CSI January Retreat
CSI just finished another successful January retreat last Friday. It was held at the Lodge at Tiburon in Marin County. Our fabulous team gathered for a day of programming that included presentations from different deparments in the company, coupled with discussions about The No Complaining Rule by Jon Gordon. Here are a few pictures from our day:
Q&A Regarding Handling Loan Modifications
Question: I am a licensed real estate broker. Our clients have asked if I can assist them with regard to applying for a loan modification. Can I assist them? If so, how much assistance can I provide?
Answer: Yes, you may assist your clients in applying for a loan modification. You can assist them in assembling paperwork and preparing applications. You can also communicate with the bank on their behalf. However, it is recommended that a real estate agent refrain from reviewing and analyzing amended loan documents from the lender. These actions would constitute practicing law and can lead to liability. If a client believes that a loan is being modified and they are being given certain terms, if the documents do not reflect those terms, the client could assert a claim against the agent for mishandling of the loan modification. It is best to refer the amended loan documents to an attorney for review.
Question: Can I accept a retainer or prepayment for these services?
Answer: No. The Legislature recently passed Senate Bill 94 effective October 11, 2009, which prohibits real estate professionals, including real estate agents and attorneys, from accepting retainers to perform services relating to loan modifications. In addition, agents cannot accept money for services, which have not been rendered unless they have received pre-approval from the California Department of Real Estate and have a separate client trust account. If agents are inclined to accept retainers for work, they are strongly advised to review the DRE regulations as this is a highly regulated area.
Shannon B Jones, is a partner at Shannon B. Jones Law Group. The Law Group currently represents over 5,000 real estate agents in Northern California. Ms. Jones is a member of the California Association of REALTORS® Strategic Defense Panel and is endorsed by the California Association of REALTORS®. She also is the author of the best-selling real estate book, “A Real Estate Agent’s Practical Guide to Avoiding Litigation”.
The information herein is not intended to offer legal or financial advice. Please consult with author or another appropriate professional for specific and/or more information. The information below provides varying degrees of perspective and may vary with market conditions. While some are legal points, many of the guidelines are marketing or practical points.
Q&A Regarding Junior Leinholder’s Demand for Compensation
Question: I am a listing agent on a short sale with two (2) loans secured against the property. The senior lender has issued an approval of the short sale and specified the amount the senior lienholder is requiring that it be paid. It has also specified the amount which may be paid to the junior lienholder. The junior lienholder is requiring additional amounts be paid to it without notice to the senior lienholder. Is this legal? Does it expose the seller or me to liability? How do I handle this situation? Can I force the junior lienholder to accept less money and close the transaction?
Answer: A short sale is a voluntary process on the part of the lenders to accept less money than the amounts of the loans. You cannot force any lender to accept a short sale. When a senior lienholder issues an offer to accept a short sale and specifies the terms, those terms must be complied with or there is a breach of contract. If payments are made to the junior lienholder without notice to the senior lienholder, the agents as well as the seller may be exposed to liability for defrauding the senior lienholder. In addition, the title company, to the extent the title company was aware of the payments, also may be held liable to the senior lienholder for not following proper escrow instructions. In order to facilitate a short sale without liability, the senior lender needs to be notified of the amounts paid to the junior and approve those amounts. In addition, all payments to all parties relating to a short sale must be disclosed on the HUD-1 approved by the lenders.
The information herein is not intended to offer legal or financial advice. Please consult with author or another appropriate professional for specific and/or more information. The information below provides varying degrees of perspective and may vary with market conditions. While some are legal points, many of the guidelines are marketing or practical points.
AUTHOR: Shannon B Jones, is a partner at Shannon B. Jones Law Group. The Law Group currently represents over 5,000 real estate agents in Northern California. Ms. Jones is a member of the California Association of REALTORS® Strategic Defense Panel and is endorsed by the California Association of REALTORS®. She also is the author of the best-selling real estate book, “A Real Estate Agent’s Practical Guide to Avoiding Litigation”.
Pros & Cons of a Seller Obtaining a Home Inspection Pre-Listing
Purchasers of residential property routinely will obtain a third-party home inspection report. However, sellers and listing agents have called us asking about the usefulness of the seller obtaining such a report.
PROS of Obtaining an Inspection BEFORE the Seller Puts a Home on the Market
- Gathering an inspection report before may avoid the situation of the seller having to negotiate repairs 30 days (or so) into the escrow; and therefore placing the seller in a weak negotiating position. This can be less of a problem with a market turnaround often giving rise to multiple offers.
- Before accepting an offer, the seller is in a stronger negotiating position. Before a contract is entered into is the time for the seller to let the buyer know what the seller will fix and will not fix. Once the seller accepts an offer and is then subsequently presented with the buyer’s “wish list” of repairs or replacements, the seller is then in a weaker position to negotiate.
- By having the inspection done up front, the number of surprises or latent problems are reduced, both to the buyer and the seller. Less surprises means less opportunity for disagreement and therefore less likelihood that the transaction will fall apart.
CONS of Obtaining an Inspection BEFORE the Seller Puts a Home on the Market
- The listing agent could unwittingly open himself up to liability by interpreting the findings of the home inspection to his principal. Where the listing agent helps the seller “figure out” or interpret the inspection report (e.g., what is major vs. minor); the listing agent may have opened himself up to a potential breach of fiduciary duty claim by the seller.
- If the seller obtains a pre-listing inspection, but decided to replace something in his home with less expensive materials or had a handyman do the work in a “temporary fix” manner, you may have a disgruntled buyer on your hands who, after closing, will pursue a claim against the seller, and/or both agents involved in the transaction.
- The belief that by simply obtaining an inspection up front will somehow fulfill a seller’s duties to disclose could be a comfortable trap for the seller. It may falsely minimize or dilute his true legal disclosure requirements (i.e., the Transfer Disclosure Statement, matters of actual knowledge, etc.)
THIS IS A VERY ABRIDGED VERSION OF THE ARTICLE; TO READ THE COMPLETE ARTICLE, “PROS AND CONS OF A SELLER OBTAINING A HOME INSPECTION PRE-LISTING”, PLEASE CLICK HERE OR EMAIL MR. STAVROS DIRECTLY AT mds@mrsvlaw.com
Copyright © 2010 by Mark D. Stavros, all rights reserved
Mark D. Stavros, Esq., a partner with Maxie Rheinheimer Stephens & Vreivh, LLP, is a member of the C.A.R. Strategic Defense Panel and represents real estate brokers/agents (residential and commercial) in trial, litigation, arbitration/mediation, DRE Accusations, and other matters affecting Realtors. Mark authors articles for various publications, provides seminars and acts as panel counsel and consultant to major carriers and other insurance intermediaries. Mr. Stavros is available at (619) 515-1155, or via e-mail at mds@mrsvlaw.com
The information herein is not intended to offer legal or financial advice. Please consult with author or another appropriate professional for specific and/or more information. The information below provides varying degrees of perspective and may vary with market conditions. While some are legal points, many of the guidelines are marketing or practical points.
New C.A.R. Risk Management Video
Check out the video below from C.A.R. It features C.A.R. Strategic Defense Counsel, Nicole Briggs Esq. and C.A.R. Strategic Defense Panel Attorney, Steven D. Spile, Esq. of Spile, Siegal, Leff and Goor LLP. The discussion centers around legal disclosure tips for agents and brokers.
Real Estate Agents E&O 101
There are a lot of misnomers out there about Real Estate E&O insurance. A lot of our blog entries will surround answering questions and providing information to help clarify E&O policy myths. Here are a couple of frequently asked questions……that may receive frequently incorrect answers:
Per transaction insurance. This does NOT exist. What does exist (with a few insurers) is a payment plan on a per transaction basis. Because the policy is a claims made policy, you must keep paying for the insurance for coverage to apply. In addition, with the companies that offer per transaction policies, you typically need to report and pay monthly. You forget for a month and bam, you’ve lost coverage for all past transactions.
What is a “claim”? When does it need to be reported? The definition of a claim is determined by the E&O policy. Some policies define a claim as a demand for money or services. Others constrain the definition to written demands. Like the claim definition, claim reporting is also defined by the policy. Some policies require the “immediate” reporting of a claim while others require the reporting “as soon as practicable”.
How do claims impact premiums in future years? Your claim history will follow you for a 5 year period. The E&O insurers require 5 years of loss history to provide pricing. How these claims will impact future pricing will depend on the frequency and severity of claims. The more frequent or severe, the more likely it will negatively impact future premiums. In today’s environment, insurers are trying to push up deductibles, so rather than see a significant premium increase, a broker might see a substantial increase in the deductible.
What are some of the key issues to understand before purchasing an E&O Policy?
- What services are covered: residential, leasing, commercial, escrow, mortgage, property management, business opportunities, expert witness services, appraisal, etc.?
- What types of claims are covered: discrimination, environmental, lockbox, etc.?
- Is “agent owned property” covered and if so what are the requirements?
- What is the deductible, and does the policy have a deductible reduction component such as use of a home warranty policy?
- What is the “retroactive date” since any transactions before that date are not covered?
- Do I get to choose my attorney; is the attorney I get qualified and on my side?
- How strong is the insurer: financial strength, rating, California admitted, experience?
- What services are offered through the policy such as risk management?
- What risk management, file management and other tools can I use to reduce risk?
Claims-Made Policies vs. Occurrence Policies
As we speak across California at various offices and local REALTOR® Associations, it has come to our attention that there is great confusion about differences between policies with an occurrence-based claim trigger and those with a claims-made claim trigger. Nearly all property, general liability, auto or workers’ compensation policies are written on an occurrence basis, while the vast majority of errors & omissions (E&O), directors & officers liability and employment practices liability policies are written on a claims-made coverage form.
With an occurrence policy, the policy in effect at the time of the accident or injury (or the occurrence), is the policy that will pay the claim.
Example: A REALTOR® purchases a workers’ compensation policy on May 1, 2008 (Policy A). One of the REALTOR’S® employees falls in the parking lot on the way home on Friday, April 30, 2009. The injured employee reports the injury to their broker on Monday, May 3, 2009. The workers’ compensation just happened to renew on May 1, 2009 (Policy B).
Question: Which policy will pay the claim? Answer: Policy A, the policy in effect when the injury occurred.
With a claims made policy, the policy in effect at the time of the claim is the policy that will pay the claim.
Example: A Broker purchases their first E&O policy on March 1, 2008 (Policy A). On November 20, 2008, one of the Broker’s agents sells a home. On March 1, 2009, the Broker renews their E&O policy (Policy B). On May 15, 2009, the Broker receives a lawsuit that alleges “failure to disclose” issues related to the home sold in November, 2008.
Question: Which policy will pay for the claim? Answer: Policy B, the policy in force when the claim was made.
Stay tuned……we’ll be providing more information about these differences in the future!
CSI at the C.A.R. Convention
Several of our Real Estate team members attended the C.A.R. convention in Sacramento on October 7-9th. Check out our smiling faces!
Welcome to the CSI Real Estate Blog!
At CSI we are very excited to begin blogging on insurance and risk management topics that will provide our clients and visitors useful information. Our company values revolve around character, because the definition of character is who you are when no one is looking. Thanks to technology and our desire to be a contributing member to the social networking world, we look forward to being a consistently informative resource that is able to reach you via the convienence of the Internet. As our clients and blog readers we hope you’ll find our entries relevant and valuable. We look forward to your comments and interaction. Our goal is to be leaders that serve.