TGIF Legal Tips


Proverbial Falling off Fiscal Cliff 2013

Proverbial Falling off Fiscal Cliff 2013

Tax Exclusion on Short Sales, extended to end of 2013.

My original post on this matter is here: Income Taxes & Foreclosures/Shortsales 12.21.2007.

As you know the tax code had an “Exclusion from gross income of discharge of qualified principal residence indebtedness (Sec. 108)”

…in other words many home owners were not taxed for 1099C income received as a result of foreclosure/short sale.  This exclusion expired 12.31.2102, it been reinstated and extended to 12.31.2013. Good news for the short sale market.

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

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

Mt. Charleston Nevada 12.16.2012

This is a follow up to the CIC liens in Nevada.  On December 12, 2012 the State Of Nevada Department Of Business and Industry Real Estate Division (NRED) issued an Advisory Opinion on the Super Priority Liens filed by home owners associations formally known as Common Interest Communities or CICS:  It can be read in detail here.  But here is a portion of it with the key holding that “costs of collecting” are not be included in the lien.

QUESTION #1:

Pursuant to NRS 116.3116, may the portion of the association’s lien which is superior to a unit’s first security interest (referred to as the “super priority lien”) contain “costs of collecting” defined by NRS 116.310313?

SHORT ANSWER TO #1:

No. The association’s lien does not include “costs of collecting” defined by NRS 116.310313, so the super priority portion of the lien may not include such costs. NRS 116.310313 does not say such charges are a lien on the unit, and NRS 116.3116 does not make such charges part of the association’s lien.

QUESTION #2:

Pursuant to NRS 116.3116, may the sum total of the super priority lien ever exceed 9 times the monthly assessment amount for common expenses based on the periodic budget adopted by the association pursuant to NRS 116.3115, plus charges incurred by the association on a unit pursuant to NRS 116.310312?

SHORT ANSWER TO #2:

No. The language in NRS 116.3116(2) defines the super priority lien. The super priority lien consists of unpaid assessments based on the association’s budget and NRS 116.310312 charges, nothing more. The super priority lien is limited to: (1) 9 months of assessments; and (2) charges allowed by NRS 116.310312. The super priority lien based on assessments may not exceed 9 months of assessments as reflected in the association’s budget, and it may not include penalties, fees, late charges, fines, or interest. References in NRS 116.3116(2) to assessments and charges pursuant to NRS 116.310312 define the super priority lien, and are not merely to determine a dollar amount for the super priority lien.

QUESTION #3:

Pursuant to NRS 116.3116, must the association institute a “civil action” as defined by Nevada Rules of Civil Procedure 2 and 3 in order for the super priority lien to exist?

SHORT ANSWER TO #3:

No. The association must take action to enforce its super priority lien, but it need not institute a civil action by the filing of a complaint. The association may begin the process for foreclosure in NRS 116.31162 or exercise any other remedy it has to enforce the lien.

Well now, that ought to cause a number of wonderful conversations just days before a close of escrow. I have listed my other writings on this below. This subject is changing often and the Legislature in Nevada is in session in just a few months, so by the summer of 2013, we might have even more changes.

Questions? darren@dwelshlaw.com

Please see my other blogs on CIC:

Nevada CIC Resale Package Costs I

Nevada CIC Resale Package Costs II

Nevada Condominium Hotel Disclosure

CIC Unpaid Delinquent Dues And How They Affect REO Listings

Changes to the Nevada CIC Resale Package

Non-Receipt of the Resale Package

Rental Restrictions within an Association

Nevada CIC Charges for Resale Packages

Nevada CIC Addendums

 

This is a follow up to my March 20, 2009 post Short Sale Seller Files Bankruptcy.

Bankruptcy in a short sale comes in two forms – the seller is already in bankruptcy or files during the short sale process. 

QUESTION: Why should a seller in or considering bankruptcy perform a short sale?

ANSWER:  To start their “waiting period” before a borrower can be eligible for certain loans.  The short sale waiting period is usually shorter than the foreclosure waiting period.

Generally bankruptcy serves to eliminate the obligation to pay a debt.  In the words of the greater bankruptcy lawyer Robert Charles.  It does not eliminate the debt, it just eliminates one party’s obligation to pay. In recent history persons seeking bankruptcy would more or less abandon over encumbered properties, allow it to go to foreclosure and wait some number of years before their re-entered the economy in attempting to purchase a home. Today, certain loan programs allow purchases after a short sale sooner than a foreclosure, even after a bankruptcy.

Look at FannieMae for example. FannieMae has a great role in conventional mortgages as America’s largest mortgage buyer. It sets guidelines to lessen the chance a borrower will go into foreclosure. FannieMae’s current guidelines have separate waiting periods depending on the type of foreclosure, in other words if it is a short sale or a classic foreclosure. Fanniemae underscores in their separate waiting periods, the “importance of borrowers working with their [lenders to avoid foreclosure.” Short sellers are rewarded with the shorter waiting period, currently a difference of 7 to 2 years depending on the circumstances. It is more complicated than simply stating 7 vs. 2 years.  This is just one example, but there is a difference and the short gets the longer end of the stick…you can read guidelines àhere.

Bankruptcy has its own restrictions, its own waiting period effects. However, even with bankruptcy (and its additional waiting periods) combined with a foreclosure, vs. a bankruptcy combined with a short sale; again the short sale can have drastically different waiting periods.  And if the debtor has “extenuating circumstances” waiting periods post bankruptcy combined with a short sale can be quite reasonable. 

ALSO, by not performing a short sale a debtor is waiting for the lender to foreclose. The lender has no duty to hurry up the foreclosure.  Nor does the bankruptcy process really address this issue.  Bankruptcy removes liability, but does not necessarily aid in starting the beginning of the waiting period.

I have been brought in on numerous transactions in 2012 where a purchase fails due to the time period not being ripe yet for a new buyer.  Each time the buyer filed bankruptcy some years prior. And each time the buyer believed that eventually their home had been foreclosed upon.  In some instances the buyer was not even aware they were still on title to their former residence and in others the foreclosure had only been finalized some months prior, although the bankruptcy case was successfully completed years prior.  In these scenarios each time, the purchaser (formerly in bankruptcy) was unable to get around the requirements of the current lender and were instructed they would have to “wait” out the actual period.  A short sale during bankruptcy starts the waiting period more effectively.

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

7 Tips for Short Sale

Addendum to Short Sale Listing

Advance Fees Continued and the FTC

Advance Fees – Short Sales – FTC II

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

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.

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

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 Advanced Fees

Short Sale Addendum to Purchase Agreement October 2010

Short Sales and Bankruptcy and Waiting Periods

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

Short Sale Wallet Size Answer Sheet

Ten Facts about Mortgage Debt Forgiveness

Questions? email me darren@dwelshlaw.com

Happy Birthday Webster The Nevada Supreme Court issued a ruling concerning MERS on Thursday September 27, 2012. Edelstein v. Bank Of New York Mellon, the Las Vegas Review Journal reported it was a “win” for the banks in foreclosure?

What does it mean?  The banks that relied on MERS are allowed to foreclose.  What is MERS?  See below.

  SHORT ANSWER  – MERS (Mortgage Electronic Registration System, Inc.), was confirmed as a proper player in the foreclosure process, and the assignments to and from MERS were upheld. The Court clarified however that the holder of the note and the holder of the deed must be the same. So, to say it is a win for the banks?  I guess you could look at it that way.  Mostly it clarified that at the time of foreclosure, the note holder (lender) and the deed holder (usually MERS) must be the same.  So MERS must assign the deed to the note holder (lender) for foreclosure to proceed.  In this case the note and deed were held by the foreclosing bank, so the Court allowed the foreclosure.

LONG ANSWER – It is obviously more complicated than that, Bank of New York Mellon’s trustee ReconTrust, BNY Mellon’s trustee, physically possessed the note a the time of the Nevada Supreme Court Mediation and used their servicer Bank of America as their representative in the Nevada Supreme Court Mediation Program.  But at the end of the day, the note and deed were held by the same bank and that bank was allowed to foreclose. So, a win for the banks? Not really, another way to look at it is that the banks must, yet again, clean up their paper work and hold both the note and deed at the time of foreclosure. This is not going to cause a landslide of foreclosures. It was not the impediment per se. It will make some mediations in the Nevada Supreme Court program perhaps go smoother.

What is this MERS you speak of centurion? MERS is often the holder of a deed of trust, and it is shown to that effect on the deed.  However, often the rights to the deed are transferred but not recorded at the county recorder. The Court explained MERS in a pretty succinct manner,

Typically, when a loan is originated, MERS is designated in the deed of trust as a nominee for the lender and the lender’s ‘successors and assigns,’ and as the deed’s ‘beneficiary’ which holds legal title to the security interest conveyed. If the lender sells or [transfers] the … [note] to another MERS member, the change is recorded only in the MERS database, not in county records, because MERS continues to [be the beneficiary of record] on the new lender’s behalf. So long as the sale of the note involves a MERS Member, … [t]he seller of the note does not and need not assign the [deed of trust] because under the terms of that security instrument, MERS remains the holder of title to the [deed of trust], that is, the mortgagee, as the nominee for the purchaser of the note, who is then the lender’s successor and/or assign. According to MERS, this system ‘saves lenders time and money, and reduces paperwork, by eliminating the need to prepare and record assignments when trading loans.

In Nevada to perform a non-judicial foreclosure on an owner-occupied residential property …(in other words not a judicial foreclosure NRS 40.430 nor a non-owner occupied foreclosure) the lender must meet certain requirements…

The Court confirmed that to enforce a foreclosure the deed and note must be held together by the same person/entity.  In this case MERS held the deed and note was held by a number of different lenders.  At the time of foreclosure MERS transferred the deed to the current note holder. The Court concluded, that the temporary separation (when one group held the deed and another held the note) was not irreparable or fatal to either the promissory note or the deed of trust. However, if they are not brought together, it prevents enforcement of the deed of trust through foreclosure. The two documents must ultimately be held by the same party.

The Court concluded that when MERS is the named beneficiary and a different entity holds the promissory note, the note and the deed of trust are split, making nonjudicial foreclosure by either improper. However, any split is cured when the promissory note and deed of trust are reunified. Because the foreclosing bank in this case became both the holder of the promissory note and the beneficiary of the deed of trust, proceeding to foreclosure was proper.

More importantly were the three cases before the Nevada Supreme Court this morning, addressing, statute of limitations on short sales, and junior liens and the right to sue borrowers as passed by the Nevada Legislature in 2011.

 Sandpointe Apartments., LLC vs. Dist. Ct. (CML-NV Sandpointe, LLC) Docket No. 59507

Nielsen vs. Dist. Ct. (Branch Banking and Trust Co.) Docket No. 59823

Lavi vs. Dist. Ct. (Branch Banking) Docket No. 58968.

These upcoming decisions will affect thousands of Nevadans that have been foreclosed upon or sold via a short sale.  I will let you know when I hear more.

Questions:  darren@dwelshlaw.com

ImageThis is an update to May 26, 2009 Eviction of Tenants In the Event of Foreclosure.

 “Helping Families Save Their Homes Act May 20, 2009” (S. 896) has been extended by the Dodd-Frank Act (Pub. L. 111–203, approved July 21, 2010) to December 31, 2014.

To fall under the Act, a bona fide lease (defined below) must be entered into prior to the date of the notice of foreclosure, which is defined as ‘‘the date on which complete title to a property has been transferred to a successor entity or person as a result of an order of a court or pursuant to the provisions in a mortgage, deed of trust, or security deed.’’  In other words AFTER the foreclosure?  So it appears you can enter into a bona fide lease the day before the trustee sale? That is not advisable.

A bona fide lease is one in which: (1) The mortgagor or the child, spouse, or parent of the mortgagor under the contract is not the tenant; (2) the lease or tenancy was the result of an arms-length transaction; and (3) the lease or tenancy requires the receipt of rent that is not substantially less than fair market rent for the property or the unit’s rent is reduced or subsidized due to a federal, state, or local subsidy.

The entire notice can be found by clicking here.  Go to page 15379.  Also I found this three page manual from the Comptroller of the Currency Administrator of National Banks  click here ——> here.

If the Federal law expires in 2014 we have NRS 40 in Nevada  what is known as the form NOTICE TO TENANTS OF THE PROPERTY,  in this statute tenants now get a minium of 60 days to vacate.

There is a helpful Renters in Foreclosure Toolkit  from The National Low Income Housing Coalition.

Questions:  darren@dwelshlaw.com

Happy 4th of July

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The US Supreme Court upheld the Patient Protection and Affordable Care Act of 2010.

Q:        Does the new health care law impose a 3.8 percent tax on profits from selling your home?

A:         No, with very few exceptions. The first $250,000 in profit from the sale of a personal residence won’t be taxed, or the first $500,000 in the case of a married couple. The tax falls on relatively few — those with high incomes from other sources.

Please read a very detailed analysis by clicking here, as written by FactCheck.org a nonpartisan, nonprofit “consumer advocate” for voters.

FactCheck.org explains:

The sort of people who would have to pay the tax might include, for example:

  • A single executive making $210,000 a year who sells his $300,000 ski condo for a $50,000 profit. His tax on the sale of that vacation home would amount to $1,900, in addition to the capital gains tax he would have paid anyway.
  • An “empty nester” couple with combined income of over $250,000 a year who sell their $1 million primary residence to move to smaller quarters. If they cleared $600,000 on the sale, they would be taxed on $100,000 of the profit (the amount over the half-million-dollar exclusion). Their health care tax on the sale would amount to $3,800 over and above the usual capital gains levy.
    FactCheck.org

However, a typical home sale in Las Vegas Valley would not incur the tax.  In March 2012 in the Las Vegas Valley, for example, the average sales prices as reported by b Forrest Barbee, Corporate Broker, Prudential, Americana Group, REALTORS®, were

  • REO . . . Ave Price – $132,635
  • Short Sales . . . Ave Price – $138,085
  • Classic Sales . . . Ave Price – $205,672

These would not generate a $250,000 profit, and so none would be subject to the tax.  All sellers should consult with a tax consultant of their choice.

Questions:  darren@dwelshlaw.com

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

This is a follow up to my  June 8, 2007 , July 2, 2o10  and January 24, 2012  reports on Kitec Plumbing in Clark County Nevada.

I have new information as to how to find out if your home is potentially involved in this litigation .  Contact Total Class Solutions (800-622-0130×312) http://www.totalclasssolutions.com/index.cfm.

§ PREVIOUS POSTS §

Kitec Claims Deadline – March 31, 2012 – Jan 24, 2012

TGIF Legal Tip:  Kitec Litigation Update – July 2, 2010

TGIF Legal Tip: Litigation Affecting Real Estate – June 8, 2007

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