Wisconsin Realtor's Assocation Legal Hottips

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Legal Hottips -
This Legal Hottips article may be reprinted only if it is reprinted in its entirety, including the disclaimers above and below the Hotline questions and answers. The Wisconsin REALTORS® Association Best of the Legal Hotline Service is an educational resource intended to keep the Association abreast of legal developments and concerns involving real estate practice in Wisconsin. We look forward to your input regarding the service, especially regarding the types of topics you would like covered. There is no attachment to this e-mail.
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Federal Short Sale Standards

Short sale procedures and forms for loan servicers are standardized in guidelines released November 30, 2009 under the federal government's Making Home Affordable loan modification initiative for troubled home owners. The Treasury Department released guidelines and forms for its new Home Affordable Foreclosure Alternatives Program (HAFA).
See http://www.realtor.org/government_affairs/short_sales_hafa for HAFA information and short sales tips and tools. HAFA is part of the Home Affordable Modification Program (HAMP). HAFA provides incentives in connection with a short sale or a deed-in-lieu of foreclosure (DIL) used to avoid foreclosure on a loan eligible for modification under the HAMP program. HAFA applies to loans not owned or guaranteed by Fannie Mae or Freddie Mac, which will issue their own versions of HAFA in coming weeks.
HAFA is a complex program with 43 pages of guidelines and forms, designed to simplify and streamline use of short sales and deeds-in-lieu of foreclosure. HAFA (https://www.hmpadmin.com/portal/docs/hamp_servicer/sd0909.pdf):
• Uses borrower financial and hardship information already collected in connection with consideration of a loan modification.
• Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).
• Prohibits loan servicers from requiring a reduction in the real estate commission agreed upon in the listing agreement (up to 6 percent).
• Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed).
• Uses standard processes, documents and timeframes/deadlines.
• Provides financial incentives: $1,500 for borrower relocation assistance; $1,000 for loan servicers to cover administrative and processing costs; and up to $1,000 for investors for allowing a total of up to $3,000 in short sale proceeds to be distributed to subordinate lien holders (on a one-for-three matching basis).
The program does not take effect until April 5, 2010, but mortgage loan servicers may implement it before then if they meet certain requirements. The program ends on December 31, 2012.

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Relaxed FHA Condominium Lending Rules

In an effort to give condominium lending a boost, the new temporary FHA rules ease concentration and owner-occupancy requirements and make changes to pre-sale rules and to the agency's spot loan approval process. For a summary of these rules, visit http://www.hud.gov/offices/hsg/sfh/condo/faqs_condo.pdf. The temporary guidance is effective for all FHA case numbers assigned on or after Dec. 7, 2009 and is effective until Dec. 31, 2010. The changes include increased loan limits, no more segregation of condominium loans form single-family loans (making them easier to sell on the secondary market), relaxation of requirement for attorney review of condominium documents and relaxed presale requirement (30 percent instead of 50 percent. To read the details, see:
• MORTGAGEE LETTER 2009-46 A Temporary Guidance for Condominium Policy: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-46aml.pdf
• MORTGAGEE LETTER 2009-46 B: Condominium Approval Process for Single Family Housing: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-46bml.pdf
These changes mean it will be easier than ever before to purchase a condominium using FHA funding. Check with a mortgage professional to determine whether FHA is a good option for a particular purchase.
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1.) Listing Contracts - Listing Protection; Listing Contracts - Termination/Withdrawal
QUESTION:
During the listing contract an offer to purchase was written but the buyer and seller could not come to terms. The seller cancelled the listing. The property is now listed with another broker. The buyer wants to submit another offer. Is this buyer protected with the original broker if the original broker and seller signed a Cancellation Agreement and Mutual Release (CAMR) instead of expiring the listing on an amendment?

ANSWER:
Buyers may be protected for listing protection in one of four ways. If (1) the buyer submitted a written offer to purchase or (2) negotiated directly with the seller, the listing protection is automatic and the first listing broker would not have been required to perform any additional steps to protect the buyer for the override period. If, during the term of the listing (3) the buyer attended an individual showing or (4) “negotiated” with a broker, the buyer will be protected only if the listing broker delivered the buyer's name to the seller no later than three days after the expiration of the first listing contract. “Negotiated,” for these purposes, means that the buyer discussed the potential terms upon which the buyer might acquire an interest in the property. Therefore, it appears that the buyer in question is qualified for listing protection due to the submission of the written offer during the term of the prior listing contract, prior to the cancellation of the listing contract.
Depending on the nature of the termination, a notice, amendment or CAMR may be used for responding to the seller and documenting the termination. The WB-42 Amendment to Listing Contract may be used if the seller and listing broker have an agreement to amend (shorten in the case of early termination) the expiration date in the listing contract.
If a listing broker does not agree to amend the listing and is merely acknowledging the seller’s termination, a notice is appropriate. The listing broker may wish to work with his or her attorney regarding the language of the notice to ensure that any remedies available as a result of a seller’s potential bad-faith termination are preserved (i.e., include language that the broker retains all legal rights under the contract and law stemming from the seller’s breach).
If the seller and the listing broker agree to waive all rights under the listing, including listing protection, damages for bad-faith termination, the right to collect commission if earned, etc., a WB-45 CAMR may be used if properly modified to meet the parties’ intent.
The seller and prior listing broker will need to review the exact terms of the termination agreement with respect to the prior listing contract to determine if listing broker retained the right of listing protection. The parties should be referred to their respective legal counsel if they legal questions.
READ MORE ABOUT IT:
More information about termination of listings is available in the September 2006 Broker Supervision Newsletter @ www.wra.org/BSNsept06. See pages 8-10 of the February 2004 Legal Update, “Listing Procedures for the Prudent Broker,” @ www.wra.org/LU0402 for further discussion of listing protection issues.

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2.) General Real Estate - Miscellaneous Issues
QUESTION:
The agent is working with a client who wants to put an offer in on a short sale property in the city of Madison. This home was assessed at $523,900 last year, and has taxes over $11,000/year on it. A market analysis indicates this home is extremely overvalued. There is no guarantee that a lower purchase price will provide compelling enough evidence to get the tax burden adjusted, but the agent is wondering how common this scenario is and if owners have been successful in getting these adjustments made. Does the county consider the previous mortgage on a property? This home was refinanced three years ago with an ARM. The buyer is ready to write an offer, but the agent would like to give him good advice. The house is on a very large lot but needs some updating (new roof alone will cost $25,000 to $30,000). Any permits might flag an even further tax increase.

ANSWER:
As a licensee the agent may not represent that she is an expert on assessments and the appeal process and in no way should indicate that the purchasers will be successful in the reduction of the taxes.
Property owners do have the ability to object or appeal their property’s assessed value during a specific window of time during each year. The following is an excerpt from the Wisconsin Department of Revenue’s Property Assessment Appeal Guide for Wisconsin Real Property Owners, a guide that helps the public better understand the assessment process, including how to appeal an assessment:
What is the most compelling evidence I can present to the Board of Review?
Under state law the best indicator of market value is a recent arm’s-length sale of a property, provided it is in line with recent arm’s-length sales of reasonably comparable property. Sales should be recent; those several years old may not reflect current market conditions. Sales must be arm’s-length. There should be no relationship between the buyer and seller that affects the sales price. For example, sales between relatives are typically not arm’s-length sales. In addition, the following conditions are necessary for a sale to be considered a market value sale:
1. The property must have been available on the open market for a period of time typical of the turnover time for that type of property.
2. Both buyer and seller must be knowledgeable about the real

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3.) General Real Estate - Foreclosure
QUESTION:
The broker is working with a service member who bought his house in 2003. He was transferred out of state in 2007. After failing to sell the property he rented it. Even after the rental income he must pay an additional $500 a month to cover costs. Right now he is receiving top rent for the property so increasing the rent will not work. It is becoming a financial burden for him. The broker’s market analysis showed he would loose about $40,000 if he tries to sell it today. Currently there is a VA Loan and Navy Federal Loan on the property. Would these circumstances qualify him for a short sale? Any suggestions besides taking a $40,000 loss, which he cannot afford?

ANSWER:
One of the first steps the owner should take is to contact his mortgage holders and lay out the facts. A number of potential resolutions may be available.
READ MORE ABOUT IT:
For more information, please see the March 2009 Legal Update entitled “Working with Distressed Sales” @ www.wra.org/LU0903.

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4.) Disclosure - Underground/Aboveground Storage Tanks (USTs/ASTs)
QUESTION:
The owner of a farmette has passed away and her son is the trustee. They want to sell the property as-is and there is an underground storage tank (UST). The trustee/son does not want to deal with it. What are the guidelines for this? Does the tank have to be closed or removed? What are the rules/regulations as far as tank size?

ANSWER:
An out of service UST used for storing heating oil or an out of service UST of 1,100 gallons or less used for storing motor fuel for noncommercial purposes is required by Wisconsin law to be registered and closed (usually removed) by a certified tank professional. According to the Department of Commerce (DComm), which administers the UST regulations, a certified UST remover can give estimates for the work needed to be done to comply with the UST regulations, handle the notifications and paperwork required, remove and properly dispose of the UST and generally see that the job is done properly. A list certified tank removers may be found at: http://apps.commerce.wi.gov/SB_Credential/SB_CredentialApp/SearchByCredType?specCode=23&cmd=Search
If the UST is removed without complying with the UST regulations, licensees will generally be obligated to disclose this fact to all parties pursuant to Wis. Admin. Code § RL 24.07(2), and buyer financing may be jeopardized without expert confirmation that there was no leakage or contamination from the improperly removed UST.
READ MORE ABOUT IT:
• Please see the DComm UST Closure page at: http://commerce.wi.gov/ER/ER-BST-Closure.html
• DComm has a Real Estate Agent’s Web page regarding USTs and ASTs at www.commerce.state.wi.us/ER/ER-BST-RealEstatePage.html.
• AST/UST tank specialist districts and contact information may also be viewed at http://commerce.wi.gov/ER/pdf/bst/Forms_FM/ER-BST-Fm-9687TankerMap.pdf.

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5.) Disclosure - Inspection Reports
QUESTION:
An agent is working with a buyer who has an accepted offer. He had the home inspection done and found mold during the inspection. He also had a radon test done. Radon came back at 8.0. The buyer’s lender wants these both conditions mitigated before the appraisal is done. The cooperating agent talked with the listing agent and he wants the buyer to pay for these and then will credit the buyer at closing. He said that if this transaction falls through the next buyer may not have a radon inspection and the inspection may not reveal mold. He said he did not have to disclose this information to the next potential buyers. Is he correct?

ANSWER:
No. If a licensee knows or is aware of information suggesting the possibility of a material adverse fact, Wis. Admin. Code § RL 24.07(3) states that the licensee will be practicing competently if he or she makes timely written disclosure of the information suggesting the material adverse fact to all parties to the transaction, recommends the parties obtain expert assistance to inspect or investigate for the possible material adverse fact, and, if directed by the parties, draft appropriate inspection or investigation contingencies. The duty to disclose has priority over any duty owed to the client.
READ MORE ABOUT IT: See pages 15 and 21 of the October 2009 Legal Update, “Diligent Disclosures” @ www.wra.org/LU0910.
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ZipForm 6 Now Available
REALTOR® and Legal Section members can now upgrade to ZipForm 6. Upgrading now is optional but will be required in February during the annual renewal of the ZipForm program.
ZipForm 6 runs on PC or Mac, requires no download for the Professional (online) version, provides one click synchronization of Standard (Desktop) and Professional (online) versions, and is filled with many user-friendly features. If you currently use ZipForm Online, you will upgrade via the “Free Upgrade to ZipForm6” button within the program. ZipForm Desktop users should go to http://www.wra.org/zipform to register. Once the button is selected you will be directed to a log in page at ZipForm where you will be prompted for your NRDS number and last name. Your NRDS number is located on your NAR REALTOR® magazine label and on your NAR membership identification card. After logging in you will verify your information and proceed with registration. When finished you will receive an email confirmation from ZipForm informing you how to access ZipForm 6 Standard and ZipForm 6 Professional.
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New Forms Available for Purchase
The WRA now has available for purchase the following new forms: WB-11 Residential Offer to Purchase, WB-40 Amendment to Offer to Purchase, WB-41 Notice Relating to the Offer to Purchase, WB-42 Amendment to Listing Contract and WB-47 Amendment to Buyer Agency/Tenant Representation Agreement. A video explaining the key differences in the new forms, ordering information and a list of other forms currently in production can be found at http://www.wra.org/formsupdate
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Join us at Winter Convention on January 25-27, 2010!

Head to the Lake of the Torches Hotel, Lac du Flambeau for three fun-filled days.
• Complete your CE (18 hours will be offered)
• Complete a 1-day CRS core course - Short Sales and Foreclosures: Protecting your Clients' Interests - taught by LeRoy Houser and Frank Serio
• Listen to Ralph Roberts’ powerful session on “Power Selling in Any Market”
• What should you know about Social Media? Rob Uhrina will provide a field guide to Social Networking and give you 10 privacy tips you should absolutely know
Besides taking courses, visiting the Exhibits, attending workshops and a top-notch Opening Session, other activities at Winter Convention include a Chili Cook-Off sponsored by the Northwoods Association of REALTORS® and a Welcome Party and Reception. Enter your favorite chili recipe and you may win a prize. You can even go out on your own and enjoy snowshoeing, snowmobiling, cross-country skiing or ice fishing – there’s something for everyone in the north woods!
Plus: Two Lucky Winners will receive a $150 WRA credit toward education or products. Must be present to win.
For more details visit: www.wra.org/winterconvention
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ABR Two-Day Required Course - January 13-14, 2010 - Brookfield
The Accredited Buyer Representative (ABR) designation is the benchmark of excellence in buyer representation. The overall goals of the ABR designation are to educate and prepare you to provide the kind of service and fidelity to buyers that sellers have customarily enjoyed and to offer methods for building your buyer representation business. This 2-day course fulfills the 2009-2010 Course 4 requirement. This designation is awarded by the Real Estate BUYER'S AGENT Council (REBAC), an affiliate of the National Association of REALTORS® to real estate agents who meet the specified educational and practical experience criteria. To earn the ABR designation, you need to complete the 2-day required course, plus an ABR elective and 5 transactions acting as a buyer's representative within 36 months after completing the first ABR course.
For additional information, visit www.wra.org/abrinfo
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This Wisconsin REALTORS® Association Best of the Legal Hotline service is provided for you by the WRA's Legal Affairs Department. The service should be considered a general statement of applicable legal principles. Given this format, it is impossible to fully address all potential legal issues which might apply in any particular situation. A determination of any individual's legal rights in a transaction can only be obtained after complete analysis of the law and its applicability to the particular fact situation. Please contact the WRA Legal Hotline if additional information is needed, or private counsel, if legal advice is needed. Thank you for using the Wisconsin REALTORS® Association Designated REALTOR® Best of the Legal Hotline service.
Debbi Conrad
Director of Legal Affairs
Wisconsin REALTORS® Association
4801 Forest Run Road Suite 201
Madison, WI 53704
Phone: 608-241-2047; 800-279-1972
Fax: 608-242-2279
WRA Legal and Public Affairs Department
The Legal Hotline is open Monday through Friday from 8:30 a.m. to 4:30 p.m. You can call the WRA's Legal Hotline direct toll free at 800-799-4468 or at 608-242-2296 during these hours.
During non-business hours, you may call the Legal Services Night Voice Mail by dialing either of the Legal Hotline numbers listed above. You can also contact the Hotline 24 hours a day via fax at 608-242-2279 or by using the on-line form on the WRA's Web site. Questions may also be mailed to the Hotline at Wisconsin REALTORS® Association, 4801 Forest Run Road, Suite 201, Madison, WI 53704. For a prompt response, all legal questions should be directed to the Hotline rather than to an individual attorney.
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