Wisconsin REALTORS® Association - Legal Hotline Hottips
Legal Hottips - July 27, 2009 Reminder: Revised TILA Mortgage Loan Disclosure Requirements Take Effect on July 30, 2009 The new rules are complex and compliance will be a challenge for lenders. REALTORS® will want to learn the basics so they can advise clients of potential delays and the new procedures. Here are key highlights of the changes:
Federal Housing Finance Agency Publishes Update on Home Valuation Code of Conduct On July 22, 2009, the Federal Housing Finance Agency (FHFA) released a notice on the HVCC to clarify some misconceptions. The notice stressed that the Code provides for communications with appraisers about errors, additional needed information and unprofessional conduct. At the same time, Fannie Mae and Freddie Mac updated their Frequently Asked Questions for HVCC. See the notice at http://www.wra.org/pdf/government/hvcc_NOTICE_7_22_09F.pdf. For additional information about the HVCC, visit the NAR HVCC page at http://www.realtor.org/government_affairs/gapublic/gses_hvcc_announced?wt.mc_id=rd0042.
Wisconsin Foreclosure Assistance Resource Center
1.) Offer to Purchase - Delivery The licensee may provide a general explanation of the following to the seller, but cannot provide legal advice. The Seller Termination Rights subsection provides, "If Buyer does not make timely delivery of said commitment, Seller may terminate this Offer if Seller delivers a written notice of termination to Buyer prior to Seller's actual receipt of a copy of Buyer's written loan commitment." See lines 171-172 of the WB-11 Residential Offer to Purchase. A seller desiring to terminate the offer based upon the buyer's failure to timely produce a written loan commitment should act promptly and deliver the buyer a written termination notice before the buyer produces a commitment. Whether the seller properly delivered the notice of termination by an authorized delivery method would require examination of the Delivery of Documents and Written Notice section of the offer where the parties indicate which delivery methods are authorized. Delivery of documents and notices shall be effective only when accomplished by one of the methods specified in the offer. See lines 22-33 of the WB-11. If the fax number used to deliver the notice was not provided for at line 33 or elsewhere in the offer to purchase it would appear the notice was not properly delivered. If the seller has actual receipt of the loan commitment prior to delivery of the termination notice the parties would proceed with the transaction. The parties should consult with legal counsel regarding their rights and obligations in the transaction. 2.) Contract Issues & Forms - Cancellation and Release QUESTION: Re: Addendum SSO. The seller accepted an offer that included Addendum SSO. The lender is not getting back to the seller in a timely manner and the buyer has opted to terminate the accepted offer. Per lines 25-27 of the Addendum SSO (2008 version), it states that the buyer may terminate the offer by written notice to the seller. Because the seller has signed to accept the offer, does the agent need to do a Cancellation Agreement and Mutual Release (CAMR) or is a notice sufficient? ANSWER: CAMR is required to formally terminate the offer and to provide authorization for the listing broker to release the earnest money. It may be best to provide a notice from the buyer, per the Addendum SSO provision, plus a CAMR. 3.) Offer to Purchase - Counter-Offers QUESTION: An agent had an offer that was countered a few times but did not go together. The sellers then came back and said they would take the terms of the last counter-offer which expired on the 14th. The selling agent said the sellers should sign a new counter-offer and resubmit it to buyers. How to proceed? ANSWER: Either the buyer or the seller can initiate a new counter-offer at any time. The numbering of counter-offers is consecutive, regardless of who initiates the next counter-offer. The party initiating the new counter-offer may include the same terms and conditions as were stated in a previously offered counter-offer. 4.) Offer to Purchase - Secondary Offers QUESTION: The broker has the listing on a short sale property. There is already a primary buyer. If the broker writes a secondary offer when does the broker have to let the agent working with the primary buyer know about the secondary offer? The offer states binding acceptance occurs not upon acceptance and delivery, but upon lender approval. ANSWER: The broker would not have a license law duty to disclose the secondary offer to the primary buyer. The broker may proceed as directed by the seller and/or the seller's lender (some lenders will accept multiple offers for short sales while others will not). Depending on how the offer was modified, it would appear the primary buyer may be able to withdraw the primary offer at anytime before binding acceptance, i.e., lender approval of the short sale. 5.) Disclosure - Broker Disclosure QUESTION: The broker's husband wants the broker to put their commercial building for sale in the MLS. Does the broker need a commercial real estate license to sell a commercial property that the broker owns with two other partners? ANSWER: The Wisconsin Department of Regulation and Licensing does not issue a commercial real estate license. A real estate broker may provide brokerage services for any type of real estate transaction, provided the broker does so competently. Per Wis. Admin. Code § RL 24.03(2), if a broker is not competent in an area of practice, the broker may engage assistance of one who is. Any person engaged to provide assistance shall be identified and that person's contribution shall be described. A broker may enter into a listing contract with the entity/owners to provide brokerage services. The governing documents of the entity should be reviewed to determine which partner(s) has the authority to act on behalf of the entity. The broker must also make proper disclosure of interest and obtain consent to act in the transaction as an agent per Wis. Admin. Code § RL 24.05(2). This rule provides that a licensee may not act as an agent in a real estate transaction on the licensee's own behalf, on behalf of the licensee's immediate family or firm, or on behalf of any organization or business entity in which the licensee has an interest without the prior written consent of all the parties to the transaction. The broker may consult with private legal counsel regarding structure of the entity and the sale thereof. Debbi Conrad |