Disclosures


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.

Private Transfer Fee (Sellers Real Property Disclosure Form)

***UPDATE*** on March 15, 2012, the Federal Govt. /Washington, DC – The Federal Housing Finance Agency (FHFA) has sent a final rule to the Federal Register on private transfer fees. The final rule limits Fannie Mae, Freddie Mac and the Federal Home Loan Banks from dealing in mortgages on properties encumbered by certain types of private transfer fee covenants and in certain related securities. Transfer fees are contractual arrangements where an owner pays a fixed amount or a percentage of the sales price at the time of transferring the property. ###

 

Private Transfer Fee (Sellers Real Property Disclosure Form)

Question #15 on the Nevada Seller’s Real Property Disclosure Form(SRPD)- “This property is subject to a Private Transfer Fee Obligation?”

What is a Private Transfer Fee?  It is an encumbrance on the property, which shows up like a mortgage deed.  It is a recurring fee paid back to the Seller, every time a sale occurs, in exchange for clear title.  The Seller maintains a financial interest in the property for decades after it’s been sold, not with a mortgage or a loan but with a private transfer fee.

As of May 2011, in Nevada they are not legal.  Per Nevada Assembly Bill 271

http://www.leg.state.nv.us/Session/76th2011/Bills/AB/AB271_EN.pdf

Nevada joined with more than half of the rest of the Country in banning private transfer fees on real estate– AB 271 makes all new private transfer fee obligations “void and unenforceable.”

If you have an “existing Private Transfer Fee” it remain legal, but the beneficiaries of currently recorded private transfer fee covenants are subjected to new recording and notice requirements to preserve their interest, including civil penalties for creation of new private transfer fee obligations or failure to comply with the recording requirements.

Question 15 of the Nevada Sellers Real Property Disclosure Statement (SRPD) asks if, “This property is subject to a Private Transfer Fee Obligation?”

Thus per the new SRPD, sellers of properties in Nevada with existing private transfer fee obligations must disclose this encumbrance.

This is a series of Disclosure Entries see also:

Nevada Disclosure In Residential Sales

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.

   …… 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.

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.

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).

The All Inclusive & Belt Way disclosures have been updated as of 9.3.2010

What is The All InclusiveThe All Inclusive addresses current issues that have not been addressed within the Seller’s Real Property Disclosure Statement (“SRPD”) and/or to expand on these issues.  Topics that are not explored within the SRPD, are the subject matter of the All Inclusive.  It is designed to aid the sales executive and the client in keeping up with and disclosing new and potentially new issues and to expand on other currently known issues.  Your broker at Prudential, Americana Group, REALTORS® aims to keep this form up to date and only as lengthy as necessary. 

Seller Signature No Longer Required.

The Seller’s Real Property Disclosure Statement  is more thorough then ever.  There is no need for the The All Inclusive to have a repetitive disclosure.  The All Inclusive has been modified to be more compatible with the SRPD.  There is no reason to have the Seller disclose, again, information the Seller has already disclosed.  Also, many times the Seller is not aware of new issues.  Therefore The All Inclusive has been rendered an informational document, that only the Buyer signs.  It now serves to inform the Buyer that there are various specific issues affecting real property in the Las Vegas Valley that the Seller might not even be aware of, but the Buyer might find of interest.  For example, a Seller may not be aware of the alleged Dry Wall issues which have been reported by the The Consumer Product Safety Commission (CPSC) or for example, if a Seller is owner occupied, the home’s CIC might have strict rental limitations which did not come to the attention of the Seller but may be extremely important to an investor purchaser.

Information Purely For Notification Purposes.

All of the information in the All Inclusive is now purely a notification of possible issues.  This format serves to assist the Buyer by generally disclosing matters and giving potential sources where they can find more information if any of the matters is of particular concern to the Buyer.  It also leaves the format for ‘disclosing’ by the Seller to SRPD. 

How Used.

If you are representing the Buyer only you will no longer be required to gain the Seller’s signature, only the Buyer’s.  If you representing the Seller, you will be required to forward the  All Inclusive to the Buyer.  If the Buyer refuses to sign it, you may merely indicate when and how you delivered it to the Buyer’s sales executive.

PLEASE ALSO SEE THESE UPDATES

An Updated All Inclusive & Belt Way Disclosure, February 14, 2010

Imported Drywall, May 15, 2009

C.L.U.E.(R) Home Seller’s Disclosure Report, July 17, 2009

New Clarification of Real Estate Disclosure Laws in Nevada, August 10, 2007

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