclosing to the client material facts of which the licensee has knowledge concerning the real estate transaction.

d. Advising the client to obtain advice from an expert relating to matters which are beyond the expertise of the licensee.

e. Accounting to the client for all money and property the licensee receives in which the client may have an interest.

The NEW version states:

A Nevada real estate licensee shall:

….

3. Seek a sale, purchase, option, rental or lease of real property at the price and terms stated in the brokerage agreement or at a price acceptable to the client;

4. Present all offers made to, or by the client as soon as practicable, unless the client chooses to waive the duty of the licensee to present all offers and signs a waiver of the duty on a form on a form prescribed by the Division;

5. Disclose to the client material facts of which the licensee has knowledge concerning the real estate transaction;

6. Advise the client to obtain advice from an expert relating to matters which are beyond the expertise of the licensee; and

7. Account to the client for all money and property the licensee receives in which the client may have an interest.

argentina1-161.jpg

We have all dealt with a transaction where the other brokerage declared, “just call my client directly.”  This option has been confusing as to how we should handle this situation.  Most times, when told to do so by the other brokerage, contacting the other principal directly was in your client’s best interest, especially if it is a simple item.  But sometimes you are actually, “negotiating” a portion of the transaction.  My advice to our salespersons at Prudential, Americana Group, REALTORS® has always been to get the permission from the other broker in writing.  I have prevailed in grievances as a result of Prudential, Americana Group, REALTORS® having the permission to speak directly to the other principal.  Well, we finally have a clear answer. 

First the Nevada legislature made direct communication a clear violation. 

As of July 1, 2007 it is now clear that negotiating or communicating with a client you know has a brokerage agreement in force is a violation of NRS 645.635.{[1]} 

Then the Nevada legislature clarified how to properly communicate directly when the principal receiving direct communication grants permission.   

When a represented client ‘chooses to waive the duty of the licensee to present all offers and signs a waiver of the duty on a form prescribed by the Division,” you are allowed to contact this principal directly.{[2]}  This form is not created yet, but I will keep you posted.  This is a good rule and allows clearer direction for all of us.  Keep in mind there are a number of sophisticated Sellers out there that want to make use of our Multiple Listing Service, thorough contemporary well prepared forms and timely material defect information affecting the Las Vegas Valley (read All Inclusive written by yours truly{[3]}) but would rather conduct all negotiations directly.  You now, as a potential selling (buyer’s) salesperson, can conduct these negotiations.   

This created and allowed in part by another clarification wherein your duty as a Prudential, Americana Group, REALTORS® salesperson to your client is that of ‘statutory,’ and not fiduciary.{See [4] Below} Further, such a relationship is not created and therefore you are not representing a client when the only relationship you have with the principal is solely from negotiations or communications with a client of another broker with the written permission of the broker in the currently non existing form above described.  That form is now available at http://www.red.state.nv.us/forms/637.pdf.  How’s that?  I explained away an issue with a new form; at least, as Aldo Martinez our esteemed Manager of the Southwest location {[5]} would say, I didn’t segway into my travels in Africa.


{1} http://www.leg.state.nv.us/NRs/NRS-645.html#NRS645Sec635

{2} http://www.leg.state.nv.us/NRs/NRS-645.html#NRS645Sec254

{3} https://americenter.americanagrp.com/info/AmeriHelp/Net%20Forms/AllInclusiveDisclosure.htm

{4} Agency as of July 1, 2007 means, “a relationship between a principal and an agent arising out of a brokerage agreement whereby the agent is engaged to do certain acts of behalf of the principal in dealings with a third party.” 

{5} http://americanagroup.net/offices.htm?office_id=304667

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