Legal Update – New Fair Housing Disclosure Form Available

The new Fair Housing Disclosure form pursuant to Public Act 16-16 is in effect and available on the Connecticut Commission on Human Rights and Opportunities (CHRO) site and may be accessed here. The statement of purpose of the Bill that passed is “To provide prospective owners of multifamily residential properties with conspicuous notice of federal and state fair housing laws.”

Under the law, which the Connecticut Legislature passed this past session, on or before July 1, 2016 the CHRO must draft and post on their website a Disclosure on state and federal fair housing laws and housing discrimination. Sixty days after CHRO makes this form available online, this Disclosure form must be signed at the closing by the purchaser(s) and attached to the Purchase and Sale Agreement.

This new Disclosure form should be provided at the time of closing by the attorneys involved in the transaction. REALTORS® may wish to inform their clients to expect this new Disclosure at the closing if the transaction is for a property with two or more residential units. However, there is no legal obligation for real estate licensees to provide this disclosure form prior to or at closing.

As a reminder, this Disclosure only applies to multifamily properties being purchased or exchanged that have two or more residential units. This Disclosure still applies regardless of purchaser’s intentions to rent the property or not, and regardless of whether the purchaser will occupy the property themselves. The Disclosure does not apply to the purchase or exchange of land, or single family residences, which includes single family homes, a single condo unit, or a single apartment.

This law does not apply to rental transactions where the property is just for rent. However, the law does apply to options, and to leases containing an option to purchase, where the subject property contains two or more residential units. In these transactions, the Disclosure must be signed by the purchaser and attached to the option contract, or lease with purchase option contract at “the time of closing.”

The law does not specify what the penalty will be for failure to provide the document at closing, but it does expressly state that it “shall not void an otherwise valid purchase agreement, option or lease containing a purchase option.” Thus, it will not cancel the contract or the transaction as a whole because the Disclosure is not attached. There is also no language in the bill which prohibits it from being used in other non-applicable transactions, such as in rentals or the sale of single family homes, or from being used before its effective date. Thus, if your clients or the attorneys wish to use it for every transaction, there is no prohibition or penalty for doing so.

The full text of the bill can be found at this link.

Advertisements
Posted in Federal | Leave a comment

Existing FHA Condo Rules Extended

On August 24, 2016 HUD extended their existing temporary guidance on condos, without the changes brought about in HR 3700. HUD continues to work on the regulatory guidance to implement the new law, but their existing guidance was set to expire. In notice 2016-13, they simply extend the existing guidance until they can publish the new rules. NAR continues to work with HUD to hasten the publication of the provisions included in the new law.  Those will:

  • Reduce the FHA condo owner occupancy ratio to 35%, unless FHA takes alternative action within 90 days.
  • Direct FHA to streamline the condo re-certification process.
  • Provide more flexibility for mixed use buildings.
  • Mirror the Federal Housing Finance Agency’s (FHFA) rules regarding private transfer fees for FHA condo lending.

Stay tuned for updates, as HUD releases the new guidance.

Posted in Uncategorized | Leave a comment

Connecticut Home Sales Drop in July

Connecticut REALTORS® reports that single-family residential home sales in Connecticut decreased 8.2 percent comparing July 2016 to July 2015. The median sales price of $265,000 reflects a 2.9 percent decrease from this period last year. Median indicates that half the homes sold for more and half for less. Total units of homes sold were 3,611 in July 2016 and 3,933 in July 2015.

StatsInfographicJuly2016

Townhouses and condominium sales in Connecticut decreased 18.1 percent comparing July 2016 to July 2015; with a median sales price of $167,500 representing a 1.8 percent increase from $164,500 in that same time period in 2015. Total units sold were 798 in July 2016 and 974 in July 2015.

Statistics released by the National Association of REALTORS® indicate total home sales nationwide (includes single-family homes, townhomes, condominiums and co-ops) decreased 1.6 percent comparing July 2016 to July 2015; and the median national home sales price is $244,100.  Regionally, Northeast home sales decreased 5.7 percent in that same time period; with a median sales price of $284,000.

“July 2016 is the first month in the past twelve to see year over year single-family home unit sales decline which means that we had 11 straight months of positive results,” says Michael Feldman, 2016 President of Connecticut REALTORS® and a REALTOR® with William Raveis in Stamford. “With this many positive months of increasing sales numbers, ‘one month does not a trend make.’ We’ll keep an eye on future months to see if this is the start of a new trend. Looking at the single-family home median sales numbers, the 2.9% decline falls into the range of the last 12 months which has seen a low of -4.8% and a high of +21.7%.”

“Condominium/townhouse year over year sales figures reached a new low within the last 12 months which also had two months of 20+% gains within that same timeframe,” Feldman adds. “We have seen rather large swings in these numbers, which is probably due to the smaller amount of total condo/townhouse sales in CT. Mathematically, when utilizing a smaller set of numbers to calculate percentage change (up or down); one can reasonably expect a larger percentage swing in either direction. The July condo/townhouse median sales price actually experienced its third straight increase. The median sales price usually doesn’t move in any direction dramatically and I don’t expect to see any drastic change in the coming months.”

“Interest rates are at all time lows,” Feldman concludes. “What an opportunity buyers have to lock into a 15 or 30 year savings by buying a home or condo today. Again, contact your local REALTOR® for expert local knowledge in your city or town.”

Connecticut REALTORS® is a statewide trade association representing over 16,000 real estate professionals engaged in all aspects of real estate in Connecticut. The term REALTOR® is trademarked and denotes membership in the National Association of REALTORS®.  Statistics are from multiple listing services throughout Connecticut and reflect properties that are openly marketed for sale.  These will vary from statistics that represent all sales including family transfers, private sales, etc. that are inclusive of property prices not driven by market demands.

Comparing slightly favorably in Eastern CT, the number of closed single family units decreased by 6% relative to the statewide decrease of 8.2%.  The median price of Windham and New London County homes in July was $203,000, marking a 5% decrease from the same time last year.

Posted in Home Selling Process, Local, State | Leave a comment

Broker’s Lien Enforced by Buyer’s Rep

This happened in March, 2016.  Good to know that Buyer Representation means something to both buyers, and buyer representatives!

A Connecticut appellate court has considered whether a buyer’s representative could collect a commission from a client when the client violated the exclusive representation agreement and bought a property while working with another licensee.

Christopher G.L. Jones (“Buyer”) met with a salesperson (“Buyer’s Representative”) of NRT New England, LLC (“Brokerage”) to find a property for him and his fiancée.  During the initial meeting, the Buyer indicated that he was not working with any other real estate professionals.

After reviewing the types of properties the Buyer was interested in, the Buyer signed an exclusive buyer’s representation agreement with the Brokerage that ran from January to June 2011. The Buyer agreed to pay the Brokerage a commission if the Buyer purchased a property during the time of representation.  In the agreement, the Buyer also acknowledged that he was not working with any other real estate professionals.

The Buyer’s Representative began searching for the type of properties that the Buyer was seeking.  She devoted several months to this search and the evidence showed that she had spent hundreds of hours investigating various properties.

In May 2011, the Buyer told the Buyer’s Representative that he was purchasing a property that he learned about from another brokerage, H. Pearce Real Estate (“H. Pearce”).  The Buyer’s Representative later learned that the Buyer had also entered into an exclusive representation agreement with H. Pearce.  Neither real estate brokerage knew of the other’s agreement.

Following the close of the Buyer’s purchase, the Brokerage placed a broker’s lien on the property for the amount of commission it would have received from the transaction.  The Brokerage then filed a lawsuit against the Buyer seeking to foreclose the broker’s lien and also alleged breach of contract.  The court ruled the Buyer had breached the contract and awarded the Brokerage the commission amount.  The Buyer appealed this ruling.

The Appellate Court of Connecticut affirmed the ruling of the trial court.  The Buyer made two arguments on appeal.  First, he argued that the Brokerage had not strictly complied with the statutory terms of the state’s broker lien law.  Second, he argued that the Brokerage had not sought compensation from his property purchase, which he believed the representation agreement required.

The court determined that the Brokerage had substantially complied with the broker lien law and so rejected the Buyer’s first argument.  The Buyer argued that the Brokerage had failed to use capital letters in describing its lien rights in the representation agreement and also the agreement cited an erroneous statutory subsection. Due to these errors, the Buyer argued the Brokerage could not enforce its lien rights.  The court rejected this argument, finding that capital letters were not required (no such requirement existed in the statute and the legislature did require this in other statutes but not here) and the citing of the wrong subsection should not deny the Brokerage a commission.  Thus, the Brokerage had substantially complied with the broker lien law.

Next, the court ruled that the Broker did not have to seek compensation from the Buyer’s purchase when it would have been a futile effort.  The representation agreement provided that the Brokerage would “whenever feasible, seek compensation from the [s]eller or [s]eller’s agent” and then goes on to state that compensation may not always be available.  The Brokerage had performed no services related to the Buyer’s purchase transaction and so was not entitled to compensation, and the court agreed that the law does not require a party to perform an act “which would be a mere futility.”  Therefore, the court affirmed the trial court’s award to the Brokerage.

Posted in Home Buying Process | Leave a comment

Preparedness Planning for Your Business

Ready Business will assist businesses in developing a preparedness program by providing tools to create a plan that addresses the impact of many hazards. This website and its tools utilize an “all hazards approach” and follows the program elements within National Fire Protection Association 1600, Standard on Disaster/Emergency Management and Business Continuity Programs. NFPA 1600 is an American National Standard and has been adopted by the U.S. Department of Homeland Security.

The five steps in developing a preparedness program are Program Management, Planning, Implementation, Testing and Exercises, and Program Improvement. Find out more about the five steps below.

This section is Expanded. Click to CollapseProgram Management

  • Organize, develop and administer your preparedness program
  • Identify regulations that establish minimum requirements for your program

Find more information on Program Management here.

This section is Expanded. Click to CollapsePlanning

  • Gather information about hazards and assess risks
  • Conduct a business impact analysis (BIA)
  • Examine ways to prevent hazards and reduce risks

Find more information on Planning here.

This section is Expanded. Click to CollapseImplementation

Write a preparedness plan addressing:

  • Resource management
  • Emergency response
  • Crisis communications
  • Business continuity
  • Information technology
  • Employee assistance
  • Incident management
  • Training

Find more information on Implemenation here.

This section is Expanded. Click to CollapseTesting And Exercises

  • Test and evaluate your plan
  • Define different types of exercises
  • Learn how to conduct exercises
  • Use exercise results to evaluate the effectiveness of the plan

Find more information on Testing and Exercises here.

This section is Expanded. Click to CollapseProgram Improvement

  • Identify when the preparedness program needs to be reviewed
  • Discover methods to evaluate the preparedness program
  • Utilize the review to make necessary changes and plan improvements

for more information on emergency preparedness, please click here.  Brought to you by the U.S. Small Business Administration.

Posted in Our [ECAR Team] | Leave a comment

6 Top Ethics Issues Today

Times change but ethical challenges don’t.

right vs. wrong

Technology is raising a host of ethics issues, such as what’s okay and what’s not to say on social media. But the biggest ethics issues continue to be those that recur year after year such as matters involving property disclosures and settlement procedures. Here are the biggest ethics issues today along with how to handle them.

1. ‘Coming Soon’ properties.

To put up a sign or advertise to let consumers know a property is coming on the market, you have to do it the right way. First, you have to have the owner’s authorization before you can provide notice of sale of a property or advertise the property, and “coming soon” would constitute both a notice of sale and an advertisement.  Second, you need to check your state license laws, because they might require you to have a listing agreement in place before advertising a property, and saying a property is “coming soon” would constitute a form of advertising. Third, you can’t let other associates in your firm show the property if you say in the MLS that it’s not available for showing. If they do, that could be construed as a misrepresentation of its availability. Conversely, if it’s listed as available for showing, associates from any firm have to be able to show it.  Fourth, if buyers are interested in the property, you have to direct them back to their exclusive representative, if they have one, and not provide them any substantive services.

2. Multiple offers.

With prices rising and interest rates low, multiple offers are becoming more frequent in many markets. Here’s the right way to handle them: First, present all offers as objectively and quickly as possible. Second, if you’re asked about them by a buyer or cooperating broker and if the seller has given you approval, disclose the existence of all offers, as well as their source. Third, If you have a signed agreement to act as the buyer representative, you have to let the buyer know that the seller or the seller’s representative might not treat the existence, terms, or conditions of their offer as confidential. Only if the seller or seller’s agent is required to by law, regulation, or an agreement do they have to treat the offer confidentially.

3. Unauthorized access.

It’s not always convenient to meet clients when they want to look at a house, but you need to be there or you risk violating the terms and conditions the seller has set for viewing the property. You also can’t give a prospect a key, a lockbox combination or use of a lockbox key. And allowing any unauthorized user, whether a member of the public or a broker without a lockbox key, the use of that lockbox key is  a violation of common lockbox system rules through MLSs or associations. (Note from ECAR CEO, Susy Hurlbert: Using the Sentrilock System will help avoid unauthorized use of a key/keybox).

4. Social media.

Public? Personal? Professional? Anything you say on Facebook, Twitter, or any other social media platform about real estate, even if you’re just giving your informal opinion, must be accurate to the best of your knowledge. That’s because social media posts, for all practical purposes, are treated as marketing under the NAR Code of Ethics and Standards of Practice. That’s the case even though it’s typical in social media to blur the lines between what’s personal and professional. What’s more, anything you say must present a true picture of the market or a property. And your professional affiliation must always be clear. That means either including the name of your firm in your post or tweet or linking to it. On platforms such as Craigslist, where there is no link to another display, you have to include the firm name in the communication.  Check your license law for any additional requirements.

5. Settlement procedures.

There are important differences between the Real Estate Settlement Procedures Act (RESPA) and the NAR Code of Ethics. The Section 8 anti-kickback part of RESPA prohibits the giving and receiving of a thing of value in exchange for a referral, with one exception: if the referral is to an affiliated business, like a mortgage originator or title company properly set up under RESPA, and that business arrangement is disclosed. The Code of Ethics and Standard of Practice 6-1 require disclosure of any financial benefit you receive for referring someone for something.

6. Property disclosure.

Each year property disclosure disputes are the top complaints filed by consumers and the past year has been no different. You are not obligated to discover latent defects with the property or provide advice on matters that are outside the scope of your license. For example, when asked about roofing problems, you should direct your client to a roofer.  What you must disclose, though, are matters you observe within the scope of your license. Brown water stains on the ceiling, for instance. Even if the owner doesn’t include that on a seller disclosure form, you should disclose that as a sign of possible water intrusion. When in doubt, disclose.

Posted in Home Selling Process, Uncategorized | Leave a comment

Lenders Told It’s Customary to Share Closing Disclosure With Agents

Real estate professionals experiencing trouble receiving copies of the closing disclosure under federal closing rules that took effect last year for residential real estate transactions should see relief under proposed changes and clarifications to the rules the federal government released today.

The Consumer Financial Protection Bureau, which revised longstanding closing procedures last year under an initiative it calls Know Before You Owe, said today it understands that it’s customary for real estate sales associates, brokers, and other third-party service providers to receive copies of the closing disclosure that goes to the customers during the transaction. The closing disclosure replaced the HUD-1 Settlement Form last year on Oct. 3 when the new procedures took effect. After the new procedures took effect, some lenders and settlement agents cited privacy concerns and refused to share the closing disclosure with real estate professionals, making it hard for them to advise their clients.

“The Bureau understands that it is usual, accepted, and appropriate for creditors and settlement agents to provide a closing disclosure to consumers, sellers, and their real estate brokers or other agents,” the CFPB said in its announcement of its proposed changes.

“REALTORS® have reported challenges gaining access to the Closing Disclosure ever since the new closing procedures went into effect, despite a long history of access to the substantively similar HUD-1,” NAR President Tom Salomone said in a statement released today. “The CFPB acknowledged that concern by making it clear that it is appropriate and accepted for creditors and settlement agents to share the closing disclosure with consumers, sellers, and their agents. That’s a significant victory that will help REALTORS® continue to provide the expert service their clients have come to expect.”

The proposed changes address three other areas of the closing procedures. They would allow housing finance agencies to charge recording fees and transfer taxes without losing their existing exemptions from disclosure requirements, extend the Know Before You Owe requirements to transactions involving cooperative units, and restore treatment of finance charges to the way they were treated prior to the Know Before You Owe changes.

The agency will be taking comments on the changes until October 18. Access the proposal.

The problem real estate professionals faced obtaining the closing disclosure from lenders is examined in the June 21 Voice for Real Estate news video from NAR.

— REALTOR® Magazine Daily News

Posted in Home Buying Process | Leave a comment