TGIF Legal Tips


ImageMany of you have heard that short sales were going to be limited so that the buyer’s and seller’s agent could not be from the same brokerage.  The new rule was effective October 1, 2013.

You can read the July 9, 2013 Mortgagee Letter (#2013-23) from HUD here.

The latest news from the National Association of REALTORS(r) is that as of yesterday September 25, 2013 HUD officials reported that they would reissue the July Mortgagee Letter (#2013-23) and remove all dual agency language.  The issue is not completed,  but the  dual agency policy will not be implemented on Oct. 1.

Open Road   I received a text on May 31, 2013; if accelerator clauses are legal, a good idea? etc.  That’s funny, I had the same question posed to me, only not by text, years ago.  Here is what I said in 2004, as in 9 years ago.  Remember 2004?

Accelerator Clauses

   Accelerator clauses are appearing in buyers’ offers.  “Buyer will pay $___ over any other offer better than theirs.  Seller must provide Buyers copy of better offer.”  Selling agents are declaring that this should ‘guarantee’ a buyer to be in first position.  Listing agents are interested in accepting these clauses to ensure the highest price in a bidding war.  There are forms and clauses being exchanged.

The issue is the meaning of the clause and what terms are being accepted.  The lower offer may have different financing, closing costs, escrow dates, lease backs, repair request, etc. Thus when the clause is triggered….it renders, potentially, another purchase agreement in first position. But is that in a seller’s best interest? What other terms differ between the former highest bid and now the Accelerator Clause triggered bid?

In a recent scenario a listing agent entertained 4 offers, all different prices, close dates, finances, closing costs and different styles of buyer.  The buyers varied from investor group, independent flipper, and first time buyer. If the Seller accepts the accelerator clause of one of the buyers, what does it mean?  Does a buyer now have to change their terms of financing to meet another offer?  As to financing, this will not necessarily work. Does the Buyer have to close earlier or later?  There is little meeting of the minds as to most aspects of the sale, all very important aspects, other than the purchase price.

By accepting the ‘accelerator clause’ the Seller may loses their ability to choose what they feel is the ‘best offer.’  From a seller’s perspective, did they get enough? What if a seller does not accept the Clause and counters All Parties for a highest and best to be ‘reconfirmed,’ by the Seller.  From a buyer’s perspective you have agreed to a higher price, was the other offer even feasible? Assuming it is valid, was it a possible offer? Was the other buyer not concerned about the price due to an appraisal contingency?  Does the Clause Buyer have that protection?.  The now accepted offer triggered by the Clause may or may not be subject to appraisal.

The accelerator clause does not solve much.  It is attractive because it gives hope. The Accelerator Clause is a cousin to the lease option in the family of bad ideas.  In all markets, it is not just price.

  Darren Welsh, 2004

So, that was my opinion in 2004.  Not much has changed.  Except, as fair warning, the Nevada Real Estate disagrees with Accelerator Clauses for different reasons.  In the 2012 Third Edition Nevada Law And Reference Guide, p. 86 (§A(4)(c)) the NRED hints Accelerator Clauses may not be fair dealing.

“Acceleration” Clauses (not what you think!) – The Division has stated it is a violation of fair dealing to insert what it identifies as an “acceleration” clause. This is not the “acceleration clause” found in general contract or financing law. According to the Division, an acceleration clause is a clause in which the offeror promises to pay a certain set amount above the highest offered sale price and usually provides for a maximum or cap amount. The Division’s example is, “I will pay $2,000 over the highest offer up to $300,000.” This type of clause automatically gives one offeror a stated advantage over other offerors and may not allow fair dealing for the other offerors.”

“Though the previous two activities (disclosing offer terms and inserting an acceleration clause) are not a direct violation of any law or regulation, and there is some controversy regarding this, nevertheless, the Real Estate Commission has found these practices to be highly suspect.”

O.K.…per NRED, they are are not an outright violation, but apparently frowned upon as it gives one buyer a “stated advantage.” Clear as mud. I am not sure where the NRED is going with that, considering the fact that merely offering a higher sales price is a stated advantage.  Nonetheless yet another reason the clauses are problematic.

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Web’s Chicken Coop

“Short Sale – Dual Tracking” during residential foreclosure is where the lender pursues foreclosure AND other loan modifications (short sales) simultaneously.

SB 321 has passed and is set to be signed by the Nevada Governor.

It affects foreclosure both statutory and judicial of owner-occupied property; providing civil remedies for failure to comply with certain provisions.  It extends the foreclosure mediation process to judicial foreclosures.

It is complicated and mostly concerns actions leading up to foreclosure.

However, for re-sales, likely the most important is the elimination of the practice commonly known as “dual-tracking” by prohibiting the continuation of the foreclosure process while an application for a foreclosure prevention alternative is pending or while the borrower is current on his or her obligation under a foreclosure prevention alternative.  So, for example, if the owner enters into an arrangement with the lender, a foreclosure prevention alternative, which could arguably include a short sale, the lender is prohibited from continuing the foreclosure process until such time as the foreclosure prevention alternative is ended. This may end the surprise foreclosures the day before short sale close of escrow.

Read the whole bill here:  SB 321

Here is the Nevada Legislative Counsel’s Digest:

  Under existing law, the trustee under a deed of trust concerning owneroccupied housing has the power to sell the property to which the deed of trust applies, subject to certain restrictions. (NRS 107.080, 107.085, 107.086) Existing law also provides for a judicial foreclosure action under certain circumstances for the recovery of any debt or for the enforcement of any right secured by a mortgage or other lien upon real estate. (NRS 40.430)

  Sections 2-16 of this bill establish additional requirements for the foreclosure of owner-occupied housing securing a residential mortgage loan.

  Under section 7.5 of this bill, these additional restrictions do not apply to a financial institution that, during its immediately preceding annual reporting period, as established with its primary regulator, has foreclosed on 100 or fewer owner-occupied homes located in this State.

  Under section 30 of this bill, these additional restrictions apply only to a notice of default and election to sell which is recorded on or after October 1, 2013.

  Section 10 of this bill provides that at least 30 calendar days before recording a notice of default and election to sell or commencing a judicial foreclosure action and at least 30 calendar days after the borrower’s default, the mortgage servicer, mortgagee or beneficiary of the deed of trust must provide to the borrower certain information concerning the borrower’s account, the foreclosure prevention alternatives offered by the mortgage servicer, mortgagee or beneficiary and a statement of the facts supporting the right of the mortgagee or beneficiary to foreclose.

  Section 11 of this bill prohibits the recording of a notice of default and election to sell or the commencement of a judicial foreclosure action involving a failure to make payment until the mortgage servicer complies with certain requirements regarding contact with, or attempts to contact, the borrower.        Section 13 of this bill prohibits the practice commonly known as “dual-tracking” by prohibiting a mortgage servicer, trustee, mortgagee or beneficiary of a deed of trust from continuing the foreclosure process while an application for a foreclosure prevention alternative is pending or while the borrower is current on his or her obligation under a foreclosure prevention alternative.

  Section 14 of this bill requires a mortgage servicer to provide a single point of contact for a borrower who requests a foreclosure prevention alternative.

  Section 15 of this bill requires that under certain circumstances, a mortgage servicer, mortgagee or beneficiary of a deed of trust must dismiss a judicial foreclosure action or rescind a recorded notice  – 2 – – of default and election or notice of sale.

  Section 16 of this bill provides for certain civil remedies for a material violation of the provisions of sections 2-16.

  Section 16 also provides that a signatory to the consent judgment entered in the case entitled United States of America et al. v. Bank of America Corporation et al., who complies with the Settlement Term Sheet under that judgment is deemed to be in compliance with sections 2-16 and is not liable for a violation of those provisions.

  Section 16 further provides that if the consent judgment is modified or amended to permit compliance with the Final Servicing Rules issued by the federal Consumer Financial Protection Bureau to supersede the terms of the Settlement Term Sheet under the consent judgment: (1) a signatory to the consent judgment who complies with the modified or amended Settlement Term Sheet while the consent judgment is in effect is deemed to be in compliance with sections 2-16 and is not liable for a violation of those provisions; and (2) any mortgage servicer, mortgagee or beneficiary of the deed of trust who complies with the Final Servicing Rules is deemed to be in compliance with sections 2-16 and is not liable for a violation of those provisions.

  Section 18 of this bill provides that in a judicial foreclosure action concerning owner-occupied property, the mortgagor may elect to participate in the Foreclosure Mediation Program.

OTHER SHORT SALE POSTS

7 Tips for Short Sale

Addendum to Short Sale Listing 1.26.2010

Advance Fees Continued and the FTC 1.6.2011

Advance Fees – Short Sales – FTC II 5.4.2011

Charging for negotiating short sales/Negotiators 10.1.2010

Deficiency Judgments Nevada 4.27.2007

Foreclosure and the One Action Rule in Nevada 4.10.2007

HAMP the Federal Shortsale Program coming April 2010

Income Taxes & Foreclosures/Shortsales 12.21.2007

Income Taxes & Foreclosure/Short Sales 2013 Update

IRS PUBLICATIONS shortsales/foreclosures:

Ten Facts about Mortgage Debt Forgiveness

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

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

Judicial Foreclosures (Short sales are looking more attractive..) 3.23.2012

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 4.20.2007

Short Sale Advanced Fees

Short Sale Addendum to Purchase Agreement October 2010

Short Sales and Bankruptcy and Waiting Periods 10.5.2012

Short Sale Junior Lien/Senior Liens Rights To Sue & Other Changes

Short Sale Wallet Size Answer Sheet

Questions? email me darren@dwelshlaw.com

Scotland 2013

Scotland 2013

Recently the Nevada State Contractor’s Board and real estate agents in Nevada have debated whether or not a real estate broker can ‘order’ a repair of a part of real property during a listing period. If that order is in the name of the agent is that agent performing duties of a licensed contractor? This is NRS 645 vs. NRS 624. My position was that such a task is in line with the servicing of a listing and should be exempt from the control of the Nevada State Contractor’s Board as falls under the licensed activities of NRS 645.030.

NRS 624 has been modified…and upon its signing by the Governor of Nevada very soon, the is now clear that such activity by a real estate agent is exempt, provided the work does not require a building permit and does not exceed $10,000.

Below is the relevant text – or you can read it the entire AB334  here http://www.leg.state.nv.us/session/77th2013/reports/history.cfm?id=758

 11. A person licensed as a real estate broker, real estate broker-salesperson or real estate salesperson pursuant to chapter 645 of NRS who, acting within the scope of the license or a permit to engage in property management issued pursuant to NRS 645.6052, assists a client in scheduling work to repair or maintain residential property pursuant to a written brokerage agreement or a property management agreement. Such assistance includes, without limitation, assisting a client in the hiring of any number of licensed contractors to perform the work. Nothing in this subsection authorizes the performance of any work for which a license is required pursuant to this chapter by a person who is not licensed pursuant to this chapter or the payment of any additional compensation to a person licensed as a real estate broker, real estate broker-salesperson or real estate salesperson for assisting a client in scheduling the work. The provisions of this subsection apply only if a building permit is not required to perform the work and if the value of the work does not exceed $10,000 per residential property during the fixed term of the written brokerage agreement, if the assistance is provided pursuant to such an agreement, or during a period not to exceed 6 months if the assistance is provided pursuant to a property management

agreement. As used in this subsection:

 (a) “Brokerage agreement” has the meaning ascribed to it in NRS 645.005.

 (b) “Property management agreement” has the meaning ascribed to it in NRS 645.0192.

 (c) “Real estate broker” has the meaning ascribed to it in NRS 645.030.

 (d) “Real estate broker-salesperson” has the meaning ascribed to it in NRS 645.035.

 (e) “Real estate salesperson” has the meaning ascribed to it in NRS 645.040.

ImageThe Nevada Seller’s Real Property Disclosure Form (SRPD) has changed effective March 8, 2013.  The changes clarify the section warning “purchaser may not waive the requirement to provide this form and a seller may not require a purchaser to waive this form,” per N.R.S. 113.130(3) removing the former citation of the Senate Bill 34(3)/Senate Bill 314. It kept the “type of seller” can be selected from a Bank, an Asset Management Company, Owner-occupier or Other.”

I want to take this time to address waiver of rights in a Nevada residential real estate transaction. Specifically the Buyer’s Remedy Waiver Of NRS 113.150 Rights.

The issue is that even though a seller may not require a purchaser to waive the receipt of the SRPD per N.R.S. 113.130(3), a buyer may waive any of her rights as to remedies under NRS 113.150.  The section 150 is where the Buyer finds their remedies for a non-disclosure.

Although the law says the Seller cannot force a Buyer to waive the right to receipt, if the Seller does not provide the SRPD, the transaction may still close. More importantly a Seller can simply avoid the subject of not providing the form and focus on getting the Buyer to waive the remedies of the non-performance by a Seller.

As described in the form Buyer’s Remedy Waiver Of NRS 113.150 Rights:  The Buyer may waive their right to:

  1. rescind the purchase pursuant to NRS 113.150(1)
    This means – that although the buyer cannot be forced to waive the right to receive the SRPD form, they can waive their right to cancel the transaction because they did not receive the form. This waiver is the least potentially damaging to a buyer. If a seller is “demanding” as a contingency that this form be signed, number 1 is the safest for a buyer to check.  The reason is that a buyer can still conduct their own inspection, find a defect and cancel the transaction per NRS 113.150(2), subject to the terms of the purchase agreement.
  2. rescind the purchase agreement pursuant to NRS 113.150(2)(a)
    This means – that although the buyer cannot be forced to waive the right to receive the SRPD form, they can waive their right to cancel the transaction even if they are informed of a new defect during escrow.  Remember NRS 113.150(2) is when…before the conveyance of the property to the purchaser a seller informs the purchaser of a defect in the property of which the cost of repair or replacement was not limited by provisions in the agreement to purchase the property… This is potentially more damaging to a Buyer.  As described above, checking number 1 on the Waiver Of Rights form still allows the Buyer the chance to cancel if they are informed of a new defect.  By waiving this right in #2, the Buyer is potentially not able to cancel the transaction without penalty even if the Seller discloses a new material defect during escrow.
  3. recover from the Seller three times the amount necessary to repair or replace any defect per NRS 113.150(4).
    This means – that although the buyer cannot be forced to waive the right to receive the SRPD form, they can waive their right to collect treble damages.  This waiver is powerful.  It eliminates the Buyer’s ability to pursue treble damages as described in my March 2012 entry, Disclosure In Real Estate Sales, As Is, NRS 113, Treble Damages, basically nullifying the clarification the Nevada Supreme Court describes in Webb v. Shull.  If a seller is “demanding” as a contingency that this form be signed, number 1 is the safest for a buyer, number 2 the next safest, number 3 is highly suspect.  Arguably a seller could not disclose, perhaps even intentionally, and not be held liable.
  4. All of my legal rights under NRS 113.150.
    This means – that although the buyer cannot be forced to waive the right to receive the SRPD form, they can waive their right to cancel the transaction because they did not receive the form; they can waive their right to cancel the transaction even if they are informed of a new defect during escrow and they can waive their right to collect treble damages.

This is a series of Disclosure Entries see also:

Disclosure In Real Estate Sales, As Is, NRS 113, 

Treble Damages

Nevada Disclosure In Residential Sales

Private Transfer Fee (Seller’s Real Property Disclosure Form)

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

questions …  email me darren@dwelshlaw.com

Legal Aid Center Celebrates Law Day with Free Ask-A-Lawyer Event

If you or anyone you know would like to sit down with an attorney to discuss a legal problem, please join Legal Aid on May 1, 2013 from 11:00-2:00 where Legal Aid Center staff attorneys will be available for 15-30 minute consultations to answer legal questions in all of thier practice areas including family law, consumer law, bankruptcy, foreclosure, social security, special education, immigration and children’s rights.  They also have attorneys from Nevada Legal Services, Senior Law Project and the DA’s Child Support Division available for consultations.

Online registration is now open.  Click here for SpanishClick here for English.

Click here to view details about this program.

To register by phone, please call 386-1070 ext.1421 for English or ext.1436 for Spanish.

http://www.homeagainnevada.gov/

Home Again is a new program effective January 2013 from the Nevada Attorney General’s office for distressed homeowners in Nevada facing foreclosure.  It is a “one-stop” free resource to determine what state or federal assistance may be available.

“Initiated by Nevada Attorney General (AG) Catherine Cortez Masto, the “Home Again Nevada Homeowner Relief Program” is designed for:

• Homeowners seeking loan modification

• Borrowers who are current, but “underwater”

• Those who have lost their homes to foreclosure

• Households working toward homeownership”

Nevada 4:34

UPDATE*** May 31, 2013

The foreclosure mediation process will soon be amended to INCLUDE judicial foreclosures.  It is within the new SB 321 (not yet signed by the Nevada Governor).  Section 18 of SB 321 provides that in a judicial foreclosure action concerning owner-occupied property, the mortgagor may elect to participate in the Foreclosure.

UPDATE*** May 31, 2013

 

The Nevada Foreclosure Mediation Program has been updated dramatically.  I first wrote about this on July 10 2009 under Mediation Option for Nevada Foreclosures.

The entire new rules effective December 6, 2012 can be found here at the Nevada Judiciary website.

Document Exchange – Likely the best change is that the documents exchanged between the Lender (Beneficiary) and the Homeowner are to be better organized and debated, discussed, etc., prior to the actual mediation.  This allows the mediation a better chance to more effective (successful) in potentially producing a loan modification, short sale, informed surrender of the home, etc.

Short Sales – The Short Sale section is also amended.  While the early exchange of documents is likely the best change so far to the rules, the Short Sale rules are also exciting. Short sales are exciting in general.  This may move to the level if spicy.  If the goal is a short sale, the homeowner may have a new helpful rule to succeed.  In § III(10) “REQUIRED MEDIATION DOCUMENTS”  it states in part

§(III)(10). The beneficiary of the deed of trust (lender)  shall …prepare an estimate of the ‘‘short sale’’ value of the residence that it may be willing to consider as a part of the negotiation, and shall submit any conditions that must be met in order for a short sale to be approved. The lender must also be able to negotiate the following:

(i) listing price,

(ii) date the property will be listed,

(iii) period of time the property will be marketed,

(iv) specified period lender has to determine whether to accept an offer, and

(v) maximum length of time escrow may last.

It continues …

(a) If the grantor (homeowner) fails to meet conditions within the period allowed by the conditions, the lender may submit a request to … issue a certificate to foreclose…”

But here is the exciting part:

(b) If the grantor (homeowner) believes that the lender failed to comply with the guidelines of the agreement for the sale, or that escrow did not close because lender’s action/inaction of trust, the homeowner may file a petition for judicial review pursuant to Rule 21.”

In other words…if there is an agreement to do a short sale at the mediation and the lender doesn’t follow the terms, a homeowner apparently can pull the lender into court and arrest a foreclosure and potentially force a short sale.

So a homeowner has a new incentive to get a commitment to shortsell at these Nevada Foreclosure Mediations.

See also

Foreclosure / Deficiency blog 4.27.2007

Income Taxes & Foreclosure/Short Sales 2013 Update 1.2.2013

Short Sales and Bankruptcy and Waiting Periods 10.5.2012

MERS and Foreclosure in Nevada 10.1.2012

Assembly Bill 149

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