thank you, course sponsors resources/2012/legal update jan_27_2… · purpose of affidavit: ….....

Today’s Session Federal Issues◦ Amendments to Freddie Mac Short Sale

Affidavit◦ Update on RECs as relates to FHA Loans◦ Update on Seller Financing

State Issues◦ BPOs◦ Septic Issues/Regs◦ Changes to RE Regs

You Be The Judge New/Amended RANM Forms

BUCKLE UP –I HAVE ONE HOUR

Amendments to Freddie Mac Short Sale Affidavit

Purpose of Affidavit:…..to prevent fraud by requiring the buyer, seller, real estate brokers, escrow/closing agent and any transaction facilitator to make various certifications (including that the short sale is an arm’s length transaction and the buyer will not resell the property within 120 days unless there are substantial improvements).


“ARMS-LENGTH TRANSACTION”: transaction between parties who are independent of one another and unrelated and unaffiliated by family, marriage or commercial enterprise, other than the purchase and sale of the mortgaged premises between the borrower(s) and the purchasers(s) that is the specific subject of the proposed short sale as disclosed to the Servicers.

Affidavit signed under Penalty of Perjury


Key Changes to New Form – 1/1/12◦ The certification is based on “the best of each

signatory’s knowledge and belief”. The additional “knowledge” component significantly reduces broker liability◦ Only negligent or intentional

misrepresentation creates responsibility for indemnifying the servicer/FM for loss◦ Only responsible for your own signature –

not others- no joint and several liability


Affidavit is not/can not be an addendum to the purchase agreement; Brokers should not sign a document implying they are parties to the sales contract

AB may sign on behalf of brokerage

NM RECS AND FHA LOANS

Issue: ◦Otherwise qualified FHA buyer denied

FHA loan b/c seller had bought on a REC

FHA Claimed –Violated Flipping Policy◦ Seller not owner of record◦ Sale would occur less than 120 days

from original sale

NM RECS AND FHA LOANS

RANM Intervened: ◦ Sent memo to HUD asking HUD to

reconsider◦ Seller as Owner under Doctrine of Equitable

Conversion◦ Sale occurred when parties entered into REC

under Relation Back Doctrine

VICTORY! - HUD Agreed

SELLER FINANCING BACKGROUND: ◦ SAFE Act◦ NM Mortgage Loan Originators Act◦ Amendments to TILA made under the Dodd-

Frank Act ◦ NAR’s Latest Position – No worries!?!?◦ CFPB – Director appointed, Richard Codray

STATE LAW: BPOs

Currently Under the Appraisal Act Brokers Can Not Do

for $$$

Status of Legislation to Change - ????? – Stay Tuned

SEPTIC REGULATIONS

SEPTICS AND THE REC◦ How NMED treats septics when property is

sold on a REC – Everyone’s problem!◦ RANM met with NMED and explained

Doctrine of Equitable Conversion◦ Another RANM Victory! NMED agreed◦ Asked RANM to draft some proposed regs

SEPTIC REGULATIONS

RANM Proposal:◦ Clarifies seller must do inspection prior

to legal or equitable transfer◦ Clarifies “owner” under REC is buyer◦ Clarifies transfer can occur without

remediation, but then buyer becomes responsible to NMED◦ Clarifies who must file for variance or

permit application if system fails

CHANGES TO BROKER AND SALESMAN ACT

EFFECTIVE JULY 1, 2011

Three key changes were enacted by the NM Legislature:

1) End of CE exemption

2) Fingerprinting requirement

3) Unlicensed activity



End of CE Exemption◦ Licensees no longer become exempt from

continuing ed requirements by being 65 years old, with 20 years experience◦ UNLESS …

The licensee was ALREADY exempt on or before June 30, 2011



Fingerprinting◦ Required for new and renewing real estate licenses ◦ REC has established more details in

Rules that became effective January 1, 2012 (more in a few minutes)



It is now a 4th degree felony to practice real estate without a real estate broker’slicense - imprisonment for up to 18 months, and/orfine of up to $5,000D.A. prosecutes(Don’t miss your renewal!)

NMREC Rules Changes Effective January 1, 2012

Fingerprinting details: Starts w/January birthdays, renewing in

February, 2012 Required for initial licensure AND

subsequent renewals Must pay for fingerprinting two cards, PLUS

review by DPS


REC includes 2 fingerprint cards and envelopewith renewal application

Take cards and Fingerprint Certification Form◦ public law enforcement official◦ private fingerprinting company◦ the NM DPS◦ law enforcement agency or private company state police county sheriff municipal, campus and tribal police.

In ABQ, metro area, only law enforcement agency that provides

fingerprinting service is Rio Rancho Police Department

500 Quantum Road One Block South of

Northern Blvd. on State Rd 528M, W, F from 10:00 – 12:00

$10 Per Card



DPS in Santa Fe4491 Cerrillos Rd.

M-F 8:00 to 4:00 pm$9.00 for both cards

If DPS does fingerprinting, tell them the cards are for a nationwide criminal background check, ask them to complete the Fingerprint Certification

Form and give you a copy and leave the cards with them.


PRIVATE COMPANIES$15- $25 FOR TWO CARDSGO TO FINGERPRINTING

SECTION ON REC WEBSITE FORLIST OF PRIVATE COMPANIES

http://www.rld.state.nm.us/realestatecommission/index.html

CALL FIRST!

http://www.rld.state.nm.us/realestatecommission/index.html�


YOU MUST:◦ Pay Fee to Entity for fingerprinting◦ Mail to DPS in enveloped provided by REC –

Don’t Fold Envelope! 2 completed fingerprinting cards a copy of the Fingerprinting Certification Form

completed by the fingerprinting company/agency check or MO for $44 payable to NM DPS

COPY THE CERTIFICATION –YOU WILL NEED IT!


DPS will send one card to FBI FBI will mail report to NMREC

(this could take 4 to 6 weeks) REC is NOT holding up any licenses until

receipt of the fingerprinting. All licenses will be issued! But….REC says “don’t wait”!


THIS IS WHEREYOU NEED THE COPY!

Send Copy of the completed “Fingerprint Certification” Form to the NMREC with your license renewal application


Fingerprints:◦ The “frequency” with which you will need to

create a fingerprint card is yet to be determined◦ REC may require that brokers generate the

cards only once, but still require submission to DPS with every renewal◦ This fingerprinting requirement WILL apply to

inactive licensees


Broker Duties – NMCA 16.61.19.8◦ C. Took out “oral” – Performance of any written

agreements made with customer or client◦ G. Disclosure of potential conflicts of interest

that broker may have in the transaction, including, but not limited to: written relationship with others; material interest or relationship in transaction, other brokerage relationships available.


Broker Duties◦ H. Written disclosure of any adverse material

facts actually known by the AB or QB about the property or the transaction or about the financial ability of the parties to the transaction to complete the transaction . Adverse material facts do not include data from a sex offender registry or existence of group homes.


QBs May be a QB for one company, AND an AB

for another company No more “7-Day” rule for appointing a

“broker-in-charge”… It is now QB’s discretion to determine

when to appoint a “broker-in-charge”… “Broker-in-charge” must be eligible to BE

a Qualifying Broker


QBs◦May pay a commission to an expired or

inactive or transferred ( or deceased) Broker IF the transaction went under contract WHILE the Broker was licensed◦Must personally sign all referral and co-

op agreements


ABs◦ MUST deliver ALL transaction documents to

their Qualifying Broker ◦ Must complete the NEW BROKER BUSINESS

PRACTICES 30-hour course in their FIRST year of licensure

… This had been required in the Associate’s first three year cycle

AND … This is NOW the Qualifying Broker’s duty to make sure it happens


ADVERTISEMENTS◦ Broker “A” lists Broker “B’s” house for sale … Must the yard sign say“Owner Broker”? NO◦ And directional – or “lead-in” signs –

do NOT have to have the name and phone number of the brokerage firm


When advertising your own property for sale, whether “listed” or not, you do need to disclose that you are licensed

….. (Nothing new here) But suppose you are advertising your own

property for RENT / LEASE? … NO, you do not

HAVE TO disclose that you are licensed


Property Management◦ Upon licensure or renewal, must “declare”

intent to do property management◦ Must have a “PM Trust Account” for just one

property◦ Must provide a final reconciliation to a client

within 60 days of termination of PM Agreement◦ Must keep all records for 6 years


Property Management – Short-Term◦ Must get written authorization from owner in

PM Agreement to collect/remit NM GRT and Lodger’s Tax ◦ Tenant Agreement must include: arrival/departure dates and check-in/out time nightly rental rate rental and security deposit fees charged to tenant accommodation rules and cancellation policy.

CASE LAW UPDATE –YOU BE THE JUDGE

Sutton v. Driver, 712 S.E. 2nd 318 (N.C. Ct. App. 2011)◦ Buyer looking for investment property

contacted brokerage. QB referred buyer to AB who was his son-in-law a.k.a. “Salesperson”◦ Meanwhile, QB as member of LLC was

purchasing Land A owned by Salesperson


QB told AB that his neighbors may be interested in selling their Property B

Property B overlooked Land A and had a great ocean view

Salesperson allegedlysaid “trust owns Land Aand it won’t ever be sold”

LLC bought Land A and subdivided. Buyers Property B lost $150,000 in value.


Buyers sued everyone – For Failure to Disclose Material Facts

Trial Court found for Defendants Buyers appealed Ct. of Appeals Considered:◦ Duty to Disclose?◦ Being bought by separate entity?◦ “For Sale” sign on Land A?


Ct. of Appeals Held:◦Duty to Disclose?◦Being bought by separate entity?◦ “For Sale” sign on

Land A?


The Land Man Realty, Inc v. Weichert, Inc. No. 2010-192 (N.Y. Sup. Ct.)◦ Owner entered into an “oral” listing agreement with

Broker A – unspecified time frame◦ Broker A understood that Owner would be later

entering into a written agreement with another Broker B, Owner’s friend◦ Broker A brought a potential buyer, but no offer made◦ Owner entered into written

agreement with Broker B


Broker A’s Buyer comes back and buys Property

Broker A claims commission – Sues Owner for all and sues Broker B for all, or in the alternative for the co-op in MLS

Owner sues Broker B claiming “should have watched out for me”


Court dismisses Owner’s claims against Broker B

Broker B claims as to Broker A “we have a duty to arbitrate”

Issues before Court:◦ Send to arbitration?◦ Broker A’s claim for ALL of commission◦ Broker A’s claims for co-op commission


Arbitration◦Article 17: “Duty to arbitrate all contractual or non-contractual disputes as defined in SOP 17-4….arising out of their relationship as Realtors.”


Commission◦ All?◦ Co-op broker commission offered

through the MLS? MLS agreement says co-op broker

commission owed to “procuring cause”. Was Broker B procuring cause………STAY TUNED!


Jack Gaughen LLC d/b/a Jack Gaughen ERA v. Unemployment Comp Board of Review, No. 1884 C.D. 2010 (Pa. Commw.)◦ AB worked part-time as IC for brokerage◦ AB received commissions and 1099◦ Brokerage terminated ICA with AB - lack of

work◦ AB filed for Unemployment Compensation◦ UC Board agreed and Brokerage appealed


Lower Court said “maybe” if certain criteria are met

Statute said “real estate salespersons do not qualify for unemployment benefits if paid a commission”

Court agreed, BUT……Brokerage did not raise this defense when before the Board, so can’t raise it now


Court said: “presumption is that person IS an employee. It’s the Brokerage’s job to rebut presumption”

Brokerage said “did not exercise required control over Salesperson AND only paid commission, so not an employee”

Court said: License law says brokerage is only allowed to pay commission and that brokerage must supervise


COURT HELD:Brokerage did not meet its burden ofproof that Salespersonwas NOT an independent contractor. Affirmed Board’s decision to awardunemployment compensation.

RANM FORMSMARCH RELEASE

AMENDED◦ 1106 Listing Agreement ◦ 1109 Referral Agreement in State ◦ 1304 Referral Agreement Out of State –◦ 2109 Short Sale Add. to Listing Agreement◦ 2304 FIRPTA & TAXATION of Foreign Persons

Receiving Rental Income from US Property - Attn: Prop. Managers◦ 2505 Right of First Refusal to Purchase and/or Lease

Real Property ◦ 2308 Septic Information Sheet

RANM FORMS NEW◦ Just released: Personal Guaranty for use with

Residential and Commercial Property Management Agreements◦ March Release: 2103 Assignment of Contract

– May be used with any contract as provided by contract. Prohibited unless otherwise stated if contract is for personal services. If not for personal services, allowed if not prohibited, BUT, confirm in contract if silent.

RANM LEGAL HOTLINE

1-877-699-7266

[email protected]

Monday thru Friday, 9:00-1:00

thank you, course sponsors resources/2012/legal update jan_27_2… · purpose of affidavit: ….....

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