Legal Hottips - March 2, 2009
This Legal Hottips article may be reprinted only if it is reprinted in its entirety, including the disclaimers above and below the Hotline questions and answers. The Wisconsin REALTORS® Association Best of the Legal Hotline Service is an educational resource intended to keep the Association abreast of legal developments and concerns involving real estate practice in Wisconsin. We look forward to your input regarding the service, especially regarding the types of topics you would like covered.
Fannie Mae Announces No Commission Reduction Policy for Short Sales
Fannie Mae has announced that effective March 1, 2009, the approval and closing of short sales will not be conditioned on the listing broker agreeing to reduce its commission due from the seller, as long as the total commission does not exceed 6%. Specifically, the Fannie Mae announcement provides:
"Effective March 1, 2009, closing of pre-foreclosure sales may not be conditioned upon a reduction of the total commission to be paid to real estate agents to a level below what was negotiated by the listing agent with the borrower, unless the fee exceeds 6 percent of the sales price of the property in aggregate. Servicers are reminded that they must continue to obtain any approvals that may be required by interested third parties in connection with pre-foreclosure sales."
$8,000 First-Time Homebuyer Credit
Buyers looking to purchase homes in foreclosure, short sales or any other residence may be able to take advantage of a new, non-repayable tax credit if they meet the eligibility requirements. Under the American Recovery and Reinvestment Act of 2009, a first-time buyer's $8,000 tax credit will be available for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009. The credit does not need to be repaid as long as the homebuyers stay in the house for at least three years. The credit is claimed on the homebuyer's income tax return using IRS Form 5405 (revised February 2009) (http://www.irs.gov/pub/irs-pdf/f5405.pdf) to reduce the buyer's income tax liability, with any unused credit refunded as a check to the buyer. The $8,000 tax credit could be a deciding factor for some buyers who are on the fence or who aren't sure how long they're going to be staying in their new residence.
See http://www.irs.gov/newsroom/article/0,,id=187935,00.html, http://www.realtor.org/government_affairs/gapublic/american_recovery_reinvestment_act_home?lid=ronav0019#taxcredit and http://recovery.gov for more information about the homebuyer tax credit as well as other programs created in the Act including increased FHA, Fannie Mae and Freddie Mac loan limits, and green building and energy efficiency measures.
FHA Loan Limits
As a result of the passage of the American Recovery and Reinvestment Act of 2009, 01HUD published changes to FHA's single family loan limits. Given that most of the loan limits decreased for 2009, most areas will revert to the higher 2008 mortgage limit.
For 2009, the maximum mortgage limit for an area is the higher of the limit that was in effect for 2008 or the current 2009 limit as stated in Mortgagee Letter 2009-07. The new loan limits, which are effective for any loan closed in calendar year 2009, are in effect through December 31, 2009. Please note that because the new limits are a comparison of 2008 and 2009 there is not a process for appealing the limits. You can find the FHA loan limit for your area @ https://entp.hud.gov/idapp/html/hicostlook.cfm.
To view the mortgagee letter online, see http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/.
Hottips Questions:
1.) Mortgage Banking/Finance - General Finance
QUESTION:
With the First-Time Homebuyer Credit, is a buyer affected if they have owned a mobile home in a mobile court where they have to pay rent (they don't own the real estate that there mobile home is on). Will they still be considered a first-time home buyer?
ANSWER:
In IRS Form 5405 (revised February 2009), the form used to claim the First-Time Homebuyer Credit (online at http://www.irs.gov/pub/irs-pdf/f5405.pdf), the instructions indicate:
Who Can Claim the Credit
In general, you can claim the credit if you are a first-time homebuyer. You are considered a first-time homebuyer if:
- You purchased your main home located in the United States after April 8, 2008, and before December 1, 2009.
- You (and your spouse if married) did not own any other main home during the 3-year period ending on the date of purchase.
If you constructed your main home, you are treated as having purchased it on the date you first occupied it.
Main home. Your main home is the one you live in most of the time. It can be a house, houseboat, housetrailer, cooperative apartment, condominium, or other type of residence."
READ MORE ABOUT IT:
See the NAR material regarding the $8,000 first-time homebuyer credit @ http://www.realtor.org/government_affairs/gapublic/american_recovery_reinvestment_act_home?lid=ronav0019.
2.) Offer to Purchase - Acceptance; Offer to Purchase - Confidentiality
QUESTION:
- Is an offer that has been accepted by the seller, an accepted offer? The buyers submitted an offer to purchase a condominium (it is a short sale) and the seller has accepted the offer. They have not heard back from the bank yet. So, if this is technically an accepted offer, should the MLS be updated to show that there is an accepted offer on the listing? Or, is it not an accepted offer until we hear back from the bank?
- A related question is this: In the interim there may be another offer that came in for the property, but the broker knows that there is a primary. Does the primary buyer have a right to know there are any other offers on the property?
- Finally, the broker heard from the other broker that the listing agent told the second broker (who may be writing up the secondary offer for the property) that there was an offer already on the property and stated it was under $300,000 (the broker's buyer offered $250,000). The primary buyer did not appreciate the listing broker advising another broker with a potential offer on these specifics of the primary offer. Can the listing agent be disciplined for giving out this information?
ANSWER:
- The WB-14 Residential Condominium Offer to Purchase defines acceptance and binding acceptance at lines __-__. In the described circumstances, the offer to purchase was accepted, contingent on lender approval of the short sale, but still accepted. The Code of Ethics in Standard of Practice 3-6 provides that REALTORS® shall disclose the existence of accepted offers, including offers with unresolved contingencies, to any broker seeking cooperation.
- A listing broker does not have a duty to inform the primary buyer of other pending or accepted offers.
- The terms and conditions of a buyer's offer are confidential. Both the REALTOR® Code of Ethics and Wisconsin license law require brokers to maintain confidential information, including the price of another buyer's offer. See Wis. Stat. § 452.133(1)(d), Wis. Admin. Code § RL 24.12(1), and Article 1 of the Code of Ethics.
READ MORE ABOUT IT:
Wis. Admin. Code § RL 24 is @ http://www.legis.state.wi.us/rsb/code/rl/rl024.pdf and
3.) Agency - Disclosure
QUESTION:
In a sub-agency situation (a co-broke has written an offer on the company's listing) where line one of the offer declares the subagent an "agent of the Seller," who is ultimately responsible for the delivery of the proper disclosure form to the buyer? The co-broke (selling agent) or the listing agent (since the selling agent is an agent for the listing broker)?
ANSWER:
A licensee working with a buyer-customer must provide a written agency disclosure statement prior to negotiations. Negotiations, simply stated, would include acting as an intermediary, drafting approved forms and presenting approved forms. Therefore, the subagent would be responsible to provide the buyer-customer with a copy of the Broker Disclosure to Customers form, at the latest, prior to drafting the offer to purchase. The listing broker may request, and the subagent must provide, a copy of that Broker Disclosure to Customers form upon the listing broker's request because the selling agent is acting as an agent of the listing broker in that transaction.
4.) Advertising - Miscellaneous Advertising Issues
QUESTION:
Can "MLS" be used in a web site domain name, for example, "www.lacrossemls.com" or "www.freelacrossemls.com?" Are there any restrictions on using "MLS" in a domain name?
ANSWER:
Unlike the term REALTOR®, "MLS" is not a membership mark. However, recent changes to the Code of Ethics apply the true picture in advertising standard to the use of "MLS" in domain names by REALTORS®. A REALTOR® must portray a true picture including in their domain names. If the domain name presents less than a true picture, the member may be subject to an ethics complaint. The new Standard of Practice 12-12 provides that
"REALTORS® shall not:
1) use URLs or domain names that present less than a true picture, or
2) register URLs or domain names that, if used, would present less than a true picture."
The application of this new Standard of Practice is demonstrated in new Case Interpretation #12-20. A violation of the Code of Ethics was found when a broker used "MLS" in his domain name because it led the consumer to believe that he or she was going to a Web site owned or operated by an MLS, and that he or she would have access to the all the MLS information on the member's site. The intent of the new Standard of Practice is to protect consumers from being misled by false or manipulative advertising.
Debbi Conrad
Director of Legal Affairs
Wisconsin
REALTORS® Association
4801 Forest Run Road Suite 201
Madison, WI 53704
Phone: 608-241-2047; 800-279-1972
Fax: 608-242-2279
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