On January 1, 2021, Congress passed the Corporate Transparency Act (“CTA”) establishing new mandatory self-reporting requirements for corporations, LLCs, and similar entities.  As of this article, reporting forms are not available, however the Department of Treasury charged FinCEN (Financial Crimes Enforcement Network ) with creating regulations and implementing the CTA.  The CTA itself, is found deep within The National Defense Authorization Act (“NDAA”) on page 1217.  The CTA was passed by Congress, vetoed by President Trump, and then resurrected to become law when Congress overrode the President’s veto (civics lesson: overriding a veto requires at least a 2/3 vote in both the House and Senate).

Purpose of CTA.  The CTA is the first significant U.S. anti-money laundering law in 20 years. When businesses are formed, most states do not require ownership information.  The CTA is designed to ban anonymous shell companies.

Why Shell Companies are Attractive to Criminals?  To remain anonymous, criminals form shell companies, usually in the form of LLCs, to purchase real estate and high valued assets. The assets are purchased in the shell company’s name, thereby concealing the true individual owners’ identities.  Anonymous shell companies are used to rapidly launder large amounts of money for: financing terrorism, tax fraud, human and drug trafficking, counterfeiting, piracy, securities fraud, financial fraud, acts of foreign corruption, and otherwise hide illicit wealth.

Corporate Layering Like Russian ‘‘Matryoshka’’ Dolls.  To evade detection, business layer their ownership, like Russian ‘‘Matryoshka’’ dolls, across various secretive jurisdictions so each time an investigator obtains ownership records, the newly identified owner is yet another corporate entity.

Corporate Layering can be like Russian “Matryoshka” Dolls

States Allowing Anonymous Company Ownership Directly and Indirectly.  Reportedly, some states do not disclose ownership information for LLCs on the internet such as: ColoradoGeorgiaIndianaNew Mexico, Alabama, Delaware Virginia, and Wyoming.  Other states do not require disclosure of information to the State at all such as: ColoradoGeorgiaIndiana, and New Mexico. Yet further, states such as Nevada, Delaware, and Wyoming, do not require ownership information to be updated, thus allowing temporary owners, directors, managers, or general partners called nominees to form the LLC. The nominee’s name and contact information will show up on the public record, and immediately thereafter, the nominee will resign allowing the true owner to assume control as the undisclosed manager of the LLC.

Florida’s Anonymous Shell Company Loophole.  In Florida, LLCs are formed in minutes using Florida’s Secretary of State online portal and paying a $125.00 fee.  When forming an LLC in Florida either a “member” or a “manager” must be listed.  So what’s the loophole?  Instead of identifying the individual “Members” (i.e. those with ownership interests in the LLC), Florida alternatively allows incorporators (those forming the LLC) to list “Managers” who are authorized to act on behalf of the LLC.   The Manager, can be an individual person or another business entity such as another LLC.  In other words, a Florida, LLC managed by another LLC.  This layering of LLCs is the loophole in Florida allowing for anonymity in company ownership.  So if one were to form  “Florida, LLC” and identify its manager as “New Mexico, LLC”, then based on the foregoing, a creditor who is following the paper trail from Florida to its manager in New Mexico (where no ownership information is required to be disclosed) may find itself at a  dead-end.

Reporting – Do “Beneficial Owners” of New or Existing Businesses Have to Report to FinCen?   Reporting requirements apply to “Beneficial Owners” of corporations, LLCs, and other similar entities which: Already exist; Will be newly formed; and Those formed in a foreign country and registered to do business in the US through its filing with the Secretary of State.

Exemptions from Reporting to FinCen.  Larger companies, heavily regulated companies, and companies that already provide information to a relevant government agency. The CTA explicitly exempts: (1) Companies employing more than 20 people, report more than $5 million in revenues on tax returns, and have a physical presence in the United States; (2) Most financial services institutions, including investment and accounting firms, securities trading firms, banks, and credit unions that report to and are regulated by government agencies such as the Securities and Exchange Commission, the Office of the Comptroller of the Currency, or the FDIC; and (3) Churches, charities, and other nonprofit organizations.

Who are “Beneficial Owners?”  The CTA will require “beneficial owners” of non-exempt businesses to file “beneficial ownership” information with FinCen.  Under the CTA, a “beneficial owner” is an individual who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise:

  • Exercises substantial control over an entity; or
  • Owns or controls 25% or more ownership interests in an entity.

Five (5) Exceptions to Who is Considered a Beneficial Owner.   There are five (5) general exceptions from the term “beneficial owner”:

  • Minor children, if the information of the parent or guardian is reported;
  • Individuals acting solely as an employee and whose control over or economic benefits from such entity is derived solely from being an employee;
  • Individuals whose only interest in the entity is through inheritance;
  • Creditors, unless the creditor meets the requirements of a beneficial owner; and
  • Individuals acting as a nominee, intermediary, custodian, or agent on behalf of another individual;

What Owner information must be reported to FinCen?  Each Beneficial owner’s:

  • Full legal name;
  • Date of birth;
  • Current residential or business street address (as of the date the report is delivered,); and
  • ID number from a:
  • Nonexpired US Passport;
  • Nonexpired ID issued by a State, local government, or Indian Tribe to the individual acting for the purpose of identification of that individual;
  • Nonexpired driver’s license issued by a State; or
  • Nonexpired passport issued by a foreign government.

Can’t evade the CTA’s Beneficial Ownership by using “Bearer instruments.”  You can’t just issue the shares or interests in the business to “bearer.”  “Bearer” means anyone holding something, like a check, promissory note, or in this case a stock certificate, or LLC’s membership interest, which states that it is “payable to bearer,” means whoever holds this paper can receive the funds due on it without their name specifically appearing on it.  Under the CTA, “A corporation, limited liability company, or other similar entity … may not issue a certificate in bearer form evidencing either a whole or fractional interest in the entity.”

Time for Reporting for Existing Businesses, and Newly Formed Businesses.  The CTA obligates the Secretary of Treasury to draft regulations.  Business entities existing before those regulations go into effect will have two (2) years to submit their report to FinCEN.  Business entities formed on or after those regulations go into effect will just submit their report to FinCen at the time the new business entity is formed or registered.

What if the Business Owners Change?  Report the change to FinCen within one (1) year.

Will my Ownership Reporting Information be Public?  No.  “beneficial ownership information … is sensitive information and will be directly available only to authorized government authorities, subject to effective safeguards and controls….”  The information will be stored “in a secure, nonpublic database, using information security methods and techniques that are appropriate to protect nonclassified information systems at the highest security level.”

Who May Obtain my Ownership Information?  (1) Federal agencies engaged in national security, intelligence, or law enforcement activity; (2) State, local, or Tribal law enforcement agency, if a court of competent jurisdiction including any officer of such a court, has authorized the law enforcement agency to seek the information in a criminal or civil investigation; (3) Financial Institutions; (4) Department of treasury for Tax purposes.

What if I fail to Report my Ownership Information. “lt shall be unlawful for any person to willfully provide, or attempt to provide, false or fraudulent beneficial ownership information, … false or fraudulent identifying photograph or document, … or  fail to report complete or updated beneficial ownership information to FinCEN.” Penalties include: “(i) US civil penalty of not more than $500 for each day that the violation continues or has not been remedied; and “(ii) may be fined not more than $10,000, imprisoned for not more than 2 years, or both.”   I can only assume these stiff penalties are aimed at severely curtailing criminals from even trying to use anonymous shell companies.

Penalties for Unauthorized Disclosure of Ownership Information. A person who misuses the information (presumably a government employee or financial institution who maliciously releases the information) can be liable for a “civil penalty of not more than $500 for each day that the violation continues or has not been remedied; and “(ii)(I) shall be fined not more than $250,000, or imprisoned for not more than 5 years, or both….”

DISCLAIMER:  Topics discussed are general concepts, not intended to constitute legal advice, accuracy, nor completeness, and may not be relied upon as such; consult an attorney or accountant.  The author is neither an attorney nor an accountant.  FTIC is a national award winning title insurance company known for its white glove customer service and “No Junk Fee Guarantee.” ®

The 411 on §1031 Exchanges

§1031 in a Nutshell.  Assume an investor wants to sell a property for a $200,000 profit. The profit is subject to taxation.  To put it in numbers, federal income tax brackets range from 10% for the lowest earners to 37% for the highest earners.  So, a total tax bracket of approximately 35%, could result in a capital gains tax bill of $200,000 X 35% = $70,000.  But, with some proper guidance, what if instead of just selling the $200,000 property, the seller did an exchange?   The seller who exchanges their investment property by selling their “relinquished property” and who rolls their $200,000 profit into buying a “replacement property” could potentially pay no capital gains tax whatsoever (i.e. $0.00), leaving the entire $200,000 to reinvest, if the transaction was set up right.   In the real estate industry, this sale and timely reporting and re-purchasing is called a “Like-Kind-Exchange” or “1031 Exchange.”

This article addresses:

I.Basic Accounting Terms
II.Residential Property Gains
III.§1031 Exchange – The Deferrable Tax Exception
IV. Is the Property “Like-Kind” Property?
V. Does the property “Qualify?”
VI. Contractual Clauses To Notify New Buyer & New Seller Of Intent To Perform A §1031 Exchange
VII. Strict Timeline For Completing §1031 Exchanges
VIII. How Will You Exchange the Two Properties?
IX.How Much Tax is Deferrable?  Am I Doing This Right? Do the “Napkin Test” to determine if there is “Boot” (* You Don’t want a Partial 1031 exchange *)

§1031’s are no brainer for investors and realtors too.  Not only is this advantageous for the Seller resulting in huge tax savings, but it is also a no brainer for realtors, who stand to earn a double commission; first through the sale of the Relinquished Property, and second through the purchase of the Replacement Property, – i.e. resulting in an exchange of properties. 

First get your accounting terminology correct.  This article is slightly more advanced but will be a good reference point to refer back.  Internal Revenue Code §1031 is part of the tax code, so sound intelligent by using accounting lingo.  Your kid may say, “I have a boo-boo;” you say “bruise;” but the doctor says, “contusion or hematoma.”  Who would you rather sound like?  Tax terms used by professionals are bolded and hyperlinked below, so commit to learning them.


Start with Basics.  Gain or Loss From Sales and Exchanges. When property is sold it usually results in either a Gain or Loss being Realized. A sale is a transfer of property for money or a mortgage, note, or other promise to pay money.   A Gain (i.e. the profit) is the amount you Realize (i.e. receive) from a sale or exchange of property that is more than its Adjusted Basis (i.e. cost).  Inversely, a Loss occurs when your property’s adjusted basis (i.e. cost) is more than the amount you realize (i.e. received) on the sale or exchange.  The Basis can be complicated to figure out but it usually starts with the cost you paid for the property (see IRS Pub 551 if you got the property by gift/inheritance).  That Basis (i.e. your cost) is then adjusted by increasing it (i.e. increasing the cost) to include costs of any improvements having a useful life of more than one (1) year. Decreases to Basis (i.e. reductions to your cost) include depreciation and casualty losses. 

Amount realized is more than the adjusted basis.
e.g. Adjusted basis =$50,000, Sells for $75,000, Gain is $25,000
Adjusted basis is more than the amount realized.
e.g. Adjusted basis =$50,000, Sells for $35,000, Loss is $15,000


Taxation of Personal Residence vs. Investment Property.  Taxation on income generated from the sale of personal residence is very different from the taxation of income on investment property.  If the taxpayer resided in the personal residence for two (2) of the last five (5) years, and their sale results in a Gain then: (1) $250,000 of a single (unmarried) seller’s Gain; or (2) $500,000 for married couples, will be disregarded/excluded/ignored.  Widowers are treated differently.  This residential exemption from paying taxes on gains may be used once every two (2) years. See, 26 U.S. Code §121 – Exclusion of gain from sale of principal residence.  


Taxation of Investment Property.  If seller sells investment property that appreciates in value, then the seller would have to pay Capital Gains Taxes; unless, with a little bit of planning, that seller’s investment property qualifies for preferential tax treatment under Internal Revenue Code Section §1031 as a like-kind exchange.  Section 1031(a)(1) states:

Nonrecognition of gain or loss from exchanges solely in kind: In general. No gain or loss shall be recognized on the exchange of real property held for productive use in a trade or business or for investment if such real property is exchanged solely for real property of like kind which is to be held either for productive use in a trade or business or for investment.

Elements of a §1031 Property.  Stated another way, to be a §1031 like-kind exchange, the property relinquished and the property received as its replacement must be both of the following: (1) “Like-kind property”; and (2) “Qualifying” (i.e. not subject to some exception).


Like-Kind does not mean Exactly.  Under §1031 there must be an exchange of “like-kind property.”  Investors often mistakenly believe they must purchase a replacement property exactly like their relinquished property.  But most are surprised to learn a wide variety of properties can be considered “like-kind.”  “Like-kind” does not refer to the type of property.  Instead, it addresses the intended use of the property i.e. that both properties be “real property held for productive use in a trade or business or for investment.”  Like-kind properties are properties of the same nature or character, even if they differ in grade or quality.   

For example, any of the following can be considered “like-kind” property exchanges: a duplex for a fourplex, bare land for improved property, a rental house for a retail center or an apartment building for an office building. Investors do not have to exchange for exactly the same type of property as relinquished.

Personal Property exchanged for Real Estate – NO.  “An exchange of personal property for real property does not qualify as a like-kind exchange.”

City Property exchanged for Farm – YES.  “An exchange of city property for farm property … is a like-kind exchange.” 

Improved exchanged for Farm – YES.  “… improved property for unimproved property, is a like-kind exchange.” 

Real Estate for 30 Year exchanged for Real Estate Lease.  – YES.  “The exchange of real estate you own for a real estate lease that runs 30 years or longer is a like-kind exchange. However, not all exchanges of interests in real property qualify.”

Foreign Real Property – NO.  Foreign real property is real property not located in a state or the District of Columbia.   “Real property located in the United States and real property located outside the United States are not property of a like kind.”  If you exchange foreign real property for property located in the United States, your gain or loss on the exchange is recognized.


Assuming the properties to be exchanged meet the definition of “Like-Kind-Properties” do they also “Qualify” for §1031 tax deferral treatment?  Section 1031’s nonrecognition rules for like-kind exchanges apply only to exchanges of “real property held for productive use in a trade or business or for investment if such real property is exchanged solely for real property of like kind….” Qualifying property examples include: buildings, land, and rental.

Which Properties Do NOT Qualify? Like-kind exchanges do not apply to the certain exchanges of property.

Real property held primarily for sale – Does NOT Qualify.  “This subsection shall not apply to any exchange of real property held primarily for sale.”

Business Assets for Business Assets – Does NOT Qualify.  “An exchange of the assets of a business for the assets of a similar business cannot be treated as an exchange of one property for another property.”

Personal or intangible property – Does NOT Qualify? An exchange of personal property for real property does not qualify as a like-kind exchange.  However, “incidental property” is disregarded, see infra.

Disregard incidental property – Does Qualify. Do not treat property incidental to a larger item of property as separate from the larger item when you identify replacement property. Property is incidental if it meets both the following tests. (1) It is typically transferred with the larger item; and (2) The total fair market value of all the incidental property is not more than 15% of the total fair market value of the larger item of property. 

For example, furniture, laundry machines, and other miscellaneous items of personal property will not be treated as separate property from an apartment building with a fair market value of $1,000,000, if the total fair market value of the furniture, laundry machines, and other personal property does not exceed $150,000.

Unrented vacation homes – Does NOT Qualify.  In Moore v. Commissioner of Internal Revenue,  the taxpayers exchanged one lakeside vacation home for another. Neither home was ever rented. Both were used by the taxpayers only for personal purposes. The taxpayers claimed that the exchange of the homes was a like-kind exchange under § 1031 because the properties were expected to appreciate in value and thus were held for investment. The Tax Court held, however, that the properties were held for personal use and that the “mere hope or expectation that property may be sold at a gain cannot establish an investment intent if the taxpayer uses the property as a residence.”

Exclusively Personal Residences – Does NOT Qualify.  In Starker v. United States, the Ninth Circuit held that a personal residence of a taxpayer was not eligible for exchange under § 1031, explaining that “[it] has long been the rule that use of property solely as a personal residence is antithetical to its being held for investment.”

Rental Residences + Occasionally Used Personally – MAY QUALIFY.  Many taxpayers hold Dwelling Units to produce rental income, but they also use those properties occasionally for their own personal purposes. A Dwelling Unit is defined as real property improved with a house, apartment, condominium, or similar improvement that provides basic living accommodations including sleeping space, bathroom and cooking facilities.  In the interest of sound tax administration, owners have a safe harbor under which their Dwelling Unit will qualify under §1031 even though they occasionally use the Dwelling Unit for their own personal purposes.  The IRS will not challenge whether a Dwelling Unit qualifies under §1031 if certain requirements are met. See, Revenue Procedure 2008-16 §4, 2008-10 I.R.B. 547 The following questions will help determine whether the property qualifies.[1]   

Own for 2 yrs.  Will you have owned the property you intend to relinquish for 24 months before the exchange?YES.  
Year 1 – Rent 14+ days.  During the 1st 12 month period, did you rent the property you intend to relinquish for 14+ days at fair rental value?YES.  
Year 2 – Rent 14+ days.  During the 2nd 12 month period, did you rent the property you intend to relinquish for 14+ days at fair rental value?YES.  
Year 1 – Your personal use.  How many days was the property you intend to relinquish rented in the 1st  12 month period?Less than the greater of 14 days or 10 percent of the number of days during the 12-month period that it was rented.
Year 2 – Your personal use.  How many days was the property you intend to relinquish rented in the 2nd   12 month period?Less than the greater of 14 days or 10 percent of the number of days during the 12-month period that it was rented.


Clauses Seller should add to Purchase and Sale Agreements.  When the Buyer purchases a Seller’s property the seller is supposed to receive the proceeds of the sale.  However, in a §1031 tax-deferred exchange, the proceeds will not go to the Seller, but instead will go to the Seller’s Qualified Intermediary (known as a “QI”), which will then use those proceeds to purchase the Replacement Property.   You don’t want to catch the buyer off guard that there will be a QI involved.  Therefore, in the beginning, include language in the Purchase and Sales Agreement, stating Seller’s intent to perform a §1031 tax-deferred exchange.  Some suggested language by some two different QIs (Starker Services, Inc., and Asset Preservation, Inc.) are: 

When Selling the Relinquished Property Option #1

“Buyer is aware that Seller intends to perform an IRC §1031 taxdeferred exchange. Seller requests Buyer’s cooperation in such exchange and agrees to hold Buyer harmless from any and all claims, liabilities, costs, or delays in time resulting from such an exchange.  Buyer agrees to an assignment of this contract to a Qualified Intermediary, by Seller.”

When Selling the Relinquished Property Option #2

“It is the intent of the Seller to perform an IRC §1031 tax-deferred exchange by trading the property herein with a QI.  Buyer agrees to execute an Assignment Agreement at the request of Seller at no additional cost or liability to Buyer.”

When Buying the Replacement Property Option #1

“It is the intent of the Buyer to perform an IRC §1031 tax-deferred exchange by trading the property herein with a QI, Seller agrees to execute an Assignment Agreement at the request of Buyer at no additional cost or liability to Seller.”


1031 Exchange Timeline

There is a limited time to select and purchase a Replacement Property so don’t place yourself in a time crunch.  Exchangers have been known toget stuck with a Hobson’s Choice –  Lose the favorable tax treatment and pay tons of capital gains tax, or close on a Replacement Propertythat the Exchanger otherwise would not have bought.  Exchangers who run out of time, may also find themselves having little to no negotiating power after discovering defects during a due diligence inspection.  Section 1031(a)(3) of the IRC sets two deadlines: an Identification deadline, and an Exchange deadline. 

A. 45 Day “Identification” Deadline. “You must identify the [Replacement] property to be received within 45 days after the date you transfer the property given up in the exchange. This period of time is called the identification period. Any property received during the identification period is considered to have been identified.”  In other words, the potential Replacement Property must be identified within 45 days of the sale of the Relinquished Property. 

  • Specific Requirements on How To Identify The Replacement Property. “You must identify the replacement property in a [1] signed written document and [2] deliver it to the person obligated to transfer the replacement property or any other person involved in the exchange other than you or a disqualified person. … [3] You must clearly describe the replacement property in the written document. For example, use the legal description or street address for real property …. In the same manner, you can cancel an identification of replacement property at any time before the end of the identification period.”
  • What does a Written Exchange Agreement with a QI entail?  “The written exchange agreement must expressly limit your rights to receive, pledge, borrow, or otherwise obtain the benefits of money or unlike property held by the qualified intermediary.”  The Written Exchange Agreement requires the QI to do the following for you:
  • Acquire your Relinquished Property, and Transfer your Relinquished Property,
  • How?  Typically You would assign the QI your rights as the Seller under your Purchase and Sale Agreement to sell your Property, You sign the Deed, the QI transfers your signed deed to your Relinquished Property to the new Buyer.
  • Acquire the Replacement Property, and Transfers the Replacement Property to you.
  • How?  Typically the QI enters into an agreement with the owner of the Replacement Property for the transfer of that property and, pursuant to that agreement, the Replacement Property is transferred to You (that is, by direct deed to you).
  • Who may be a Qualified Intermediary (QI) and who is Disqualified?  Persons who are disqualified from serving as QI’s include: “your employee, attorney, accountant, investment banker or broker, or real estate agent or broker within the 2-year period ending on the date of the transfer of the first of the relinquished properties….”  On the other hand, Routine financial, title insurance, escrow, or trust services by a financial institution, title insurance company, or escrow company, and Services with respect to exchanges of property intended to qualify for nonrecognition of gain or loss as like-kind exchanges may serve as QIs.

B. *180 Day “Exchange” Deadline. Additionally, the closing of the purchase must occur within 180 days of the sale of the Relinquished Property.  “The property must be received by the earlier of the following dates: (1) The 180th day after the date on which you transfer the property given up in the ex-change; [*or] (2) The due date, including extensions, for your tax return for the tax year in which the transfer of the property given up occurs.  This period of time is called the exchange period.”

VIII. How Will You Exchange the Two Properties?

There are four (4) different types of 1031 Exchanges.  The illustration above is the first and most common; it is called a Delayed Exchange

Simultaneous Exchange, is when the sale of the Relinquished Property and the purchase of the Replacement Property happen at the same time. 

Reverse Exchange is the opposite of a Delayed Exchange.  Ideally, an investor will be able to sell the Relinquished Property first, and then use that money to close on a Replacement Property. But sometimes investors may need to buy the Replacement Property first, without selling their Relinquished Property. This can be accomplished through a reverse exchange.  In it, the Replacement Property is purchased before the Relinquished Property is sold.  The same timing rules apply, but in reverse.  The Relinquished Property must be identified within 45 calendar days and sold with 180 calendar days.

“A reverse exchange is somewhat more complex than a deferred exchange. It involves the acquisition of replacement property through an ‘Exchange Accommodation Titleholder’ [EAT], with whom it is parked for no more than 180 days. During this parking period the taxpayer disposes of its relinquished property to close the exchange.” IRS Fact Sheet 2008-18, February 2008, See also, IRC Rev. Proc. 2000–37 for more detail.

Construction Exchange a/k/a Improvement Exchange  Is utilized when repairs, construction or maintenance needs to be completed on the Replacement Property before the Buyer takes ownership of the Replacement Property.  The IRS specifically prohibits using §1031 proceeds from the Relinquished Property to directly pay for repairs, maintenance, or new construction.  So how do investors make improvements to Replacement Properties without directly violating the rules.  The short version is the If you want to build or improve your replacement property then it must be purchased and held, temporarily, by a holding company known as an Exchange Accommodation Titleholder (EAT). The EAT stays on title during the building period. The EAT names you “construction manager,” you oversee the improvements (work with contractors, inspect work, collect invoices, etc).  The construction Funds are drawn, at your direction, from the exchange account. The EAT makes the payments.  Once the construction is complete or the 180-day exchange period is over, whichever is first, the EAT transfers title of the property to you and the exchange is finished.  However, usually a Delayed Exchange will suffice and the Exchanger will take ownership to the property and perform the repairs.  The procedures to safely accomplish construction 1031 exchanges are set forth in IRC Rev. Proc. 2000–37.

IX. How Much Tax is Deferrable?  Am I Doing This Right? Do the “Napkin Test” to determine if there is “Boot” (* You Don’t want a Partial 1031 exchange *)

Boot is bad.  You don’t want Boot.  Performing a partial 1031 exchange results in creating Boot.  So let’s figure out if your Replacement Property is going to result in you having to pay taxable gains or not. 

The term “Boot” is not used in either the IRC nor the Regulations, but is the term commonly used to describe the money (or fair market value of “other property” received by the taxpayer) in an exchange and which is not tax deferrable.  A partial 1031 exchange may produce two different types of boot: (1) Cash Boot or (2) Mortgage Boot.

A. “The Napkin Test” a/k/a “The Even Up Rule” is used to determine whether there is “Boot.”  The Napkin test is simply a matter of determining if the Exchanger is trading across (i.e. $0.00) or up in value.  To avoid “Boot” an exchanger must trade either “across” or “up” in both Equity and Mortgage (this will be repeated several times).  

Napkin Test #1 – No Boot.

Purchase price Increased and Mortgage Increased

 A Relinquished PropertyB Replacement PropertyUp / Across / Down ?  Boot
Equity$   500,000   $   500,000   ACROSS 

* To avoid “Boot” an exchanger must trade either “across” or “up” in both equity and mortgage. * “Boot” exists if either: equity or mortgage are Down.

In the example above, the Exchanger is trading up in Value, across in Equity and up in Mortgage; therefore, the Exchanger has no taxable boot.   To avoid a taxable gain, always trade your Properties and Mortgage either “across” or “up;” never trade them down (the “even or up rule”). In the scenario above, the Seller’s equity position of $500,000 never changed when he replaced property A with Property B. 

Napkin Test #2 – Boot.

Purchase price Increased and Mortgage Increased

 A Relinquished PropertyB Replacement PropertyUp / Across / Down ?  Boot
Equity$   500,000   $   300,000   DOWN$200,000

* To avoid “Boot” an exchanger must trade either “across” or “up” in both equity and mortgage. * “Boot” exists if either: equity or mortgage are Down.

Trading down always results in boot received, either cash, debt reduction, or both.  In the example above, the Seller made $500,000 but rather than reinvest his $500,00 gains he only reinvested $300,000 in gains, thereby receiving $200,000 in cash boot when he replaced the property A with Property B. 

B. Cash Boot.  If you receive cash from a sale and do not fully reinvest the proceeds in the new property, this results in Cash Boot.   When the value of the new property (i.e. replacement property) is less than the value of the old property (i.e. relinquished property) it results in Cash Boot. For example in scenario #1(A), if you sold a property for $250,000, and bought a replacement property for $200,000, the $50,000 in Gain is considered Cash Boot.  This makes the exchange a partial 1031 exchange. You need to reinvest 100% of the $50,000 Gain (see Example #1B)) from the like-kind exchange in order to defer all taxes.


Purchase price Decreased

 A Relinquished PropertyB Replacement PropertyUp / Across / Down ?  Boot


Purchase price Increased

 A Relinquished PropertyB Replacement PropertyUp / Across / Down ?  Boot

C. Mortgage Boot.  If the new mortgage on the Replacement Property is less than the old mortgage you paid off on the Relinquished Property then this results in Mortgage Boot  “Mortgage boot” results when an Exchangor reduces the amount of their loan or debt by exchanging properties. If the old loan was $1,000,000 on the Relinquished Property and the new loan on the Replacement Property is $900,000, there is $100,000 worth of mortgage boot, which may be taxable. Another example. If you loan $100,000 to a friend and only require him to pay back $70,000, then your friend will have received $30,000 of relief of indebtedness income which he will have to pay tax upon.

To avoid Boot, not only must the Replacement Property be of equal or greater value, but additionally, the amount of equity to be reinvested must also be equal to or greater than the equity from the Replacement Property.  If the mortgage balance on the Replacement Property is not equal to or greater than the mortgage balance from the Relinquished Property, then the difference is considered to be “mortgage boot” and taxable.


Purchase price remains the same and Mortgage increases

Up / Across / Down ?A Relinquished PropertyB Replacement PropertyUp / Across / Down ?  Boot
Equity$150,000$  80,000DOWN$70,000

* To avoid “Boot” an exchanger must trade either “across” or “up” in both equity and mortgage. * “Boot” exists if either: equity or mortgage are Down.


Purchase price increases and Mortgage increases

 A Relinquished PropertyB Replacement PropertyUp / Across / Down ?  Boot
Equity$150,000$  50,000DOWN$100,000

* To avoid “Boot” an exchanger must trade either “across” or “up” in both equity and mortgage. * “Boot” exists if either: equity or mortgage are Down.

D. You think you know boot but you don’t – Common Misconception.  The above Example #2(A) and #2(B) will help you visualize a common misconception about Boot.  It is commonly believed that so long as a taxpayer buys Replacement Property equal to or greater in value than the net sale price of the Relinquished Property and takes on new mortgages more than the old mortgages, then there is no net Boot received; however, this isn’t always true!  This is why you need the Napkin Test.  For example, the taxpayer will be in receipt of net taxable cash Boot if the taxpayer sells Relinquished Property valued at $250,000.00 with existing mortgages of $100,000.00 and buys Replacement Property valued at $250,000.00 with $170,000.00 new mortgages. In this example, the taxpayer cashed out $70,000.00 in equity and is in receipt of net taxable cash Boot. The taxpayer over-financed the acquisition of the replacement property, which resulted in the receipt of net taxable cash Boot in the amount of $70,000.00.


Purchase price stays the same and Mortgage Decreases

 A Relinquished PropertyB Replacement PropertyUp / Across / Down ?  Boot
Mortgage$100,000$  80,000DOWN$20,000

* To avoid “Boot” an exchanger must trade either “across” or “up” in both equity and mortgage. * “Boot” exists if either: equity or mortgage are Down.


Purchase price Increases and Mortgage Decreases

 A Relinquished PropertyB Replacement PropertyUp / Across / Down ?  Boot
Mortgage$100,000$  50,000DOWN$50,000

* To avoid “Boot” an exchanger must trade either “across” or “up” in both equity and mortgage. * “Boot” exists if either: equity or mortgage are Down.

Another common misconceptions is what I liken to the poker mentality when players only play with their winnings.  One misconception is that a Seller can receive net cash in an exchange in the amount of the taxpayer’s initial capital investment in the acquisition of the relinquished property (i.e. I invested $100,000, so when I sell and buy a new property I can take out my original $100,000 = MISCONCEPTION).  A second misconception is that a taxpayer need only replace the profit in the relinquished property and not its value net of exchange expenses (i.e. I will make a $100,000 profit, so when I sell and buy a new property I only need to play with my winnings of $100,000 = MISCONCEPTION). In all of these cases, the taxpayer would be in receipt of taxable Boot either as Net Cash Boot received or Net Mortgage Boot received, or both.  That is why it is important to run a Napkin Test.

E. Rules of Thumb for Avoiding Boot

If the Seller buys a new Replacement Property equal (=) or greater (>) in value to the net sale price of the old Relinquished Property and spends all of the old Relinquished Property proceeds on buying the new Replacement Property, then the Exchange will be fully tax deferred. If the taxpayer follows this rule, then there is no cash Boot received and the taxpayer either took on new mortgages in excess of the old mortgages (no mortgage Boot received) or the taxpayer gave cash Boot to offset any mortgage Boot received.


To report a like-kind exchange, taxpayers must file Form 8824, Like-Kind Exchanges, with their tax return for the year they transfer property as part of a like-kind exchange. This form helps taxpayers figure the amount of gain deferred as a result of the like-kind exchange, as well as the basis of the like-kind property received. Form 8824 also helps taxpayers compute the amount of gain they must report if cash or property that isn’t of a like-kind is involved in the exchange.

DISCLAIMER:  Topics discussed are general concepts, not intended to constitute legal advice, accuracy, nor completeness, and may not be relied upon as such; consult an attorney or accountant.  The author is neither an attorney nor an accountant.  FTIC is a national award winning title insurance company known for its white glove customer service and “No Junk Fee Guarantee.” ®


.01 In general. The Service will not challenge whether a dwelling unit as defined in section 3.02 of this revenue procedure qualifies under § 1031 as property held for productive use in a trade or business or for investment if the qualifying use standards in section 4.02 of this revenue procedure are met for the dwelling unit.

.02 Qualifying use standards.

(1) Relinquished property. A dwelling unit that a taxpayer intends to be relinquished property in a § 1031 exchange qualifies as property held for productive use in a trade or business or for investment if:

(a) The dwelling unit is owned by the taxpayer for at least 24 months immediately before the exchange (the “qualifying use period”); and

(b) Within the qualifying use period, in each of the two 12-month periods immediately preceding the exchange,

(i) The taxpayer rents the dwelling unit to another person or persons at a fair rental for 14 days or more, and

(ii) The period of the taxpayer’s personal use of the dwelling unit does not exceed the greater of 14 days or 10 percent of the number of days during the 12-month period that the dwelling unit is rented at a fair rental.

For this purpose, the first 12-month period immediately preceding the exchange ends on the day before the exchange takes place (and begins 12 months prior to that day) and the second 12-month period ends on the day before the first 12-month period begins (and begins 12 months prior to that day).

(2) Replacement property. A dwelling unit that a taxpayer intends to be replacement property in a § 1031 exchange qualifies as property held for productive use in a trade or business or for investment if:

(a) The dwelling unit is owned by the taxpayer for at least 24 months immediately after the exchange (the “qualifying use period”); and

(b) Within the qualifying use period, in each of the two 12-month periods immediately after the exchange,

(i) The taxpayer rents the dwelling unit to another person or persons at a fair rental for 14 days or more, and

(ii) The period of the taxpayer’s personal use of the dwelling unit does not exceed the greater of 14 days or 10 percent of the number of days during the 12-month period that the dwelling unit is rented at a fair rental.

For this purpose, the first 12-month period immediately after the exchange begins on the day after the exchange takes place and the second 12-month period begins on the day after the first 12-month period ends.

[2] Fair market value. Fair market value is the price at which the property would change hands between a buyer and a seller when both have reasonable knowledge of all the necessary facts and neither is being forced to buy or sell. If parties with adverse interests place a value on property in an arm’s-length transaction, that is strong evidence of fair market value. If there is a stated price for services, this price is treated as the fair market value unless there is evidence to the contrary.

[3] “You can identify more than one re-placement property. However, regardless of the number of properties you give up, the maximum number of replacement properties you can identify is: Three properties regardless of their fair market value; or Any number of properties whose total fair market value at the end of the identification period is not more than double the total fair market value, on the date of transfer, of all properties you give up.”

If, as of the end of the identification period, you have identified more properties than permit-ted under this rule, the only property that will be considered identified is: Any replacement property you received before the end of the identification period, and Any replacement property identified before the end of the identification period and received before the end of the exchange period, but only if the fair market value of the property is at least 95% of the total fair market value of all identified replacement properties. Fair market value is determined on the earlier of the date you received the property or the last day of the exchange period. See Receipt requirement, later.

Realtor Resolutions – Maybe in 2021

Resolutions are short lived and fade by February.  A goal on the other hand is a dream with a deadline.  – Napoleon Hill.  So when you set your goal, commit to making yourself S.M.A.R.T.E.R.; that is, make your goals Specific, Measurable, Attainable, Realisticand Timed (E.g. done in 4 months).  I interviewed the presidents of both Realtor Associations, a top-notch-pack-the-room real estate instructor, and then offer my own list of 24 goals.

Broward, Palm Beaches, and St. Lucie Realtors President Karen Johnson foresees real estate as the number one driver for Florida’s economy.  Therefore, it is paramount that realtors focus on Professionalism, Integrity, and Excellence (“P.I.E.”).  (1) Answer your phones, (2) Do what you say you are going to do; (3) Look professional; and (4) Update the MLS with Active and Pending Sales promptly as misinformation distorts market data for supply and demand which directly affects pricing.

Miami Association of Realtors’ President Daniel Guerrasays: (1) Understand your market.  Your realtor association offers a lot of good information.  Realtors are attracted to glitz and glamour, but consumers are more interested in knowledge.  Educate yourself with data specifically for the market you are in. (2) In a COVID world find more ways to connect with your prospects.  Reach out to your top prospects by phone, not just by text, or emails.  Call for birthdays.  Go the extra step.

Real Estate Instructor Adam Von Romer.whom I affectionately call “the real estate slayer,” teaches realtors how to be better agents.  (1) “For all those sucked into the internet phenomenon thinking all you have to do is slap something on the internet and it will fall in your lap,” Von Romer offers omens, “If you sit and wait for the phone to ring, you are going to go out of business.”  Don’t fish where everyone is fishing.  Go out and distinguish yourself.  “Social media is part of the solution; it is not the total solution.” (2) Education does not stop the moment you get a real estate license. “You’re not done, this is just the beginning!”   NAR Ethics Rule 11 mandates realtors achieve competency in handling real estate transactions.  “Many don’t strive to take their education to the next level. I’m not talking about satisfying bare minimum bi-annual 14 hour FREC CE requirements; I mean real, practical, experience.”  Good is the enemy of great, and complacency is not an option for Von Romer, who wants to see more realtors get designated as: GRIs (Graduate Realtor Institute), CRS (Certified Residential Specialist), CRB (Certified Real Estate Brokerage Manager).

My Suggested Resolutions and pet peeves:

  1. Get rid of your prom picture and get a new headshot already. I will even help photoshop the first ten (10) I receive.
  2. Take on a new leadership role.
  3. Get a business coach.
  4. Stop pinching pennies. Like a general contractor, surround yourself with a go-to trusted team of highly qualified vendors to get the job done smoothly and without headache (not so subtle hint – LIKE USING US AS YOUR TITLE COMPANY).
  5. Make a video of your intended goals, share it, keep yourself accountable.
  6. Regular contact with your tenants, stimulate buying opportunities.
  7. Enhance your customer experience. How would you rate yourself?
  8. Buyer-Broker Agreements with every prospective buyer, no exceptions.
  9. Hire a transaction coordinator.
  10. My personal pet peeve – When initialing revisions DATE the initials!
  11. Don’t be a secret agent, promote yourself to everyone.
  12. Learn new ways to prospect each month and find out what works.
  13. Take a real estate class a week.
  14. Utilize programs your broker has to make you more efficient.
  15. Get out and get more. Join a non-profit board or organization; trust me it repays you in dividends in more ways than just ROI.
  16. Master Social Media
  17. Start dialing. utilize cold call and CRM programs: LionDeskMojoColeReboGatewayRedXLandVoiceVulcan7Espresso Agent,
  18. If you already have one, then utilize your CRM more effectively.
  19. Post but don’t pester on Social media.
  20. Make more videos.
  21. Expand your sphere of influence.
  22. Try new technologies
  23. Be kind.
  24. Be very patient, this is not an overnight success story, have grit and don’t give up.

REALTOR GIFTS – How do you compare?

Why do business gifts, these spontaneous tokens of unexpected affection work?  Because they make someone feel good?  Create bonds and stronger relationships?  Drive loyalty?  Boost reputations?  Show appreciation?  Reward?  Encourage reciprocity?  Planning and buying gifts is an endeavor. The true task is much more than choosing the right gift.  I had the pleasure of interviewing 46 Realtors offering enlightening and creative ideas.

But before we dive in, I heard a lot of misinformation about the gift giving.  According to tax expert Misty Weinger, CPA “Per tax law, business gifts to clients are only deductible up to $25.00 per client.  Promotion and advertising expenses are not subject to the $25.00 gift limitation. It is important to review with your CPA to determine which category your expenses will qualify.”  So, this does not mean that you cannot give gifts.  The question simply is how much can be deducted as a business expense for tax purposes.

Adam Bursztein – Compass.  Practical and kind, and all-around cool guy. Expect to have something thoughtful and useful from Adam. In addition to cigars and baskets, Adam has purchased washers, and dryers for his clients.  Just watch out you don’t find one of Adam’s pairs of underwear in there.    

Adolfo Gil – Weichert, Miami.  Adolfo runs a non-profit called “Selling Real Estate for a Cure.”  Ten percent (10%) of his commission is donated to a client’s choice of charities.  Certificates are prepared and personally addressed along with a lovely note stating, “If it wasn’t for your sale, this donation could not have happened.”  It pays off because not only do the clients become more aware about the charity, but those at the charitable organizations have also referred clients.  Additionally, he listens to buyers, picking up on what they love.  For instance, for love of his wife, a relenting husband bought a house, despite concerns where he would put his beer with such a small fridge.  A stack of cold beers were promptly delivered to the husband.

Audrey Muller – Keyes, Ft. Lauderdale.  Audrey is super hip but at heart an old sole.  A merry old sole.  Her go to gift re”treats” back in time, framing a historical map of the location, and a cutting board.

Barbara Shapiro – Coldwell Banker, Weston.  The Elipse Vase is a stellar combination of smooth glass and a thin, elliptical shape gives a futuristic sense of style and provide countless decorative possibilities  “I give it because everyone loves it and it displays magnificently, adding to the home.”

Ben Garcia – List Realty. Finds out what clients like throughout the deal. Nicaraguan Cigars and specifically tailored brands of liquor.  If he hasn’t broken the ice, then edible arrangements or a basket.

Ben Moss – Compass.  Compass’ boutique website, accessible exclusively to Compass agents, allows for the perfect array to select client gifts.  Family engraved cutting boards made of cherry wood and marble.

Chip Falkanger – Compass.  Many clients are transplants unfamiliar with the area.  So why not show them a good time?  Along with a gift basket, Chip has been known to give five (5) one hundred dollar ($100.00) gift cards to different restaurants.  Ironically, he even saw a client eating at one of the restaurants, elated to see him, promptly displayed their gift card and said, “this one is on you Chip!”

Chris Brooks – Compass.  In touch with the vibe and emotion of the family, personalizes each gift but for her Brazilian clients, edible arrangements is a completely new and unique concept.  Children love the hand-dipped chocolate covered fruit which come in an assortment of shapes.

Chris Ricci – Re/Max Integrity, Davie.  The Captain of this and President of that, this man is everywhere in the real estate world but is he spreading himself thin?  Chris knows how to give impressionable gifts such as: a spreading knife which says, “Spread the Word;” or a Carving knife etched with “Cut above the Rest.”

Connie Cabral – BHHS EWM, Aventura.  Connie is too hot in the real estate world.  Be ready to soak in the tub with a fine bottle of wine etched with your family’s name on it, and then dry off in white embroidered Egyptian cotton towels and washcloths with your family’s initials.  “Nothing with our company name on it, as I find that tacky.”

Connie Cooper – Connie Cooper Realty.  First thing she does is build a rapport.  Client loved a house but it had no outdoor kitchen.   So Connie delivered a Bar-B-Que with “Willie’s BBQ” engraved on it.  A woman loved to garden was surprised when Connie had a landscaper install a lemon tree in her yard.  No the lemon tree was not engraved.

David Carrion-Levy – Compass, This realtor really knows how to clean up. Roombas, the robotic vacuum cleaners.  “People don’t realize how good they are until they actually have one and it is seen regularly.”  Bottle of Dom Perignon and name engraved baccarat champagne flutes.

Debra Hilsenroth – Coral Shores Realty.  Move over Etsy, Debra is blessed with the gift giving and creating talent.  Making her own baskets better than professionals using shrink wrap and heat guns, you will love her love.  Moscow mules, copper mugs, mint filled, limes, vodka, dog treats, crystal bowls, picture frames, who knows what goodies you will get?

Denise Rubin – Coldwell Banker, Aventura.  Who does not know Denise?  Well you also won’t be able to forget her, as she likes to give .  Stylish and compact, welcome people over and show off your new home with a trillium engraved bamboo cutting board in the shape of a home, champagne with her logo, door knockers, and display books about Miami.

Desiree Avila – Charles Rutenberg Realty, Ft. Lauderdale.  Care to share a pint at the local pub?In addition to receiving a photography session from a professional photographer of your new home and family, enjoy artesian spirits crafted by a local distillery right in Oakland Park from Chainbridge Distillery. Just make sure you take your photos before you partake in the spirits, or not.

Diana Escobar – United Realty, Plantation.  Recalls placing golfers in a home located on a golf-course.  A golf basket with balls, gloves, outfits, and an entire package was a natural fit for this couple.

Emel Onur – Lead Realty, Boca Raton.   Catering to international Turkish clients, blesses the home with protection from jealousy or bad feelings, by gifting a Nazarboncuk (evil eye in Turkish) but in the shape of a home.  Meaningful to her clients, this gift cannot be duplicated here, as it is designed, crafted, and purchased by Emel on her regular visits to motherland Turkey.

Eric Manten – Silmar Realty, North Miami Beach.  If I ever lit anything on fire this expensive, I would be arrested for arson.  Who knew $400 candles existed?  Eric’s response, “but they smell so good.”  And it is understandable, we have all been swept back to a moment in our lives after perhaps smelling the nectar of a sweet perfume, the beach’s air, a campfire, popcorn, a sharpened pencil.  Well Eric wants to be remembered and indelibly will be burned into his client’s brain.  Check out Diptqyue’s French candles and home décor.

Erica Stowers – Florida Luxurious Properties.  Picture this,  No literally, a picture book of the house being sold was presented to a woman who was just emotionally detached from her home when it sold (albeit for a record price) after 30 years of memories.

Gina Tarr – One Sotheby’s, Las Olas.  This I have never seen before, and it is so simple but so elegant, and all I can say is I want one.  Pineapples appear on all sorts of décor, from door knockers to quilts. “The fruit symbolizes the intangible assets we appreciate in a home: warmth, welcome, friendship and hospitality,” says Gina.  Champagne and chocolates are symbols of celebration, special occasions, love, and romance.  Gina combines it by selecting the finest champagne, hot gluing Ferrero Rocher Chocolates around, fountain into a green stem.  This is my kind of healthy fruit treat.

Ilana Gross – Level Realty Partners, Ft. Lauderdale.  Artsy at heartsy, Ilana loves to present clients with art from Galleries.  When people ask “Oh Wow! Where did you get that?” her clients naturally respond “Oh, my realtor.”  A client who lost her cat received a portrait of the cat.  A Jewish couple may receive a Mezuzah, Birkat Habayit ( A blessing over the house), and/or a Hanukkiah like none other.  “They have to be conversation pieces.”

Jeanette Pressman – Dezer Platinum.  A fish out of water, got her feet wet in real estate and now hosts open houses by stocking the pool with real-live mermaids.  A creature of the sea, and a concerned for safety, gives swimming lessons to children in homes with a pool.

Joel Matus – William’s Island Realty, Aventura.  Reminds us “Don’t think of giving a gift as a chore. And don’t get it done just for the sake of getting it done.”  Whatever the gift may be, which her personalizes for every client, “the presentation of the gift together with the packaging is just as important.”  Joel enjoys personally delivering each-and-every gift himself.  If he is not at his exclusive brokerage inside William’s Island, or at the club, you will probably find him in Aventura Mall on the 3rd floor of Bloomingdales selecting just the right gift, tailored for each special client.  He also likes to use to engrave high end MacCallan, Tequila, or Champagne bottles, which hare enveloped in embroidered Williams Island: robes, slippers, and monogrammed soaps and bubble bath salts.

Kim Hackett – Compass.  The best part of waking up is to a Kim Hackett present.  Jura espresso machines,  are the finest aromatic, fully automated, specialty coffee machine and are simply stunning.  It is like parking a Ferrari (or cappuccino) in your garage, so make sure you have the home to match so Kim can freshly grind this luxury item for you.

Lara Orlanis – Exclusively Baronoff Realty, Sunny Isles Beach.  Developer’s models look amazing because they are decorated with coffee table books.  Depending on client interests, Lara buys Coffee table books about fashion, art, racing cars.  “I think books are more valuable because, they are always out, and you have it forever.”

Larry Genet – CBRE, Las Olas.  Winner of the legend & leaders community award, and seen on social media and video more than a George Foreman grill, he is everywhere.   I bow to you sir.  Expect a crystal award with a floating picture of the acquired building or shopping center.  But the genius of Larry comes in when he hosts an annual dinner and allows all his high-net-worth clients to socialize, meet each other, and recapture some of that commission they paid him.  I would love to get on that exclusive list; as soon as a I have $10M+ to buy commercial Larry.

Laurie Richter-Spector – Compass.  Personally selects hand made cutting boards.  A client liked sage so much, Laurie hand-created an entire sage basket dawning Sage: recipes, candles, aromas, herbs, soaps, syrup, swag, scrubs, infused honey, and oils.  Somethings you just cannot buy off the shelf.  Non-residents have also received gift certificates to great local restaurants allowing them to get to know the area. How refreshing Laurie!

Lenzel Davis – One Sotheby’s, Coral Gables.  Always the stylish one who turns heads in a room, founded his own shoe company, Machiko, known for their bespoke Italian designs.  Be prepared to step into your luxury home with your new hand crafted shoes, custom measured to your foot.  This man is charming, so don’t be surprised when he also presents you with your favorite songs, on today’s equivalent of a mix-tape, as he harnesses his radio talents when he used to work as an electric engineering for some of our favorite radio stations.

Linda Seitel – One Sotheby’s, Las Olas.  What resonates with clients is something personal to them.  Recalling one especially strifeful transaction, and we have all had them, Linda hysterically assembled a basket of wines based on the wines’ names like: Tension; Conundrum; Freak Show; etc…  She has the best smile, so I’m glad she could keep her sense of humor.

Lori St John – Keller Williams Partners, Plantation.  Reminds us that it is not just a house that is being sold; but memories, which can be very emotional.   Sometimes, I think that it may be even more emotional for Lori because she invests so much of herself into learning all about the house, down to the studs, and the accretion of the beaches.  Lori featured a home on the cover of a magazine and had it framed, another was painted in watercolors by an artist, and the most unusual has to be the 3-D models replicating the home with a sterling silver tab identifying the family.  Additionally, Lori listens to her clients and family is very important to her.  So she has given fun gifts like private family trips or the Miami Zoo.

Lucy & Eduardo Cofresi – Dezer Platinum / Armani Residences, Sunny Isles Beach.  This power couple have been my friends for almost 20 years, and rose to the top, being sought after by developers to sell out their buildings like the Porsche building and now the Armani.  Armani has broadened their brand into home and décor under Armani/Casa.  Expect to be presented with a unique accent piece from the designer. At the Porsche building it is Porsche glasses, belts, and other designer accoutrements.  Brand names are collected by their clients so why not add to the collection?  Open up a matching Gucci, Channel, LV, wallet and purse.  If you don’t like it then you can easily exchange it.  For that reason, they do not give spa certificates at the buildings because many of their clients have their own people, give the certificates away, or never use them.

LysandraDevonaand Romina Wu – Luxe, Coral Gables.  Super as three (3), this family of Avengers combine to give the ultimate attention to their clients, and their gifting is no different.  Using a cricket machine they personalize pillows, portraits, and coasters, and capture that moment by chronicling the closing, familial surname, and address.  “Ring doorbells have been given too, but where’s the fun in that?”

Matt Weiner – Laurie Finkelstein Reader Realty, Plantation.   Just to say his name makes you smile and want to party, both of which I have done with this guy.  I can’t keep up.  So get ready to have fun, as Matt caters a house warming party for 20 of your closest friends and even handles the invite, and photographer of the party and even the family for a before and after party shoot.

Meryl Koslow – One Sotheby’s, Las Olas.  Enough said when that impressionable “Tiffany Blue” box arrives at your door.  Did you know that color was used on Tiffany’s Blue book first published in 1845?  Toast your new purchase with Tiffany champagne flutes, and two (2) bottles of Napa Valley’s Caymus.  Touched by a family member suffering with Alzheimer’s, and wanting to make a difference, Meryl made a sizeable charitable donation.

Michael & Wendy Ledwitz – Engel & Volkers, Boca Raton.  Living in the Polo Club, Michael and Wendy have catapulted into being the number one (#1) realtors at Boca Raton’s Polo Club.  But “the Club” is much more than their office.  It is their community.  “It is important to get to know clients, but it is even more important to make wonderful friends.  Living at the Polo Club allows us to expand our friendships every day.”  Michael and Wendy can be found dining with their new found friends, whether it be at the Club’s elegant Crown Room or SteepleChase.

Michele Tabb – Compass.  Looking for that special something?  Michele’s secret helper is Chef Mom, with an bevy of uniquely styled kitchenware, tableware, blankets, pillows, candles, totes, décor, and more.  She has also found, what I call “Michele’s Picks,” that her laminated list of favorite restaurants and necessities have drawn the most attention and gratitude.

Nana Rezaie – Keller Williams, Wellington.  One gift that never leaves your site, because it is too heavy, is the Breville Smart Oven Air, which includes 13 baking and roasting features including warming, dehydrating, air frying, and super convection.   I don’t know how I ever lived without mine; this is truly a fantastic gift.

Nicki Riettie – Douglas Elliman, Las Olas.  Known for being tres chic, after moving in a professional photographer will show at your home for a 2 hour session and present you with a large frameless photograph of the happy family in their new home.

Regina Vasquez – Coldwell Banker, Aventura.  Stylish and compact, welcome people over and show off your new home with a trillium engraved bamboo cutting board, chocolates wrapped in gold, and an invaluable kitchen gadget like Cutco’s super shears.

Robyn Selner – Coldwell Banker, Weston.  As a professional and a mom, Robyn has an eye for detail and will incorporate the playfulness of Romero Britto into your home.  It could be his artwork of children playing, a colorful house, a functional lighting fixture, or something that just speaks to her client.

Scott Kaplan – Re/Max Realty Associates.     Learned his lesson that oak cutting boards required too much maintenance and may only be brought out on special occasions, shifted his gift giving to practicality, with a reusable and recyclable Publix bag, beach towels, Turvis tumblers, golf sized umbrella, Chapstick, jar opener, and other everyday useable items.

Sherri Pfefer & Megan Pfefer – Coldwell Banker, Las Olas.  Known for their humor and always keeping it “Pfresh,” especially in the kitchen who knows what homebaked good may rise?  Prada and Gucci key chains help the clients arrive to their house. Home warranties, with notices from the warranty company, allow them to follow up and keep in touch with their clients should any appliance fail.  And coasters designed on Shutterfly, transition images of old into the new house so, clients see where they came from and how far they’ve come.

William Webb III – Webb & Associates, Hollywood.  Don’t mess with Bill.  With him, your first cleaning from a maid service will be provided by him.  And today, he has even added a COVID cleaning prior to moving in.

Zachary Oppenheim – Oppenheim Realty, Ft. Lauderdale.  Every client comes with a story, and Zachary helps write it by adding in details.  It could be a knife block for a couple that just got engaged yet to share the same last name, or a Publix card with a note to enjoy their first family meal courtesy of Oppenheim Realty.  Ever so stylish, he has created a demand for his clothing, so coming soon is an online boutique where each client will be given a gift certificate to buy swag and merch.

DISCLAIMER:  Topics discussed are general concepts, not intended to constitute legal advice, accuracy, nor completeness, and may not be relied upon as such; consult an attorney. FTIC is a national award winning title insurance company known for its white glove customer service and “No Junk Fee Guarantee.” ®


Senate Resolution 1008 “Great American Realtor Days is designated for February 3-5, “in recognition of the outstanding services realtors provide to residents and visitors of the state and the critical contribution they make to the state economy.” Finding teal estate represents 21.9% of Florida’s gross state product.

Fla. Stat. §40.013. Excuse Me? Jury Duty. Excuses from jury service 18-21 year old full-time-students.

Fla. Stat. §83.5615 Tenant Protection from Foreclosures. Prohibiting buyers of foreclosed properties from terminating bona fide residential leases without first providing the tenants with a 90-day notice to vacate (unless federal law requires more time).

Fla. Stat. §193.155 Homestead Portability. In the 2021 tax roll, increases timeframe which accrued benefits on homestead property tax assessments may be transferred from a prior homestead to a new homestead from 2 years to 3 years.

Fla. Stat. §196.082Ad Valorem Tax Reduction for Disabled Veteran’s Surviving Spouse. So long as the surviving spouse does not remarry, the ad valorem tax discount will be extended to surviving spouse, also allows for the discount to be ported over to surviving spouse’s new residence.

Fla. Stat. §§ 420.621-420.6275 Homelessness. Redefining homelessness as “An individual or family who lacks a fixed, regular, and adequate nighttime residence … or who will imminently lose their primary nighttime residence ….” Adds prohibition on excluding based on race, color, national origin, sex, handicap, familial status, or religion.

Fla. Stat. §§ 455.213, 489.115. Reciprocity for Out-Of-State Contractors. Opens up ability to get Florida construction license for those who held a valid and current contracting license for at least 10 years issued by another U.S. state.

Fla. Stat. §455.2278DBPR Licensure and Student Loans. Eliminating license suspensions or revocation based on student loan default or delinquencies.

Fla. Stat. §§ 456.072, 460.27, 760.22, 817.265 False use of Emotional Support Animals (“ESA”), Criminalizing, Disabilities. Word “Handicap” is no longer used, replace with “Disability.” Disciplining health care professionals if without personal knowledge they state a person is disabled or needs an emotional support animal (“ESA”). Makes it a 2nd degree misdemeanor and requires 30 hours of community service, if a person misrepresents they have a disability or disability-related need for an ESA. Makes persons with ESAs liable for damages caused by their ESA. Unless federally prohibited, housing providers:

  • May, require proof of licensing and vaccination of the ESA.
  • May, deny an ESA if it (1) poses a direct threat to safety or health of others; (2) physical damage to other’s property; and the threat cannot e reduced or eliminated by another reasonable accommodation.
  • May, If the disability is not readily apparent, request reliable information reasonably supporting the person’s disability like:

(1) Determination from the government,

(2) Disability benefits or services from the government,

(3) Proof of eligibility for housing assistance or housing voucher due to disability,

(4) Information from a health care or telehealth provider,

(5) Information identifying the particular assistance or therapeutic emotional support provided by the animal.

(6) Animal registrations of any kind (i.e. ID card, patch, certificate, or internet registration) by themselves are insufficient to reliably establish a person’s disability or need for an ESA.

  • May NOT, request information disclosing diagnosis or severity of a person’s disability
  • May NOT, request medical records relating to the disability
  • May NOT, require the use of a specific form or notarized statement
  • May NOT, discriminate in housing against persons with disabilities or needs for an ESA.
  • May NOT charge extra for an ESA.

Fla. Stat. §481.209Interior Designer Licensure. Eases the requirements for becoming a registered interior designer and obtaining a seal.

Fla. Stat. §489.103. Handyman licensure exception. Raises from $1,000 to $2,500, the exemption from licensure as a contractor. Doesn’t apply if work is part of a larger operation undertaken by the same or a different contractor.

Fla. Stat. §501.2106 Deceptive Legal Advertising. Solicitations for legal services directed to the public must clearly and conspicuously state “This is a paid advertisement for legal services”; Disclose the sponsor of the advertisement; Disclose the attorney or law firm who will represent persons responding to the advertisement or how those persons will be referred if the sponsor will not represent the persons; cannot imply it is a consumer alert or public service announcement; display logos or similar thereof implying affiliation with a government agency.

Fla. Stat. §613.57 Increases Property Insurance Requirements for Associations. Increases coverage for property insurance claims by a condo, co-op, or HOA under Florida’s Insurance Guaranty Association (FIGA) from $100,000 to $200,000 multiplied by the number of units.

Fla. Stat. §689.01Eliminates 2 Witness Requirement for Leases. “[N]o subscribing witnesses shall be required for a lease of real property or any such instrument pertaining to a lease of real property.”

Fla. Stat. §689.041Curing Scrivener’s Errors in deeds. Correcting an erroneous deed can be costly and time-consuming, as such action requires either tracking down the original grantor and getting the grantor to file a corrective deed or bringing a lawsuit in court for deed reformation. Now a single error or omission of: a lot or block; unit, building or phase number for condos or co-ops; a directional designation; or a fraction in the section township or range, can be fixed by recording a “curative notice” of the erroneous deed.

Fla. Stat. §712.05 Voids Discriminatory Restrictions in Property Records. Declaring “discriminatory restrictions” (meaning restrictions on an individual’s ownership, occupancy, or use of real property based on their race, color, national origin, religion, gender, physical disability, or other protected class) found within recorded title transactions (e.g. deeds, easements, condo docs) null and void.

Florida Chapter 714Adopts the Uniform Commercial Real Estate Receivership Act (UCRERA): A receiver is a person appointed by a court to take possession of another’s property and to “receive, collect, care for, and dispose of the property or [its] fruits.” In some instances, a receiver’s appointment (“receivership”) is governed by Florida statute. In other cases, such as receiverships for commercial real estate, a receiver is appointed under the court’s equity powers (“equitable receivership”). The Uniform Commercial Real Estate Receivership Act (UCRERA), adopted by seven states since 2017, specifies the circumstances under which a receiver may be appointed for commercial real estate, the scope of such a receivership proceeding, and the receiver’s powers, duties, and liabilities.

Fla. Stat. §§ 718.129, 719.131, 720.318Curbs Law Enforcement Parking Restrictions at HOAs. Condos, Co-Ops, and HOAs may not treat law enforcement vehicles as commercial vehicles, and may not prohibit them from parking in an area where the unit owner, or its tenant, guest, or invitee has a right to park.

Fla. Stat. §760.34 Private Lawsuits for Housing Discrimination. No more waiting and having to exhaust administrative remedies. Housing discrimination lawsuits alleging violations of the Florida’s Fair Housing Act (“FFHA”) may now be immediately filed in court without having to be first presented to Florida Agencies like the Florida Commission on Human Relations and waiting for their outcome.

Fla. Stat. §791.08 Fireworks and HOAs. HOAs may not prohibit homeowner’s from using fireworks on December 31st (New Year’s Eve), January 1st (New Year’s Day), or July 4th (Independence Day).

DISCLAIMER:  Topics discussed are general concepts, not intended to constitute legal advice, accuracy, nor completeness, and may not be relied upon as such; consult an attorney. FTIC is a national award winning title insurance company known for its white glove customer service and “No Junk Fee Guarantee.” ®

How to Protect Real Estate Buyers During Hurricane Season

We know major storms come, so how should realtors and practitioners in disaster prone areas prepare to minimize disruptions in their transactions? According to the National Hurricane Center, Florida’s hurricane season runs from June 1st to November 30th. Facebook also likes to remind me with pop-ups, that for the past 4 years during the exact same week, my family and I have had to prepare for a major storm. Suffice it to say, hurricanes are here to stay.

Property Insurance considerations. As a precondition to loaning money to buy property lenders generally require borrowers to purchase a property insurance policy with 100% Replacement Cost Value (RCV). Watch out because insurers are supposed to offer RCV policies with a “Law and Ordinance” endorsement which: (1) do not include costs necessary to meet applicable laws and ordinances regulating the construction, use, or repair of any property or requiring the tearing down of any property, including the costs of removing debris in the aftermath of a loss; and (2) does include such costs. However, if the insurer does not obtain the policyholder’s written rejection of both coverage options (1) and (2), “any policy covering the dwelling is deemed to include the law and ordinance coverage limited to 25 percent of the dwelling limit.” See, Fla. Stat. §627.7011(1)(a)-(b).

Claims for: Hurricane Michael (10/2018) averaged $57,754, Hurricane Florence (09/2018) $47,138, and Hurricane Harvey (08/2017) $116,823. Hurricane deductibles can be 2%, 5% or 10% of an insurance policy. See, Fla. Stat. §627.701(3)(a). Look for an insurance company that gives an accurate RCV, without over-insuring the property. It’s counterintuitive but, more insurance could mean less coverage for repairs. Consider this scenario, a property costs $1M to purchase, but the insurance agent offers coverage at $1.5M with a 2% deductible. The agent then explains that it will cost more to rebuild (regardless of your purchase price) and that is why the estimate is for $1.5M. First, when buying property, your purchase price included the land and maybe a pool – which generally isn’t going anywhere absent complete Armageddon. So when your agent calculates an RCV, speak to them about how they came up with their RCV estimation. Second think about if you had $60K in damages, the deductible on a $1M Property with a 2% deductible would only be $20K; but if the property were over-insured at $1.5M that deductible would kick up to $30K before any insurance dollars were paid out, meaning less money for the insured. So more insurance can be counter-productive.

Flood Insurance considerations. Flood Insurance is separate from property insuranceeven if hurricane winds and rain caused the flood to occur. The term “flood” includes, “The unusual and rapid accumulation or runoff of surface waters from any source.” Properties in high-risk flood areas with mortgages from federally regulated or insured lenders must have flood insurance (and there is no 30 day waiting period). In moderate/low risk flood areas, lenders may require flood insurance. But if there is no lender at all (e.g. cash buyer) or the lender is a Non-FDIC insured lender (e.g. private) and flood insurance is requested, then prepare to wait because there is a 30 day waiting period imposed by the NFIP (National Flood Insurance Program). As a work around, a buyer can purchase private flood insurance company (i.e. not NFIP backed) or have the seller transfer their existing flood insurance to the buyer. If you don’t have coverage and a storm hits, you may not get federal assistance through FEMA unless the event is declared a federal emergency and even then, post-disaster grants averaged less than $10,000.

Be diligent, when a storm is imminent insurers impose a binding moratorium and will not write new insurance policies, making it impossible to get a loan. Therefore, during storm season it is advisable to have the insurance agent “bind” coverage as soon as possible but postpone the effective date the insurance policy goes into effect until the closing date.

Lender/Mortgage Considerations. Lenders and insurers may elect to re-inspect or re-appraise property for storm damage and can charge their borrowers to re-value the property (i.e. the collateral), and cause delays. Further, if the new cost is bundled into the loan (as opposed to being paid outside of closing), then the Loan Estimate would need to change triggering a new 3 day waiting period under TRID. Moreover, interest rate locks may expire during a storm and cost more money to extend. Admirably, we know some awesome mortgage brokers have chosen to eat these cost for their borrowers.

As-IS Contractual Considerations. While the “As-Is Residential Contract For Sale And Purchase” may have a time-is-of-the-essence clause it specifically addresses casualties, losses, and force majeures in varying ways.

In the event of a disruption due to a force majeure, Section 18G allows for all time periods (not just the closing date) to be “extended a reasonable time up to 7 days after the Force Majeure no longer prevents performance under this Contract.” It may surprise you to learn that the term “force majeure” broadly includes any extreme weather, act of God, or unusual transportation delays which, by exercise of reasonable diligent effort, the non-performing party is unable in whole or in part to prevent or overcome. Could a force majeure include an intervening cancelled flight, a death, fed-ex’s failure to transport required documents? If a delay due to a force majeure arises anytime during the course of a contract (not just on the deadline) the parties should promptly provide the other party with a description of the delay, what was done to lessen the delay, the time adjustments needed.  But extensions are not indefinite. Force Majeures that push the closing date more than 30 days allow either party to cancel the Contract without penalty.

18.G. FORCE MAJEURE: Buyer or Seller shall not be required to perform any obligation under this Contract or be liable to each other for damages so long as performance or non-performance of the obligation, or the availability of services, insurance or required approvals essential to Closing, is disrupted, delayed, caused or prevented by Force Majeure. “Force Majeure” means: hurricanes, floods, extreme weather, earthquakes, fire, or other acts of God, unusual transportation delays, or wars, insurrections, or acts of terrorism, which, by exercise of reasonable diligent effort, the non-performing party is unable in whole or in part to prevent or overcome. All time periods, including Closing Date, will be extended a reasonable time up to 7 days after the Force Majeure no longer prevents performance under this Contract, provided, however, if such Force Majeure continues to prevent performance under this Contract more than 30 days beyond Closing Date, then either party may terminate this Contract by delivering written notice to the other and the Deposit shall be refunded to Buyer, thereby releasing Buyer and Seller from all further obligations under this Contract.”

Typically a due diligence period is around 7 to 15 days; however, Section 10G of the As-IS addresses Flood Insurance by providing 20 days (unless changed) to cancel the contract if the buyer discovers that for insurance purposes the property is “below minimum flood elevation or is ineligible for flood insurance coverage.”

(d) FLOOD ZONE; ELEVATION CERTIFICATION: Buyer is advised to verify by elevation certificate which flood zone the Property is in, whether flood insurance is required by Buyer’s lender, and what restrictions apply to improving the Property and rebuilding in the event of casualty. If Property is in a “Special Flood Hazard Area” or “Coastal Barrier Resources Act” designated area or otherwise protected area identified by the U.S. Fish and Wildlife Service under the Coastal Barrier Resources Act and the lowest floor elevation for the building(s) and/or flood insurance rating purposes is below minimum flood elevation or is ineligible for flood insurance coverage through the National Flood Insurance Program or private flood insurance as defined in 42 U.S.C. §4012a, Buyer may terminate this Contract by delivering written notice to Seller within _____ (if left blank, then 20) days after Effective Date, and Buyer shall be refunded the Deposit thereby releasing Buyer and Seller from all further obligations under this Contract, failing which Buyer accepts existing elevation of buildings and flood zone designation of Property. The National Flood Insurance Program may assess additional fees or adjust premiums for pre-Flood Insurance Rate Map (pre-FIRM) non-primary structures (residential structures in which the insured or spouse does not reside for at least 50% of the year) and an elevation certificate may be required for actuarial rating.”

Maintaining the property and Casualties are addressed in Section 11 and Section 18M of the As-IS. Sellers are generally required to maintain the property, pool, and landscaping excepting ordinary wear and tear. But in the event of a “Casualty Loss” including from a severe storm or fire which occurs prior to closing, the Seller could be liable for repair costs up to 1.5% of the Purchase Price. If the costs exceed 1.5% then the Buyer can cancel without penalty or take the 1.5% and close as-is.

11. PROPERTY MAINTENANCE: Except for ordinary wear and tear and Casualty Loss, Seller shall maintain the Property, including, but not limited to, lawn, shrubbery, and pool, in the condition existing as of Effective Date (“AS IS Maintenance Requirement”).”

18.M. RISK OF LOSS: If, after Effective Date, but before Closing, Property is damaged by fire or other casualty (“Casualty Loss”) and cost of restoration (which shall include cost of pruning or removing damaged trees) does not exceed 1.5% of Purchase Price, cost of restoration shall be an obligation of Seller and Closing shall proceed pursuant to terms of this Contract. If restoration is not completed as of Closing, a sum equal to 125% of estimated cost to complete restoration (not to exceed 1.5% of Purchase Price) will be escrowed at Closing. If actual cost of restoration exceeds escrowed amount, Seller shall pay such actual costs (but, not in excess of 1.5% of Purchase Price). Any unused portion of escrowed amount shall be returned to Seller. If cost of restoration exceeds 1.5% of Purchase Price, Buyer shall elect to either take Property “as is” together with the 1.5%, or receive a refund of the Deposit thereby releasing Buyer and Seller from all further obligations under this Contract. Seller’s sole obligation with respect to tree damage by casualty or other natural occurrence shall be cost of pruning or removal.”

DISCLAIMER: Topics discussed are general concepts, not intended to constitute legal advice, accuracy, nor completeness, and may not be relied upon as such; consult an attorney. FTIC is a national award winning title insurance company known for its white glove customer service and “No Junk Fee Guarantee.” ®

How to Get offers accepted in a Hot Market – 28 Secret Weapons

In a hot market with low inventory, meaning there is a glut of available properties for buyers to purchase, when something comes on the market; you have to be lighting-fast and come out with guns blazing a strong offer!! Sellers are receiving multiple offers at-and-above asking price, the market is highly competitive, and you need your offer to stand out. So how do you get to yes? Here are some ideas categorized by the: (1) Kindness Approach; and (2) Economically Strategic Approach; on how to get your buyers’ offers accepted:


1. This sounds hokey but I am starting with this as my number one (#1). Call and build a rapport with the listing agent and ask what terms are most important for the seller. I’ve heard about a listing agent receiving seven (7) offers one weekend but only heard from two (2) before or after receiving their offers.

2. Present the offer in person or (nowadays) virtually via zoom. Let them know it will only take a few minutes, and you are bringing them a very nice offer that you know the seller and they will be excited to see! It will only take no more than 5 minutes of their time ?.

3. Video the buyers (in front of the house) as to why they love the house.

4. Pay very close attention to seller’s personal collections and family pictures. After touring the house, buyer notices a Miami Heat poster in the kid’s room and a vacation picture at Disney. Buyer sends Disney tickets and a signed Heat Jersey.

5. Look up the Sellers. Find out what sellers are involved in and make $500.00 payment to charity of their choice.

6. Picture drawn by the kids of the house.

7. Hand signed letter from the heart, identify what you love, honored if chosen, and a promise to take care of it.

“I had the pleasure of touring your home and fell in love with the possibility of one day living here. I think it would be the perfect home to raise my children in, and they were excited to have a place that we can finally call home. I want the best for my children. I would like to move to ______ so I can surround them with diversity, culture, and education they deserve. I would love more than anything to have a stable home for them to always come home to. Please consider accepting my offer. Thank you for your kind consideration, /s/ Signature.

8. Uber eats personally delivers the offer.


9. Nonrefundable deposit up to $1,000.00 to be immediately released to Seller, but credited to buyer if deal closes.

10. Put down a higher (e.g. double) earnest money deposit.

11. Show proof of funds (whether cash buyer or not).

12. Shorten closing date to 2 weeks.

13. Shorten closing date to 2 weeks BUT, add Post-Occupancy Agreement for Seller to stay at $0.00.

14. Shorten closing date to 2 weeks BUT, for every day thereafter buyer pays non-refundable extension fee of $______/day to be released from buyer’s deposit to seller, and which, if the property closes, is either: [_] in addition to the sales price; or [_] goes towards the sales price. If the property does not close within ____ days from the effective date, then allow either the seller or buyer to cancel but preserving seller’s obligation to pay the extension fee.

15. Pre-Approval Letters from buyer’s lender and indicating that buyer already has provided all of their check stubs, bank statements, tax returns to get the process started. Be proactive and show you may be able to close sooner than the standard 30-45 days.

16. Shorten inspection period.

17. Limited inspection rights. Notwithstanding buyer’s inspection rights, buyer waives the first $4,000.00 of inspection issues.

18. Waiving inspection entirely (extremely dangerous and not recommended unless gutting/demolishing the structure or buyer previously inspected).

19. Buyer pays seller’s prorations (e.g. taxes, HOA maintenance).

20. Buyer pays maintenance, landscaping, pool, and utilities from time of acceptance until closing.

21. Pay seller’s moving costs (with a cap).

22. Pay typical seller costs (with a cap) like:

(1) Doc Stamps + surtax on the deed;

(2) Seller’s Settlement Fee (e.g. to prepare their closing documents charged by their attorney or title company)

(3) HOA estoppel fees (if any);

(4) Title search (if SELLER’S Box is Checked or the Miami-Dade/Broward Regional Provision is Checked under Article 9),

(5) Municipal lien search (if SELLER’S Box is Checked or the Miami-Dade/Broward Regional Provision is Checked under Article 9),

(6) Owner’s title policy (if SELLER’S Box under Article 9)

23. Buyer pays commissions.

24. Cooperating broker (buyer’s sales agent) gives back 0.50% commission. Buyer separately agrees to reimburse Cooperating Broker 0.5%

25. If does not appraise, Buyer will pay the difference.

26. If the appraised value comes in below the contract price, the buyer agrees to pay $____ above the appraised value, not to exceed the contract price.

27. Escalation Clauses allow buyers to get another bite-at-the-apple and insures they are the highest bidder. The problem with giving a “Highest and Best,” “Final Offer,” “Take it or Leave it!” is that it leaves no room to negotiate. These can be quite useful in multiple offer scenarios. An escalation clause states that the buyer will pay a certain amount of money above the highest offer the seller receives. It generally includes a ceiling cap to make sure the buyer doesn’t agree to pay more money than they can afford. Now whether the no cap matters or not, may not make a difference if a buyer can simply cancel under the inspection period anyway.

Advantages: (1) It’s an attention grabber; (2) Seller could cross out the escalation clause and counter with buyer’s highest bid (See disadvantages); but who cares? The Buyer got what it was willing to spend anyway; (3) Seller may perceive the buyer as the most desirous to have the home; (4) If you think a listing agent is lying (I know it never happens) about having multiple offers. No Buyer’s remorse after losing deal thinking, “I wonder what would have happened if I just had the opportunity to offer $5,000 more?” At today’s 30 year fixed mortgage interest rates, a $10,000 increased would only amount to a little over $40.00 month.

Disadvantages: (1) Upsetting a seller into thinking you’re playing games. If you can offer +$5,000 then just include that in your hard offer; (2) It’s only an offer so Seller could cross out Buyer’s escalation clause and counter with your highest bid [in fact – expect this]. (3) Seller may reject and say just give me your highest and best offer; (4) Some sellers don’t like it because the buyer isn’t putting their best foot forward and are not competing fairly (I only heard one example of this); (5) Frustrating and offending the Seller with gamesmanship – “Hey I am offering X but I am really willing to pay up to Y.”; (6) In some states like TX they are not allowed so check with your local ethics Board, FREC, and attorney.


Credit: Lifestyle International Realtor Livan Bec. Jr.

28. Kick-Out-Clause / Right-of-First Refusal. What a terrible term! I prefer Right-of-First-Refusal. When a seller receives a weak or low offer or one full of contingencies with terms less optimal than seller hoped for, this is an attractive alternative to bridge the gap and keep things moving. The way it works is, if another buyer comes along and makes an offer, the original buyer is given 24-72 hours to either meet or beat the new offer or receive their deposit back. Form Simplicity has two (2) forms which serve as examples: (1) CR-5x_X. Kick Out Clause; and (2) CRSP16.E.backup kickout addendum. * Note this concept is different from a back-up-offer which would allow a 2nd offer to put down a deposit and then move into 1st position if the original offer is terminated and falls through.

Another scenario is if the Seller insists their Fair Market Value is $600,000, but your research shows it is overpriced, and a fair estimate would be $500,000. Make an offer with a 60 day kick out clause. This essentially says I am so confident my offer is fair that I am willing to bet you won’t find a better deal out there.

DISCLAIMER: Topics discussed are general concepts, not intended to constitute legal advice, accuracy, nor completeness, and may not be relied upon as such; consult an attorney.   FTIC is a national award winning title insurance company known for its white glove customer service and “No Junk Fee Guarantee.” ®

How the CFPB Protects Buyers in Real Estate. Common Questions Answered.

History of the CFPB. It started with professor Elizabeth Warren, who taught and specialized in bankruptcy. Yes, the same Elizabeth Warren who became a US Senator and sought the Democratic nomination for President. She called for the creation of a new independent federal agency to focus on regulating consumer financial products targeted at American households like credit cards and mortgages to name a few.[1]   Her goal was to: move away from legal jargon, be more coherent and consumer-oriented, and have financial products reviewed under one (1) single independent agency. Her timing was just right because, in 2010, the subprime mortgage market collapsed, $10 Trillion in household wealth was wiped out, and in that aftermath Obama’s administration asked Congress to establish an agency to ensure consumer protection. [2]

So What is the CFPB?   The Dodd-Frank Act created the Consumer Financial Protection Bureau (CFPB) as an independent financial regulator within the Federal Reserve System.[3] It moved 18 existing federal statutes to the CFPB to administer including the Truth-In-Lending Act, Fair Credit Reporting Act, and the Fair Debt Collection Practices Act and vested the CFPB with potent investigative and enforcement powers including seeking restitution, disgorgement, injunctive relief, and civil penalties of up to a $1Million a day! The CFPB pursues unfair, deceptive, or abusive acts or practices; Writes rules; Supervises companies; Enforces laws outlawing consumer finance discrimination; Gives financial education; and Monitors new risks to consumers.[4] In the past 10 years, the CFPB obtained $11 Billion in penalties ($1 Billion from Wells Fargo for charging too much for mortgage interest rate-lock extensions, and adding insurance costs and fees into auto loans).[5]

CFPB is the watchdog for: (1) Mortgage Companies; (2) Credit Reporting; (3) Personal Loans; (4) Debt Collection; (5) Credit Repair Services; (6) Personal Consumer Reports; (7) Credit Cards; (8) Pre-paid Cards; (9) Checking Accounts; (10) Savings Accounts; (11) Vehicle Loans; (12) Leases; (13) Student Loans; (14) Payday loans; (15) Title Loans; (16) Money Transfers; (17) Virtual Currency; (18) Check Cashing; (19) Currency Exchange; (20) Cashier’s/ Traveler’s checks; and (21) Debt Settlement.[6] Complaints can be filed against companies and individuals with CFPB online, and the CFPB can be called at (855) 411-CFPB (2372) for more information.

Is the CFPB a valid Agency or has it been Abolished? On June 29, 2020, the United States Supreme Court decided Seila Law, LLC v. Consumer Financial Protection Bureau, putting the CFPB in the hotseat of whether it would be dismantled. The case revolved around a law firm providing debt-related legal services was issued a subpoena from the CFPB in order to investigate the firm’s business practices, the law firm refused to comply, objecting that the CFPB’s entire existence was unconstitutional as its structure violated the Separation of Powers. The Supremes agreed in part, but offered a resolution to fix the CFPB’s ill-formed structure stating,

“In organizing the CFPB, Congress deviated from the structure of nearly every other independent administrative agency in our history. Instead of placing the agency under the leadership of a board with multiple members, Congress pro­vided that the CFPB would be led by a single Director, who serves for a longer term than the President (i.e. 5 years) and cannot be removed by the President except for inefficiency, neglect, or malfeasance. The CFPB Director has no boss, peers, or voters to report to.” … “Such an agency lacks a foundation in historical practice and clashes with constitutional structure by concentrating power in a unilateral actor insulated from Presidential control. We therefore hold that the structure of the CFPB violates the separation of powers. … The agency may therefore continue to operate, but its Director, in light of our decision, must be removable by the President at will.”

Questions answered by the CFPB as it pertains to Real Estate. Remembering that the CFPB is consumer oriented, so it has a wealth of information. The following questions have been answered by the CFPB as common questions that occur in real estate transaction but unfortunately their website is not well organized by topic. I have re-organized them for easy reference as it pertains to obtaining a loan for real estate transactions:

DISCLAIMER: Not intended to constitute legal advice, accuracy, nor completeness, and may not be relied upon as such; consult an attorney.   FTIC is a national award winning title insurance company known for its white glove customer service and “No Junk Fee Guarantee.” ®

[1] Seila Law, LLC v. Consumer Financial Protection Bureau Pg. 8

[2] Seila Law, LLC v. Consumer Financial Protection Bureau Pg. 8

[3] Seila Law, LLC v. Consumer Financial Protection Bureau Pg. 9

[4] The Bureau.

[5] Wells Fargo Hit With $1 Billion In Fines Over Home And Auto Loan Abuses

[6] CFPB Complaint.


History. Civil rights leader Martin Luther King Jr. said that The Civil Rights Act of 1964 was nothing less than a “second emancipation.” President John F. Kennedy, initially proposed the Act garnering strong opposition, but Kennedy’s successor, Lyndon B. Johnson signed it into law. The Act was championed for ending segregation in public places, and banning employment discrimination based on: race, color, religion, sex, and national origin. The Act was later supplemented to embrace pregnancyage, and disability as additional protected classes.[1] The Act paved the way for two major follow up laws: The Voting Rights Act of 1965, which banned the use of obstacles (e.g. state and local poll taxes, literacy tests, refusal to tabulate or cast a vote, intimidation, threats, or coercion) preventing African Americans from exercising their right to vote as guaranteed by the U.S. Constitution’s 15th Amendment; and the Fair Housing Act of 1968 (“FHA”) which is the heart of this article.

Passing of the FHA, and MLK Jr.. On April 4, 1968, the day the Senate voted in favor of the FHA, Martin Luther King, Jr. was assassinated in Memphis, Tennessee. Amid a wave of emotions, including riots, burning, and looting in more than 100 cities around the country, President Lyndon B. Johnson pressured Congress to pass the new civil rights legislation before King’s funeral in Atlanta. On April 10, 1968, the House passed the FHA, and President Johnson signed it into law the following day.

Who does the FHA apply to? Property owners, property managers, developers, builders, architects, real estate agents, mortgage lenders, homeowner associations, insurance providers, and others who affect housing opportunities.

Prohibited Discriminatory Practices In Housing Sales and Rentals. It is discrimination to take any of the following actions because of race, color, religion, sex, familial status, or national origin and in some cases disability:

  • Refuse to negotiate sales or rentals.
  • Discourage sales or rentals.
  • Discourage the purchase or rental of a dwelling.
  • Misrepresent that a dwelling is unavailable for inspection, sale, or rental even though it is.
  • Make unavailable or deny a dwelling.
  • Refuse sales or rentals after making a bona fide offer.
  • Different terms, conditions, or privileges of sales or rentals.
  • Different services or facilities in connection sales or rentals.
  • Make a statement of preference, limitation, or discrimination for or against a protected class. (for this reason, realtors are guided to use words that only describe the property, and avoid words as outlined more fully below).
  • “Blockbusting” – For profit, persuade, or try to persuade, homeowners to sell their homes by suggesting that people of a particular protected characteristic are about to move into the neighborhood.
  • “Steering” – steer a renter or buyer to a certain area.
  • Deny access or membership to any MLS or real estate brokers’ organization.
  • Different sales prices or rental charges.
  • Different qualification criteria, applications, standards, or procedures, (e.g. income standards, application requirements, application fees, credit analyses, approval procedures or other requirements)
  • Evict a tenant or a tenant’s guest.
  • Sexual harassment (e.g. quid-pro-quo, or a hostile environment). Women, particularly those who are poor, and with limited housing options, often have little recourse but to tolerate the humiliation and degradation of sexual harassment or risk having their families and themselves removed from their homes. The Department of Justice’s enforcement program is aimed at landlords who create an untenable living environment by demanding sexual favors from tenants or by creating a sexually hostile environment for them.
  • Fail or delay performance of maintenance or repairs.
  • Assign person to a particular building, section, or neighborhood.
  • Different terms or conditions of homeowner’s insurance.
  • Retaliate against one who files, or assists in filing, a fair housing complaint or investigation.
  • Fail to make reasonable accommodations and allow reasonable modifications necessary to allow persons with disabilities to enjoy their housing.
  • Discriminate in appraising a dwelling
  • In Lending: Charge different points, interest rates, or other costs.
  • In Lending: Denying a mortgage, or charging higher interest rates for properties located in minority neighborhood
  • In Lending: Fail to consider applicant’s disability-related income, such as SSI, or SSD.
  • In Lending: Steering borrowers to loans with less favorable terms.
  • In Lending: Refusing mortgages to women on maternity leave.
  • In Lending: Providing a different customer service experience.

Words to avoidAll words must be considered in context, however a non-exhaustive list of words and phrases to generally “avoid,” “use caution,” and which are “acceptable” are found in this link.

“No criminal convictions.” Some statements may not seem discriminatory but in fact have a discriminatory effect, result in disparate treatment, and thus have a “Disparate Impact” on a protected class. Although criminal convictions are not by themselves a protected class, a 2016 HUD memo, titled Office of General Counsel Guidance on Application of Fair Housing Act Standards to the Use of Criminal Records by Providers of Housing and Real Estate-Related Transactions found that screening out all criminal convictions, regardless of underlying crime and when it occurred, could violate the FHA. The memo mentions that,

“Across the United States, African Americans and Hispanics are arrested, convicted, and incarcerated at rates disproportionate to their share of the general population. Consequently, criminal records-based barriers to housing are likely to have a disproportionate impact on minority home seekers.”

Drug or alcohol useUnder the Fair Housing Amendments Act, landlords cannot refuse to rent to someone on the basis of past drug addiction, or alcoholism, as this is considered a disability. However, current drug users, as well as individuals with convictions for drug sales or manufacturing, are not part of this protected category.

Exemptions from discrimination. The FHA generally exempts but subject to even more limited circumstances: (1) “The Mrs. Murphy exemption” i.e. an owner-occupied building with 4 units or less; (2) Sales or rentals by an owner of 3 or fewer single-family homes, provided no agent is used, no discriminatory advertisements are used, owns 3 or fewer single-family homes, is not in the business of selling or leasing dwellings, and has not sold a home in the previous 24 months; (3) housing operated by religious organizations for persons of the same religion; (4) Tenants constituting a direct threat to others health or safety, or whose tenancy would result in substantial physical damage to others’ property; (5) Housing for Older Persons (55+ years of age) may discriminate based on age; and (6) Private clubs not open to the public may limit occupancy to its members if the lodging is an incident to its primary purpose, and is owned or operated by them not for a commercial purpose.

Not so obvious examples of discrimination. A landlord locates families with children to a single portion of a complex, places an unreasonable restriction on the total number of persons who may reside in a dwelling, or limits access to recreational services provided to other tenants. Muslim woman wearing a jihab sees an advertisement and is told no units are available and asks to be put on a waiting list but never receives a call. Asian man interested in a neighborhood is asked by realtor if he will feel comfortable there, and another neighborhood with more “people like you” is suggested. Advertising ‘professionals only,’ may unfairly discriminate against people who can’t work due to disabilities.

Undercover Informants. Trained volunteers who, without any intent to rent or purchase, pose as prospects to gather information. These “Testers”, inform whether a housing provider is complying with fair housing laws or engaging in unlawful housing discrimination based on race, national origin, disability, or familial status. Most testing cases are based on allegations of agents misrepresenting the availability of rental units or offering different terms and conditions based on race.

HUD Enforcement. Housing discrimination complaints are investigated by The U.S. Department of Housing and Urban Development (HUD’s), Office of Fair Housing and Equal Opportunity (FHEO). Complaints may be filed within one year as an online complaint. FHEO intake specialist can be reached nationally at 1 (800) 669-9777 or 1 (800) 877-8339, in the regional office for Florida at (404) 331-5140 or (800) 440-8091, or directly at the Miami Field office at (305) 536-4456.

HUD’s Tools For Forcing Compliance. HUD may: conduct investigations, engage in “Conciliation” (i.e. mediate), request parties enter into a “Conciliation Agreement” (i.e. a written settlement or require the parties go to arbitration to award appropriate relief including monetary); make the conciliation agreement public, refer breaches of the conciliation agreement to the Attorney General’s Office for a civil lawsuit to be filed, at any time authorize the AG’s Office to file immediate injunctive relief pending final disposition of the complaint; and if the complaint relates to discriminatory housing practices may refer the matter to a State agency. Hearings may be conducted on an expedited basis before an administrative law judge, or by the AG’s office in United States District Court. Sanctions include: actual damages; injunctive relief; equitable relief; and civil fines up to $10,000 (1st time); $25,000 (>1 in 5yrs); or $50,000. If a real estate agent is found to have committed discriminatory housing practices HUD must refer the case over to the DBPR for disciplinary action.

Civil Lawsuits. Within two (2) years an aggrieved person (i.e. Someone who claims to have been injured, or will be injured, by a discriminatory housing practice) may sue, and the court may appoint an attorney upon application. The court may: award actual damages; award punitive damages; order temporary and permanent injunctions; issue restraining orders; compel affirmative action be taken; award attorney fees and costs; and award other relief as the court deems appropriate.

* Additionally, be aware that Florida’s Fair Housing Act (Fla. Stat. §§760.20-37), and any county or city rules that could add even more protected classes, such as source of income, age, or actual or perceived status as a victim of domestic violence, dating violence, or stalking.

DISCLAIMER: Not intended to constitute legal advice, accuracy, nor completeness, and may not be relied upon as such; consult an attorney. FTIC is a national award winning title insurance company known for its white glove customer service and “No Junk Fee Guarantee.” ®

[1] In 1988, Congress passed the Fair Housing Amendments Act, which expanded the law to prohibit discrimination in housing based on disability or on family status (pregnant women or the presence of children under 18).

eNotes and eVaults – Why are they eSpecial?

Many of us are familiar with DocuSign as a quick and easy means of signing documents electronically. But why can’t you just slap a digital signature on a promissory note, what makes promissory notes so different, and what is an eNote?

History. Back in 2000, Congress passed the ESIGN Act (Electronic Signatures in Global and National Commerce) 15 USC §7001 et sequi, forcing states to accept electronic signatures and records as valid, legal, and enforceable means of conducting transactions but “Transferable Records” (or eNotes as they are commonly called in the industry) were given special treatment.[1] As a result, 47 states adopted the UETA (Uniform Electronic Transactions Act) which established uniform guidelines for accepting electronic signatures and records (WA, NY, and IL adopted their own similar legislation).

Promissory notes are unique. The obligation to repay a loan for a residence was traditionally evidenced by a written-paper-negotiable promissory note. It is common for the original lender to then turnaround and resell that note secured by a mortgage to GSE’s (Government Sponsored Enterprises) like Fannie Mae, Ginnie Mae, and Freddie Mac. The GSEs then pool, bundle, and repackage notes and mortgages into Mortgage Backed Securities (“MBS”) and resell them on the secondary mortgage market to investors. These are typically seen as low-risk investments because the GSEs guarantee the principal and interest on the note even if the borrower defaults. Reselling the note is how lenders free up money to make more loans and the circle of buying and selling notes, which is big business, on the open market continues.

How is a note Transferred? Transferring a written promissory note is generally accomplished by physically delivering the original wet ink signed note, along with a written or stamped “indorsement,” thereby giving the transferee the right to enforce the note. But as the industry moved to substitute paper notes, a new process to replace the physical delivery of possession and indorsement of an “original” paper promissory note needed to be created.[2] Most promissory notes fall under the legal scheme of “negotiable instruments,” which is governed by Article 3 of the Uniform Commercial Code (UCC).[3] Article 3 of the UCC alone does not support a promissory notes executed as electronic records.[4] But more importantly, the industry and borrowers needed assurances and protection. A pdf of a promissory note signed by a borrower could be easily duplicated and forwarded by email instantaneously to an infinite amount of people, a black-market of duplicated counterfeit notes could be sold to unsuspecting buyers, borrowers could be subject to multiple counterfeit claims because their note was resold to multiple investors without anyone knowing (unlike a wet-signed paper version) which one of the electronically signed promissory notes was the original and only note capable of being enforced. This is why eNotes required special attention and legislation, and simply slapping an electronic signature on a pdf of a note is insufficient.

“eNotes” are the electronic version of a paper-based negotiable promissory note. It is not just a pdf version of a promissory note. Florida’s Statute §668.50 is Florida’s UETA (Uniform Electronic Transfer Act) which establishes the framework for signing, storing, and transferring eNotes from an original lender to subsequent purchasers. The technical and legal term for an eNote under Florida’s UETA is also called a “Transferrable Record.”[5] Rather than being concerned with a paper promissory note’s “possession” and “indorsement” requirements, eNotes focus on “control” and “transfer of control” of the electronic records showing ownership thereof. In addition to meeting Florida’s statutory requirements set forth in §668.50(16), in order for the eNote to qualify for being purchased by a GSE (e.g. Fannie Mae’s requirements are examined below), eNotes must be:

  • Electronically created by the Lender in the MISMO S.M.A.R.T. Doc® format (Not a pdf).[6] SMART stands for Securable • Manageable • Archivable • Retrievable • Transferable; [7]
  • If it is an eNote that is intended to be offered for sale to Fannie Mae or Freddie Mac, then be aware that they use “Uniform Instruments” which must be modified to reflect that the promissory note is actually an eNote. If an eNote is going to be used as part of the loan package, then the eNote must contain additional headers, footers, and clauses agreeing to the electronic means; [8]
  • eNote is then loaded by the lender into the eClosing platform chosen by the lender.[9]
  • Electronically signed by the borrower;[10]
  • A system of logs and audit trails must be maintained for the life of the loan plus seven (7) years; [11]
  • A tamper-evident cryptographic seal, created by digital signature technology, must be applied to the signed document immediately after the last borrower’s signature has been applied. If any alterations are made to the document, the seal will be compromised, therefore making it apparent that the document has been altered. [12]
  • Within one (1) business day of signing, the eNote must be “registered” in the “MERS® eRegistry” (owned and operated by MERSCORP Holdings, Inc) showing the original lender named in the eNote as the party with “control” of the eNote (the “Controller”) and the location of the eNote (i.e. where the eNote is being stored); [13]
  • After registration, all subsequent transfers of “control” from one party to another must be properly recorded on the “MERS® eRegistry”, so that the MERS® eRegistry identifies the current party in “control” (i.e. the current transferee).

eVAult. With respect to locating the eNote, the eNote is only “registered” in the MERS® eRegistry but that is not where the eNote is “stored.” The MERS® eRegistry is like the librarian of the eNote world. It simply tracks who controls which eNote and which eVault the eNote is stored. The actual eNote is stored and maintained by the lender or its designated custodian in an “eVault.” eVaults are electronic platforms built to store the eNote and integrate directly with the MERS® eRegistry. That lender must be prepared to demonstrate that the eNote, while in the lender’s “control,” has not been impermissibly altered since it was signed, thus the eVault must have the proper controls in place to maintain a definitive copy of the eNote, otherwise referred to as the “authoritative copy.[14] Thus an eVault is a critical component to enforceability. Controllers mostly utilize third-party services to maintain the eVault, but some operate the eVault software platform within their own internal data processing services.

DISCLAIMER: Not intended to constitute legal advice, accuracy, nor completeness, and may not be relied upon as such; consult an attorney. FTIC is a national award winning title insurance company known for its white glove customer service and “No Junk Fee Guarantee.” ®

[1] See, 15 USC §7002.

[2] See, 673.2011 Negotiation.—

(1) The term “negotiation” means a transfer of possession, whether voluntary or involuntary, of an instrument by a person other than the issuer to a person who thereby becomes its holder.

(2) Except for negotiation by a remitterif an instrument is payable to an identified person, negotiation requires transfer of possession of the instrument and its indorsement by the holder. If an instrument is payable to bearer, it may be negotiated by transfer of possession alone.

[3] Why Can’t I Just Slap an E-signature on a PDF Note?

[4] Enabled By Lenders, Embraced By Borrowers, Enforced By The Courts: What You Need To Know About Enotes, By Margo H.K. Tank and R. David Whitaker, May 1, 2018, Pg. 1

[5] Fla. Stat. §668.50(16)


(a) For purposes of this paragraph, “transferable record” means an electronic record that:

1. Would be a note under chapter 673, or a document under chapter 677, if the electronic record were in writing.

2. The issuer of the electronic record expressly has agreed is a transferable record.

(b) A person has control of a transferable record if a system employed for evidencing the transfer of interests in the transferable record reliably establishes that person as the person to which the transferable record was issued or transferred.

(c) A system satisfies paragraph (b), and a person is deemed to have control of a transferable record, if the transferable record is created, stored, and assigned in such a manner that:

1. A single authoritative copy of the transferable record exists which is unique, identifiable, and, except as otherwise provided in subparagraphs 4., 5., and 6., unalterable.

2. The authoritative copy identifies the person asserting control as the person to which the transferable record was issued or, if the authoritative copy indicates that the transferable record has been transferred, the person to which the transferable record was most recently transferred.

3. The authoritative copy is communicated to and maintained by the person asserting control or its designated custodian.

4. Copies or revisions that add or change an identified assignee of the authoritative copy can be made only with the consent of the person asserting control.

5. Each copy of the authoritative copy and any copy of a copy is readily identifiable as a copy that is not the authoritative copy.

6. Any revision of the authoritative copy is readily identifiable as authorized or unauthorized.

(d)Except as otherwise agreed, a person having control of a transferable record is the holder, as defined in s. 671.201(21), of the transferable record and has the same rights and defenses as a holder of an equivalent record or writing under the Uniform Commercial Code, including, if the applicable statutory requirements under s. 673.3021, s. 677.501, or s. 679.330 are satisfied, the rights and defenses of a holder in due course, a holder to which a negotiable document of title has been duly negotiated, or a purchaser, respectively. Delivery, possession, and indorsement are not required to obtain or exercise any of the rights under this paragraph.

(e) Except as otherwise agreed, an obligor under a transferable record has the same rights and defenses as an equivalent obligor under equivalent records or writings under the Uniform Commercial Code.

(f) If requested by a person against which enforcement is sought, the person seeking to enforce the transferable record shall provide reasonable proof that the person is in control of the transferable record. Proof may include access to the authoritative copy of the transferable record and related business records sufficient to review the terms of the transferable record and to establish the identity of the person having control of the transferable record.

[6] Guide to Delivering eMortgages to Fannie Mae, April 20, 2020, ¶3.3.2

[7] Mismo SMART Doc® Components consist of: “An electronic document created to conform to a specification standardized by MISMO®. A SMART Doc® can lock together data and presentation in such a way that it can be system-validated to guarantee the integrity of the document. The SMART Doc Specification is a technical framework for representing documents in an electronic format. This format links data, the visual representation of the form, and signature. The visual representation of the documents can utilize a variety of technologies, such as XHTML, PDF, and TIFF. A SMART Doc can be secured to prevent tampering. Therefore, the Specification allows system validation to ensure that what the borrower sees and signs on the computer screen is the exact document that will be stored. It also ensures that the data displayed on the screen will be the exact data used for processing the loan.”

[8] Guide to Delivering eMortgages to Fannie Mae, April 20, 2020, Appendix A ¶(c) e-Note Clause

[9] E-Notes and E-Mortgages what you should know.

[10] Guide to Delivering eMortgages to Fannie Mae, April 20, 2020, ¶3.3.3

[11] Guide to Delivering eMortgages to Fannie Mae, April 20, 2020, ¶3.3.4

[12] Guide to Delivering eMortgages to Fannie Mae, April 20, 2020, ¶3.4.1

[13] Guide to Delivering eMortgages to Fannie Mae, April 20, 2020, ¶3.5

[14] Enabled By Lenders, Embraced By Borrowers, Enforced By The Courts: What You Need To Know About Enotes, By Margo H.K. Tank and R. David Whitaker, May 1, 2018, Pg. 2