Contracts


Nevada Case Confirms Tail Periods Are Valid.

Easton Business Opportunities, Inc. v. Town Executive Suites-Eastern Marketplace, LLC

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What is a tail period?  In an exclusive right-to-sell brokerage agreement the tail period is a certain amount of time after the final termination of the listing period.  During this “tail” or extension period if the property is sold to anyone with whom the listing broker has had negotiations or to whom the property was shown prior to the final termination, a commission is owed.  The duty to pay a commission ends typically if the seller enters into a valid brokerage listing Agreement with another licensed real estate broker after the final termination of listing agreement.

The dispute in Easton Business Opportunities was a commission claimed under an exclusive right-to-sell brokerage agreement.  The purchaser viewed the property during the listing period and purchased the property directly from the seller during the tail period.  The Seller refused to pay the commission.

TRIAL – BROKER LOSES

The case went to trial in the Eighth Judicial District Court of Nevada, County of Clark.  The District Court ruled in favor of the seller and against the broker.  The District Court declared that the broker failed to give the seller a list of the people to whom the broker had shown the property at the end of the listing period.  Therefore no commission was owed.

APPEAL – BROKER WINS

On the May 6, 2010 in Easton Business Opportunities, Inc. v. Town Executive Suites-Eastern Marketplace, LLC the Nevada Supreme Court reversed and held in favor of the broker and against the seller.  The Nevada Supreme Court said, “ we are loath to impose such an obligation.”  So there is not an obligation for a broker to give a ‘list’ to a seller in Nevada at the term of the listing agreement of potential purchasers.  The Nevada Supreme Court placed liability on the seller for the commission if the seller sold during the extension period to a buyer to whom the broker had shown the property or negotiated with-in other words, it allocated the risk of being wrong about the buyer being commission-free to the seller.

The Nevada Supreme Court said, “we disagree with the district court’s reading of the brokerage agreement as a matter of law …  The agreement, as written, supports the opposite result and should have been upheld.”

The oral arguments can heard by clicking here.

Questions? darren@dwelshlaw.com

1992 College Ultimate Trophy, missing 19 years, recently recovered. The search is over.

Is REO title safe?  I contacted Equity Title of Nevada and asked this exact question and here is what I have to report.

Yes.  Provided you have title insurance.

Then why these reports about REO, and foreclosure?  These indictments you hear about from the Attorney General are discussing the ‘procedures’ that some limited persons used in filing foreclosures.  The Attorney General is not representing the consumer in attempting to unwind any sales.  The question really is, will a former owner arrive and demand to be reinstated on title?  Well, since that would come with the debt also, let’s just say, I doubt it.

But if there is a claim about the foreclosure process that affected my home (literally my home is listed as one of those with potential previous foreclosure defects) am I safe?  Yes, again. The odds of there being a claim on your title are very remote.  If there was one, you have title insurance, and you are going to be able to get title insurance in the future.  So it is a non-issue for the normal consumer.

Let’s discuss title insurance.

On residential purchase transactions, there are three primary forms of title insurance that are currently available to buyers.

  • The Homeowners Policy (most recently revised in 2010).
  • The ALTA Residential Policy (1987 form).
  • The ALTA 2006 standard coverage owners policy.

All of these policies provide coverage against loss or damage sustained by reason of title defects which exist as of the date of policy.  Imagine a hypothetical scenario in which, after the date of policy, a former homeowner files a lawsuit which seeks to set aside the prior foreclosure as defective.  If this former owner is successful and ultimately obtains a final, non-appealable court order which rescinds the foreclosure and reinstates his ownership interest then he will have established that the insured’s title was in fact defective as of the date of policy.  Even though the filing of the lawsuit itself was a post-policy matter, the outcome is a court determination of a pre-policy title defect, i.e. an invalid foreclosure.  In this scenario, a title defect or a marketability claim tendered by the insured under any of the above listed owners policy forms would presumably be determined by the underwriter to be a covered matter which must be defended.

There is however, a new law that went into effect on October 1, 2011.  This new law may cause some discussions.  Title companies may not be willing to insure post-foreclosure without a special exception for any claims that are based on an allegation that the foreclosure did not comply with the provisions of AB284.  An REO buyer must simply object to not receiving this coverage.  This is not happening now.  The coverage is being granted.  We need merely watch the field and see if the industry changes.

Equity Title of Nevada recommends to any residential buyer that they consider obtaining the Homeowners Policy. There are many additional benefits to this form of policy which are worth a buyer paying the additional 10% premium.

Any questions, email me darren@dwelshlaw.com or call me 7022451787.

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.

   …… Changes to the Nevada residential real property disclosure.  Effective October 1, 2011 the Seller’s Real Property Disclosure Form, also known as the S.R.P.D. can longer be waived. This form must be provided in just about every residential transaction in Nevada.  There are some exceptions, see below.

    …… The statute controlling this form (NRS 113) was modified within Senate Bill 314 in the July 2011 Nevada Legislative Session removing the section that allowed a seller and buyer to mutually agree that the SRPD would not be provided. Such a waiver had to be signed before a notary by a buyer.  The Law can be found here NRS 113

  …… This will affect many sales such as probate, short sales, and bank owned (REO). Exceptions are foreclosure (when the trustee sale occurs, not a bank selling after they have already foreclosed) between co-owners and new home. All sellers in Nevada must now provide this form. Some sellers have not lived in, or even seen these properties, but the statute is clear, it must still be filled out. If a Seller does not provide the form, a buyer may cancel, without penalty.

…… This should not affect the August 7, 2007 entry on disclosure – New Clarification of Real Estate Disclosure Laws in Nevada.  Remember in that case (the Nelson Case), the Nevada Supreme Court ruled on the scenario where a defect, now repaired, was not disclosed on the Nevada SRPD – “Once the [damage] was repaired … it no longer constituted a condition
that materially lessened the value or use of the [home. Accordingly, [the Seller] did not have a duty to disclose the …. damage.” This rule would still apply.

This is a series of Disclosure Entries see also:

An Updated All Inclusive & Belt Way Disclosure

The New, Improved All Inclusive Disclosure

Nevada Condominium Hotel Disclosure

Nevada S.R.P.D. New Clarification of Real Estate Disclosure  Laws in Nevada

Any questions, you can call me Darren Welsh 702 245 1787.

January 17 2011 Mt Charleston

January 17 2011 Mt Charleston

EFFECTIVE June 13, 2011.  This law was repealed.  The subject of this blog was that the Nevada Energy Commissioner established a program for evaluating energy consumption in residential property in Nevada which required a seller to provide a copy of this evaluation to a purchaser of his or her property. (NRS 113.115, 701.250).  That law has been appealed by AB 432.  Which can be read here.  http://www.leg.state.nv.us/Session/76th2011/Bills/AB/AB432_EN.pdf

THIS FORM IS NO LONGER REQUIRED. 

This is a follow up to my December 28, 2010 submission Seller’s Energy Consumption Evaluation Form.

As you know effective January 1, 2011, there is a new form from the Nevada Renewable Energy and Energy Efficiency Authority which is known as the Seller’s Energy Consumption Evaluation Form which is commonly known as the  “SEEF,”  Pursuant to Nevada Revised Statute (“NRS”) 113.115.

There is now a new form that allows the Waiver of the SEEF form.  In lieu of having to use the entire SEEF form, and use the waiver section of Page 4 of the SEEF, you can now have the Seller and Buyer sign this Waiver of the SEEF.

The waiver form is also effective January 1, 2011, although it came out a bit later.

The Waiver of the SEEF form is located by clicking HERE.

The SEEF form is located HERE.
An explanation of the SEEF form is on the SEEF form.
Instructions to fill out the SEEF form are located HERE.
Any questions?  Darren Welsh, Esq. 702 733 9310 ofc, 702 245 1787 cell.
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

Dr. Hatice Gecol  Nevada Energy CommissionerSeller’s Energy Consumption Evaluation Form

There is a new form concerning residential real property sales.  The Seller’s Energy Consumption Evaluation Form or the “SEEF.”  Pursuant to Nevada Revised Statute (“NRS”) 113.115.

When is it effective?  January 1, 2011.

The SEEF form is located HERE.

What is it? An energy consumption evaluation. The explanation is more in depth on the SEEF form.

Instructions to fill out the SEEF form are located HERE.

When must it be provided?  Before closing.

Can it be waived by the Buyer?  Yes, and on page four (4) of the SEEF there is already a section to have the Buyer waive the receipt.

Who is exempt? 1.) Foreclosure (not REO) but at the time of the trustee sale.  2.) Sales between co-owners.  3.) Relocation Companies (only the transfer from owner to relo company, not to purchaser from relo company).  4.) Sales where Buyer waives their rights to receive the form.  5.)  If an evaluation was completed in last five (5) years, that older evaluation may be used.

Suggested language.  If you are representing a Seller, and the Seller does not want to provided the SEEF
I suggest the following language in a counter:

“Buyer agrees to waive receipt of the Seller’s Energy Evaluation Form (SEEF)”

Any questions?  Darren Welsh, Esq. 702 733 9310 ofc, 702 245 1787 cell.

There is a new Short Sale Addendum for purchase agreements.  This form which serves to better define the terms of the Short Sale has some new additions and removed some items.

This is a great tool for short sales.

Here are the changes…

Section 1 – now has this language, “Seller understands and acknowledges that lender approval may be conditioned upon any or all of the following: (a) making a cash payment; (b) signing a new promissory note; (c) continuing to owe the lender the unpaid portion of the loan(s); and (d) other requirements made by lender.”

WHAT IT MEANS – Short sales, unlike any other normal sale can result in the Seller having legal liability in years to come.  This can come in the form of collections or even law suits.  This section serves to better warn the Seller.  See my blog on Seller Liability After Short Sale

Section 2 – the Lender Short Sale Approval Addendum has been incorporated into the Addendum.

WHAT IT MEANS – See my explanation of the Lender Short Sale Approval Addendum form by clicking here.

Section 3 – now has the language, “either Party may, in its sole discretion, reject the amended terms required by Lender.”

WHAT IT MEANS – If the Lender changes the terms, for example refuses to pay closing costs from proceeds, any party may cancel.

 

Section 4 – Time Frames, due diligence commencement has been changed to “(1) calendar day after the Parties’ mutual written approval of the Lender Approval”

WHAT IT MEANS – Due diligence commences upon the Parties agreeing to the terms of the Lender.  This is tricky.  If there was no change by the Lender, then this should be when the listing agent informs the selling agent of Lender approval.  If the Lender changes the terms and the Lender Short Sale Approval Addendum is used, then the due diligence commencement is the date of the final signature of the Parties, not the date it was served upon the selling agent.

 

Section 6 – The first right of refusal has been REMOVED!  All subsequent offers are now “back up offers.”

Section 9 – Legal and Tax Consequences has added, “A Short Sale May Have Serious And Adverse Legal, Tax, Credit And Economic Consequences For The Seller. Seller agrees to seek advice from an attorney, a certified public accountant or other qualified professional regarding the legal effect and meaning of a short sale and any Lender Approval.”

WHAT IT MEANS – Short sales, unlike any other normal sale can result in the Seller having legal liability in years to come.  This can come in the form of collections or even law suits.  This section serves to better warn the Seller.  See my blog on Seller Liability After Short Sale

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

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.

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

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