Wisconsin REALTORS® Association - Legal Hotline Hottips
Legal Hottips - January 11, 2010 Mandatory HUD Settlement Cost Booklet The booklet also explains how interest rates, points, fees, and pre-payment penalties affect a mortgage payment, helps to troubleshoot loan and loan servicing problems after closing, gives advice to avoid foreclosure and discusses refinancing and a home equity borrowing. It also gives a line-by-line break down of the Good Faith Estimate (GFE) that estimates a buyer’s settlement charges. See HUD’s Settlement Cost Booklet Shopping for Your Home Loan at http://www.hud.gov/offices/hsg/ramh/res/Settlement-Booklet-January-6-REVISED.pdf. The buyers in transactions will be receiving this and they may ask you questions, so every REALTOR® would be wise to make a copy of the booklet and become familiar with its provisions! HUD is requiring that loan originators (lenders) provide borrowers with a standard GFE that clearly discloses key loan terms and closing costs and that closing agents provide borrowers with a new HUD-1 settlement statement. These new RESPA regulations went into effect January 1, 2010. A copy of the new GFE is at http://www.hud.gov/offices/hsg/ramh/res/gfestimate.pdf and a copy of the new HUD-1 is at http://www.hud.gov/offices/hsg/ramh/res/hud1.pdf. Instructions for the completion of these forms and additional HUD and RESPA information is available at http://www.hud.gov/offices/hsg/ramh/res/respa_hm.cfm. For the new RESPA rule FAQs, visit http://www.hud.gov/offices/hsg/ramh/res/resparulefaqs.pdf.
1.) General Real Estate - Zoning/Land Use The structure may be permitted to remain as a legal nonconforming structure (i.e. grandfathered) if the structure was in existence prior to the enactment of the zoning/ordinance preventing the construction of the second garage. The buyers should be encouraged to contact an attorney to review the facts in question as well as the local ordinances to consider all their options. Further, the attorney may assist in the appeal process for the variance if such action would be deemed prudent. READ MORE ABOUT IT: 2.) Disclosure - Environmental & Health Issues QUESTION: A prospective seller has a home built in the early to mid 1900’s and apparently has asbestos wrapped pipes. No test has been done and the seller refuses to test materials for confirmation of the presence of asbestos containing materials (ACM). The broker wishes to take the listing however the seller wishes to remove all possible asbestos himself. 1) Would the listing broker have any duty to disclose to possible buyers if the seller removes materials that are not definitely known to be asbestos but are likely to be “ACM?” ANSWER: 1) The newly revised asbestos rules in Wis. Admin. Code Chapter DHS 159, effective May 1, 2009, affects many different workers in Wisconsin. Asbestos-Containing Material (ACM) is now defined as (1) material or product containing more than 1 percent of asbestos and (2) material meeting the definition of suspect ACM. Suspect ACM means (1) vermiculite insulation, unless a recommended EPA sampling and analysis protocol specific to vermicu¬lite insulation proves that it does not contain asbestos and (2) any untested materials used in or on building com¬ponents with the exception of metal, glass, wood and fiberglass. Everything else is suspect ACM unless tested and found to not contain more than 1 percent asbestos. There is no EPA protocol for sampling and analyzing vermiculite insulation at this time, so it is assumed to contain asbestos. Therefore the material in the seller’s property is classified as ACM. Whether presence of ACM constitutes a fact a licensee needs to disclose as a material adverse fact is a judgment that only the licensee can make after considering all of the facts and circumstances in the situation. If the agent, as a competent licensee knows that this fact: (1) has a significant adverse affect on the value of the property; (2) significantly reduces the structural integrity of the property; (3) presents a significant health risk to the occupants of the property or (4) is information that indicates that a party to the transaction is not able to or does not intend to meet their obligations under the contract, then the issue constitutes an adverse fact. If a party to the transaction were to so indicate, or if a competent licensee would generally recognize that this fact is of such importance that it would affect a reasonable party's decision to enter into a contract or would affect the party's decision about the terms of the contract, the fact is both adverse and material. If this fact is both adverse and material, then Wis. Admin. Code § RL 24.07(2) requires the licensee to timely disclose the fact in writing to all parties to the transaction, even if the client would direct the licensee not to disclose. If the licensee knows or is aware of information suggesting the possibility of a material adverse fact, Wis. Admin. Code § RL 24.07(3) states that the licensee will be practicing competently if the licensee makes timely written disclosure of the information suggesting the material adverse fact to all parties to the transaction, recommends the parties obtain expert assistance to inspect or investigate for the possible material adverse fact, and, if directed by the parties, draft appropriate inspection or investigation contingencies. The duty to disclose has priority over any duty owed to the client. 2) A real estate licensee may not give a seller legal advice regarding disclosure of potential ACM hazards or the completion of a Real Estate Condition Report. The broker may refer the seller to private legal counsel regarding the seller’s disclosure duty regardless of whether the seller has or has removed any ACMs. 3) Individual certification is not required for homeowners who engage in an asbestos abatement activity or asbestos management activity when performed by the owner on his or her own single-family, non-rental residential property that is occupied or intended to be occupied solely by the owner’s family. Nonetheless the broker may wish to suggest that the owner consider use qualified persons to remove the pipe wrap because an owner may unintentionally create a hazard when an activity disturbs asbestos and is not conducted using safety protocols. READ MORE ABOUT IT: 3.) Offer to Purchase - Licensed Purchasers QUESTION: The broker has a property listed and an agent wants to look at it for himself. Would the agent write his own offer or would the broker have to write it for him? It is broker's understanding that buyer/licensees cannot receive a commission. Is this correct? ANSWER: When acting as a buyer of real estate, the licensee is a principal or party in the transaction and not the agent for anyone. Therefore, the buyer/licensee cannot collect a commission from the seller because the buyer/licensee cannot perform services on behalf of the seller with undivided loyalty when the licensee has his or her own interest as the buyer at stake. It is also inconsistent for a buyer/licensee to act as his or her own agent and collect a commission for representing him or herself. Instead, a buyer/licensee can negotiate a buyer’s incentive to be paid by the listing broker or the seller. This incentive can be for the amount of the co-broke commission which would otherwise be paid to the selling broker in the transaction or any other amount agreed to by the listing broker or seller and the buyer/licensee. The buyer's incentive should be properly documented in writing before closing, preferably before the offer to purchase is executed. An incentive from the listing broker should be documented in a separate letter or memo because it is a separate agreement between the licensee/buyer and the listing broker. Under the DRL's interpretation of Wis. Admin. Code § RL 24.05(4), the seller also must consent in writing to this incentive no later than the time that the offer is accepted, so a recitation in the offer regarding the incentive from the listing broker to the licensee/buyer may be the most efficient way to meet this requirement and avoid any possible DRL enforcement actions. 4.) Offer to Purchase - Earnest Money QUESTION: Question regarding the new WB-11 Residential Offer to Purchase (2010), line 43. If this box is marked “n/a” does this then preclude mailing the earnest money? ANSWER: No. Unless the language is struck, line 11 of the new WB-11 allows for earnest money to be mailed. Lines 34-55 of the offer are for delivery of documents and written notices only. Debbi Conrad |