All posts by Robert Bevans

Saving Deals and Saving Time–Use and Occupancy Agreements Are “All-Purpose Solutions”

Customer Service, Uncategorized,

In Massachusetts, where I practice real estate law, lenders and developers often do not live up to their promises. That Unit which, for sure, is going to be ready by the end of the month, still has requires major finish work. “On my God, your loan got stuck in underwriting, and even though we issued a commitment and knew that you needed to close by January 29th, we just are not ready.” How many times have we all heard this and cringed, because our clients have no place to live and a truckload of furniture and furnishings are driving around somewhere in a moving van or storage facility, accruing daily charges at an alarming pace?

The solution to these, and many other problems, can be a well-drafted Use and Occupancy (“U and O”) Agreement. There are some caveats here:

     1. You cannot utilize a Use and Occupancy Agreement if an occupancy permit for the dwelling has not issued. Living in a dwelling under with a C of O poses insurance, and even legal risks.

 

    2. A Seller should NOT enter into a U and O if there is any real doubt that the delay with the lender is ministerial and not substantive. In other words, even though a U and O states that it is only a license to inhabit, and not a Lease, if the Buyer’s mortgage loan does not come through, the Seller may have to evict the Buyer from the dwelling, notwithstanding the language in the U and O.

    3. Make sure the title to the premises is clear. I have had clients enter into longer-term U and O agreements, and then run into title problems when they were ready to close on the purchase.

    4. Do a Walk-through of the dwelling before the Buyer takes occupancy. Normally, this walk-through will be the final inspection called for in the Purchase and Sale Agreement. Therefore, this will be the time to note, and deal with, conditions in the dwelling which do not comply with the terms of the Purchase and Sale Agreement.

Assuming all of the hurdles set forth above are not problems, I often draft U and O Agreements, which permit occupancy prior to closing. Among other things, these are the items which must be considered and included in a well drafted U and O Agreement:

     1 Financial Terms.  Normally the U and O licensee pays the principal, interest, tax and insurance for the dwelling. The Seller should be able to present evidence of all these items so there is no confusion.

     2. Term of the U and O. That varies from deal to deal. It is important ,however, to provide for a large payment due from the Buyer should the Buyer “hold-over” after the agreed upon term. For example, if the U and O fee is $100 a day, after the term is over, it increases to $250 a day. This protects a “squatter” situation by the Buyer.

     3. Escrow Held by an Attorney. This needs to be substantial (at least $2,500) to protect the Seller from a “holding-over” Buyer or physical damage done by a Buyer who does not close.

     4. Other Terms. Payment of utilities is usually a Buyer requirement. Other items like condominium common area charges are similarly treated. It is important to set forth what standard of cleanliness is required at the termination of the U and O, if a sale is not completed.

At Topkins & Bevans, we do Use and Occupancy Agreements on a regular basis. We will soon  be including some standard types of Use and Occupancy Agreements on our website, www.topkinsandbevans.com. Those of you who are in the business of buying and selling real estate should know about Use and Occupancy Agreements. They may be the “secret weapon” you can use to hold a wobbly deal together.

The Title Abstract as a “Family Tree” for the Home your Client is Buying–Help your clients learn the “Rest of the Story”

Marketing / Communication, title,

In Massachusetts, where I practice real estate law, the closing agent (almost always an attorney) requests a title abstract, which provides an at least 50 year history of the property in question. The Abstract, among other things, will show a “chain of title” which indicates dates and purchase price paid for the various prior deeds. Since the goal of the abstract is to establish that there are currently no “encumbrances” on the property, all mortgages and other consensual liens will be checked out, as well as bankruptcies and foreclosures. I like the process to knitting a sweater. If there is one dropped stitch (i.e problem in closing out all prior encumbrances) the abstract falls apart, and that issue needs to be dealt with.

Parenthetically, in this day and age, the “dropped stitch” is generally a missing mortgage discharge, where a prior mortgage has been paid off, but the proper evidence of same has not been recorded, so that the “record title” still shows the mortgage as being outstanding. Depending on the circumstances, a missing discharge may delay, or even more importantly,  prevent, a pending sale transaction. Having a ready ability to “play over” this imperfection is one of the most important reasons why I always suggest my clients obtain an Owner’s Policy of Title Insurance. With that document in hand, the Title Insurance Company will generally assume the burden of providing the missing discharge, post closing, and the transaction can be completed.

Setting aside the legal aspects of the Title Abstract, I have another “marketing” suggestion for you Buyer’s Agents who want to highlight the unique aspects of the service you are rendering to your Buyer. Request the actual Title Abstract from the title agent furnishing title certification.  This little puppy is crammed with useful information that your Buyer will enjoy researching. It will show who owned the property and for how long. It will show Probates and deaths of owners. It will show how much the property sold for in 1968, and the price fluctuations throughout the period  of the Abstract. It may also show divorces and other instruments and agreements affecting the property.

In this age of Google, your Buyer will have a field day looking up the prior owners, and determining whether any of them are famous,or at least noteworthy. From the 50 year Abstract, your Buyer can make a Registry or Town Hall visit and find a way to trace the house’s longer than 50 year history set forth in the Abstract. I have found that local Registry officials are more than happy to direct constituents to the old document books either on site or in an off-site archive. Lots of cocktail conversation, and more, is sitting right there in the Registry.

For my important clients, I have done this work, myself, and presented my clients with a house “family tree” at the closing. It is just one of the little things I try to do to differentiate myself from other Massachusetts conveyancers doing, essentially, the same work I am doing. This might be an interesting “add-on” for you Buyer’s Agents, as well

BPOs for loan Modifications and Short Sales need agent involvement!

Short Sales & Foreclosures

To those people who regularly look at my posts, I commend this information for you review. Short sales are not going away, and our real estate community needs to know their options.

Elliott

When listing a Short Sale one of the most important things during the process is the BPO (Broker Price Opinion).  For those of you not familiar with these it is somewhat of a mini appraisal done by a Realtor to help advise the bank of the market value during a loan modification or short sale.  It is important for the listing agent to meet the BPO agent to assist in providing detailed info about the property and it’s value.  You never know what the experience level of the BPO agent is.  They might not even be the actual BPO agent and merely a licensed assistant.  I do tons of BPOs for both loan modifications and other agent’s Short Sales.  What amazes me is how many times the listing agent doesn’t show up when I have an interior BPO.

Today, after driving all the way down to Temecula from Riverside, I found that the home was in a gated community.  I tried calling the agent to no avail.  I searched the MLS from my phone trying to find gate codes.  There were none and the property I was headed to wasn’t listed.  I finally was able to follow someone else in and I was met by the homeowner.  The homeowner didn’t speak English.  I don’t speak Spanish.  When she answered the door, she looked puzzeled at who I was and why I was there.  The best I could do was wave my camera in the air to show her I wanted to take pictures.  She reluctantly let me in but I’m not sure if she even knew why.  The next issue was that 4 of her 6 bedroom doors were locked and I couldn’t get in to take pics.  Apparently the rooms belonged to her kids and they locked them before going to school.  She didn’t have keys.

Well, I took pics of what I could and left, leaving another message for the agent to reschedule me driving all the way back down to Temecula AGAIN!  I let the asset manager know I needed an extension and why.  he thought it was funny.

Foreclosures are a bad thing for homeowners.  No one wants to be foreclosed on.  Realizing this, the Government (along with cooperation from the banks)is making it far easier and appealing for homeowners to conduct Short Sales to save themselves and their credit from the terrible stigma and long term affects of the dreaded foreclosure.  Short Sales are a great avenue to help homeowners and the banks are getting better at getting them pushed through.  But without agents out there that are willing to do their job and do it well, the homeowner is left…well, pretty much just left!

So, agents…PLEASE!  Help me help you! And homeowners, make sure you have copies of your kid’s bedroom keys.

By the way, if you or someone you know is at risk of losing a home to foreclosure, please know that there are new options available to avoid this devastating occurrence. And know that there is someone here you can trust to help. As a Certified Pre-Foreclosure Specialist, I understand the ins and outs of Short Sales and Loan Modifications. I am also a Wachovia and World Bank trained Pre-Foreclosure expert and well educated in the Government’s new H.A.F.A. and H.A.M.P. programs for helping homeowners facing foreclosure.

Click on the link below to find out more about Preforeclosure alternatives:

Ray Wright – Preforeclosure Specialist

Click on the link below to find out more about Preforeclosure alternatives:

Click here to visit my website!

Dealing with Home Inspection Results–Health, Safety and that old Stand-by “Bargaining Power”

Uncategorized,

In Massachusetts, we have a rather archaic practice regarding agreements for the purchase and sale of real estate. There is an Offer to Purchase (usually signed by both parties without the benefit of counsel). After the Offer is signed, there is an hiatus where the Buyer causes a home inspection to be conducted. A well-written Offer will give the Buyer a complete “out” if the Buyer finds something that is seriously wrong with the dwelling.

The difficult issues come up when small issues arise, and the Buyer often sees these as an opportunity to “renegotiate” the deal. The Buyer’s risk after the Offer is signed is minimal. He or she could possibly lose the $500 or $1,000 which they put down as a “good faith binder” when they submitted the Offer. The Buyer has much more risk after the Purchase and Sale Agreement (more terms, almost always with the assistance of counsel, and a substantial deposit) is signed.

Whichever side I am representing in terms of turning an Offer into a Purchase and Sale Agreement, these are the rules, I try to live by with home inspection issues:

     1. Unless we are speaking about new construction, and Seller’s warranties, the Buyer is purchasing a “used house”. That means that the paint may be chipped, the electrical and plumbing systems not the most modern, the boiler not as efficient as the brand new ones. The Buyer needs to understand this set of facts and accept them.

     2. Health and safety issues are a different story.If the electrical system contains unsafe wiring, or there is a hole in the foundation, these items needs to be addressed. I normally opt for a “credit at closing” over having the Seller do the repairs. Somehow, I cannot see the Seller putting his or her heart and soul into a repair or re-installation which is only done to permit the sale of the dwelling. To me, the Buyer is the proper person to effect this work, because of his or her entirely different perspective on the project.

     3. Nothing I have said in Paragraphs 1 or 2 applies if one of the parties has disparate bargaining power. A home which has been on the market for 249 days is a lot different from one that was listed last week. If you have a motivated Seller, there is nothing wrong with exacting some financial or repair concessions based on your situation. Similarly, if the home you have dreamed of just gets listed, you may have to swallow some expenses to get the deal done.

My experience has been that a savvy Buyer’s Agent will be able to steer the Buyer through this minefield. First and foremost, the Buyer’s Agent should let the Buyer know what would appear to be possible. At that point, taking a reasoned, and unemotional, approach to dealing with home inspection items seems to have worked best for my clients. I have said in other posts that a major contribution of a real estate professional is to attempt to moderate, and channel, the Buyer’s, or Sellers’, angst. There is no better example of this talent than in the area of dealing with home inspection items, which never fail to arise.

Fixed fee Billing for Purchase Transactions and Sale Transactions–I have found this the only way to provide effective representation to my Massachusetts clients

Customer Service, Marketing / Communication

I am a Massachusetts real estate attorney with over 40years of experience in the field of titles and conveyancing. If I don’t know how to do a residential real estate transaction by now, it it pretty obvious that I will never know. I am not saying I know every nuance of every kind of a transaction: I am saying my years of experience  have pretty much shown me what to expect in terms of time and expertise in any matter I am asked to get involved in.

That being said, I now take the position, in all residential real estate transactions, of providing my client with the option of a fixed fee for representation. I take a look at the scope of the deal, determine what amount of time I reasonably would expect to spend on the matter, and tell the client what the fixed fee will be. I ask for one-half of the fee as a retainer; the remainder of the fee can be paid at the closing table, by the Buyer or the Seller.

Once the fixed fee is agreed upon, there are no more discussions about billing. I keep my end of the bargain, in all instances. Sometimes (not often) I overestimate the time I need to spend on the matter, and the fixed fee presents a small windfall for me. It is more often the case, however, that I spend more time on the matter than anticipated. That has not proved to be a major matter of concern, and I  never,ever to mention that fact to my client. From my point of view, it is business risk I have assumed, and it generally has nothing to do with the client.

The results of this fixed fee approachhave been gratifying. I have clients who communicate, who ask questions. They do not call all the time. A few are somewhat pesty. You have the same problems as realtors or mortgage originators. The best effect,for me, is that my clients are unafraid to contact me. They are not worried about that Boogeyman, the time meter. They know that they have an all-inclusive fee, and they have to right to understand what they are signing and committing to.

I do fully 85% of my business through referrals. Satisfied clients tell their friends and family that I was easy to work with. They will use me to prepare their estate plans, or set up an LLC or corporation for them. They have learned to trust me. I have become convinced that my fixed fee approach to residential transactions has been a great part of the reason i have been able to expand my practice.

Couples “Uncoupling”–The Sequel

Uncategorized, , ,

Many of you showed interest in this post, and I thought it might make some sense to “flesh out” terms and conditions  a well-drafted Tenancy in Common Agreement or Joint Tenancy Agreement (the “Uncoupling Documents”) might contain. There is nothing magic here: common sense and simplicity should always be the ruling impulses.

Here are some ground rules.

     1. Both parties should have counsel. If people are willing to enter into an agreement like this, they want it to be enforceable somewhere down the road. It is perfectly acceptable for one attorney to take the laboring oar in drafting, with the other attorney serving in a “review” status. That will obviate the ability of a party to say, “I did not understand” or “I signed but I didn’t know what I was getting into.” The cost of a reviewing attorney should be minimal.

     2. There is no need to record this document. At least in Massachusetts, where I practice, recording serves the function of giving notice to the world of a certain set of circumstances affecting a property. It is title driven. The Uncoupling Documents do not affect title. They are simply some understanding the parties have with regard to their ownership. As a point of fact, recording the Uncoupling Documents may complicate title review.

     3.  Basic “Exit Approaches” I have used.

          a. Notice to the other person with an Offer to purchase at a price. The other person has thirty (30) days to accept or say that he or she will buy the offering person’s interest at the price in the first offer. This keeps the offers from the first person honest and fair.

       b. The same Notice as Paragraph 3a, but no price. Each party then selects an appraiser, and the price is the average of the two appraisals. There is a variation of this approach which has the appraisers selected by the parties selecting a third appraiser, and the third appraiser doing the appraisal, and it is binding. This approach has the merit of having the price be accurate. I still like to give the “non-offering” party a chance to buy at whatever price has been determined.

       c. Whoever ends up withdrawing, at whatever price, there is a provision for delayed payment. I usually suggest a down payment of at least 20%, with the balance to be paid over three (3) years at prime plus 2%. There is obviously no magic in this, but some formula should be included to give the other person time to buy out the withdrawing person. A sale of the dwelling would trigger payment in full at that time.

       d. Sell the property and split the proceed. This may be the easiest, and cleanest, solution. Each party should be able to require this. It clears the air, and gives each party the ability to “move on” and not have to deal with the other on any continuing basis. I have found it helpful to make some provision for selecting a firm or person to market the property is another good provision for the Uncoupling Document.

Most people will honor a written agreement that they understand and have signed. The problem in the Uncoupling Scenario is that people have a real problem agreeing on what is “fair”. There is hurt or deception mixed in to their relationship. The ability to have a well-drafted and easily to understand exit strategy can ease the pain for both sides. That is what I have found in my more than forty (40) years of trying to help people protect themselves.

How to get an offer accepted? Use a Realtor!

closing, Marketing / Communication

This is an extremely sensible approach to REO practice. I do a lot of REO work for Lenders, and I would like all my sales agents to have this material.

How to get an offer accepted? Use a Realtor!

Many buyers are asking on various internet portals how to get an offer accepted.  My answer is easy, use a Realtor. The multiple offer phenomenons have returned in certain markets. Where is that? The areas are in the Short sale and Bank-owned property. This market is smoking.

 I have buyers who have submitted at least 15 offers. Forget low balls, think full price and above asking price. Then why is my offer still not accepted? Buyers ask these questions. How is it that the lower priced offer got accepted? The answer is they had cash, you have FHA. Many private remarks to agents state NO FHA. As discouraging it is you still have to keep going. Now the great news comes CONGRATS, your offer has been accepted, six, seven, eight months later still no Closing. Why is that? It is called SHORT SALE!.

This process is tedious and lengthy. Do you have to patience for this? 

I just closed on a Bank Owned Property, after four different attempts. Why did it take this long? The buyer had all cash, we needed to learn, that automatic low balls do not get acceptance. We were in multiple offers all four times. We missed out four times. Then as luck would have it, the first buyer did not perform. Said they had all cash, truth be told they were exaggerations. Then the second buyer did not perform either. So you would think we automatically came in. No, we had to give best and final to compete with three other buyers. So an All Cash nine day escrow with virtually no contingencies and a million dollar got us a property.

 No what did it take to get the offer accepted? The answer is a good strategy, good financial status and a strong stomach to take on a fixer with virtually no contingencies and a Realtor that guided the buyer through these turbulent negotiations. So we had a happy ending on the REO.

 We are still waiting on the Short Sale, patience is a virtue. We are being virtuous.If you are a consumer  who is considering buying  or selling  a home, investment real estate, vacation homes, or beach properties in Southern California, Los Angeles, Century City, Westwood, West Hollywood, Beverly Hills, Culver City, Marina Del Rey, Venice or Malibu. Feel Free to give me a call at 310.486.1002 (USA) or email me at homes@endrebarath.com  or visit one of my websites at http://www.endrebarath.com  Your Pet Friendly Realtor. I contribute a portion of My commission to Local Animal Rescue Organizations.  

Couples “Uncoupling” and Owning Real Estate–“Breaking Up is Hard to Do”

Uncategorized, , ,

In Massachusetts, where I have been practicing real estate law for more than 40 years, many unmarried couples purchase real estate together. Some engaged people are trying to take advantage of the current low interest rates, and market indecision, to get something “we own before we marry”. Other couples, who never intend to marry, have the inclination to pool their assets to make joint ownership  a part of their personal relationship.

When I assist people in purchases who are in this situation, I explain to them their two ownership options; tenancies in common and joint owners with right of survivorship. Only the extremely practical even consider tenancies in common, whereby at the death of one of the owners, his or her undivided one half interest in the property passes to the person’s estate. Almost everyone chooses “joint ownership with right of survivorship” I might add that in each of these situations, I strongly suggest that the parties enter into Tenancy In Common Agreements or Joint Ownership Agreements to provide in advance for the possibility that they may part company from each other while owning the property in both names.

Very few clients are willing to enter into the Agreements I outline above. I may write a future post on what  terms and conditions these documents contain. In any event, most couple says “No”, so when a couple breaks up, the “fun” really starts. One party moves out, and says “why should she continue to make the mortgage payments, I no longer live here”.  And “by the way, I put down most of the down payment, and I want my money back, NOW” “I will only pay the mortgage payment if I can claim ALL the deductions on my tax return.”  “I will not sign for a refinancing, even at better rates, unless you buy me out on my terms” “OK, if you have moved out, I am changing the locks, and you cannot have access to the property” I can honestly tell you I have heard all these statements and more.

There is a judicial solution for these situations. It is called a “Petition for Partition” and it is an equitable proceeding, wherein all the factors involving the Tenancy are examined. It is not cheap!!! It is not fast!! It rarely reaches a conclusion that addresses all the concerns of the parties!!!

When you, as real estate professionals,  see an unmarried couple buying real estate, urge them to enter into some kind of “exit strategy” agreement. It is truly for their own good. A failure to have something in place can only exacerbate the drama of the break up. This piece of advice could be the single most important thing you do for these customers; they will thank you somewhere down the line. Topkins & Bevans are there to help, if any of your customers wish to discuss this entirely sensible, and prudent, strategy.

Is Your Massachusetts Client About to be Foreclosed Upon?–No Need to Start Packing Up Things Just Yet

Short Sales & Foreclosures, Uncategorized

This is an actual situation which is confronting a client of mine who has not made a mortgage (or tax) payment in the last eighteen (18) months. The mortgage lender has finally gotten around to scheduling a foreclosure sale. This course of action has really been necessitated by the lender’s unwillingness to demonstrate the least degree of flexibility in terms of several short sale go-rounds.

The sale is scheduled for the end of January. My client has asked me for a timetable as to when he must leave. Since there has been a dearth of good news for him in the past year or so, I was not unhappy describing the path he would face in terms of when he needs to vacate the premises. None of these suppositions are “sure things” but this has been my experience:

     1. The Foreclosure Sale. Lately in Massachusetts, outside bidders have been appearing at foreclosure sales and making winning bids. As much as anything else, this has been caused by the lender’s obtaining current and realistic appraisals of the property in question, and adjusting their bidding instructions accordingly. Furthermore, the lender now have a pretty good “feel” for the expense of boarding and otherwise securing REO property, and they would rather sustain their losses and move on. Assume there is a successful bidder at the foreclosure sale. The “closing” on the sale generally takes place in 30-45 days. During that period, there is no question that my client can remain in the home.

    2. After the Foreclosure Closing. Self help, even for former owners who remain on the premises, is a thing of the past. The former owner is afforded the due process safeguards of a “tenant” in terms of removing him from the dwelling. This means the service of a notice to quit, which will be followed by a Summary Process hearing, which will be followed by a judgment for possession, which will be followed by an execution and eventual physcial eviction. For a sinle adult, this process can be completed in probably 6 to 8 weeks. For a faimilt with childred, or elderly former owners, add another three months or so. Often during this period, the former owners will be presented with a “cash for keys” scenario, and very often the amount of cash involved is not small.

So, I told my client to plan to leave his home around Memorial Day. It could be a longer duration than that time, but will almost certainly not be shorter. That’s four (4) more months of cost-free housing. What a country we live in!!!

Purchasing Real Estate from an Estate–Get Some Legal Help Very Early in the Game!!!

Uncategorized, ,

More often than not, a purchase from an Estate in Massachusetts can offer a “bargain price” element to the purchaser who is involved. The heirs may be anxious to “liquefy” their inheritance, and do not want the inconvenience of having to maintain the real estate in question, including insurance and taxes. There are, however, some title issues which you, as real estate professionals, should be aware of when you are involved in an “Estate Sale”, and I thought it might be helpful to bring these items to your attention:

     1. When there is a Will and an Executor: 

      a. The Executor is a fiduciary. In a word, that means that the Executor must obtain the very best price he, she or it can obtain for the real estate that is being sold. So, as difficult as it may be for some people to understand, in Massachusetts, even if an Executor enters into a Purchase and Sale Agreement for the sale of a piece of real property, the Executor must state that if a higher offer is presented prior to closing, the Executor must accept that offer. This happens rarely, but if you are representing a Buyer, it is important to let that person know that the Executor is not trying to pull a fast one with this language, the Executor is following the law

     b. If the sale transaction takes place within a year of the death of the decedent. The Executor will apply to the Probate Court for a License to Sell. The P & S will be presented with the application. The executor can then complete the transaction with the approval of the Court, and if a creditor does not contest the License, the creditor will have no standing to seek a surcharge from the Executor.

 2.      When there is no Will and no Executor:

    a. While it is never a good thing to do,  many people never execute a Will. That means that their property will pass to their heirs at law, as determined by the intestacy laws of the Commonwealth of Massachusetts. Rarely, if ever, do these laws precisely mirror what the decedent had in mind. Moreover, a deed in this situation must be executed by all parties who have an interest as a legatee under the statute. This can give “grey hairs” to even the most patient conveyancers.

   b. If the sale transaction is to take place within a year of death, there are more problems. A License to Sell will still be required, if the Buyer wants to relieve him or herself from the claims of creditors. A second step must be taken prior to the issuance of the License. Someone must take the role of “Administrator” of the Estate to apply for a License to Sell. This can take time, and at such time as you get a listing from a group of heirs of an intestate estate, I strongly advise that you start the Administrator application process right away.

As this post indicates, the sale of property which was owned by someone no longer living can be complicated and may be fraught with peril for the Buyer. Make sure that you obtain competent legal advice on the correct path early in the game. The other lesson here is to encourage all of your customers to make sure their Wills and other estate planning documents are in order. There is really no easy way to “get there from here” if a valid Will is not in existence.