Monthly Archives: July 2010

Massachusetts Buyer Beware!!!! If there is a foreclosure in your back title, you may not be getting what you are expecting

Short Sales & Foreclosures, Uncategorized

Here is a tale of woe that is real, and may be repeated many times in the future for Massachusetts real estate scenarios. Well before I started representing my client, he purchased a home which had a recent foreclosure in its title. My client, now attempting to do a refinancing to take advantage of lower interest rates, has run into a seemingly “non-fixable” road block with regard to his home. The property in question had been foreclosed upon and purchased back by the bank at auction. My client subsequently purchased the property from the bank at a price in excess of $450,000. At the purchase closing, my client made a decision not to purchase an owner’s policy of title insurance as it was “too expensive.”

After the closing took place, the Massachusetts Land Court issued several decisions that, in part, retroactively invalidated certain foreclosures. My client, who informed me he had paid for substantial improvements to the property, had just learned his application to refinance the property had been denied as a result of the Land Court decisions. In sum, the underlying foreclosure by the bank had been rendered invalid and, therefore, there is a question as to whether my client even owns the property. The invalid foreclosure probably means that the person who was foreclosed upon still owns the property. Not all foreclosures will be affected.

The Land Court decision concerned a foreclosure where the original mortgagee had assigned the mortgage to another servicer but had not received an executed assignment for recording prior to the commencement of the foreclosure. That being the case, the Land Court held that the foreclosing party did not “own” the mortgage and could not foreclose on a mortgage that it did not own. The decision stressed that the assignment did not have to be “on record” before the foreclosure. It just needed to be in existence. It would appear that if my client had purchased owner’s title insurance, he would at least have “insurable title” to his property. Insurable title would probably be enough to permit a refinancing of the property. That would be much better than the current condition.

On the other hand, “insurable title” is NOT “marketable title”, and even if there was an owner’s policy in place, my client may have insurmountable problems selling this property in the future, if the person examining the title realizes that the proper steps were not taken in terms of the foreclosure. People attempting to sell homes which have foreclosures in the title may be faced with the unpleasant prospect of obtaining a confirmatory deed from the former owner who may be “long gone” or “hard to find” and then paying a large sum to obtain same. Given the circumstances, and the justifiable reliance these people had on the strength of the owner’s policy, many title insurance companies may be willing to pay the fee to the former owner just to straighten out the really difficult position the current owner (who paid a premium for an owner’s policy) now find himself in.

Without an owner’s policy, a seller of real property with this problem is facing the difficult, and expensive, prospect of cleaning up this title problem, all on his or her own dime. The lesson learned here, at least in Massachusetts, is that if you are aware that a customer of yours is purchasing a home which has a foreclosure in its title history, you need to be extremely careful about moving forward. I have recently contacted my state senator to see if he could sponsor legislation which would cure this problem. In my eyes, the good faith purchaser for value should always prevail over the person who did not pay his or her mortgage and was, accordingly, foreclosed upon. I urge all of you Bay Staters to consider similar kinds of initiatives with your elected officials, so we can prevent this situation from becoming extremely disruptive to our already fragile real estate market.

Throwing Out the Baby with the Bath Water–Make sure your “Associations” with other Professionals don’t bring you Down

closing, Uncategorized

I swear, it was not my fault. In my mind, every closing in which I,or my firm participated, was handled promptly and professionally. We even conducted the closings “on-site” to make it easier for the 30 or so purchasers of the Condominium Units. Toward the end of the process, I started to see what the problem was. The mortgage loan originator, who brought my firm to the deal, and introduced me to the very talented and helpful Realtor whose commitment to this project was total had totally “dropped the ball”. Phone calls were not returned by the originator; data was requested from Borrowers two, sometimes three, times for the same piece of paper or information. The level of frustration was high, and I could feel it as I closed successive loans.

The transactions are now completed, and the project is sold out. I often get future business from people whom I have met at closings. There has not been one from this set of closings. I thought my rapport with the listing Realtor was excellent. She and I had spoken about how she wanted to get me involved in future deals. She doesn’t even return my emails or phone calls.

It is apparent to me that I have been tossed down the drain by my association with this originator and this lender. Since I was the closing agent, I must be involved with the problem. As most of you know, that is not really the case. My law firm is independent from this, or any other, lender. We review the title, prepare the closing documents and conduct the closings. We operate under a set of ethical rules which are governed by our State Bar Association.

Regrettably, none of this seems to matter to the purchasers or the listing agent. The purpose of this post is not to rant. It is to caution all of you that you need to be extremely careful with whom you associate in your business dealings. Bad behavior, or negligence, on the part of the Realtor, mortgage professional or attorney or escrow agent can drag you down, even if you performed your part of the transaction flawlessly. My late, great father had an expression, “Tell me who your friends are, and I will tell you who you are” It would appear that the wisdom of this truism applies to our respective professional lives as much, or more, than our personal lives.

Condominium Trustee Meeting Minutes–Important Information Often Neglected

Condominium

The problem is this. Many condominiums are frightfully mismanaged. Nobody wants to serve as a Trustee, and so the people who do serve are either megalomaniacs or people who don’t have much business savvy, but have a lot of time on their hands. Meetings of Trustees are poorly attended. A kind of Peter Principal takes over–the least qualified, either from a business or ethical sense, are in charge. There are very few really responsive Condominium Management Companies. If you are involved with a good one, they find a way to charge for every possible service, which somewhat negates their effectiveness.

Well, my rant is now officially over. I have gotten this off my chest (41 years of frustration) and now I can go on with my post. If (and this is a big “if”) we find a well-managed Condominium which has regular meetings of Trustees, and keeps good minutes of same, we can do a much better job for our Buyer of a Unit in this Condominium than if these documents were not present,

When I can locate same, I ALWAYS review at least one year’s minutes to try to uncover any lurking assessments, or shrugging Unit owners. If there is consistent discussion about painting all the Units, or replacing the elevator, I better let my Buyer know that. He or she is almost definitely looking at an upcoming assessment, and it is extremely difficult to exact any help on this from the Seller since it is only in the “preliminary” stages. But, we can at least tell our client that it is coming.

Ditto, if there are discussions about Unit owners who are not paying their monthly fees. In Massachusetts where I practice law, there is a fool-proof method to get these fees, from the Lender if the Unit Owner will not pay.Most other states provide similar statutory relief.  If this Condominium has not been diligent in collecting delinquent fees, then it is poorly managed, and your Buyer will pay the price for this somewhere down the road.

Other information, sometimes of a more positive nature, is also found in the minutes. If a lot of people are participating in taking on tasks, that is a good sign. There is a spirit of participation from many, and that usually works the best for Condominiums. If one or two individuals are doing everything, you may have a case of Condominia Tyranus, which generally means that your client will be subject to the whims and fancies of a few  people who may have nothing else to do, or, worse yet, love being “in charge”. if left to their own devices, these people can literally terrorize the people who live in the Condominium.

Bad Home Inspection–Don’t Let It Kill Your Purchase

Uncategorized

In times like these, the last thing any of us need is a bad home inspection. Many of you have labored long and hard to find the right home for your Buyer, negotiated the purchase price and other terms, made arrangements for financing,perhaps even had your Buyer engage an attorney for assistance with the sale agreement, only to see the results of the home inspection reveal substantial problems with the home.

I want to inform each of you that when I am representing a Buyer, the first thing I tell the Buyer is “the home inspection is not a second opportunity to negotiate the amount of the purchase price.” In most instances, the Buyer is purchasing a “used home”, and used homes probably do not have the most efficient electrical wiring or most modern air-conditioning system. There are certain negative aspects of the home inspection which must be accepted by either the Seller agreeing to rectify same, or a manageable closing cost credit.

What I am addressing here is a substantial in inspection problem. A material crack in the foundation, a roof that maybe has no more than six (6) months of useful life, a health and safety issue such as asbestos insulation being present. These types of inspection issues are material, and the Buyer is well within its rights to walk away when they present themselves.

The point of this post is to suggest that you still may be able to do your deal, if you use the inspection report wisely. The Seller wants to sell the home; the Seller has entered into an agreement indicating same. The Buyer may be willing to go further is major price concessions are given. I have worked on several deals the past year where the Seller made large price concessions once the home inspection was completed.

In Massachusetts, where I practice law, the Seller, and the Seller’s agents are generally not liable for defects in the home of which they are not aware. Once an inspection reports indicates major problems, the liability issue changes. The Seller now knows that there is a major problem, and that problem will need to be disclosed to every potential Buyer. Perhaps, you can convince the Seller to deal with your Buyer. This is a person who might be willing to go forward and complete the purchase, if the terms are sweetened to address the problem. In the situations like this where I have been involved, I have urged the Buyer’s Agent to present the Buyer as “the devil you know”. As I have indicated, this strategy has worked for my Buyers on several occasions in 2009, and I urge you to consider using it in 2010.

Year End Real Estate Tax Adjustments–A Great Marketing Opportunity to Reconnect With Your Buyer Customer

Marketing / Communication

In Massachusetts, where I have practiced real estate law since 1968, the fiscal year for local real estate taxes begins on July 1 and ends on June 30. Almost all cities and towns collect taxes on a quarterly basis, although there are still a few semi-annual holdouts. In any event, to the best of my knowledge, all cities and towns use an estimated tax for the first six months of the fiscal year, with the actual bill for Jul1 through June 30 being sent out in late December or early January.

Since this seems to be a consistent pattern through Massachusetts (and perhaps in other jurisdictions, as well), there is an opportunity for all of us to revisit those of our clients and customers who bought in the July 1 through December 31 period and re-calculate the correct tax adjustment for them. If the recalculation amounts to only a fe dollars, there is no need to contact the Seller for payment. If hundreds of dollars are involved, like in the instance I am currently working on, where a 2 Unit Condominium was formally taxed as a single family dwelling, and has been upgraded because of a zoning change, the exercise can prove profitable for the Buyer.

It would seem only natural that your Buyer will be eternally grateful to you for pointing this out to him, her or them. Many times at closing, I hear Realtors tell their customers that they will keep in touch. Here is a contact that may put dollars in your customer’s pocket. I know of one Realtor who sends his client a copy of the HUD-1 Settlement Statement for the transaction and encourages the customer to compare the tax adjustment with the “real” tax bill.

As an aside, with real estate prices falling in some sections of the country, it is possible that real estate taxes may have gone down. If this is the case, this adjustment may favor the Seller, and perhaps, the listing agent will want to bring the fact that money is owed to the Seller’s attention.

Representing Same Sex Clients–Documentation at Purchase Is Generally a Worthwhile Enterprise

Uncategorized

In Massachusetts, where I practice real estate law, same sex marriage has been legally acknowledged. In a situation where a same sex, married couple, purchases real estate, I suggest that the Grantee clause read “a married couple, as tenants by the entirety”. Massachusetts law provides excellent protection from creditors to husbands and wives who take title as tenants by the entirety, so I believe it is important to attempt to obtain similar protection for same sex couples who are married. To my knowledge, the validity of this approach has not been tested in a bankruptcy or appeals court, but I am reasonably certain that the protection would be provided if the matter were ever adjudicated.

Many states do not recognize same sex marriages. Many same sex couples in states that permit marriage have not chosen to marry. The question then becomes how to offer solid, enforceable protection to these couples, who do not hold as tenants by the entirety. There are two other ways to hold property in multiple names; tenancy in common and joint tenancy with right of survivorship. The difference between the two types of tenancies (in Massachusetts, at least) is that a tenant in common can leave an undivided one-half interest to his or her heirs, while a joint tenant’s interest passes to the surviving tenant (without the need for a Probate) at death.

Whether a couple owns real property as tenants in common or as joint tenants, there are some “issues” which should be resolved immediately after purchase. My suggestion to my same sex clients is a binding agreement between the two of them which sets forth what will take place between the two parties if there is a “break-up” of their relationship. This, of course, can, and does, happen with same sex relationships in the same way as husband and wife relationships. The difference for married couples is there is a set of laws and decisions which govern divorces. There is no such thing for unmarried couples.

When any of you are involved in a same sex purchase situation, you would be doing your clients a favor if you suggested they address the issue of “what-if” when they are together and happy. The tenancy-in-common agreements I draft provide precise exit terms and conditions, which the parties develop as a couple. Once there is a problem in the relationship, one person’s definition of “fair” may not coincide with the other’s, and painful arguments, and even litigation, may ensue.

The Phenomena of Transference–Use it to Your Advantage When Negotiating Your Deals.

Uncategorized

“Transference” has been around for a long time. What it means in the context of this post is the ascribing or motives which the person on the other side has, and maybe always had, to you. As an example, suppose your are about to finish up an Offer with a listing of yours, and the Buyer’s agent, on the other side, says “How do I know that by the time of closing, you will not substitute a range of lower quality for the range that currently exists?”  Well, you and I know  that this kind of conduct is nothing short of unethical, and may be criminal, but you deal with this issue by telling the Buyer’s agent either that you will put the make and serial number of the appliance on the Offer, or you will “tag” this, and every other appliance, with stickers initialed by both of the realtors.

In other words, there are ways to deal with the “slime ball” on the other side, but now you are sure of who she or he is, and you can make judgments in the future that involve being very defensive and precautionary. By using “transference” you have figured out with whom you are dealing. That can come in handy all the way down the road to closing.

In my practice, I have seen “transference” manifest itself in many ways. When an opposing attorney says to me “How do I know you will not give the keys to the Buyer before I inform you that the Deed is on record?”, I realize that that premature releasing of keys , probably more out of sloth than anything else, is this attorney’s way of doing business. I make a note to get everything in writing with this person in future deals. When a person on the other side accuses me of “back-dating” a document (not something I do), I am reasonably certain that documents I receive from that person may well not contain the actual date they were signed.

The bottom line here is that  using”transference” can give you a necessary advantage when dealing with someone on the other side who does not have your high ethical standard. Listen for tell-tale remarks of transference that may give you clues. In the end, “forewarned is forearmed”, and you can learn a lot about the person on the other side from his or her requests or articulated concerns. We are all “detectives” , anxious to obtain the best results we can for our clients no matter who is on the other side. Effective use of transference can help us attain this goal.

Cleaning House–It is Time to “Fire” No Fewer than Ten Percent of My Clients!!!

Uncategorized

The is no question that Jack Welch, the former CEO at GE, and now a frequent contributor on CNBC and other financial forums is extremely full of himself. If you have read his books, he will regale you with principles and approaches to management that he claims cannot fail. Well, despite the fact that his personal life may have left something to be improved upon,  some of the “Gospel according to Jack” has merit.  He has inspired me to do an annual evaluation of my clientele that has turned out to be very helpful.

Welch’s evaluation is employees; mine is clients. Yours could be customers. The approach goes something like this:

     1. In every context in which we deal, there are A, B and C individuals.

                a.  The A’s (hopefully 25% of so) do not need to be described. They are performers!!!!

                b.  The B’s have potential, but potential can take you just so far. Some of them will become  A’s. Some will fall by the wayside. They deserve careful scrutiny. Your job as a manager is to make the final determination where they will fit, sooner rather than later.

                c.   The C’s are either former B’s, who did not advance, or people who just never bought in to the things which we think are important.  If you continue to retain these people, they will take your organization down. The C group, which hopefully comprises no more than 10% of your emplyee population, must be let go.

     2.  At the beginning of every year, we must find a way to sever our connections with the C’s.

               a.  If we are speaking about employees, we must let the C’s go elsewhere. We have made a determination that they will never be consistent B’s, let alone the A’s which make our organization effective.

               b. If we are speaking about clients (or customers), we must contact the C’s and inform them that we have decided that it is is not in our mutual best interests to continue representing them, or working with them.

This may sound strange, coming from an real estate, transaction-driven,  Massachusetts attorney who is generally  anxious to expand my client base, but there is a method in my madness. My C clients have been nothing but headaches for me. They may have ethics which I do not approve of. They may question every bill I send to them. They may not listen to the advice I give them and then blame me when things go wrong when they have chosen their own course. They delay paying me, and often request bill reductions, not on an exception basis, but all of the time.

I politely inform them that I have decided to provide no further representation for them and suggest they obtain successor counsel. Most sulk off and tell me that I didn’t do a very good job for them, anyway. If that is the way they truly feel, our parting is felicitous for both of us. Some ask me if I could reconsider. I ALWAYS give them another chance to shape up. If they do, I have a client I can work with. If they do not, they will make my cut list next year, or maybe even sooner. Many work hard to improve our relationship. They were truly unaware that things had gone so badly off the track.

I urge each of you to consider the approach I have taken with the people you do work for. It has worked well for me, and I have gradually assembled a group of clients, who appreciate my efforts and with whom I can work effectively. That has always been my goal, and the “clean house” approach has helped me get closer and closer to what I have been seeking.

Closings in Martha’s Vineyard and Nantucket–They are not Quite as Mysterious as you Might Imagine

closing, Uncategorized

I am sure most of you are aware of the existence of Martha’s Vineyard and Nantucket, if for no other reason, the fact that several of our recent president’s have spent summer vacations “on Island” as they call it. Each of these islands has its own Registry of Deeds (Dukes County for Martha’s Vineyard; Nantucket County for Nantucket). Each of the islands has special “land taxes” of Two (2%) Per Cent of the Purchase Price, which must be paid by the Buyer before their Deed will be permitted to be recorded.

Couple the land tax with still lofty prices charged for homes on the island, and there is an almost sense of intimidation that accompanies considering purchasing a home, or assisting a client purchasing a home,  on Martha’s Vineyard and Nantucket.

My  law firm, Topkins & Bevans, has offices in Boston, Waltham and Braintree, Massachusetts. Over the years, we have established many solid connections on the two islands. We regularly conduct real estate closings with respect to island property, and we are familiar with local practices. There is regular plane service from Boston to each of the islands. The flights are short and reliable.

If you are an out of state realtor or attorney, we would welcome the opportunity to assist you in weaving through Martha’s Vineyard and Nantucket transactions. They can be managed “off-island” extremely efficiently and, generally, at a substantial savings in cost.

Bad Things Come in “Three’s”, Too–Three Difficult Situations in the Life of a Massachusetts Real Estate Attorney

Uncategorized

In general, the fact that I have been practicing for over 40 years in Massachusetts puts me in a position where I can honestly say “I’ve seen that, and I believe I know what to do to fix it” rather easily. This past week I encountered three (3)  difficult scenarios, and I am fixing them, but (1) there was a lot more work involved than I will get paid for and (2) I wish I were a little more certain that my solution to each problem is going to work.

1. The Case of the Totally Mismanaged, and Misdrafted, Nominee Realty Trust. In Massachusetts,people use nominee realty trusts  for numerous purposes . The main reason is anonymity, I believe, although there are recent Supreme Judicial Court decisions which suggest that the names of the beneficial (i.e. real) owners can be determined by discovery if there is litigation. In any event, my client is the Buyer purchasing a single family residence from a nominee trust. Seems rather simple, no? It isn’t. The Trust was poorly drafted; two of the beneficiaries have died during its pendency. Probates will be required. We certainly will NOT be closing on January 8, 2010. I have working on a use and occupancy agreement. I must make sure that this document will not adversely affect my client’s financing. These days, anything you do can affect your client’s financing!!!

2. The Case of the Abutter’s Deck having a part thereof on the land my client is purchasing. Fortunately, the Abutter is, in effect, the same person as the Seller. The names on the titles are different so that the two lots are not merged, since neither one of them is a conforming lot for zoning purposes. My solution here is an Abutter’s Agreement, between the Buyer, Seller and Abutter. I am putting this document on record, so it will   who purchase the Abutter’s property. The Abutter’s Agreement will give the Abutter a couple of months to trim his deck. If he does not do it, my client can do the trimming and obtain reimbursement from the Abutter. If the Abutter does not pay, the Abutter has consented to a lien being attached to his home. We can close on this basis; I always worry whether I am opening up a hornet’s nest not getting the work done before closing. There is more than a foot of snow on the ground in Massachusetts. The delayed resolution seems the only one available.

3. The Case of your water and sewer connections going through my land. This case is not so very different from Case #2, except the solution is below ground and continuing. Again, a common owner scheme, so my Buyer had an opportunity to formulate a proposed solution. The plan here was an Easement, which would reference a Engineer’s Plan, which would be recorded at the Registry of Deeds. This is an expensive solution, but I was able to convince the Seller to pay for the Engineering work and my drafting. I guess my concern here is just how careful the Seller will be if he has to dig up my client’s lawn to do a water line rupture. I have included  what I consider “necessary language” regarding indemnification,  but I never can be sure that it will prove to be adequate.

So, these are three situations where creative thought, and drafting are required. Many people ask me how I can continue to do residential real estate transactions because they are so repetitive and boring. Solving the problems set forth above certainly do not qualify in those categories. besides, helping people buy the home of their dreams is really never boring. Ditto, the fact that every client has a different story, and their individual story, which I gain insight into while working with them, enriches my own life experiences.