Today’s Session Federal Issues◦ Amendments to Freddie Mac Short Sale
Affidavit◦ Update on RECs as relates to FHA Loans◦ Update on Seller Financing
State Issues◦ BPOs◦ Septic Issues/Regs◦ Changes to RE Regs
You Be The Judge New/Amended RANM Forms
BUCKLE UP –I HAVE ONE HOUR
Amendments to Freddie Mac Short Sale Affidavit
Purpose of Affidavit:…..to prevent fraud by requiring the buyer, seller, real estate brokers, escrow/closing agent and any transaction facilitator to make various certifications (including that the short sale is an arm’s length transaction and the buyer will not resell the property within 120 days unless there are substantial improvements).
Amendments to Freddie Mac Short Sale Affidavit
“ARMS-LENGTH TRANSACTION”: transaction between parties who are independent of one another and unrelated and unaffiliated by family, marriage or commercial enterprise, other than the purchase and sale of the mortgaged premises between the borrower(s) and the purchasers(s) that is the specific subject of the proposed short sale as disclosed to the Servicers.
Affidavit signed under Penalty of Perjury
Amendments to Freddie Mac Short Sale Affidavit
Key Changes to New Form – 1/1/12◦ The certification is based on “the best of each
signatory’s knowledge and belief”. The additional “knowledge” component significantly reduces broker liability◦ Only negligent or intentional
misrepresentation creates responsibility for indemnifying the servicer/FM for loss◦ Only responsible for your own signature –
not others- no joint and several liability
Amendments to Freddie Mac Short Sale Affidavit
Affidavit is not/can not be an addendum to the purchase agreement; Brokers should not sign a document implying they are parties to the sales contract
AB may sign on behalf of brokerage
NM RECS AND FHA LOANS
Issue: ◦Otherwise qualified FHA buyer denied
FHA loan b/c seller had bought on a REC
FHA Claimed –Violated Flipping Policy◦ Seller not owner of record◦ Sale would occur less than 120 days
from original sale
NM RECS AND FHA LOANS
RANM Intervened: ◦ Sent memo to HUD asking HUD to
reconsider◦ Seller as Owner under Doctrine of Equitable
Conversion◦ Sale occurred when parties entered into REC
under Relation Back Doctrine
VICTORY! - HUD Agreed
SELLER FINANCING BACKGROUND: ◦ SAFE Act◦ NM Mortgage Loan Originators Act◦ Amendments to TILA made under the Dodd-
Frank Act ◦ NAR’s Latest Position – No worries!?!?◦ CFPB – Director appointed, Richard Codray
STATE LAW: BPOs
Currently Under the Appraisal Act Brokers Can Not Do
for $$$
Status of Legislation to Change - ????? – Stay Tuned
SEPTIC REGULATIONS
SEPTICS AND THE REC◦ How NMED treats septics when property is
sold on a REC – Everyone’s problem!◦ RANM met with NMED and explained
Doctrine of Equitable Conversion◦ Another RANM Victory! NMED agreed◦ Asked RANM to draft some proposed regs
SEPTIC REGULATIONS
RANM Proposal:◦ Clarifies seller must do inspection prior
to legal or equitable transfer◦ Clarifies “owner” under REC is buyer◦ Clarifies transfer can occur without
remediation, but then buyer becomes responsible to NMED◦ Clarifies who must file for variance or
permit application if system fails
CHANGES TO BROKER AND SALESMAN ACT
EFFECTIVE JULY 1, 2011
Three key changes were enacted by the NM Legislature:
1) End of CE exemption
2) Fingerprinting requirement
3) Unlicensed activity
CHANGES TO BROKER AND SALESMAN ACT
EFFECTIVE JULY 1, 2011
End of CE Exemption◦ Licensees no longer become exempt from
continuing ed requirements by being 65 years old, with 20 years experience◦ UNLESS …
The licensee was ALREADY exempt on or before June 30, 2011
CHANGES TO BROKER AND SALESMAN ACT
EFFECTIVE JULY 1, 2011
Fingerprinting◦ Required for new and renewing real estate licenses ◦ REC has established more details in
Rules that became effective January 1, 2012 (more in a few minutes)
CHANGES TO BROKER AND SALESMAN ACT
EFFECTIVE JULY 1, 2011
It is now a 4th degree felony to practice real estate without a real estate broker’slicense - imprisonment for up to 18 months, and/orfine of up to $5,000D.A. prosecutes(Don’t miss your renewal!)
NMREC Rules Changes Effective January 1, 2012
Fingerprinting details: Starts w/January birthdays, renewing in
February, 2012 Required for initial licensure AND
subsequent renewals Must pay for fingerprinting two cards, PLUS
review by DPS
NMREC Rules Changes Effective January 1, 2012
REC includes 2 fingerprint cards and envelopewith renewal application
Take cards and Fingerprint Certification Form◦ public law enforcement official◦ private fingerprinting company◦ the NM DPS◦ law enforcement agency or private company state police county sheriff municipal, campus and tribal police.
In ABQ, metro area, only law enforcement agency that provides
fingerprinting service is Rio Rancho Police Department
500 Quantum Road One Block South of
Northern Blvd. on State Rd 528M, W, F from 10:00 – 12:00
$10 Per Card
NMREC Rules Changes Effective January 1, 2012
NMREC Rules Changes Effective January 1, 2012
DPS in Santa Fe4491 Cerrillos Rd.
M-F 8:00 to 4:00 pm$9.00 for both cards
If DPS does fingerprinting, tell them the cards are for a nationwide criminal background check, ask them to complete the Fingerprint Certification
Form and give you a copy and leave the cards with them.
NMREC Rules Changes Effective January 1, 2012
PRIVATE COMPANIES$15- $25 FOR TWO CARDSGO TO FINGERPRINTING
SECTION ON REC WEBSITE FORLIST OF PRIVATE COMPANIES
http://www.rld.state.nm.us/realestatecommission/index.html
CALL FIRST!
NMREC Rules Changes Effective January 1, 2012
YOU MUST:◦ Pay Fee to Entity for fingerprinting◦ Mail to DPS in enveloped provided by REC –
Don’t Fold Envelope! 2 completed fingerprinting cards a copy of the Fingerprinting Certification Form
completed by the fingerprinting company/agency check or MO for $44 payable to NM DPS
COPY THE CERTIFICATION –YOU WILL NEED IT!
NMREC Rules Changes Effective January 1, 2012
DPS will send one card to FBI FBI will mail report to NMREC
(this could take 4 to 6 weeks) REC is NOT holding up any licenses until
receipt of the fingerprinting. All licenses will be issued! But….REC says “don’t wait”!
NMREC Rules Changes Effective January 1, 2012
THIS IS WHEREYOU NEED THE COPY!
Send Copy of the completed “Fingerprint Certification” Form to the NMREC with your license renewal application
NMREC Rules Changes Effective January 1, 2012
Fingerprints:◦ The “frequency” with which you will need to
create a fingerprint card is yet to be determined◦ REC may require that brokers generate the
cards only once, but still require submission to DPS with every renewal◦ This fingerprinting requirement WILL apply to
inactive licensees
NMREC Rules Changes Effective January 1, 2012
Broker Duties – NMCA 16.61.19.8◦ C. Took out “oral” – Performance of any written
agreements made with customer or client◦ G. Disclosure of potential conflicts of interest
that broker may have in the transaction, including, but not limited to: written relationship with others; material interest or relationship in transaction, other brokerage relationships available.
NMREC Rules Changes Effective January 1, 2012
Broker Duties◦ H. Written disclosure of any adverse material
facts actually known by the AB or QB about the property or the transaction or about the financial ability of the parties to the transaction to complete the transaction . Adverse material facts do not include data from a sex offender registry or existence of group homes.
NMREC Rules Changes Effective January 1, 2012
QBs May be a QB for one company, AND an AB
for another company No more “7-Day” rule for appointing a
“broker-in-charge”… It is now QB’s discretion to determine
when to appoint a “broker-in-charge”… “Broker-in-charge” must be eligible to BE
a Qualifying Broker
NMREC Rules Changes Effective January 1, 2012
QBs◦May pay a commission to an expired or
inactive or transferred ( or deceased) Broker IF the transaction went under contract WHILE the Broker was licensed◦Must personally sign all referral and co-
op agreements
NMREC Rules Changes Effective January 1, 2012
ABs◦ MUST deliver ALL transaction documents to
their Qualifying Broker ◦ Must complete the NEW BROKER BUSINESS
PRACTICES 30-hour course in their FIRST year of licensure
… This had been required in the Associate’s first three year cycle
AND … This is NOW the Qualifying Broker’s duty to make sure it happens
NMREC Rules Changes Effective January 1, 2012
ADVERTISEMENTS◦ Broker “A” lists Broker “B’s” house for sale … Must the yard sign say“Owner Broker”? NO◦ And directional – or “lead-in” signs –
do NOT have to have the name and phone number of the brokerage firm
NMREC Rules Changes Effective January 1, 2012
When advertising your own property for sale, whether “listed” or not, you do need to disclose that you are licensed
….. (Nothing new here) But suppose you are advertising your own
property for RENT / LEASE? … NO, you do not
HAVE TO disclose that you are licensed
NMREC Rules Changes Effective January 1, 2012
Property Management◦ Upon licensure or renewal, must “declare”
intent to do property management◦ Must have a “PM Trust Account” for just one
property◦ Must provide a final reconciliation to a client
within 60 days of termination of PM Agreement◦ Must keep all records for 6 years
NMREC Rules Changes Effective January 1, 2012
Property Management – Short-Term◦ Must get written authorization from owner in
PM Agreement to collect/remit NM GRT and Lodger’s Tax ◦ Tenant Agreement must include: arrival/departure dates and check-in/out time nightly rental rate rental and security deposit fees charged to tenant accommodation rules and cancellation policy.
CASE LAW UPDATE –YOU BE THE JUDGE
Sutton v. Driver, 712 S.E. 2nd 318 (N.C. Ct. App. 2011)◦ Buyer looking for investment property
contacted brokerage. QB referred buyer to AB who was his son-in-law a.k.a. “Salesperson”◦ Meanwhile, QB as member of LLC was
purchasing Land A owned by Salesperson
CASE LAW UPDATE –YOU BE THE JUDGE
QB told AB that his neighbors may be interested in selling their Property B
Property B overlooked Land A and had a great ocean view
Salesperson allegedlysaid “trust owns Land Aand it won’t ever be sold”
LLC bought Land A and subdivided. Buyers Property B lost $150,000 in value.
CASE LAW UPDATE –YOU BE THE JUDGE
Buyers sued everyone – For Failure to Disclose Material Facts
Trial Court found for Defendants Buyers appealed Ct. of Appeals Considered:◦ Duty to Disclose?◦ Being bought by separate entity?◦ “For Sale” sign on Land A?
CASE LAW UPDATE –YOU BE THE JUDGE
Ct. of Appeals Held:◦Duty to Disclose?◦Being bought by separate entity?◦ “For Sale” sign on
Land A?
CASE LAW UPDATE –YOU BE THE JUDGE
The Land Man Realty, Inc v. Weichert, Inc. No. 2010-192 (N.Y. Sup. Ct.)◦ Owner entered into an “oral” listing agreement with
Broker A – unspecified time frame◦ Broker A understood that Owner would be later
entering into a written agreement with another Broker B, Owner’s friend◦ Broker A brought a potential buyer, but no offer made◦ Owner entered into written
agreement with Broker B
CASE LAW UPDATE –YOU BE THE JUDGE
Broker A’s Buyer comes back and buys Property
Broker A claims commission – Sues Owner for all and sues Broker B for all, or in the alternative for the co-op in MLS
Owner sues Broker B claiming “should have watched out for me”
CASE LAW UPDATE –YOU BE THE JUDGE
Court dismisses Owner’s claims against Broker B
Broker B claims as to Broker A “we have a duty to arbitrate”
Issues before Court:◦ Send to arbitration?◦ Broker A’s claim for ALL of commission◦ Broker A’s claims for co-op commission
CASE LAW UPDATE –YOU BE THE JUDGE
Arbitration◦Article 17: “Duty to arbitrate all contractual or non-contractual disputes as defined in SOP 17-4….arising out of their relationship as Realtors.”
CASE LAW UPDATE –YOU BE THE JUDGE
Commission◦ All?◦ Co-op broker commission offered
through the MLS? MLS agreement says co-op broker
commission owed to “procuring cause”. Was Broker B procuring cause………STAY TUNED!
CASE LAW UPDATE –YOU BE THE JUDGE
Jack Gaughen LLC d/b/a Jack Gaughen ERA v. Unemployment Comp Board of Review, No. 1884 C.D. 2010 (Pa. Commw.)◦ AB worked part-time as IC for brokerage◦ AB received commissions and 1099◦ Brokerage terminated ICA with AB - lack of
work◦ AB filed for Unemployment Compensation◦ UC Board agreed and Brokerage appealed
CASE LAW UPDATE –YOU BE THE JUDGE
Lower Court said “maybe” if certain criteria are met
Statute said “real estate salespersons do not qualify for unemployment benefits if paid a commission”
Court agreed, BUT……Brokerage did not raise this defense when before the Board, so can’t raise it now
CASE LAW UPDATE –YOU BE THE JUDGE
Court said: “presumption is that person IS an employee. It’s the Brokerage’s job to rebut presumption”
Brokerage said “did not exercise required control over Salesperson AND only paid commission, so not an employee”
Court said: License law says brokerage is only allowed to pay commission and that brokerage must supervise
CASE LAW UPDATE –YOU BE THE JUDGE
COURT HELD:Brokerage did not meet its burden ofproof that Salespersonwas NOT an independent contractor. Affirmed Board’s decision to awardunemployment compensation.
RANM FORMSMARCH RELEASE
AMENDED◦ 1106 Listing Agreement ◦ 1109 Referral Agreement in State ◦ 1304 Referral Agreement Out of State –◦ 2109 Short Sale Add. to Listing Agreement◦ 2304 FIRPTA & TAXATION of Foreign Persons
Receiving Rental Income from US Property - Attn: Prop. Managers◦ 2505 Right of First Refusal to Purchase and/or Lease
Real Property ◦ 2308 Septic Information Sheet
RANM FORMS NEW◦ Just released: Personal Guaranty for use with
Residential and Commercial Property Management Agreements◦ March Release: 2103 Assignment of Contract
– May be used with any contract as provided by contract. Prohibited unless otherwise stated if contract is for personal services. If not for personal services, allowed if not prohibited, BUT, confirm in contract if silent.