2012 April Archive - Combs Law Group

Disclosure Obligations of Sellers and Brokers Seminar

Combs School of Real Estate presents: Disclosure Obligations of Sellers and Brokers

3-Hour ADRE-Approved CE in Disclosure Law

Thursday, May 3, 2012
9:00 a.m.- 12:00 p.m.
Check-in from 8:30-9:00 a.m.

Academy Mortgage
1750 E. Northrop Blvd. Suite 230
Chandler, AZ

Seminar Fee with Pre-Registration – $10
Seminar Fee on day of class – $20

Chris Combs and Aaron Green will be presenting on the following seminar topics:

Statutory and Administrative Rule – Lead-Based Paint/Swimming Pool Barriers/HOA Disclosure/ Affidavit of Disclosure/ Septic Tanks/ Right to File ROC Complaint
Warranties of Disclosure in the AAR Contract
Duty to Disclose Known Property Defects
Discovery of Defect after Inspection Period & Before Close of Escrow
Types of Defects Requiring Disclosure
Broker’s Independent Obligations of Disclosure
Litigating/ Arbitrating Non‐Disclosure Cases
Protecting Buyers from Seller’s Non‐Disclosure

Owners Could Demand Office-Condo-Fee Guarantee

Question: I am on the board of directors of the owner’s association for a group of office condominiums in north Scottsdale. Most of the owners of these office condominiums are single-asset limited liability companies. The mortgage lenders recently foreclosed on two condominiums. After these foreclosures the delinquent monthly owner’s assessments owed by the two condominiums became uncollectible because the single-asset LLC’s have no other assets. Our board of directors wants to avoid this uncollectibility problem after future foreclosures. Can we require new owners of office condominiums that take title in an LLC to designate a responsible individual to guarantee the payment of the monthly owner’s assessments?

Answer: Probably. The covenants, conditions and restrictions or other governing documents of the owner’s association should provide for amendment by a certain percentage of the owners — for example, 75 percent. If so, an amendment could be adopted to require a responsible individual to execute a personal guarantee of payment of the monthly assessments.

Seller Carry-Back Financing Is Booming Again

In today’s Arizona real estate market, with many homes still being lost to foreclosures, many investors today are paying cash to buy a home and then “flipping” the home with seller carry-back financing. The advantages to the investor are two fold.

One, many buyers cannot qualify for conventional financing, and an investor using seller carry-back financing can sell the home for a price higher than fair market value.

Two, the investor can require the buyer to make a significant cash down payment, and the investor will then have a secure investment earning interest at higher than the market interest rate for investments.

The advantage to a buyer, who often has just lost their home to foreclosure, is that the buyer can get back into a home while housing prices are low, take advantage of tax deductions for mortgage interest and real property taxes and build equity in the home.

Deed Clause Key to Boat’s Fate

Question: We live in a subdivision in Queen Creek. Apparently, at one time there was a homeowners association, but because of so many foreclosures in our subdivision, the homeowners association no longer exists. There are deed restrictions, however, and these deed restrictions prohibit boats and campers in the driveways of homes. The tenants next door have both a boat and a camper in their driveway. When we asked the tenants to move their boat and their camper from their driveway, they refused. The owner of the home then called us to say that the deed restrictions are no longer enforceable. Is that true? Do we have any recourse?

Answer: Whether or not there is a homeowners association, any homeowner generally has the right to enforce deed restrictions unless the deed restrictions have been abandoned by the homeowners. In other words, the deed restrictions in your community would be abandoned if many homeowners in the neighborhood have had boats and campers in their driveways for years. If the deed restrictions have not been abandoned, you, as a homeowner, have the right to get a court injunction ordering the tenants next door to move their boat and their camper from the driveway. If you are successful, the court generally will award you a judgment for real estate attorney‘s fees and court costs.

New AAR Forms Recently Released

In February and August of every year the Arizona Association of Realtors® (“AAR”) releases new AAR forms and any revisions to existing AAR forms. The following are the new and revised AAR forms released February, 2012:

1. Agreement Notice (Pursuant to the Short Sale Addendum)

Under the AAR Short Sale Addendum used in most Arizona short sale transactions, if the seller and the bank agree to the short sale the seller was required to deliver an Agreement Notice to the buyer. There was no form for the Agreement Notice, and the Agreement Notice could be as simple as an email from the seller’s agent to the buyer’s agent. Lenders today, however, are more frequently requesting modifications to the purchase contract, e.g.,change of close of escrow date. Therefore, the new Agreement Notice form has two options. One, approval of the short sale contract with no amendments requested by the lender; or, two, approval of the short sale contract by the lender only if the short sale contract is amended by the seller and the buyer executes the AAR Addendum attached to the new Agreement Notice.

2. Revisions to Multiple Counter offer and to MultipleOffer/Counter offer forms

Both forms now require a deadline for final acceptance by the seller. If the seller does not accept the buyer’s offer by this deadline, the buyer’s acceptance is deemed with drawn.

3. Revisions to the Domestic Well Water Addendum and to the Domestic Well Water Addendum to the SPDS

These two forms had not been revised for almost ten years. These revisions clarify such matters as the well inspection requirements and the buyer’s obligation to investigate current water use laws.

4. Broker’s Initials

The Arizona Department of Real Estate requires that the designated broker review all listing agreements, purchase contracts, and non-residential lease agreements, or similar instruments, within ten business days of the date of execution. A.R.S. §32-2151.01(G).

In response to requests from designated brokers, the prompt for a broker’s initials already on several AAR forms was added to 15 more AAR forms suchas the Counteroffer and the As Is Addendum.

Because of Recorded Deed Dad’s Girlfriend, Not Daughter, Gets Home

Question: After my mother passed away eight years ago, my father purchased a home in Sun City. Last year, he had a serious heart attack and I took care of him full time. Recently, my father passed, and since I am an only child, I thought I would be the owner of the home. However, the title company, is telling me that two years ago my father recorded a deed to his former girlfriend. I called this woman and she said that she did not know that my father had conveyed the home to her. The home is free and clear and worth $80,000. According to Arizona real estate law, is his former girlfriend entitled to the $80,000 sales proceeds if the home is sold because of the deed?

Answer: Yes. First, although the Arizona real estate law requires either actual or constructive delivery of a deed to a grantee, the recording of the deed is constructive delivery to the former girlfriend. Second, the law presumes acceptance of any conveyance of real property. Therefore, the fact that the former girlfriend was unaware of the recording of the deed is irrelevant. In other words, the former girlfriend should be entitled to sell the home and take all of the $80,000 sales proceeds.

Timeshare Transfer Will Release Seller’s Liability

Question: I purchased a timeshare in Sedona for cash about six years ago, and I have never used it. I have been unable to sell it, and I would like to know what I can do to get out from under the monthly maintenance fees of almost $300. What happens if I just don’t pay these monthly fees anymore? Also, this timeshare will be inherited by my children when I am gone, and they don’t want it, either. Help!

Answer: Unfortunately, a timeshare owner generally has a contractual obligation to pay the monthly maintenance fees until there is a bona-fide transfer of the timeshare to a new owner. Therefore, you should consider transferring the timeshare for a minimum price, or even nothing, to any buyer who might use the timeshare, and who would be willing and able to make the monthly maintenance payments.

Unless New Bill Passes There Will Be a Chilling Effect on Short Sales

The Mortgage Forgiveness Debt Relief Act of 2007 (“2007 Act”) provides for an exemption for any income tax on debt forgiveness for money used to purchase, or make improvements to, a principal residence. This 2007 Act is scheduled to expire January 1, 2013. If there is no extension of this 2007 Act, a seller will pay income tax on the amount of the debt forgiveness by a lender in a short sale. For example, if a homeowner with a $250,000 mortgage does a short sale for $150,000, the homeowner will have to pay income tax on the amount of the $100,000 debt forgiveness.

On March 19, 2012, Representative Charles Rangel (D-NY), the sponsor of the 2007 Act, introduced a new bill HR 4202, Mortgage Cancellation Relief Act of 2012 (“proposed 2012 Act”). This proposed 2012 Act is basically one sentence extending the January 1, 2013, expiration date of the 2007 Act for two years until January 1, 2015.

Seems simple, but politics are involved. In an earlier post I noted, among other things, that the current Speaker of the House, John Boehner, voted against the passage of the 2007 Act. Furthermore, although all of the other Democrats besides Rep. Rangel on the House Ways and Means Committee are co-sponsors of the proposed 2012 Act, none of the 22 Republicans on the House Ways and Means Committee agreed to be a co-sponsor. Therefore, the chances of passing the two-year extension are problematic. In fact, the website www.govtrack.us, which tracks the passage of Congressional legislation, states that “we think this bill has a 9% chance of passing Congress.”

If there is no passage of the proposed 2012 Act, or any other extension of the current debt forgiveness law, there will be a chilling effect on the recovering housing market. The number of short sales will be significantly reduced. Many “underwater” homeowners will continue to make their mortgage payments and hope that the value of their home eventually appreciates to the amount of their mortgage, rather than do a short sale and pay a significant tax bill.

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