Wednesday, October 31, 2007

The Husick Couple Selling Strategy

I've seen some great real estate sales techniques, but this one ranks up there with the best. A couple in Pennsylvania has offered to sell their house with a special covenant: the money will be returned to them when the couple dies. What's more, there's another option for the buyer--take care of the couple and you get a bonus. A home in Arizona.


For us probate minds, one must wonder: what if the buyer elects to rescind for some reason, the sellers fight this election, and the sellers both die before the court rules on the rescission?

Tuesday, October 30, 2007

A Transfer Disclosure Statement Example

I wrote about the TDS, or transfer disclosure statement, yesterday, and I'd like to provide an example, just one example of many in my mind, of why it's important to follow-through on these.

I was involved in a case a few years ago where the seller didn't properly list the items in the kitchen which weren't properly. In the lawsuit against the seller, the buyers added this failure to disclose to their laundry list of fraud causes of action.

The case primarily centered on fraud in non-disclosure of inadequate support for the house (an older house) and pest problems. When that part of the case essentially fell apart a few months later, the buyers were faced with whether to proceed or not. Lots of money in attorneys fees were at stake. Their case didn't support this risk. BUT, they also had this failure to disclose in the kitchen, which, if they took to trial and won, they may get their attorneys fees, or some of them, back. They could take a chance on the big one, and if they lose, they can still fall back on the small ones. The buyers ended up settling with my clients (the sellers) on the eve of trial, for very little money. But it was touch and go for awhile there, and their attorney kept harping on these small items.

If I remember correctly, the dishwasher didn't work properly, the stove didn't work properly, and there were some exposed wires in the kitchen. Items that sometimes are overlooked in the TDS process.

Monday, October 29, 2007

Transfer Disclosure Statements: Document Your Efforts

Your client's house is in escrow and the clock is ticking on the close. The TDS i still in need of attention. The seller is not cooperating, for one reason or another.

How do you represent a seller that won't focus on the TDS? Make documented efforts to schedule a thorough walk-through. Make sure your client knows that you've placed a great importance on disclosure. Make sure your client knows that you want to disclose anything and everything that might be an issue to a reasonable seller.

Remember, if there is a problem with non-disclosure, the agent/broker is usually brought into the dispute. That's where a solid collection of notices and memos may protect a Realtor who has done his or her job.

Wednesday, October 24, 2007

Should the Housing Industry Solve the Housing Mess?

I respect Jim Jubak and enjoy reading his columns. I also respect any writer who, with reason, thinks outside the box. Jubak's latest column echoes what many experts and leaders in the real estate and finance industry have been saying: let's have the lenders, brokers, and builders fix the housing mess. To me, that makes little sense. First, the fact that an industry finds a way for a consumer to buy a product easier than he or she would otherwise, is not new, and goes on everyday. Look at car dealers!

Second, the regulatory oversight of builders and of lenders makes it realistically impossible to craft and implement a solution that benefits troubled consumers, and thereby fixes this "mess". This reasoning actually flies in the face of what many others believe, that we simply need more regulation and less discretion for the lenders, brokers, and builders.

A refreshing approach: why not treat housing like other products and commodities, and accept that there will be highs and lows, and inventory swings in both directions? Do we really need to make an industry (in this case, housing) pay extra for making its product more accessible to the consumers?

Tuesday, October 23, 2007

Memories of a Malibu Fire

The Malibu fire brings back some memories. It was October 1985. I was a sophomore at Pepperdine, living right near the convergence of Malibu Canyon and the coast. I've never seen a fire tear through the landscape so quick. This brutal wilderness which sits behind the mountain range overlooking the beaches, has been the site of many fierce firestorms in the past, not just this one or the one I experienced. (BTW, the school was closed for four days!).

Who owns this land? I don't know. Most of it will never be developed so the owners aren't too worried. It's the homes, expensive homes, next to the wilderness, on top of the hills or looking over the water from the side of the hills, that are the real victims of these fires. All you can do as a homeowner in these areas is get lots of good insurance and keep lobbying for more controlled clearing of brush and trees in your area.

Another Disclosure Example

Does a seller of property have to list defects that are subjective in nature? Usually, they should, since the seller often must assume that the buyer is an arbitrary person. The subject of my last post, the haunted house, got me thinking. What if, for example, your neighbors around the corner have loud parties until late in the night? May not bug you. You've been there, done that. But if you think it is something that would decrease the value of your property in a material way, you may want to let the other side know. If they have reason to know of this already, perhaps they have heard about these neighbors or expect that type of behavior in this particular neighborhood, you probably do not have to disclose it. I've been involved in a matter with this "factor" before and in our case, I can recall that it was difficult to show that the loud noise affected the value. This is especially the case if the buyers start throwing their own late-nighters!

Monday, October 22, 2007

Boo! Your Listing is Haunted!

I expected the article to say that ghosts in the house would decrease the value of the house, possibly cause the broker to disclose this "defect". What I didn't expect was that, in some cases, haunted houses are a good thing? Good or bad, folks, this is something you need to disclose. Question is, when does this "factor", good or bad, cross the line from fairy tale to real. Happy Halloween!

Saving Your Home From Foreclosure

Contrary to what some homeowners think, most lenders do not mind if you can save your home from foreclosure. Why? Because usually that means that they're getting paid. But what can you do to save the property? There are many ways to do it, and some are actually legit. Not just some fly-by-night gimmick from some real estate scam artist.

If there is fraud in the making of your loan, depending on the type of fraud you may be able to convince a judge that the sale should be stopped. If the loan and its making was fair but you simply aren't able to come up with the funds on time, there are options. One is a right of redemption. This is a rather complicated legal right. But it essentially is a right the homeowner has to pay off the loan after the sale.

The period of time in which a homeowner has this right of redemption depends on whether the sale proceeds covered the loan amount. If it did, the period may be three months. If the sale proceeds were not sufficient to pay the loan, the period may be a year. Check with your attorney on this.

Right of redemption may allow a homeowner to find an investor (an honest investor!) to work with him or her to put the property back in his or her name.

Thursday, October 18, 2007

More Fraud Examples

My last post linked to a guy who put deals together in Indiana when he did not have a license. The post mentioned having a license as one factor a buyer or investor looks for when considering a deal. Let me clarify one thing though. There are many people in California who managed to get a license, both a salesperson license and a broker license, and who are just as shady as the guy in Indiana. I've represented victims in some of these cases myself and can tell you that a valid license is a positive, but it is by no means a badge to rely upon. I'm hopeful that the DRE can strengthen its regs a little more so that many of these folks can be eliminated from the industry, not just the profession. But do this consumer check, too.

Licenses are there for a Reason

The slump in the real estate market has weeded out some of the fly-by-nighters, but courts all over the country are still cleaning up the messes left behind by the last flight of greedy dealers. It's happening in your town, too, I'm sure. You would probably have to go down to the courthouse to hear about much of it, but I promise you the shady deals are being exposed. Only problem it's usually the victims who expose them, at the expense of hiring a lawyer to remedy the fraud.

The best advice for anyone dealing with real estate, is the same as for anyone dealing with any other profession that the State of California had decided it's important to regulate. Check their license. Check the quality of their past work. And, don't do business with them if anything doesn't seem right. Just ask these folks in the Indiana deal linked above, or many other deals that went south because of a shady investor or dealer.

Lis Pendens: To Expunge or Not to Expunge

The lis pendens is in some respects, a provisional remedy, that is, a remedy used by a party in litigation prior to a trial or resolution of the whole case. Some courts consider it in another respect, a notice. I won't say "just a notice", because it's effect is greater than just notifying a would-be buyer or transferee that the property is the subject of litigation. In most cases, it simply brings to a halt any effort made by a seller/defendant to transfer or sell the property, since no transferee would voluntarily assume a problem like this.

Does that mean it's a weapon? No, just a tool. And a tool only to be used when there is a sincere concern that possession or title to the property could be lost forever. And a sincere belief (because in most cases this will have to be proven to a judge in a motion to expunge the lis pendens) that the plaintiff will prevail at trial on their action, and the action involves title to or possession of the property.

It's the latter point, the action must involve title to or possession of real property, that is the subject of most disputes in court over whether a lis pendens was properly filed. Sure, the case itself must have merits, but it must specifically address title or possession.

For example, a suit over money owed from A to B should not involve a lis pendens over A's property unless the money involved a sale from B to A of real estate and A can show that he/she was defrauded out of his/her property, or something of that nature. Court's understandably so, are reluctant to uphold a lis pendens unless there is a real property claim and the claim has merits.

So if you're property is tied up by a lis pendens, or you're looking at filing and recording a lis pendens in conjunction with a complaint, look carefully at when and why this is allowed.

Wednesday, October 17, 2007

A Delicious Break from Court

I'm having lunch in downtown San Jose before a court hearing yesterday (at a wonderful cafe named Cafe Rosalena) and I leave with a loaf of cinnamon bread from the bakery next door. Turns out that I took home a very popular, amazing cinnamon bread. Since I don't live in San Jose, or anywhere in the bay area for that matter, I would be out of luck if I wanted more of this delicious bread, at least until my next trip to the west. But I'm in luck, and so is anyone else who discovers this bread. Not only is it available at many local stores that have discovered it, but you can order it online. It's called Greenlee's Bakery. It's on The Alameda, about 1/2 mile west of HP Pavilion.

What's this have to do with real estate? Well, my hearing was on a motion to expunge a lis pendens. That'll have to do for now. More on the realities of filing a lis pendens, and having a lis pendens removed, in later posts.

Tuesday, October 16, 2007

Becoming A Good Faith Purchaser

California law goes out of its way at times to protect a good faith buyer of real estate. I'm not referring to someone who buys property really intending to pay a fair price, but someone who is buying the property without knowledge that someone else has an interest in the property. The buyer who does his or her homework, and is reasonably comfortable with the status of the property after a fair amount of research, will be considered a good faith purchaser. This means that he or she has good title regardless of someone else's claim to the property. Of course, the buyer has to pay a fair price for the property, too.

Oh, yes, there is one small exception to the protection afforded good faith purchasers. Isn't that the way it is with the law??!!

I'll get to that in a later post.

Saturday, October 13, 2007

A.B.C. Approval of a Business Sale in California

The purchase and sale of a business is already complicated enough without the need to transfer a liquor license. When the sale involves a restauant or some type of nightclub, the broker and the escrow company need to make sure their procedure is airtight, and that they strictly follow this procedure.

In California, this includes the publication of a bulk sale notice and the requirements to have the transfer approved by the Department of Alcoholic Beverage Control, or A.B.C. The delay in getting A.B.C. approval can occur if there is some concern with the buyer's character, or if the seller has taxes that are not paid, or if the local agency has an issue with the transfer. I've seen many sellers and buyers try to circumvent the A.B.C. process so that they can get the escrow done. This is the last thing that should occur, even for a day. Brokers, escrow agents, stick to your timelines!

Friday, October 12, 2007

Disclosure of Bad Neighbors

A seller's duty to disclose, or for that matter, a broker's duty to disclose, continues to grow into a world of unknowns. Does it also include a duty to notify that a neighbor is unpleasant? What if the neighbor routinely cleans his firearms in the front yard? As a broker, you don't want to kill the deal, especially in today's market where the deals are less frequent, but how far does this go? The legal answer to this lies somewhere in the notion that if the "defect" materially affects the value of the property, it should be disclosed. That's a good reason why brokers earn their paycheck. They are left to answer this one every time they show a property. Here's a link to a video involving a "defect"! http://blog.sellsiusrealestate.com/unzillowable/rotten-neighbors-and-the-duty-to-disclose-2/2007/10/08/

Thursday, October 11, 2007

Mold in my Theater: A Failure to Disclose of the Governor's Kind

California's governor and first lady have their own real estate disclosure case to deal with. Seems they sold a home in Pacific Palisades a couple of years ago, and the buyers, a personal injury attorney and a pro golfer, complained of a failure to disclose, including the common defect, mold in the movie theater. I'm sure all real estate agents are trained to watch for this one!

You can read about it hear in the WSJ site: http://blogs.wsj.com/law/2006/09/29/pricey-real-estate-the-law/

Tuesday, October 9, 2007

The Going Concern of Brokering a Business Sale

The sale of a business is often handled by real estate brokers and agents. Many of the agreements are prepared on standard DRE (Dept. of Real Estate) forms. Even where the sale is handled through an escrow, the broker/agent needs to be extra careful.

Unlike some, or most land deals, the sale of a going concern is just that, a going concern. There are a number of issues that need to be addressed. I'll deal with many of these in future posts, but one is the disclosure of financial information. If the broker/agent acts in any regard in transferring the information from the seller to the buyer, that broker/agent may be considered to have represented that the financial information is valid and true. What happens when the buyer finds out otherwise, or believes otherwise, after paying lots of money for the business? The buyer goes after the seller, and the broker/agent. The broker/agent needs to make it crystal clear that it is not verifying any of the information. Better yet, the broker/agent should have no part in the physical transfer of this information.

More thoughts on broker/agent liability in business sales coming up.

Friday, October 5, 2007

Auctions in the New World of Home Sales

Going once, going twice, sold..... in a different way than you could have imagined.



Anderson Homes is just one of many builders who have utilized the auction procedure for selling homes. It's news today in the Modesto Bee, as some neighbors weren't thrilled about this. Here's the article: http://www.modbee.com/local/story/85257.html . What's most interesting to me is that, unlike with a traditional sale, buyers can buy more than one, and buyers can purchase for investment purposes. That is, buyers don't have to reside in the home.



This is interesting because the lender normally has something to say about purchasing for investment purposes, and lenders these days are trying to figure out the new world order for home loans. Do they care about these new policies of homebuilders? I'd be interested to hear about this from mortgage brokers and lenders.



This is also interesting because it really changes the dynamics of a neighborhood. It's true that right now many neighborhoods are ghost towns. When the market turns around, and it will, many of these neighborhoods will have a much different look and feel from what some developers envisioned when they designed them. All due to these changes in the market.

Thursday, October 4, 2007

The Foreclosure State of Mind

Foreclosures are happening at an unbelievable pace. It seems like more and more clients and potential clients are looking at letting property go, whether the property consists of their home or some land which they acquired for development purposes. The interesting that I have noticed of late, the last few days or so, is that many landowners are actually resigned to this fact of life. Last year, or even this summer, a pending sale would bring with it more anxiety.

I think this is part of the natural order of things. It's a sign that we might be hitting bottom in this market when the attitude of owners and sellers changes from frustration to resignation. Let's hope that resignation turns to eternal hope soon.

Tuesday, October 2, 2007

Happiness and Lawyers Go Together

I love reading (or hearing) about people who practice law and then decide they're going to do something else they love. I love my practice and wouldn't give up the daily excitement that comes with real estate and probate. And helping people with their estate planning is something everyone should have the chance to experience. It's important to my clients, so it's important to me.

But if you get a chance to check out this person's blog, do so. This attorney apparently has taken up writing, and has a great concept: happiness. www.happiness-project.com/

Careful when transferring by Will to a Caregiver

A gift to a caregiver could run into trouble if the person is deemed a disqualified person under California Probate Code Section 21350. If the testator is a dependent adult and he or she gives the assets to a care custodian, then it is important that the attorney drafting the will or other instrument have an independent review of the proposed transfer. The purpose is to protect against elder abuse. This law applies to persons making donative transfers who are 64 or over. In a probate setting, this could become a contested gift depending on the size of the asset and how dependent the testator is, or better yet, how close the caregiver and the testator have become. BTW, there are exceptions. For example, if the asset is less than $3000, or there is a blood relation of a certain degree between the testator and the caregiver, the donative transfer does not fall under 21350.

Monday, October 1, 2007

The "New" Option Agreement

Sellers of raw land are still out there; there just aren't as many buyers right now. Enter the more buyer-friendly option agreement.

The option agreement, a popular mechanism for buyers and developers in the past, normally contains a feasibility (or due diligence) period during which a buyer can consider whether the land could be developed, and at what cost. Normally, the deposit a buyer puts up for the purchase, becomes non-refundable at the end of the feasibility period unless the buyer disapproves of the feasibility of the land for the proposed project.

In this slower and slower housing market, many buyers are being offered rather generous terms in their option agreements. One area where they have more flexibility is the period of feasibility and the amount of the deposit. Given the relative risk that many developers are taking nowadays when paying option money for land, the new option agreement is one way to keep the land transactions from stopping altogether, and a great way to allow builders to move ahead with building attractive projects in the future.