RE Attorneys Archives
National REIA Applauds US District Court Ruling Upholding Fourth Amendment that Protects Property Owners from Unnecessary Gov’t Harassment
Cincinnati, Ohio) The National Real Estate Investors Association (National REIA) issued a statement today applauding the U.S. District Court’s (Southern Ohio) recent decision stating that the city of Portsmouth’s (Ohio) occupational licensing requirements, which are imposed upon landlords violates the Fourth Amendment to the United State Constitution.
Charles Tassell, Chief Operating Officer of National REIA said “Today’s ruling laid bare the excuses used by local governments to steal the freedoms of property owners.”
He further added that “The 4th Amendment is still alive and well, and citizens should NOT be forced to have their homes intrusively ‘inspected’ by warrantless searches. Every local government should take note that warrantless searches are STILL illegal and unconstitutional.”
Regarding the ruling itself, Tassell said “The ruling won by the 1851 Center For Constitutional Law was a victory for freedom against a tyranny with which the Founding Fathers were all too familiar. Citizens of the United States have an expectation to live without local, state or federal inspection of their home based on flimsy excuses disguised as law.”
Judge Susan Dlott, of the Western Division of the Southern District of Ohio, held as follows: “[T]he Court finds that the Portsmouth [Rental Dwelling Code] violates the Fourth Amendment insofar as it authorizes warrantless administrative inspections. It is undisputed that the [Rental Dwelling Code] affords no warrant procedure or other mechanism for precompliance review . . . the owners and/or tenants of rental properties in Portsmouth are thus faced with the choice of consenting to the warrantless inspection or facing criminal charges, a result the Supreme Court has expressly disavowed under the Fourth Amendment.”
For more information and to read a copy of the the Court’s ruling visit www.realestateinvestingtoday.
PRIVITY OF CONTRACT:
Who Is Making Repairs For Your Buyer?
The #1 post closing question we get asked is this: “the sellers agreed to repair the (roof, electrical, plumbing, etc.) and now we’ve moved in and the (roof, electrical, plumbing, etc.) isn’t fixed. Can we go back to the seller and make them do the work properly?”
Under MOST situations, the answer is NO!!!
Huh? You mean it’s ok the seller didn’t have the work properly done as they agreed they would do? Yep, that’s exactly what we’re saying. And here’s why.
In Kentucky there’s a legal concept called “privity of contract.” Privity of contract says if I didn’t enter into a contract with a contractor directly, and if the contractor does a crummy job, the contractor is not liable to me.
Therefore, when a buyer requests a seller to make certain repairs after the home inspection, the way most agents handle the situation, there would NOT be privity of contract because the seller picks the contractor, not the buyer.
In addition, when a buyer allows the seller to pick the contractor, we know the seller will likely pick World’s Cheapest Contractor, LLC to do the work. This only increases the odds the buyer will have an issue after closing.
So, how do we fix this?
We’d love to say “insist on your buyer picking the contractor,” but we don’t think that’s realistic. Instead, as a selling agent, we’d suggest when you’re dealing with Big Ticket Items (roof, HVAC, basement, structural issues, electric, plumbing), you reach out to the listing agent BEFORE making a repair request and ask them who they are likely to use for this work. If you are comfortable the person doing the work is qualified, in the repair request specifically state the seller shall use [insert name of qualified contractor listing agent suggested] and state specifically “buyer’s name shall appear along side the seller’s name on the invoice.” If you are NOT comfortable with the contractor they suggest, you need to write in the repair request the contractor your buyer would like to use for the work. In this case, you will still need to add “buyer’s name shall appear along side the seller’s name on the invoice.”
When the buyer’s name appears on the invoice, we now have privity of contract.
If an issue pops up after closing, the buyer can now go back to the contractor to insist the contractor take care of the problem. And at the same time, we’re now using a contractor we feel good about.
Another alternative would be to have the seller give the money for all repairs directly to buyer, but this should NEVER happen without the buyer’s lender’s consent. Of course, in a cash closing, it’s fine to give money directly to the buyer, but not if there’s a lender involved.
We hope your summer has been fun and productive and we hope to see you soon at a closing table!
Since the early 1970s, our firm has practiced primarily in the field of real estate law. We represent banks and mortgage companies, real estate investors, builders and individual buyers and sellers in a variety of transactions related to residential and commercial real estate in Kentucky and Indiana. Our primary area of practice is real estate closings. However, our attorneys also practice in other areas of law as well.
DODD FRANK FOR TODAY’s INVESTOR
by attorney Harry Borders
PART TWO- RESTRICTIONS ON OWNER FINANCING!!!
Here’s the GOOD NEWS… Investor buyers can STILL get financing from any source they want.
Here’s the TERRIBLE news… Owner occupant buyers now have lots of restrictions place on who they can get a loan from.
These new rules impact “contract for deeds” and “Land Contracts” as well as seller retained mortgages (and, of course, the ever present contract for deed in disguise as a lease-option) and private financing.
So, assuming an owner occupant wants to obtain a loan from a source other than a bank or mortgage company, here are the new rules.
If the lender only lends once in a 12 month period, the lender:
a) MUST be a “natural” person (i.e. not an LLC or corporation);
b) MUST have owned the property (i.e. no private financing, only owner financing);
c) MUST NOT have built the home in the ordinary course of his/her business;
d) MUST NOT have a negative amortization;
e) MUST be for at least 5 years, and if longer and adjustable, must be tied to an index rate, such as Libor
If the lender lends 2 to 3 times in a 12 month period, the lender MAY be an LLC or corporation. But the lender also:
a) MUST have owned the property (i.e. no private financing, only owner financing);
b) MUST NOT have built the home in the ordinary course of his/her business;
c) MUST NOT have a negative amortization;
d) MUST be FULLY AMORTIZED;
e) if the rate is adjustable, it must be fixed for at least 5 years, and it must be tied to an index rate, such as Libor; and
f) MUST determine in good faith that the consumer has a reasonable ability to repay the loan (similar to what a loan officer would do).
If the lender lends more than 3 times in a 12 month period,
all of the above requirements for a lender lending 2 to 3 times in a 12 month period apply and
IN ADDITION, the lender MUST BE A LICENSED LOAN OFFICER.
As you can see, navigating the waters of seller financing has again become tricky.
Please check with your real estate attorney before embarking on a seller financing transaction for a dwelling.
Until next time, peace,
P.S. Your simple solution to stay out of trouble is to never offer seller financing to any tenant / buyer or owner occupant. You can use Seller Financing to sell to other Investors, not owner occupants.
Ignorance of the Law is not Your Get Out of Jail Free Card!
An Everett, Washington landlord has been ordered to pay a $21,800 fine after failing to include a lead disclosure in his lease.
The landlord, who manages 26 units located in Bellingham, Washington, repeatedly leased properties to tenants over the course of several years without including the federally-mandated lead disclosures. The EPA brought the charges against him.
“People have the right to know about lead hazards prior to renting or buying a place to live,” said Rick Albright, Director of EPA’s Office of Air, Waste and Toxics in Seattle. “Sellers, landlords and property managers who do not properly notify the people who will live in these homes can face stiff penalties.”
The Disclosure Rule requires landlords, property management companies, real estate agencies, and sellers to inform potential lessees and purchasers of the presence of lead-based paint and lead-based paint hazards in pre-1978 housing. They must also provide the purchaser or lessee with a copy of the Lead Hazard Information Pamphlet, “Protect Your Family from Lead in Your Home” before entering into any lease or sales agreement, and keep records showing they have met the federal requirements.
This 6 minute is an excerpt from the the 3 day “How To Buy without Banks!… money, credit, or private lenders”
The 16-month robo-signing saga ends with a $26 billion settlement.
Nearly all 50 states agreed to a deal with Bank of America ($8.13 0%), JPMorgan Chase ($38.30 0%), Wells Fargo ($30.63 0%), Ally Financial ($23.31 0%) and Citigroup ($34.23 0%). Oklahoma AG Scott Pruitt is the only one not to sign.
If another nine smaller servicers join the settlement, the deal could rise to $30 billion.
Evidence arose showing these firms and their processors allegedly signed foreclosure documents en masse without a proper review of the loan file, evicted homeowners while in the modification process, and other abuses.
Iowa Attorney General Tom Miller led a multi-state coalition with the Justice Department and the Department of Housing and Urban Development beginning in October 2010. Since then, a settlement has been perpetually imminent as negotiations dragged on in the largest federal settlement with a single industry since a deal with tobacco companies in 1998.
Roughly $5 billion of the funds will be used as $2,000 payouts to hundreds of thousands of borrowers affected by the abuses and were foreclosed on between the beginning of 2008 and the end of 2011. A portion of the $5 billion will also go to the states.
Nearly 8.9 million properties received at least one foreclosure filing since 2007, according to Realty Trac.
Another $17 billion will be used as “credits” toward writing down principal on roughly 1 million loans mainly held in the bank servicing portfolios.
However, officials said some of the principal reductions will go toward mortgages in private-label securities, meaning investors will take some of the hit. However, the “credits” would be significantly less for mortgages held in private MBS holdings.
Banks must comply with any pooling and servicing agreements with investors, meaning before a servicer can write down principal on a mortgage in a privately held MBS, it must pass the net-present value test. Only “a couple” of the servicers would do this, officials said.
Roughly $10 billion of the $17 billion held for principal reduction credits will go to borrowers who are delinquent on their mortgages.
Not every dollar the servicers reduce from the principal will be “credited” from the $17 billion the banks agreed to.
For every dollar forgiven, roughly 50 cents or less will be credited under the $17 billion number. Officials said the settlement would ultimately result in an estimated $45 billion in total principal reductions.
Another $3 billion will be spent on refinancing borrowers who owe more on their mortgage than their home is worth. The servicers will send plans to an oversight monitor to be determined on how they would solicit borrowers for the refinance program.
As part of the deal, Bank of America will send $1 billion cash to the Federal Housing Administration as part of the settlement.
“We believe this settlement will help provide additional support for homeowners who need assistance, brings more certainty to the housing market and aligns to our ongoing commitment to help rebuild our neighborhoods and get the housing market back on track,” said a Bank of America spokesman of the entire deal completed Thursday.
The servicers are required to complete the fixes within three years. The AGs built in incentives for relief provided within the first 12 months. The servicers are required to reach 75 percent of their targets within the first two years. Servicers that miss settlement targets and deadlines will be required to pay “substantial” cash amounts.
California and New York were in deep negotiations well night Wednesday.
California will get $18 billion of the agreement. California AG Kamala Harris left the multi-state negotiations last September when the estimated relief to the state was $4 billion.
“California families will finally see substantial relief after experiencing so much pain from the mortgage crisis,” Harris said. “Hundreds of thousands of homeowners will directly benefit from this California commitment.”
New York will receive $648 million in assistance from foreclosure settlement, including $495 million for principal reductions.
The settlement also establishes servicing standards similar to those agreed to in the federal consent orders signed last year.
Robo-signing, and dual-track foreclosures are forbidden and new processes are required to be put in place in order to clean up lost paperwork and oversight of document processors.
“In the past it’s been a dysfunctional system. This set of guidelines has the potential to change all that,” said Iowa AG Tom Miller. “I have a message for the banks. This is an opportunity for you to change things for the benefit of the homeonwers, the investors, yourself and your reputation.”
The settlement will also clear participating AGs to work with a federal fraud task force.
New York AG Eric Schneiderman will co-chair a task force with the Justice Department and HUD, reversed his previous decision to not sign onto the foreclosure deal. He was removed from the central negotiation committee last year when he tried to expand the scope of the investigation into securitization and other issues. His task force, along with California AG Kamala Harris and several other AGs, will look into secondary market and other fraud outside of the robo-signing probe.
Also as part of the deal, Schneiderman will not have to drop his suit against the banks for their use of the Mortgage Electronic Registration Systems.
“This historic settlement will provide immediate relief to homeowners – forcing banks to reduce the principal balance on many loans, refinance loans for underwater borrowers, and pay billions of dollars to states and consumers,” said HUD Secretary Donovan. “Banks must follow the laws. Any bank that hasn’t done so should be held accountable and should take prompt action to correct its mistakes. And it will not end with this settlement.”
By Jon Prior from the Housing Wire