Search: Offer

Buyer Loses $31,000 Deposit After Refusing To List Current Residence For Sale As Financing Condition

by Rich Vetstein on January 30, 2012

in Massachusetts Real Estate Law, Mortgages, Offer To Purchase, Purchase and Sale Agreements, Real Estate Litigation

Standard Mortgage Contingency Language At Issue

I recently came across a very interesting and scary case from the Appeals Court, Survillo v. McDonough No. 11–P–290. Dec. 2, 2011. (It’s technically an “unpublished” opinion but it’s available to the public). The case underscores how carefully attorneys must craft the mortgage contingency to protect the buyer’s deposit in case financing is approved with adverse conditions.

“Prevailing Rates, Terms and Conditions”

The buyers, Mr. and Mrs. Survillo, submitted the standard Offer To Purchase the sellers’ home in Walpole. The offer provided it was “Not subject to the Sale of any other home.” The sellers accepted the offer. The buyers received a conditional pre-approval from a local bank for a first mortgage in the amount of $492,000. The pre-approval also stated that anticipated loan was “[n]ot based on sale of any residence.”

The parties then entered into the standard form purchase and sale agreement (P & S), with the typical mortgage contingency provision for a $429,000 mortgage loan:

“In order to help finance the acquisition of said premises, the [buyers] shall apply for a conventional bank or other institutional mortgage loan of $492,000.00 at prevailing rates, terms and conditions. If despite the [buyers] diligent efforts a commitment for such loan cannot be obtained on or before October 5, 2009, the [buyers] may terminate this agreement by written notice to the [sellers] and/or the Broker(s), as agent(s) for the [sellers], prior to the expiration of such time, whereupon any payments made under this agreement shall be forthwith refunded and all other obligations of the parties hereto shall cease and this agreement shall be void without recourse to the parties hereto “

Change In Circumstances: Lender Requires Piggyback Loan & Buyers List Their Residence

Due to the buyers’ debt to income ratios, the lender required that the loan be structured as a “piggyback” — a first mortgage of $417,000 and second mortgage of $73,400, and with the condition that the buyers listing their primary residence for sale prior to the loan closing. The buyers absolutely did not want to list and seller their residence, so they wanted out of the deal.

On the last day of the extended financing deadline, the buyers timely notified the sellers that they had “not received a loan commitment with acceptable conditions,” and attempted to back out of the agreement under the mortgage contingency provision. Ultimately, with the buyers refusing to sell their home, the bank denied the buyer’s the mortgage application based on the fact that the “borrower would be carrying three mortgage payments and the debt to income is too high.”

Focus On “Prevailing Terms” Language

The sellers refused to return the deposit, and litigation over the deposit ensued.

The Court framed the case as follows: “Before the extended mortgage contingency deadline of October 21, the buyers received a commitment from the bank for two mortgages totaling $492,000. The P & S’s mortgage contingency was accordingly satisfied unless the bank’s requirement that the buyers list their home for sale was not a “prevailing” term or condition.”

The court started with the assumption that “the typical loan condition for most borrowers is to require them to sell an existing home before the new loan closes. The condition here required only that the buyers list, not sell, their home and it was accordingly not a typical condition.” The buyers argued that because the condition was unusual, it was not a “prevailing” condition within the meaning of the contingency clause of the P & S, despite the fact that the condition was more favorable to them than the standard condition. The court flat out rejected that argument, citing prior rulings that terms of a mortgage contingency presuppose that the buyers will accept commercially reasonable loan terms. If less is required, the condition becomes an option. The court also noted that the buyers failed to notified the sellers that they were unwilling to list or sell their existing home, nor did they insert a proviso to that effect into the mortgage contingency clause. Subsequent events suggested that if the buyers had timely disclosed their intentions to the bank, the loan would have been disapproved, which may well have given the buyers the shelter they sought under the mortgage contingency clause.

The court ruled against the buyers who had to forfeit their $31,000 deposit.

An Ounce of Prevention Is Worth A Pound of Cure

I’m not sure who is to blame here, the buyer’s attorney or the buyers themselves. Probably both.

From a legal drafting approach and as the court pointed out, the buyer’s attorney could have insisted on language into the mortgage contingency provision that the buyers’ financing could not be conditioned on the listing or sale of the buyers’ present residence. After all, the language was in the Offer, so it could have easily been carried over into the P&S. There was no indication from the decision that this was raised or negotiated.

It also seems apparent that the buyers were not particularly up front with anyone on their insistence that they would not list and sell their current residence. If they had been more forthcoming about that, perhaps they could have avoided this situation.

A commenter on Boston.com also places some blame on the loan officer:  “Not all pre-approvals are created equal. For a few minutes of work and adherance to a common standard of practice by the mortgage professional, a true pre-approval is supported by a credit report, the main criteria for ability to qualify for a mortgage. This is generated in a few seconds, and the pre-approval letter usually states subject to verification of income, assets, and property appraisal. Had this been done, THE DEBT TO INCOME RATIO ISSUE WOULD HAVE SURFACED EARLY.”

Based on the loan amount, this mistake or gamble cost the buyers around $31,000 plus legal fees. Ouch!

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Richard D. Vetstein, Esq. is an experienced Massachusetts real estate attorney. Please contact him if you need assistance with a Massachusetts purchase or sale transaction.

 

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New Trends Emerging In Massachusetts Short Sale Legal Practice

by Rich Vetstein on January 24, 2012

in Foreclosure, Massachusetts Real Estate Law, Offer To Purchase, Purchase and Sale Agreements, Realtors, Short Sales

The Offer to Purchase Has Become Much More Important

With a glut of distressed property still on the market and lenders realizing foreclosures aren’t very cost-effective, analysts are predicting a healthy spike in short sales for 2012. Short sales are quite unique in terms of deal dynamics, and should be handled differently than the typical transaction.

Massachusetts real estate attorneys and Realtors, however, are set in their ways when it comes to real estate contracts. For decades, we’ve been using the standard form Offer to Purchase and Purchase and Sale Agreement from the Greater Boston Real Estate Board or some variation thereof. We have also developed a predictable process in which the parties sign the Offer, conduct property inspections, sign the Purchase and Sale Agreement, obtain financing, order title, and get to closing.

With the recent proliferation of short sales, we have had to … yes, that dreaded word, CHANGE, the way we do things. Some agents and attorneys still do things the “old way” for short sale transactions, but they are doing themselves and their clients a disservice by doing so.

In this post, I will outline —  and explain — the “newer and better” way of handling the legal contracts in a Massachusetts short sale transaction.

The Offer to Purchase: Now The Operative Contract Document

We are seeing a shift to making the offer the operative contract in a Massachusetts short sale transaction. And for good reason. A short sale, by definition, is subject to a critical contingency: obtaining short sale approval from the seller’s lender(s). No short sale approval, no deal. Experienced short sale attorneys and real estate agents (and their clients) don’t want to spend the time and incur the expense of drafting a comprehensive (and contingent) purchase and sale contract when there is no guaranty of getting short sale approval. Furthermore, short sale lenders will accept a signed offer from the buyer during the approval process.

When we were first doing short sales, there were several instances where we drafted up purchase and sale agreements and then the short sale approval fell through. We had to charge the client for the drafting work or eat the cost. No one was happy.

The better way has proven to be the following:

  • Build all contingencies into the Offer to Purchase, namely, Short Sale Approval and Financing (we’ll talk about home inspections later)
  • Use a standard rider with short sale contingency language, with a deficiency waiver
  • Seller to use best efforts in obtaining short sale approval
  • Buyer agrees to be bound for set approval period  (60-90 days) in exchange for seller taking property off the market and not accepting back up offers. Negotiate deposit amount, usually 1% of purchase price. Buyer will obtain his financing and loan commitment during this approval period.
  • Negotiate extension rights, with corresponding protection for Buyer’s financing/rate lock
  • Upon short sale approval, purchase and sale agreement is signed within 5-7 days and full 5% deposit made
  • Closing within 30 days of short sale approval. (Most short sale approvals are only good for 30 days)
  • Waiver of home inspection or inspection prior to offer acceptance. Sellers should never agree to allow a home inspection contingency giving the Buyer a right to terminate. If the buyer doesn’t want to pay for an inspection up front, he is not a serious short sale buyer.

Change Is Hard…

I recognize that this is a departure from the “normal” way we document residential real estate contracts, but trust me, it’s a better way, and will actually decrease the time it will take to obtain short sale approval, because the parties are not waiting around for the P&S to be negotiated and signed and the buyer (and his attorney) don’t have to do unnecessary work.

Another important piece here is that the Buyer must get his financing in order, ready to go by the time short sale approval comes through. Lenders must recognize the unique short sale process and work with borrowers to get a firm loan commitment issued timely. Also, there’s no need for a lender to insist that the borrower have a signed purchase and sale agreement for underwriting approval. Under the process that I’ve outlined and under established Massachusetts case-law (McCarthy v. Tobin), the Offer is a legal and binding contract for the sale of the subject property and is sufficient for underwriting purposes. If it’s ok for the short sale lender, it should be ok for the buyer’s lender.

Help Is An Email Away

If you are a Realtor and need some guidance on the new Short Sale Offer, email me here and I will send you the form Rider. Also, if you need a referral for an excellent short sale negotiator, I highly recommend Andrew Coppo at Greater Boston Short Sales LLC.

__________________________________________________________

Richard Vetstein, Esq. is an experienced Massachusetts short sale attorney. For more information, please contact him at info@vetsteinlawgroup or 508-620-5352.

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From Asbestos to Radon: The Massachusetts Home Inspection Process, A Legal Perspective

by Rich Vetstein on January 13, 2012

in Condominium Law, Construction Law, Disclosures, Home Inspections, Lead Paint, Massachusetts Real Estate Law, Offer To Purchase, Purchase and Sale Agreements, Realtors, Safety, Septic/Title V

The home inspection is one of the most critical aspects of every Massachusetts real estate transaction. Virtually every buyer in a standard purchase transaction (meaning not a short sale, foreclosure, or bank-owned property) will opt to perform a home inspection, and for good reason. You need to know whether there are any serious structural, mechanical or other defective conditions in the home before you close.

As always, I’m going to focus on the legal aspects of the home inspection as it impacts the overall transaction.

Buyer Beware

Let’s start out with the legal framework for what, if anything, a seller and his real estate agent are required to disclose to a prospective buyer. Surprisingly to most buyers, a private seller has no legal duty in Massachusetts to disclose any type of information, good or bad, about the property (except for the presence of lead paint). This is called caveat emptor, or buyer beware. Real estate agents stand on a heightened legal footing. Under Massachusetts consumer protection regulations governing real estate brokers, a broker must disclose to a buyer “any fact, the disclosure of which may have influenced the buyer or prospective buyer not to enter into the transaction.”

Nevertheless, I always advise buyers not to rely or trust anything the seller or his/her agent says about the property. This is exactly the reason why most buyers will choose to get an independent home inspection.

Inspection Contingencies

The standard form Offer to Purchase (click for form) will include several inspection related contingencies: the general home inspection contingency, radon, lead paint, and pest contingencies. The buyer typically has between 5 and 10 days to complete these inspections. If the inspections reveals any problems requiring repair or remediation, the parties will negotiate repairs during this inspection period, and the agreement will be reflected in the standard purchase and sale agreement or sometimes a separate repair agreement which is signed around 14 days after the accepted offer. Typically, the Realtors do the heavy lifting on home inspection negotiations, and by the time it gets to the attorneys, there is an agreement in place.

The attorneys can craft the language for repairs. I always insist that repairs are performed by licensed contractors with evidence of completion provided prior to or at closing. Also, buyers should know that repairs provided in the purchase and sale agreement may trigger a second property inspection by the lender’s underwriters which could add another layer of oversight into the deal.

If the problems are so serious that the buyer wants to walk away from the deal, there is a mechanism for where the buyer provides notice to the seller and a copy of the inspection report. It’s very important to provide proper notice in order to get the buyer’s deposit returned. An attorney should be consulted for this situation.

Home Inspector License Requirements

Since 1999, Massachusetts has required that home inspectors be licensed by the state Board of Registration of Home Inspectors. You can search for home inspector licenses here: Massachusetts Home Inspector License Search.

Buyers should recognize the limits of the home inspection. The state regulations requires inspection of “readily accessible” components of a dwelling. Most modestly priced inspections are visual inspections of the property. The inspector is trained to identify defects in the systems of a house but cannot be expected to have x-ray vision. Moreover, property inspectors are not generally trained civil engineers. Structural defects and weaknesses may not be readily apparent, and may require follow up by a licensed structural engineer. In many cases, however, evidence of inappropriate settling or structural failure can be observed during a visual inspection. An experienced inspector will summarize the “big picture,” but inspectors are not required to identify the exact nature and extent of structural deficiencies. Regulations specifying the elements of a dwelling to be observed and reported on by the home inspector may be found here at 266 C.M.R. § 6.00.

Condominiums

When you buy a condo, you not only buy the unit, but the common areas such as the common roof, mechanical and HVAC systems, grounds, etc. Good home inspectors will ensure that the inspection of a condominium includes the common areas as well as the unit itself. The common area inspection may reveal deferred maintenance needs and inadequately performed repairs that may result in increased condominium fees and special assessments.

Radon

The Environmental Protection Agency (EPA) has established an “action level” of 4.0 pico-curies per liter (4.0 pCi/l) of radon present in indoor air. Although not established as an unsafe level, this figure has been established as the point at which protective measures are recommended. Prospective purchasers and home inspectors frequently use commercially available canisters to collect radon data. This method is cost-effective but may not give accurate results. The canisters are ordinarily placed for twenty-four to forty-eight hours in the basement and on the first floor of the dwelling. The canisters must be placed away from drafts and should not be disturbed. After the test period, the canisters are sealed and forwarded to a testing laboratory. Sometimes, the radon results are not ready by the time the purchase and sale agreement has to be signed. In this situation, the parties can either agree to extend the deadline or agree to a radon contingency.

If the radon results come back over 4.0 pCi/l, depending on the language of the radon contingency, the buyer can typically opt out of the deal altogether or require the seller to install a radon remediation system. Often the sellers will attempt to cap the cost of the system.

Pests

Most home inspectors are also qualified to perform inspections for wood-boring insects, such as termites, powder post beetles, and carpenter ants. All properties should be inspected for such pests. Properties financed by certain government-sponsored loan programs, such as the Federal Housing Authority, require a pest inspection as a condition of obtaining a loan. It’s a good idea to ask the sellers if they have an existing pest control contract that can be transferred to the new buyers.

Lead Paint

The Massachusetts Lead Law requires the buyer to be given the opportunity to inspect for lead paint. The seller or broker is required to provide potential purchasers of homes built before 1978 with the notification package prepared by the Massachusetts Department of Public Health.

Sellers and real estate agents are required by law to disclose any information about known lead paint hazards in their properties, and to provide copies of any documentation relating to the lead paint status of the properties (i.e., a lead inspection report or risk assessment report). The seller must grant a ten-day contingency period from the date the buyer receives the property transfer notification to conduct a lead paint inspection. If the buyer discovers lead paint in the dwelling during the inspection period, the contingency required by the statute permits the buyer to withdraw from the agreement without further obligation.

Although a seller is under no obligation to actually abate the lead paint, a lead-free house may be more valuable and marketable. This is particularly true for multi-family properties where tenants with children under six years of age may trigger the abatement requirements of the law. Sellers are required to provide any documentation they have of the estimated costs to abate the lead paint. Should a seller refuse to make a price concession based on the presence of a lead paint hazard, a buyer could argue that any subsequent buyer also should be made aware of the hazards and related costs. As a result, the availability of a lead paint inspection and cost estimate can become a powerful negotiating tool for the buyer.

Lead paint testing is typically not done as part of a standard home inspection, and must be separately arranged by a certified lead paint assessor.

Mold and Mildew

Mold and mildew are tricky subjects for home inspectors. The presence of excessive amounts of mold spores has been linked to asthma and other respiratory ailments and is claimed to cause permanent injuries. Mold grows in warm, moist environments and can be present behind walls and ceilings, in heating and cooling ducts, and in other difficult-to-inspect parts of a house or condominium building. As noted, although a building inspector cannot peer behind walls, a thorough inspection can detect water penetration, which is the precursor and necessary condition for a mold problem. Where mold is suspected, a buyer can always request that his home inspector be allowed to drill small exploratory holes to test for the presence of mold/mildew.

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Richard D. Vetstein, Esq. is an experienced Massachusetts real estate attorney. Please contact him if you need assistance with a home purchase or sale.

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Maximizing Massachusetts Short Sale Success: From Hardship Letter To Closing

by Rich Vetstein on December 25, 2011

in Fannie Mae, Foreclosure, Massachusetts Real Estate Law, Short Sales

Tireless Determination The Key To Massachusetts Short Sale Success

What Is A Short Sale?

A short sale is special type of real estate transaction between a homeowner, his mortgage holder(s), and a third party buyer where the property owner’s mortgage balance exceeds the market value of the property — known as being “under water.” In a short sale, the homeowner’s mortgage lender agrees to accept less than what is owed on the outstanding mortgage, thereby being left “short.” Ideally, the lender will agree to release out the entire debt including any deficiency between the sales price and mortgage balance. This is called a deficiency waiver and most skilled short sale negotiators will insist on this.

The entire process can be extremely time consuming and typically requires a lengthy negotiation with the lender by a skilled Massachusetts short sale attorney or lawyer. Banks and loan servicers now realize that short sales are a preferred method to dispose of distressed properties as they are far less expensive than foreclosure. Short sales are generally reserved for homeowners who do not qualify for a loan modification.

Do I Qualify For A Short Sale?

Homeowners can qualify for short sale approval by proving a recognized involuntary financial hardship. An involuntary financial hardship is some event, beyond the homeowner’s control, that caused the mortgage payments to become unaffordable, even if only temporarily. Acceptable hardships typically include:

  • Loss of a employment
  • Curtailment of income
  • Increased mortgage payment or liabilities
  • Loss of tenant(s)
  • Divorce or Separation
  • Catastrophic medical event
  • Job relocation
  • Military service; or
  • Death in the family

Most lenders distinguish between someone who lost their job and someone who voluntarily quit their job. Thus, unless you are able to prove that you were forced to leave your job, or asked by your employer to take a significant pay cut, a change of employment status may not automatically qualify you for a short sale. Furthermore, many homeowners have suffered multiple hardships, and it can be difficult deciding which hardship you should present to your lender when requesting a short sale. 

The Hardship Letter

As a part of the short sale application process, a skilled Massachusetts short sale lawyer will draft a hardship letter detailing why you are no longer able to make mortgage payments on your home and why you qualify for a short sale. The hardship letter can be one of the most important aspects of the short sale process and should be as detailed as possible, telling a compelling story about the applicant’s individual circumstances.

As part of the short sale hardship package, the short sale applicant will also submit the following:

  • Third party authorization (allowing your lawyer and/or realtor to communicate with your lender)
  • Financial worksheet (breakdown of monthly expenses and income)
  • Hardship letter (why you could pay your mortgage before and why you cannot now)
  • Recent pay-stubs
  • Recent Bank statements
  • Offer to Purchase
  • MLS listing showing the market history of your property
  • Last 2 Years Federal Tax Returns

How Long Does Short Sale Approval Take?

Depending on who your lender is and how many loans you have, short sale approve can take on average between 60 – 120 days, depending on the particular lender and complexity of the case. If the lender makes a counter offer on the purchase price or if there are multiple mortgages and liens against the property, the process will take longer. One of the keys is to submit requested documentation as fast as possible, and to stay on the lender, with frequent requests for status updates. That’s what separates a skilled short sale attorney from the run-of-the-mill negotiators who’ll let your file languish.

Credit and Legal Ramifications

A short sale is far less damaging to your credit and ability to secure a mortgage down the road than a foreclosure or bankruptcy, although it does have some impact.

Foreclosure Short Sale
Credit Score Same impact as a bankruptcy, 200 – 300 negative points on a credit score.  Score affected minimum of 3 years and will report for 7 – 10 years. Any late/missed mortgage payments will show on credit score. Once the short sale is completed, it will be reported as settled for less than full amount due (or similar verbiage).  Impact can be as little as 50 points, lasting apprx. 12 to 18 months.
Credit History On credit history for 7 to 10 years. Only the late payments will be reported on your credit. The short sale will appear the same as a charge off on a credit card and will be reported as settled for less than full amount due (or similar verbiage).
Future Home Purchase (Primary Residence) Ineligible for Fannie Mae backed mortgage for 5 years. Ineligible for Fannie Mae mortgage for 2 years. (Can use local bank or private lender).
New Mortgage
 Must disclose foreclosure on 1003 loan application which may affect future rates after the 5-7 waiting period. There currently are not any questions related to a short sale on the loan application.
Deficiency Rights In Mass., lender retains right to collect any deficiency judgment after foreclosure. It is rare however. We are typically successful in negotiating full and complete deficiency waiver in a short sale approval.

 

Do I Need A Short Sale Attorney?

Only if you want to maximize your chances of getting short sale approved, obtain approval in the fastest manner possible, and protect your legal rights and future credit history at the same time! There are real estate agents and short sale firms advertising themselves as short sale negotiators — and some are really good — however, they are not licensed to provide legal or tax advice, and you must seek that advice elsewhere at additional cost. With an experienced Massachusetts short sale attorney, the applicant can “kill two birds with one stone,” by having the attorney take over the entire short sale approval process. While negotiating with your lender, the short sale attorney can simultaneously perform all necessary short sale legal work, including reviewing and drafting the offer to purchase, short sale approval letter and purchase and sale agreement with short sale addendum/riders. The cost is relatively the same across the board, and some of the fees may be paid by the lender, depending on who it is.

We highly recommend Andrew Coppo at Greater Boston Short Sales LLC, an experienced and successful short sale negotiator. Andrew writes all about Massachusetts short sales on his fantastic blog, The Closing Table.

______________________________________________________________

Richard Vetstein, Esq. is an experienced Massachusetts short sale attorney. For more information, please contact him at info@vetsteinlawgroup or 508-620-5352.

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Electronic Signatures Gaining Acceptance and Popularity In Massachusetts Real Estate Transactions

by Rich Vetstein on November 12, 2011

in Closings, Electronic Closings, Massachusetts Real Estate Law, Purchase and Sale Agreements, Realtors, Technology

images-13Compliance Concerns Unwarranted

Electronic signature technology has been quickly gaining steam throughout the U.S. real estate community, and has now arrived in earnest in Massachusetts. Electronic signature software lets you send legally binding documents and get signatures anytime, anywhere from any Internet-connected device. It’s mostly used in Massachusetts on Offers and Purchase and Sale Agreements. I’ve been using DocuSign, and with a little learning curve, it’s been fantastic.

Realtors and attorneys who use electronic signature software can simply email encrypted contracts to their clients for signatures, rather than deal with travel, signing 4 original copies, and coordinating all the signatures. It’s especially helpful for out of state clients.

The Massachusetts real estate industry, traditionally conservative and slower to adopt new technology, has been lagging behind more progressive states such as California when it comes to adopting electronic signature technology. Plus, it hasn’t helped that technologically challenged attorneys are often involved in the drafting of the purchase and sale agreement.

In my informal survey of Realtors, the biggest questions were (1) are electronically signed contracts legal and valid, (2) how does it work: and (3) will lenders accept them?

Are Electronic Signatures Valid For Massachusetts Real Estate Contracts?

The answer is yes. Under the Massachusetts Uniform Electronic Transactions Act (UETA), real estate contracts which are electronically signed in compliance with the law are legal and valid.

Electronic signature legislation was adopted over 10 years ago. In 2000, Congress enacted the E-SIGN law which validates certain contracts in electronic form and electronic signatures across the country. In 2004, Massachusetts adopted its UETA, codified in Mass. General Laws Chapter 100G, which is essentially adopts and updates the federal E-SIGN law. Lawmakers designed UETA and E-Sign to recognize that “a signature, contract, or other record relating to a transaction may not be denied legal effect, validity, or enforceability solely because it is in electronic form.” The Massachusetts UETA provides, simply, that “In a legal proceeding, evidence of a record or signature may not be excluded solely because it is in electronic form.”

For offers and purchase and sale agreements, I have formulated the following rider provision to ensure electronic signature validity and enforceability. Feel free to use it.

This Agreement may be executed by and through electronic signature technology which is in compliance with Massachusetts law governing electronic signatures, including but not limited to, DocuSign®.  Electronic signatures shall be considered as valid and binding as original, wet signatures.  Signatures, originally signed by hand, but transmitted via e-mail or fax shall also be deemed valid and binding original signatures.

How Does It Work?

There are several electronic signature systems out there, including EchoSign, eOriginal, and DocuSign, which I use. All three providers warrant full compliance with federal E-SIGN and state UETA law and their European counterparts.

Since I’ve been using DocuSign, here is a quick video overview how it works.

As the individual requesting that a document be DocuSigned, you control who signs by providing the signer’s email address and other contact information. The document is routed to the signer’s email with a request to sign. DocuSign records the signer’s IP address and a time stamp of the signing activity. In addition, a signer can opt to provide geo-location information at the time of signing. If you require deeper levels of identity management, DocuSign offers additional authentication options, including: access code, knowledge-based ID check and biometric phone identification, among others.

As you can see, in many respects, an electronically signed contract is more secure and less susceptible to fraud and forgery than a traditional “wet” signature.

Are Lenders Accepting Electronically Signed Contracts?

Most are now. In fact, starting in 2012, FHA and the IRS will formally allow electronic signatures on loan and tax documents. However, I hear that some short sale lenders are still requiring wet signatures.

This is always the problem with adopting new technology. It’s disappointing because electronic signatures have been legal and valid for 10 years now. The law was passed by Congress and now all the states. As more and more agents and attorneys embrace the technology, we will see objections falling by the wayside, just as we did with faxed signatures.

QuickBooks Enterprise hosted on Citrix Virtual desktop is an perfect example of an accounting software used by real estate agents which lets you put a signature on a document without the hassles of scanning, printing, signing, and faxing. Instead, you can simply view documents online and add your signature electronically.

Agents, are you using electronic signatures, and if so, how has it helped your business and clients? Have you run into issues or objections from lenders or attorneys?

_________________________________________

Richard D. Vetstein, Esq. is an experienced Massachusetts real estate closing attorney who’s handled over 1,000 closings. Please contact him if you need legal assistance purchasing residential or commercial real estate.

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Upcoming Free Webinar (Nov. 1, 11:00AM): An Ounce of Prevention Is Worth A Pound Of Cure: Strategies & Teamwork To Avoid Deal Disasters

by Rich Vetstein on October 24, 2011

in Closings, Condominium Law, Massachusetts Real Estate Law, Offer To Purchase, Purchase and Sale Agreements

Realtors, are you using the most current contingencies and language in your Offers? Do you know the most current Fannie Mae/FHA condo rules and how they will impact your condo sale? Want to know the latest on the U.S. Bank v. Ibanez ruling and the foreclosure title mess? How can you avoid last minute crises? All these questions and more will be answered in our upcoming free webinar.

One Hour Complementary Webinar: An Ounce of Prevention Is Worth A Pound Of Cure: Strategies & Teamwork To Avoid Deal Disasters

November 1, 2011, starting at 11:00am EST.

Presented by: Richard Vetstein, Esq. and Marc Canner, Esq. of TitleHub Closing Services and Brian Cavanaugh of MetLife Loans.

Click Here To Register

Facebook Event Invite Here

Topics Include:

1. Must Have Language For Your Offers
a. Fannie/FHA condo compliance
b. Realistic deadlines
c. Beyond the standard contingencies

2. Early Lending Intervention
a. Coordinating with Mortgage Partners
b. Pre-quals and pre-approvals
c. Current underwriting concerns

3. The Attorney’s Role: Purchase and Sale Agreement
a. Common Pitfalls & Solutions
b. New buyer rider provisions
c. Ibanez Foreclosure Title Issues

4. Dealing with 11th Hour Problems
a. Extensions for financing
b. Title issues & title insurance
c. Use and occupancy agreements

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Get Out! A Landlord’s Guide to Massachusetts Evictions

by Rich Vetstein on October 7, 2011

in Landlord Tenant Law, Massachusetts Real Estate Law, Real Estate Litigation

Massachusetts Summary Process Evictions: An Unlevel Playing Field For Landlords

How do you evict a tenant in Massachusetts? In Massachusetts, evictions are called “summary process.” According to the rules governing eviction cases, summary process is supposed to be “just, speedy, and inexpensive.” In practice, however, summary process can be anything but that. In fact, as I always inform my landlord clients, Massachusetts is one of the most tenant friendly states in the country, and an eviction can be costly, frustrating and unfair to landlords. In some cases, it can take many months to evict a tenant.

Further, Massachusetts eviction practice is loaded with traps for the unwary and procedural complexities for landlords. Landlords who represent themselves do so at their own peril and will often arrive at court with their cases dismissed for not following these requirements. It’s not a do-it-yourself situation.

Grounds For Eviction

A.      Non-payment

There are several common grounds for evicting a tenant. The most common is for non-payment of rent. In these cases, the landlord must send the tenant a statutory 14 day “notice to quit” before starting the eviction process. The 14 day notice to quit must be drafted carefully, and the best practice is to have it served by a constable or sheriff to ensure proof of delivery. The landlord must prove in court that the tenant received the notice, and service by constable or sheriff will automatically qualify as “good service.” Certified mail is not good enough as tenants can avoid pickup. Having an experienced eviction attorney draft the notice to quit can prevent have your case being “dead on arrival.”

B.      No-Fault

Another common ground for eviction is for termination of a 30 day tenancy at will, otherwise known as a no-fault eviction. Again, a 30 day notice to quit must be served on the tenant before commencing an eviction. Landlords often trip up on this type of notice with short months. In practice, judges will often give tenants in no-fault evictions a bit more leeway in terms of vacating the premises.

C.      For cause

“For cause” evictions encompass the range of bad behavior by tenants in violation of lease provisions. It could be illegal activity, drug use, excessive noise, uncleanliness, harassment of other residents, non-approved “roommates” and the like. Like all other evictions, the landlord must issue a notice to quit to the tenant stating the specifics of the offenses. “For cause” evictions are the most involved of all evictions as the landlord must offer proof by way of live testimony of the tenant’s violations of the lease. Getting police officers to show up for an eviction hearing can be challenging. For drugs and other illegal activity, Massachusetts also has a special expedited eviction process.

Read our post on the Massachusetts Notice To Quit: Don’t Be Dead On Arrival At Eviction Court

Going to Court

Starting an eviction requires the preparation and service of a Summary Process Summons and Complaint. You can choose to file your case in the local District Court or the Housing Court which is specialized to hear evictions. The Housing Court fees are less expensive, but can be busier. Some Housing Court judges have the reputation of being tenant or landlord friendly as well. Some would probably be happier retired and playing golf. It’s a tough job these days.

The summary process summons and complaint form is complicated to the layperson. It must be first served by a constable or sheriff on the tenant. Then, no less than 7 days after, it must be filed with the court by the “entry date,” which is always a Monday. The hearings are almost always on Thursday morning. Again, it’s best to have an experienced Massachusetts eviction attorney handle the legal paperwork.

Tenant Defenses and Counterclaims

Through the use of discovery requests, defenses and counterclaims, tenants in Massachusetts have ample legal means to delay and beat evictions. All tenants have a right to file “discovery” – formal requests for information and documents – from the landlord, which will automatically delay the hearing for two weeks. The tenant also may assert defenses and counterclaims against the landlord. These can range from improper notice or service, state Sanitary Code violations, no heat/hot water, failure to make repairs, retaliation, discrimination, and violations of the security deposit law—which carries triple damages and attorneys’ fees. (See my prior post on security deposits). Regardless of the merits of such claims, these defenses and counterclaims make the eviction process more complicated, time-consuming, and expensive.

Read my post on the Massachusetts State Sanitary Code — Everything A Landlord Wanted To Know But Was Afraid To Ask

Agreements for Judgment and Mediation

Eviction sessions are very busy. In some courts, there are over 100 cases stacked up on any one day and only one judge to hear them all. Accordingly, the courts will encourage parties to work out their differences on their own through mediation which is an informal sit-down between the parties to discuss ways to resolve the case. Some courts have housing specialists who can preside over the mediation session. Mediation is always non-binding so if no agreement can be reached you can proceed to a trial.

In the Housing Court, there are trained housing specialists who facilitate the mediation process. There are many advantages for landlords to mediation, and I almost always recommend giving it a try. The end result of a mediation is for the parties to sign an agreement for judgment. In a non-payment case, you can structure a payment plan and/or voluntary move-out. For a “cause” eviction, you can provide for a “last chance” agreement or move-out. The major benefit for landlords is that an agreement for judgment becomes a binding court order and the judge is supposed to enforce it upon proof of a violation. It also shows the judge that the landlord has been reasonable and accommodating. Experienced Massachusetts eviction attorneys will also make the tenants waive their rights to appeal and right to delay the case any further so as to avoid last minute requests for more time to vacate.

On the other hand, sometimes the situation is untenable and you have to go before the judge. Some judges hold a basic hearing, giving both sides the opportunity to speak. Some judges, particularly in the Housing Court, are more formal and require an actual trial with live witnesses and exhibits. I’ve had hearings last one minute and jury trials in eviction cases go on for days. But I’m always prepared to put on a case on for trial, as I always have my client present in court or on standby.

Appeals

Tenants in eviction cases do have a fairly robust right of appeal which can greatly delay resolution of the case. (A good reason in and of itself to do an agreement for judgment waiving appeal rights). However, in certain cases, the landlord can ask the court to impose an appeal bond so the tenant must pay rent into court to proceed with the appeal. Most tenants do not have the financial ability to do that, so that will terminate the appeal.

If you have any questions or need assistance with a Massachusetts summary process eviction, please contact me via email at [email protected] or by phone at 508-620-5352.

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Richard D. Vetstein, Esq. is an experienced Massachusetts summary process & eviction attorney who has handled over 2,000 eviction cases all across Massachusetts. For help with a landlord tenant matter, please email him at [email protected] or call him at 508-620-5352.

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The Trilogy: Explaining the Deed, Promissory Note and Mortgage at a Massachusetts Closing

by Rich Vetstein on September 9, 2011

in Deeds, Massachusetts Real Estate Law, Mortgages

Prospective real estate buyers tend to think of the “mortgage” as the contract they are signing with the bank. This is misleading. The promissory note is the actual contract to loan and borrow money between lender and borrower. The mortgage is the lender’s instrument, or more accurately, its security interest, to enforce that loan contract. This is an important distinction because, if for example, a couple purchases property or refinances, and the loan is taken out solely in the wife’s name, then lining up the correct parties on the signing documents becomes important. But before discussing how to properly configure the closing documents, it is important to understand the definitions.

The Deed

The deed is the legal instrument conveying an ownership interest of the property to a grantee (buyer). The deed is typically drafted by the seller’s attorney. It includes the grantor (seller), the grantee (buyer), the manner in which the buyer is taking title (the tenancy), the consideration (the amount of the purchase price), a legal description of the property, and a cite to the recording information of the prior deed. Click here for an example of a Massachusetts quitclaim deed.

The Promissory Note

The promissory note is the lending contract between the borrower and the lender. The note includes the name(s) of the borrower and the property address. It also includes the amount of the loan, the term (number of years), and the interest rate. The lender generates the note and uses a FannieMae/ Freddie Mac standard template which reflects that it is a uniform instrument. A typical note includes a provision of whether the loan is fixed or adjustable, contains a “no pre-payment fee” clause, and includes language that sets the deadline for the 15th of the month for the lender to receive payment (and sets out a late fee penalty). Click here for a standard form Fannie Mae promissory note.

The Mortgage

The mortgage is the lender’s security interest in the property. In Massachusetts, a “title state,” the borrower is conveying his ownership interest in the home to the lender, such interest would be exercised only in the event of default. Thus, the lender has a lien on the property, which gives it authority to foreclose in the event of continued non-payment. The mortgage is also a uniform instrument whose template is typically generated by the lender and designed and approved by the above-referenced government housing agencies. The only unique terms in the mortgage are the names of the borrowers, the property address and the exhibit which provides a legal description of the property. The rest of the mortgage is standard, providing that the borrower agrees to keep the property insured and maintained, make it her primary residence (unless it’s an investment loan), and not to contaminate the property with hazardous waste, among other requirements. Click here for a sample Massachusetts Fannie Mae mortgage.

Thus, to return to our example, if husband and wife purchase a home and only wife is to be on the loan, then the grantees on the deed are husband and wife, reflecting their ownership interest in the property. The note will contain only the wife (since she alone is taking out the loan). The mortgage however must contain both owners of the property since this instrument tracks the deed. Thus, the husband and wife are both on the mortgage.

After the closing attorney explains the deed, mortgage and promissory note, there are a stack of other loan documents and disclosure to review. We’ve written posts about all the important ones:

Good luck with your closing!

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Attorney Marc E. Canner brings years of experience working closely with Buyers, Sellers, mortgage brokers, loan officers and realtors to provide expert counsel on closing residential real estate transactions. Marc is the founding partner of the Law Offices of Marc E. Canner and a founder of TitleHub Closing Services LLC.

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Court Upholds Oral Handshake Deal In Land Swap

by Rich Vetstein on August 22, 2011

in Commercial Real Estate, Condominium Law, Massachusetts Real Estate Law, Purchase and Sale Agreements, Real Estate Litigation

26297-cooperation-handshakeSeller Couldn’t Sit Back & Watch Construction Project Unfold

Massachusetts appeals judges have been mighty busy this summer issuing real estate decisions. From the forced removal of condo buildings to toxic mold, to foreclosure eviction defense, it’s been no summer vacation in Massachusetts real estate law.

Handed down today is a case right from a first year law school property exam, Hurtubise v. McPherson, embedded below.

As most real estate professionals know, contracts for the sale of real estate must be in writing and signed by the party to be charged, i.e, the seller. This is a rule of law going back to English common law and is called the Statute of Frauds which can be found in the General Laws of Massachusetts, Chapter 259, Section 1. As with most black letter law, there are a few exceptions to the general rule, and this case is a textbook example of the “detrimental reliance” exception to the Statute of Frauds.

Hand-Shake Land Swap Agreement

Here are the facts of the case. Hurtubise and McPherson owned adjoining tracts of land in the town of Templeton. Hurtubise operated a storage business on his property. He wanted to build an additional storage shed along the border between his property and McPherson’s property. Hurtubise realized that he could not meet the setback requirements of the local zoning code unless he acquired land from McPherson. Hurtubise approached McPherson, explained his need, and proposed a land trade, offering to convey to McPherson a portion of the front of his (Hurtubise’s) property in exchange for the portion of McPherson’s land at which Hurtubise intended to erect the new storage shed. McPherson agreed to the proposal and the parties shook hands.

Hurtubise proceeded with his plans for construction of the new building. He obtained a building permit and began to excavate along the border of McPherson’s lot. During the seven to eight weeks of construction, Hurtubise saw McPherson at the site. McPherson never objected to the location of the new building. Hurtubise eventually constructed a 300 x 30-foot storage shed for $39,690.

After construction, McPherson objected and accused Hurtubise of taking more land than he initially had represented. McPherson informed Hurtubise that an exorbitant payment of $250,000 would resolve the dispute which Hurtubise refused to pay. McPherson then notified the town that Hurtubise’s new building encroached on his property. The town’s building commissioner revoked Hurtubise’s building permit and ordered him to cease occupancy of the storage shed. After McPherson threatened to demolish the building, Hurtubise brought suit to enforce the oral agreement.

Exception To Written Contract Rule

As mentioned above, to be enforceable, real estate contracts for the sale of property must be in writing and signed by the seller, at minimum. As Judge Mitchell Sikora wrote in the opinion, “however an equitable qualification puts some flexibility into the joints of the Statute.” An oral agreement for the sale of land can be valid if the party seeking enforcement, in reasonable reliance on the contract and on the continuing assent of the party against whom enforcement is sought, has so changed his position that injustice can be avoided only by specific enforcement. In non-legalese, this means that if you start a construction project and spend thousands of dollars upon the promise of a land deal, albeit not in writing, you may be able to enforce that promise.

Because Hurtubise just sat by idly and watched McPherson construct his shed at considerable cost without objection, the court ruled that he couldn’t then complain there wasn’t a written agreement, in an attempt to wriggle out of the land swap deal. The court then ordered Hurtubise to convey McPherson the land necessary to build the shed.

This case is one of the very few instances where a court has upheld an oral hand-shake real estate agreement. The take-away: make sure your real estate contracts are always in writing and signed!

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Richard D. Vetstein, Esq. is an experienced real estate litigation attorney who’s handled numerous real estate contract breach cases in Land Court and Superior Court. Please contact me if you are dealing with a Massachusetts real estate contract legal dispute.

Hurtubise v McPherson Case

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FHA Stays In Condominium Game With Issuance Of Revised Lending Guidelines

by Rich Vetstein on July 5, 2011

in Condominium Law, FHA, HUD, Mortgages

Good News For First Time Condo Buyers

FHA loan programs offer low down payment mortgages which are often ideal for first time home buyers who lack cash for a 20% down payment but are otherwise strong borrowers. On June 30, 2011, FHA confirmed its commitment to financing condominiums with the issuance of revised lending guidelines (HUD Mortgagee Letter 11-22). The new FHA Condominium Project Approval and Processing Guide can be downloaded here.

“Today, we institute revised guidelines that preserve FHA’s role in the condo marketplace during these difficult times while making certain we manage risk in a responsible way,” said FHA’s Acting Commissioner Robert Ryan. “This guidance formalizes and expands the policies we put in place in 2009 and lays the groundwork for a more formal rulemaking process going forward.”

Highlights Of New Guidelines

1.  Reserve Study Requirements:
New guidelines require reserve studies on all conversion (i.e., new) developments. Reserve Studies are valid for a period of 2 years.

2.  Reserve Funding
In addition to a reserve study determination, a minimum of 10% of the operating budget must be set aside as a baseline in a reserve account. Funds to cover the total cost of any item in the Reserve Study or that will require replacement within 5 years must be deposited in HOA’s reserve account. The insurance deductible must also be included in the reserve fund.

3.  Delinquent Condo Fees

On existing projects, the condominium cannot have more than a 15% delinquency rate on unpaid condo fees. This could be a problem for struggling condominiums. A waiver may be granted, however, with supporting documentation.

4. Pending Litigation

Litigation impacting the financing soundness of the condominium must be disclosed and explained to FHA. Again, this could be problematic if the condominium is involved in, for example, a lawsuit with the original developer over construction defects.

5. HO-6 Policies

Individual HO-6 insurance policies are required if the master condo insurance policy does not provide interior unit coverage (which most don’t).

6. Fidelity Bonds For Large Projects

Fidelity insurance to protect against employee dishonesty is required for projects over 20 units.

7. New Construction Pre-Sale
New Construction pre-sale requirements remain at 30%, although only for one year after the first closing. After the first year, it increases to 50% for the development.

8.  Maximum Commercial Concentration
Remains at 25%, however, new guidance allows for possible waiver request up to 35% of the development.

9. 10% Investor Concentration
No longer includes sponsor unsold units or units required to be rented by State or Municipality, ie; rent stabilized/rent controlled.

 

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Is “Buyer Beware” Alive and Well? An Overview of Massachusetts Real Estate Disclosure Law

by Rich Vetstein on June 21, 2011

in Condominium Law, Construction Law, Disclosures, Massachusetts Real Estate Law, Offer To Purchase, Purchase and Sale Agreements, Realtors, Safety

iStock_000003014021XSmal.jpgCaveat Emptor: “Let The Buyer Beware”

Caveat Emptor is an old common law rule which means “Let the Buyer Beware.” In plain English, it means that home buyers are on their own when it comes to the condition of the property. If there is a defect of any kind, it becomes the buyer’s problem, not the seller’s.

Most home buyers are unaware that in Massachusetts, with a few exceptions, the rule of Buyer Beware is still alive and well. That is why in the vast majority of transactions, buyers choose to have the property inspected by a licensed home inspector. And it’s also why there is a contingency in the offer or purchase and sale agreement giving the buyer the right to opt out of the agreement if there are serious issues.

But what happens if the home inspector misses a broken A/C unit, or the sellers concealed that the basement flooded, or the Realtor didn’t tell the buyers there was a Level 3 sex offender next door? These are all thorny disclosure issues.

Private Sellers: No Duty to Disclose

A private seller has no legal duty in Massachusetts to disclose anything about the property (except for the presence of lead paint). Yes, you read that correctly. He doesn’t have to say boo. Will that assist the buyer in selecting the home for purchase? Maybe not. But if the basement floods, the seller does not have to say anything about it.

A seller, however, cannot affirmative misrepresent a material fact about the property. That is, if the seller is asked a direct question, such as “has the basement ever flooded?” and he answers “never” when it has, he has lied and can be held liable for that.

Most agents will insist that Sellers fill out a Statement of Property Condition (see below) which will fully disclose just about every conceivable condition of the premises. However, the standard form does contain small print language purporting to limit the agent and seller from disclosure liability.

Real Estate Agents: Heightened Duty

Under Massachusetts consumer protection regulations governing real estate brokers, a broker must disclose to a buyer “any fact, the disclosure of which may have influenced the buyer or prospective buyer not to enter into the transaction.” This is somewhat of a subjective standard; what may matter to one buyer may not matter to another. If a broker is asked a direct question about the property, she must answer truthfully, accurately, and completely to the best of her knowledge. Further, a broker cannot actively avoid discovering the details of a suspected problem or tell half-truths. This is why most Realtors err on the side of full disclosure, as suggested in Bill Gassett’s blog.

As for that Level 3 sex offender living next door, I would advise the listing agent to disclose that fact. The Massachusetts Supreme Judicial Court has held that off-site physical conditions may require disclosure if the conditions are unknown and not readily observable by the buyer and if the existence of those conditions is of sufficient materiality to affect the habitability, use, or enjoyment of the property and, therefore, render the property substantially less desirable or valuable to the objectively reasonable buyer. I think a dangerous sex offender would be something a buyer would want to know about, wouldn’t you?

Home Inspectors

In 1999, Massachusetts joined a growing number of states that require home inspectors to be licensed. There is now a state Board of Registration of Home Inspectors. Home inspectors are now required to carry at least $250,000 of errors and omissions insurance. The board is empowered to suspend licensed home inspectors for violations of the statute or regulations and to impose civil penalties on persons purporting to conduct a home inspection without the required license.

A home inspector is one of the most important referrals your Realtor will give you. Most agents know which inspectors are great and which are terrible. If you are the unfortunate victim of an incompetent home inspectors, they can be sued civilly for breach of contract or negligence.

Massachusetts Sellers Disclosure//

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Massachusetts Tornado Disaster: Hope For The Best, Plan For The Worst In Your Purchase and Sale Agreement

by Rich Vetstein on June 2, 2011

in Closings, Insurance, Massachusetts Real Estate Law, Purchase and Sale Agreements, Safety

What happens if the property you have under agreement is wiped out by a tornado, burns down or is otherwise subject to a casualty?

Yesterday’s horrific tornadoes — which leveled parts of Springfield and Central Massachusetts — demonstrate the power and fury of Mother Nature and how little control we have over natural disasters. Our thoughts and prayers go out to everyone affected by the tornadoes….

The tornadoes were also a stark reminder to me that an extremely important part of my job as a real estate attorney is disaster planning. Although most buyers and Realtors don’t like to think pessimistically (and neither do I), we always have to plan ahead for the worst case scenario.

Which bring us to the topic of this post. What happens if the property you have under agreement is wiped out by a tornado, burns down or is otherwise subject to a casualty?

The Standard Form Casualty & Insurance Provisions

Let’s start with the basic concept that the buyer does not own the property until the closing occurs, money is exchanged and the deed/mortgage is recorded with the registry of deeds. The purchase and sale agreement is there to govern the parties’ relationship and the property from the time the offer is signed until the closing. The seller retains ownership and control over the property during this period of “under agreement.”

Seller Must Keep Property Insured

The standard form Massachusetts purchase and sale agreement contains two important provisions dealing with homeowner’s insurance and casualty. First, the standard form provides that the seller must keep the existing homeowner’s insurance coverage in place. A good buyer’s attorney will insert language that the “risk of loss” remains with the seller until the transaction closes, to ensure that if a tornado levels the home, that loss is the seller’s responsibility.

Opt Out/Election

Second, the standard form spells out what happens if there is a casualty. If the house is deemed a causualty loss, the buyer has the option of terminating the agreement and receiving his deposit monies back. However, the buyer has the option of proceeding with the transaction and can require the Seller to assign over to the buyer all of the insurance monies available. Depending on the amount of coverage available and the cost to re-built, this may not be a bad situation, but it’s the buyer’s call.

As a “belt and suspenders” measure, I also add the following provision to my purchase and sale rider to ensure that the buyer is protected in case of a disaster:

Notwithstanding any provisions of this Agreement to the contrary, in the event that the dwelling and/or other improvements to the Premises are destroyed or substantially damaged by fire or other casualty prior to the delivery of the deed, the cost to repair which exceeds $10,000.00, BUYER may, at BUYER’S option, terminate this Agreement by written notice to SELLER, whereupon all deposits made hereunder shall be forthwith refunded, all obligations of the parties hereto shall cease, and this Agreement shall become null and void without further recourse to the parties hereto.

Although natural disasters are rare, a certain amount of disaster planning must be done for every Massachusetts real estate transaction. Think of a real estate attorney as part of your insurance policy to protect you in a worst case scenario.

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Dealing With Dysfunctional Massachusetts Condominium Trustees & Homeowner Associations

by Rich Vetstein on May 10, 2011

in Condominium Law, Massachusetts Real Estate Law

images-12I’ve been getting a fair amount of calls these days regarding what I like to term dysfunctional condominium management. Usually these are smaller, self-managed condominiums, converted multi-family homes, etc. Sometimes, however, the problem of dysfunctional condominium management can plague larger condominiums.

As I often tell clients, condominiums often bring out the worst in people. Professionalism and respect get thrown out the door, and childish behavior rules.

The problems can range from poor to no financial management, unpaid monthly condominium fees, problems with the transition from the original developer to the association of unit owners, power hungry condo trustees, special assessments, and disputes over costly repairs and capital improvements. Here’s some advice for would-be condominium buyers and condo unit owners to prevent and deal with dysfunctional condominium management problems.

Dealing With A Dysfunctional Condominium Board of Trustees or Association

A. Financial Mismanagement

A condominium is supposed to run like a democracy with trustees being elected by the majority of unit owners, and subject to being voted out of office when they do a poor job. The procedures for elections and removal should be set forth in the condominium declaration of trust/by-laws. In the case of financial mismanagement, unit owners often may have difficulty enforcing the internal governance rules. At minimum, disgruntled unit owners should call a special meeting and attempt to removal or vote out trustees who are causing problems. If the internal governance doesn’t work, unit owners may seek legal action for “breach of fiduciary duty” against the trustees in the Superior Court. In egregious cases, the court can grant preliminary injunctions and other remedies to protect the unit owners from financial harm.

B. Unpaid Condominium Fees

With the down economy, unpaid condo fees have become a real problem, especially for smaller condos who rely on the monthly income to pay common area expenses. Fortunately, we have a strong Massachusetts condominium lien law with some teeth, called the “Super Lien Law.” Condominium associations can file a lien for unpaid condo fees against the delinquent owner, and the first 6 months of unpaid fees will have “super-priority” status over and above the mortgage(s) on the unit. The association can then foreclose on the lien and sell the unit at auction. Attorneys’ fees and collection costs can also be pursued. The condominium may even require that a unit owner’s tenant pay the association rent to pay down the unpaid fees. These are a very valuable enforcement mechanisms to ensure that condominiums get their condo fees paid. Often the mortgage lender will pay the condo fees on behalf of the borrower to avoid the super-priority lien.

C. Transition Issues

For new construction condominiums, the developer desires to have control over the condo management during the majority of the sell out process. This, however, can create conflicts with unit owners who have bought units. Typically, the condo documents will give the developer control over the association until 75% of the units are sold out or 3 years after the master deed is recorded, whichever is earlier. But what if the developer isn’t managing the finances properly or isn’t doing much of anything? Often the only viable remedy in this type of situation is a Superior Court lawsuit for breach of fiduciary duty against the developer-trustees.

Questions To Ask Before You Buy Into A Dysfunctional Condominium

  1. What are the condominium by-laws, rules & regulations? You or your attorney must read these condominium documents and make it a condition of your offer. Condominium by-laws and rules are supposed to provide a structure for good decision making. Make sure you carefully review the rules and regulations before buying.
  2. What is the monthly condominium fee and what does it pay for? The monthly condominium fee can range quite dramatically from condominium to condominium. The fee is a by-product of the number of units, the annual expenses to maintain the common area, whether the condo is professionally managed or self-managed, the age and condition of the project, and other variables such as litigation. For budgeting and financing you need to know the monthly fee and exactly what you are getting for it.
  3. How much money is in the capital reserve account and how much is funded annually? The capital reserve fund is like an insurance policy for the inevitable capital repairs every building requires. As a general rule, the fund should contain at least 10% of the annual revenue budget, and in the case of older projects, even more. If the capital reserve account is poorly funded, there is a higher risk of a special assessment.  Get a copy of the last 2 years budget, the current reserve account funding level and any capital reserve study.
  4. Are there any contemplated or pending special assessments? Special assessments are one time fees for capital improvements payable by every unit owner. Some special assessments can run in the thousands, others like the Boston Harbor Towers $75 Million renovation project, in the millions. You need to be aware if you are buying a special assessment along with your unit.  It’s a good idea to ask for the last 2 years of condominium meeting minutes to check what’s been going on with the condomininium.
  5. Is there a professional management company or is the association self-managed? Usually, a professional management company, while an added cost, can add great value to a condominium with well run governance and management of common areas. Self-managed condos tend to have a higher incidence of dysfunction.
  6. Is the condominium involved in any pending legal actions? Legal disputes between owners, with developers or with the association can signal trouble and a poorly run organization. Ask whether there are any pending lawsuits.
  7. How many units are owner occupied? A large percentage of renters can create unwanted noise and neighbor issues, and result in a higher incidence of dysfunction. It can also raise re-sale and financing  issues with the new Fannie Mae and FHA condominium regulations which limit owner-occupancy rates.
  8. What is the condominium fee delinquency rate? Again, a signal of financial trouble. Plus lending guidelines want to see the rate at 15% or less.

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Richard D. Vetstein, Esq. is an experienced Massachusetts Real Estate Condominium Real Estate Attorney. For further information you can contact him at [email protected].

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Spring Cleaning: Repairing Waters Stains & Mold From Ice Dam Damage

by Rich Vetstein on April 18, 2011

in Construction Law, Safety

1471403_10203128432314745_4869425574151873063_nA Guest Post by George Lonergan, Owner of Lonergan Construction, Inc. a licensed Massachusetts general contracting company servicing the Metrowest Massachusetts area including Framingham, Natick, Wayland, Sudbury and Hopkinton.

This winter caused a substantial amount of ice dam damage in the Massachusetts area. The water on your roof that pools above ice dams and then seeps down onto your ceilings and between your inner and outer walls typically causes two related problems: 1) ceiling stains and 2) mold, which is a serious health risk.

Treating Ceiling Stains and Mold

If the stain is yellow, it’s dry and can be treated, but only if there’s no mold behind it. Look at the entire floor of the storage area or attic above the stained ceiling. If there’s mold, you’ll probably see it. Don’t disturb it. Spray the affected area with bleach, but don’t soak it.

Next, apply paint blocker to the stained area, let it dry, and apply a coat of white ceiling paint. (If on first inspection the ceiling stain hasn’t yellowed, it’s not dry, and there is still a leak. Find out where the water is coming in, repair the “port of entry,” wait for the stain to dry, and then refinish.

Paint the repaired area with the original color that you had left over, if it still matches the rest of the ceiling, and if you’re not working in a bathroom—where there is too much moisture, which affects wall and ceiling colors—or in a kitchen, where ceilings, due to cooking vapors, lose color more quickly over time than elsewhere in the house. If you need to repaint the entire ceiling, used painter’s tape on the wall where it meets the ceiling. And it’s always a good idea to remove the furniture, or at least move it to the center of the room and cover it with plastic, especially if you have a sand-textured ceiling, which tends to splatter paint.

Treating Mold Between Walls

Begin to determine if the ice dam leak has caused mold to form between your inner and outer walls by looking to see: 1) if there are stains on the interior wall; 2) if there is peeling paint on that wall; or 3) if there is a pool of water on the floor (formed as the ice dam melts). If you see any of these conditions, you had best look between the walls because, where there is moisture, mold usually forms.

The least invasive way to check for mold between the walls is to call in a company that uses special instruments to measure moisture. This is expensive, and won’t tell you what you want to know about mold if the moisture has dried up by the time of testing. A second way is to remove the baseboard molding where the leaking has occurred, exposing the sheetrock or blueboard (plaster) behind it, and check for mold. At the same time, check the backside of the baseboard molding.

If neither procedure provides signs of mold, a more invasive procedure is necessary. Remove the sheet rock that’s just behind the molding, usually 3-4 inches—the height of the molding—and about a foot laterally. Do you see mold?

If it’s determined you have mold between the walls, hire the contractor to perform mold remediation, which includes: 1) removal of the baseboard molding, sheetrock or plaster wall, and insulation; 2) treatment of the exposed studs (whether wood or metal); 3) reconstruction of the wall; and 4) application of a finish to match the color of the rest of the wall.

Never paint over mold in an attempt to mask it! If you do, it will continue to grow and spread. Mold must be removed in order to eliminate the health risk.

Health note: Mold above the ceiling is usually in full view, so you don’t have to disturb it to find it. But the invasive procedures needed to deal with mold between walls means that you have to “encapsulate” the work area, because any mold you encounter, once disturbed, will become airborne and pose a health risk. That’s why you also have to wear a filtering facemask. Mold can cause illness not only in the person doing the work, but also to the rest of the household, whether or not any of them suffer from pre-existing respiratory problems. So it’s best to bring in a qualified contractor to check for mold and take a sample for a controlled test. He’ll identify the strain of mold, too, which is important to know if any of the residents suffer from respiratory problems.

Lonergan Construction, a licensed Massachusetts corporation, builds new homes and remodels existing ones. We offer design and architectural services as well as work in concrete, general construction and demolition, plumbing and electrical systems, heating-ventilation-air conditioning (HVAC), septic systems, roofing, painting, cabinetry, and flooring (wood and ceramic), as well as residential (home) and commercial (office) repairs and remodeling.

Our business comes almost exclusively through referrals, and our only advertising is word of mouth.

Lonergan Construction

508-875-0052

www.lonerganconstruction.com

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What Baseball & The Red Sox Can Teach Us About Real Estate

by Rich Vetstein on March 31, 2011

in Realtors

April 1st marks the Boston Red Sox’s Opening Day. No more wait ’til next year. This is the year!

Come to think of it, there is a lot that Youk, Pedroia, Big Papi and the rest of the Red Sox can teach us about real estate. Here are a few tips–

Listen to your Manager and your General Manager. Your Manager is your real estate agent. Your General Manager is your real estate attorney. Tito and Theo (yeah!). Joe Girardi and Brian Cashman (boo!!!). This is the foundation of your team. Listen to them. Trust them. They will lead you to the World Series–your closing.

Spring training is more than just practice. In real estate, spring is the busiest time of year. So apply your eye black and get your game face on. Make your best offer. Swing for the fences. Everything counts in the spring in real estate.

When you get up to the plate, make sure you have your batting helmet and battling gloves on, and you’ve studied the pitcher. In real estate, this means that if you are buying, you need to be well prepared. Get pre-qualified or even better, pre-approved for a mortgage so your offer will be seriously considered by the seller. Studying the pitcher means do your homework. Have your real estate agents pull comparable sales and obtain market research before settling on a offer price. Same for sellers. It’s not what you need or want for a price, but what the market will bear. Reality check.

Baseball is a rewarding long-term investment. Watching a baseball game can be a long term investment. (Sometimes too long!). So is real estate. Think long-term. This is going to be your home for the next several years. Don’t lose sight of that.

Don’t get caught stealing. Sellers, be honest and upfront about your home and its problems. The home inspector will most likely find all the issues you’ve tried to hide, so disclose up front. Otherwise, you’ll lose all credibility, and the deal will be that much harder to close.

Expect an occasional curveball. With tight credit requirements and longer underwriting, closing in 30 days is very difficult. Delays are becoming more prevalent as well. So, hope for the best, but prepare for the worst.

Statistics & numbers are critical. ERA stands for Earned Run Average, not a well known local real estate office. CMA stands for Comparative Market Analysis. For real estate, you need to crunch a lot of different numbers: price per square foot, PITI, down payment, taxes, etc. You can’t properly analyze a baseball team or a real estate market without understanding the numbers. Sabermetrics for real estate anyone?

Waiting until next year is not always the best strategy. This is more true than ever. Most experts believe we have hit bottom in the Greater Boston area. Interest rates are still at historical lows. It’s time to pine tar the bat and get up to the plate. Get out of the on deck circle.

Spitting should never be permitted in a dugout or a living room. ‘Nuff said.

Play Ball and go Red Sox!!!

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Richard “Lefty” Vetstein, Esq. is an experienced Massachusetts real estate attorney and life-long, diehard Red Sox fan. Rich was once a fire-balling southpaw pitcher in Little League, striking out 14 batters in one game. His baseball career is now relegated to second-guessing managerial decisions and throwing things at the TV.

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Buy/Sell “Piggyback” Transactions In A Changed Market

by Rich Vetstein on March 15, 2011

in Closings, Massachusetts Real Estate Law, Purchase and Sale Agreements, Real Estate Marketing, Realtors

This is a summary of a recent presentation given by Jon Ufland and Chuck Silverston of Prudential Unlimited Realty, Attorneys Richard Vetstein & Marc Canner of TitleHub Closing Services, and Mark Maiocca of Mortgage Network.

Selling & Buying Simultaneously

Many home buyers today still need to sell their current homes and use the sale proceeds for their next purchase. Often, there is a closing in the morning on the “sell,” and a closing in the afternoon on the “buy.” This is called a “piggyback” or “back to back” sale.

Back in the boom days, we were doing piggyback transactions all the time, and lenders were able to offer special programs, like bridge loans, to facilitate these back to back transactions. The days of bridge loans, no-docs, and 100% financing may be over, according to Mortgage Network’s Mark Maoicca, but piggyback transactions are still going on, but in a changed market.

There are numerous factors and variables to consider when doing a piggyback transaction, from a legal, financial/lending and marketing perspective.  There can be at least 11 different people involved – buyer, seller, 2 agents, up to 3 attorneys, loan officer, appraiser, home inspector and contractor.

Sales/Marketing

There are a number of considerations on the sale/marketing side according to Jon Ufland and Chuck Silverton of Prudential Unlimited Realty. When to put your home on the market so as to ensure a quick sale? Statistics show that the most sales activity in the Greater Boston area occurs in March, April and May, with families trying to get settled before the summer and back to school season ends. December through February is the dead zone. Getting a pre-sale home inspection and comparable market analysis before putting your home on the market are two good tips suggested by Jon and Chuck.

Lending

According to Mark, lenders are no longer offering bridge loans or 100% financing, which helped cash strapped sellers to close on their new purchases. Also, home equity lines are tougher to qualify for. No income verification and stated income loans are just about long gone for the recently self-employed. Mark also says that the days of “washing the rent” on income properties is over. You need a 2 year history of rental income for qualification purposes. You also need to factor in the required real estate tax and insurance escrow reserve in your mortgage payment affordability analysis.

Bottom line, confer with your loan officer and financial planner as early as possible in the process before putting your house on the market! Get those financial ducks lined up before….

Coordination & Control

The piggyback transaction works best when one person takes on the role of “project manager.” It’s usually your real estate agent or attorney. Communication and coordination is the recipe for a successful piggyback transaction.

On the legal side, the overriding goal is to keep your buyer’s feet to the proverbial coals on the sale while protecting your deposit on the buy. It may seem like common sense, but it’s best to hire the same attorney to handle both transactions. An experienced attorney will line up the two mortgage contingency deadlines so that your buyer will obtain a firm loan commitment as soon as possible (with no contingencies, especially the sale of other property), and you have sufficient time on your purchase to get your own firm commitment while protecting yourself from any worst case scenarios like job loss, defective title, etc. The attorney should always be on top of these important deadlines so he or she can ask for extensions and otherwise exercise any opt out rights. Failure to do that can result in the loss of your deposit. Delays are common today in the tighter lending environment.

The Big Day

As the closing day approaches, everyone gets into high gear, with the agents coordinating smoke certs and pre-closing walk-throughs, the attorneys drafting preliminary HUDs, deeds, and coordinating wires, and loan officers sending closing packages. Speaking of wires, your attorney should be able to coordinate a wire of your sale proceeds into the IOLTA account of the purchase closing attorney, so you have good funds to close.

The closing day is about as hectic as you can get. I suggesting giving your attorney a power of attorney so he or an associate can attend the closing on the sale, get on record, coordinate the funds, and you can deal with moving and attending the purchase closing in the afternoon.

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Jon, Chuck, Marc, Rich and Mark have all worked together as a team on piggyback transactions. Don’t hesitate to contact us if you need expert assistance.

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How Will Real Estate Closings Look In 2021?

by Rich Vetstein on March 2, 2011

in Closings, Electronic Closings, Offer To Purchase, Purchase and Sale Agreements, Technology

Are Electronic Contracts And E-Signatures On The Way?

Catching my eye this week was a recent New York Times article discussing a New York state court opinion regarding the legal effect of e-mail in real estate contracts.  The ruling reaffirmed that e-mail may carry the same weight as traditional ink on paper contracts.

It made me think about the future of real estate contracts and how they will look. Will the common practice of executing four original purchase and sale agreements be replaced by some type of electronic PDF document with electronic signatures? (I hope so. They are in the West Coast now). Same for the standard Offer to Purchase? What about the stack of disclosures and loan documents signed at closings? (There must be a better way). And mortgages are already being electronically recorded in several Massachusetts counties.

I wonder how closings will be conducted in 2021?

Congress and state legislatures have already laid the groundwork for electronic real estate contracts and e-signatures. In 2000, Congress enacted the E-SIGN law which validated certain contracts in electronic form and electronic signatures. In 2004, Massachusetts adopted the Uniform Electronic Transactions Act (UETA), which is essentially updates the E-SIGN law. Lawmakers designed UETA and E-Sign to recognize that “a signature, contract, or other record relating to a transaction may not be denied legal effect, validity, or enforceability solely because it is in electronic form.” The Massachusetts UETA exempts several types of contracts and disclosures (e.g., wills), but not real estate contracts.

Old Traditions & The Statute of Frauds

But old traditions are hard to change, especially when it involves real estate.  As every first year law student learns, Massachusetts real estate contracts are governed by the Statute of Frauds.  This doctrine, originated in old English common law, says that any contract for the sale of real estate must be in writing and “signed by the party to be charged therewith.”  One can make a compelling argument that secured electronic contracts and signatures serve the purpose of the Statute of Frauds by providing some objective evidence, other than word of mouth, that there really has been a binding deal.

I haven’t found any cases dealing with the interplay between the UETA and the Statute of Frauds.  And there’s something about that “wet” ink signature on real paper that gives people security and comfort.  The same is true for our beloved Greater Boston Real Estate Board standard form Offer and P&S.  We’ll have to see how the issue plays out in the courts.

But if you can purchase a Ferrari online through E-Bay, why can’t you buy a home using a secure electronic contract?  How do you think technology will affect real estate in the future? What would you like to see change in the industry?

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Are The Lowest Mortgage Rates In History Now History?

by Rich Vetstein on February 12, 2011

in Fannie Mae, FHA, HUD, Mortgages, USDA loans

A guest post by David Gaffin, Senior Mortgage Lender, from Greenpark Mortgage.

David Gaffin, Greenpark Mortgage

Since Nov. 3rd when the Federal Reserve Bank released details of QEII (Quantitative Easing II), we have seen a very rapid rise in mortgage rates. On a national basis, the Freddie Mac 30 year fixed rate has moved from 4.20% to 5.05% this week. The 10 year Treasury has risen above 3.70% and Inflation seems to be the word of this month.

Last year at this time the 10 year was at 3.73% and it hit 4.00% on April 5th. It then started a fairly rapid descent all spring and summer to its low of 2.38% on October 8th. There were several economic events that brought this about, but the question in every mortgage company’s and consumer’s mind is “Will history repeat itself this year”?

Wishful thinkers will say YES. Many think the stock market is overbought. The Mid-East and Egypt situation is still very unstable. Inflation remains low according to the FED. Unemployment is stubbornly high and the housing market is continues to be very sluggish.  Until these issues are resolved, rates cannot rise too far or consumer demand will fall and economic growth will not be sustained.

HOWEVER, there are a few wrinkles that have nothing to do with Macroeconomics that will be in play in the coming months and years.

Changes In Loan Officer Compensation

As part of the Dodd-Frank Bill, loan officers’ compensation is about to undergo a dramatic change. Loan officers will no longer be paid based on certain loan characteristics such as interest rate. The intention is to have consumers with like profiles receive the same interest rate when quoted from one loan officer to another within the same company. One the surface this makes sense. In practice, the policy is very unfriendly to the consumer, limits consumer choice, and is uncompetitive for the marketplace. Loan officers already have a fiduciary responsibility to their clients to put them in the best loan for them, while compensation to the loan officer is not a major factor. This is a higher standard than the financial planning or brokerage environment which must merely come up with a suitable product, not the best product for their clients.

The anticipated effect of this change, coupled with the reduced volume of loan transactions due to rising rates, will further increase the profit pressures on lending institutions, thereby requiring them to make their loans more profitable. This may be done through reduction of expenses and overhead (read layoffs) or higher rates to the consumer, and will eventually lead to fewer choices to the consumer as companies go out of business. The large lending institutions will then be free to control the market even more so.

Fannie/Freddie (GSE) Reform

A bigger factor is the Fannie/Freddie GSE reform now being detailed by the Treasury. This plan, which may take affect over several years, will reduce/eliminate the government’s backing of the mortgage market, except perhaps through FHA, VA and USDA loans. When the government moves to a private secondary market, those investors are going to want a greater return on their investments and rates will almost certainly rise and may do so dramatically. Less than 10 years ago 7.25% was considered a great rate!

Current programs such as a 30 year fixed rate may vanish in favor of the adjustable rate mortgages which move with the interest rate market and would be more profitable for investors. Additionally, for those programs that are somewhat or fully guaranteed by the government, I would expect the fees associated with these programs to rise substantially.

The GSE reform options include reducing the Agency Jumbo Limit to $625,000, down from $729,000 in the highest cost areas. In Massachusetts those high cost areas are Martha’s Vineyard and Nantucket Islands off Cape Cod. The highest max loan amount in other counties is $523,750. Will this reduction of loan size have a big impact? I don’t think so. Current rates may be .250% to .500% higher with portfolio lenders that offer loans over these limits, but these jumbos have come way down in rate compared to the depths of the financial crisis. Most of the risk is relieved through very strict underwriting guidelines.

I have Portfolio lenders offering under 4% on ARM rates on loans to $1MM at 5 year interest only for the right borrower! While ARMs may not be the right product for everyone, they are for certain individuals and these folks are saving tremendous sums compared to where rates were just a couple of years ago.

A big concern for for future homeowners with GSE reform will be the minimum down payment requirements. There is talk that borrower’s may be required to put down 10 or 20% to qualify. Some major lenders have suggested 30%. Yeah, that’ll work…not. If that becomes the requirement you can kiss home ownership goodbye for the next generation or so, and rents will rise very rapidly.

I certainly recognize the need for GSE reform. Taxpayers have been getting killed by the losses from the mortgage giants, and the bleeding will not stop anytime soon. The plan as outlined by the Obama administration will gradually make changes to the GSEs over 5-7 years. But hopefully the market will understand what will be happening well in advance of the changes occuring.

Interest Rate Predictions For 2011 and Beyond

So what do I think? I think (unfortunately) rates will:

  • increase to 5.875%-6.125% for a 30 year fixed rate by the end of 2011;
  • increase to 6.50% by end of 2012; and
  • level out at closer to 7% by 2013.

By that time hopefully there will be a more clear path to GSE reform.

I want low rates. It’s good for my business, helps pay for my mortgage, and keeps the house heated.

All of this rate speculation, however, could be meaningless if Congress decides to finally act on the deficit. If they do, then rates could stay low for a very long period. One thing is for sure, my 3 kids are going to see a very different economic and housing landscape when they are ready to buy a home.

To see the  the full report on Reforming America’s Housing Finance Market, click here .

I welcome comments and your point of view.  I also welcome subscribers to my blog, The Massachusetts Mortgage Blog. Also check out my new Facebook page, Mortgagemania. I can be reached via email by clicking here.

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A New Chapter M for Mortgage Bankruptcy?

by Rich Vetstein on February 2, 2011

in Bankruptcy, Foreclosure, Mortgage Crisis, Title Defects

I recently came across a very provocative and interesting idea to address the foreclosure and bankruptcy crisis: a new Chapter M for Mortgage bankruptcy. As described on FireDogLake:

“Prof. Adam Levitin has proposed this with his Chapter M for Mortgage bankruptcy. It would remove foreclosure actions from state court to federal bankruptcy court. Successful petitions can be offered a standardized pre-packaged bankruptcy plan. The plan would be based on HAMP modification guidelines (interest rate reduction to achieve 31% DTI goal, but without federal funding) plus cramdown to address negative equity.

We can make this fair on the backend. If the homeowner redefaults we can speed up the foreclosure process. It wouldn’t affect non-mortgage lenders. It is fast-tracked relative to traditional Chapter 13. It can have clawback mechanisms to address potential future appreciation.

And going through the process can give the lender clean title. Because there’s this whole issue of who owns what in the securitization chain which is a few court cases away from putting our financial system over a cliff. And the best feature is that it has no cost to the federal government. Like other smart policy, it builds off already existing infrastructure, so it can be started immediately using existing courts and Chapter 7 panel trustees for sales.”

Any solution which can simultaneously address banks’ unwillingness to offer loan modifications to otherwise qualified distressed homeowners and the litany of title problems created in the wake of cases like U.S. Bank v. Ibanez should be seriously considered. The recent foreclosure legislation proposed by Secretary of State Bill Galvin and Attorney General Martha Coakley contains mandates following these ideas. Galvin’s would create a special court to deal with Ibanez issues, and Coakley’s requires loan modifications for certain sub-prime loans before foreclosure.

We certainly need out of the box thinking to deal with these problems. What are your thoughts?

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Massachusetts Real Estate Law Year In Review & Outlook For 2011

by Rich Vetstein on December 27, 2010

in Condominium Law, Fannie Mae, FHA, Foreclosure, HUD, Massachusetts Real Estate Law, Purchase and Sale Agreements, RESPA, Short Sales

It’s that time again for our annual review of hot topics and top posts for the last year, 2010.

#5. The Great Flood of 2010. Ah, who can forget the flooding in the spring of 2010. I sure remember bailing out my flooded basement every 30 minutes through the night, into exhaustion. Good times… FEMA declared a “major disaster” and the IRS granted taxpayers in 7 counties an extension to file their taxes.

Read More: Federal Aid And Tax Extension To May 11 Available To Massachusetts Homeowners Affected By Flooding

#4. The Obama HAFA Short Sale Program. The Obama short sale program, announced at the end of 2009, was aimed to speed up short sales of homes and other loan modification alternatives to stem the rising tide of foreclosures. The Home Affordable Foreclosure Alternatives Program (HAFA) provides financial incentives and simplifies the procedures for completing short sales, a growing practice in which a lender agrees to accept the sale price of a home to pay off a mortgage even if the price falls short of the amount owed. By all accounts, however, the HAFA program has been a dismal failure.

#3. On Jan. 1, new RESPA rules went into effect, significantly changing the way lenders disclose settlement services, in particular closing attorneys’ fees, and title insurance. Read more: New RESPA Rules 2010: Disclosure of Settlement Services, Closing Attorneys’ Fees, And Title Insurance .

#2. Our popular primers on the Massachusetts Offer to Purchase and the standard form Purchase and Sale Agreement, checked in with over 16,000 reads. Great to see posts about buying a new home ranking so highly. An indicator of the recovery of the Massachusetts real estate market perhaps?

Read More:

#1–Fannie Mae & FHA Condominium Regulations:  Our series on the Fannie Mae and FHA strict new condominium lending rules were incredibly popular, combining for over 25,000 reads during 2010.  The new guidelines had condominium developers and associations, buyers and sellers in a tizzy, as Fannie and FHA imposed much tougher pre-sale requirements, condominium financial guidelines and the imposition of unit owner HO-6 insurance policies, among other requirements.

Read More:

Honorable Mention: With Old Man Winter upon us, our post on the changes in Massachusetts snow removal law is very popular:  Massachusetts Property Owners Now Have Legal Responsibility To Shovel Snow & Ice.

What To Expect In 2011

Final Ruling In the Ibanez Foreclosure Case

Early 2011 should bring the final word from the Mass. Supreme Judicial Court on the very controversial foreclosure case of U.S. Bank v. Ibanez which invalidated foreclosures across the state for sloppy paperwork. Thousands of property owners and their ownership rights to their homes hang in the balance. Click Here For Our Entire Series Of Post On the Ibanez Case.

Fate Of Real Estate Attorneys

Year 2011 should also bring the final word in the The Real Estate Bar Association of Massachusetts, Inc. (REBA) v. National Real Estate Information Services, Inc. (NREIS) case. This case pits Massachusetts real estate closing attorneys versus out of state non-attorney settlement service providers which are attempting to perform “witness or notary” closings here in Massachusetts. At stake is merely the billion dollar Massachusetts real estate closing industry.

What are your predictions for 2011?

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