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:

I. KINDNESS APPROACH:

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.

II. ECONOMICALLY STRATEGIC APPROACH:

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. Accord.BankRate.com.

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.

Examples:

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.

Unequal≠Housing

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)

(16) TRANSFERABLE RECORDS.—

(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

PropTech, turf-war for Realtors, or welcomed change?

PropTech, refers to technology in real estate. It focuses on ways to optimize the way people research, rent, buy, sell, and manage property. PropTech already sought to disrupt the real estate industry but COVID-19 and stay-at-home orders just catapulted it into the fast tracked. Here are some PropTechs worthy of your attention that are going to be market disrupters, useful tools, or game changers that will help real estate professionals adapt, evolve, fail, be inspired, or make strategic partnerships in a virtual cyber gang-war over real estate turfs:

CupixEasyPanoEyeSpy360MatterportRicohToursZillow, 3DHomeTour, 360 degree cameras for virtual tours. Some turn a space into accurate and immersive digital doll houses giving the real feel of being right inside the property. Matterport allows you to click and drag to accurately take measurements for furniture placement.

AivaMarketLeaderReferralExchangeBoomTownVerse/Agentology, Real estate lead generation. Verse even calls, makes the appointment, and calendars like a personal secretary.

ApartmentListBungalowNestPick. Residential rental listings, find a roommate.

Co-Buy. Buy a home with one or more friends, family, or lovers. Handles joint financing, if co-owner wants to leave but the other doesn’t, or if one goes bankrupt.

CompStak. Provides nationwide lease and sales comps.

Cozy. Tenant screening.

CrowdStreetRealCrowd. Investment opportunities for various real estate projects.

Divvy. Locates rent-to-purchase homes. Good for those worried about being corporately relocated.

DoorSteadOneRent. Property management, and pays guaranteed amount if property remains vacant.

EasyKnockLeaseBack. Sell house, get needed money, and lease it right back.

FastCustomer. Free App. Instead of waiting on hold, App has company call you back.

Flip, finds replacement tenant, proposes qualified subtenant to landlord, and provides paperwork.

Flyhomes. Makes every buyer offer more attractive as a cash-offer.

FTIC that’s us, national award winning title insurance company authorized to conduct Florida closings 100% virtually and has trademarked the “No Junk Fee Guarantee.” ®

Happy. Logs and records punch list for needed repairs during property inspections. Good for multi-units.

HelloRentedMyndObligo,. Insures landlords against lost rent in case of residential tenant default, helps ease burden of large advanced rent and security deposit requirements, or acts as double insurance for nonpayment.

HouseCanary. Quickly appraise property on your desktop with certified inspector and appraiser using AI.

Keepe. Take picture of handyman needs and receive bids.

Knock.  Start living in new home while Knock sells old home, no waiting for old house to sell.

Krisp. Mute background noise in videoconferences and any communication app.

Niido, Development company that design-built an apartment complex in Miami with home-sharing in mind to avoid roadblocks of short term rentals that Airbnb faced.

OpenDoorKnockOfferpad, Buys and/or sells houses via iBuying, which stands for instant buying, using prompt, algorithm-driven cash offers and then sell the homes themselves.

RealtyHive. Markets buyers based on geofence created around property.

Rentberry, bid on home rentals anywhere in the world like an ebay auction.

Reonomy. CRE.

Seniorly. Senior living listings and the peculiar care options.

Squarefoot.   Rental listings for commercial real estate and shared office space.

TruliaZillow. Real estate and rental listings.

Unison. Instead of a loan they provide cash in exchange for co-ownership.

UrbanDoorZeusLiving. Furnished apartments for professionals who travel. Owned by Airbnb.

Vacasa. Airbnb alternative. Rent vacations homes with 3D virtual tours and maid service.

We, Shared office spaces, good for freelancers and remote workers needing occasional away from home office, high-speed internet, bright modern spaces, large common areas, business-class printing and scanning, conference rooms and private phone booths.

How Pandemics like COVID-19 infect Real Estate

This article addresses (1): The origins of COVID-19, “Wet Markets”, and the Chinese sale of Wildlife; (2) Chinese buyers are hot, but how about for Florida?; (3) Cultural differences about using masks; (4) Becoming today’s 2020 Virtual Realtor; (5) Mortgage rates bottom to lowest in 49 years; (6) HELOCs as an alternative to fix up homes; (7) Lack of inventory and new construction; (8) Can COVID-19 Survive on Imported Products/Goods/Building Supplies?; (9) Litmus Test of Looking at Retail Stores in Airports; (10) Other Brick and Mortar Retailers/Tenants; (11) Triggering Insurance Coverage; and (12) Real Estate Stocks.

Origins of COVID-19, “Wet Markets”, and Chinese sale of Wildlife. This is not the first time the world encountered a pandemic or a coronavirus. For instance, the phrase “Avoid it like the plague!” dates back to the 14th Century bubonic plague which swept Asia, Europe, and Africa up in the “Black Death” killing an estimated 50 million people.

Coronaviruses are named for the spikes protruding from their surface which resemble a crown. In 2003, a coronavirus called SARS-coV (Severe Acute Respiratory Syndrome) emerged from Civet Cats in a wet market in southern Foshan, China. In 2012, a coronavirus called MERS-coV (Middle East Respiratory Syndrome) emerged from camels in Saudi Arabia.[1] Diseases derive from animals to wit: Plague (fleas); Influenza (birds, pigs); HIV (chimpanzees), EBOLA (fruit bats); ZIKA (Mosquitoes); MERS-coV (Camels); SARS-coV (Civet Cats); and COVID-19 (Bat to Pangolin).

Doctors traced COVID-19 (the nickname for Coronavirus disease 2019) to a “wet market” in Wuhan, China. Wet markets are a market where live animals are slaughtered and sold for consumption. In Wuhan, cages and cages of animals were lined up in rows and then stacked one-over-another. As the waterfall of animal urine, blood, vomit, and excrement soaked each of the ensuing caged animals from the animals above, conditions became exponentially unsanitary allowing viruses to brew and fester.

In the 1970’s, communist China which controlled all food production, faced famine and was unable to feed all its people. In 1978 China gave up control, allowing private farming. Big companies focused on staples like beef, poultry, and pork production. Smaller farmers however focused on wild animals like snakes, bats, turtles, ostrich mouse, bear, peacock, alligator, duck, fox, civet cats, tiger, rhinoceros, camel, and pangolin. In 2018 the wild-life market was estimated at ¥148 Billion Yuan (equivalent to $21.3 Billion US dollars) and exerted tremendous lobbying power in China to stay open. The wildlife food industry shifted marketing strategies to promote wildlife animals as tonics, body-building, sex enhancing, and disease fighting. Notably, the majority of Chinese do not eat wildlife animals. China has since shut down thousands of wet markets and temporarily banned wildlife trade. Unlike in the past, Chines social media is now available and is pressuring the government to make the ban on wildlife sales permanent. [2]

Chinese buyers are hot, but how about for Florida? For seven (7) consecutive years, since 2013, China has been the largest foreign buyer in the U.S. in terms of total dollars spent of residential property: (2013 $12.8B); (2014 $22B); (2015 $28.1B); (2016 $27.3B); (2017 $31.7B); (2018 $30.4B); and (2019 $13.4B). For five (5) consecutive years, since 2015, China has also been the largest foreign buyer in the U.S. in terms of total number of purchases of residential property: (2015 33,807); (2016 29,195); (2017 40,572); (2018 40,372); and (2019 19,900). For Seven (7) consecutive years (excepting 2017) the average purchase price paid by Chinese buyers in the U.S. has also been the highest (2012 $484K) (2013 $556K); (2014 $590K); (2015 $832K); (2016 $937K); (2018 $753K); and (2019 $675K). However, even though Florida has consistently dominated the U.S. market as a major destination for all foreign buyers (e.g. Canada, UK, India, Brazil, etc…) since 2009; only 4% of Chinese buyers are buying in Florida, with the lion share of 34% of Chinese buyers purchasing in California. But before snubbing 4% off, that would translate into over $53 Million in Florida residential sales in 2019, and nearly half of all Chinese purchases were all-cash. [3]

Cultural Differences in Using Masks. In the U.S. when you see someone with a facemask you think they’re sick. But in China, the understanding is that people wear facemasks to avoid getting infected by others.

Becoming Today’s 2020 Virtual Realtor. Today, just about every part of a real estate transaction can be accomplished virtually. Realtors may expect reaction to be strongest among sellers, who worry about strangers entering their homes. Realtors have been giving property tours through WhatsApp, Facetime, and other video conferencing phone apps.   When listing properties, realtors may want to consider three-dimensionally scanning homes, so buyers may virtually tour homes without having to congregate in an open house. My favorite technology is offered by Matterport which amazingly uses 360 degree cameras to turn a space into an accurate and immersive digital doll house that gives the real feel of being right inside the property. The program also allows you to click and drag to accurately take measurements for furniture placement. Contracts can be signed through DocuSign, money can be transferred through wires, and effective January 1, 2020 we are even capable of having all of a buyer’s and seller’s documents signed and notarized using simultaneous online audio and video technology through our specially licensed Remote Online Notaries.

Mortgage Rates Bottom to Lowest in 49 Years. Lower rates mean more buying power for those already motivated in the market looking to buy. Lower rates will also entice previously unmotivated new buyers who have been hesitantly sitting-on-the-fence to jump at the opportunity for FOMO (Fear of Missing Out). In early March we saw the 30-year-fixed mortgage rate fall to 3.29%, which is the lowest rate in history since Freddie Mac started tracking such rates in 1971. Similarly, the 15-year fixed hit 2.79%, which is also the lowest rate in history since Freddie Mac started tracking that rate in 1991. The central bank noted that the move was in response to the “evolving risks” the COVID-19 outbreak poses to the economy.[4] Mortgage applications are up, the industry is on a mortgage broker hiring spree, and it anticipates capturing refinances to save owners several thousands of dollars in lower monthly payments. Big banks are shifting staff to help support the influx of mortgage applications. Refinances could stimulate the economy because consumers will have more money in their pockets to spend. Although some experts predict 30-year-fixed rates may drop further to 3.0%, how much more do they really need to drop considering the current low rates already accomplished the goal of creating a boom to refinances, and despite homebuyer interest it doesn’t change the fact that there is a shortage of homes for sale? As a result, lenders don’t need to give Americans much more incentive to apply for new home loans.

HELOCs as an Alternative to Fixing Homes. As an alternative to refinancing, one thing to suggest are HELOCs (or Home Equity Lines of Credit). Although falling in popularity, the rates on HELOCs from lenders are going to be so tempting, especially for people wanting to fix-up homes and take out temporary but modest loans.

Lack of Inventory and New Construction. Generally, as mortgage rate drop, home sales rise. However, the major problem is the supply of homes being offered for sale remains at historic lows. No matter how much a buyer wants, there are not enough homes on the market for sale to buy. Therefore, regardless of how good the rates are, prices from sellers may remain unaffordable. But the lack of inventory of re-sales, should promote growth in construction of new homes to relieve the strain of low inventory. Focus on pre-construction contracts for new developments. While “pending contracts” are not completed contracts, it is an indicator of future housing trends. The concern however is that developers will suffer from building supply shortages such as lighting, appliances, flooring etc., which will lead to higher construction costs, defaults, and delays in finding alternate suppliers.

Can COVID-19 Survive on Imported Products/Goods/Building Supplies? COVID-19 seems to behave like other coronaviruses with studies suggesting that it may persist on surfaces for a few hours or several days, which may vary under different conditions (e.g. type of surface, temperature or humidity of the environment).[5] A study of other coronaviruses found they remained on metal, glass and plastic for up to nine (9) days.[6],[7]

Litmus Test of Looking at Retail Stores in Airports. Declining foot traffic in terminals flying to Asia have seen sales slump by as much as 50% (JFK); 20% (LAX); 15% (SFO); and in terminals inside of Asia like Hong Kong, Singapore, and Thailand, as much as 70%; causing some major airport authorities to offer rent relief for several months.[8]

Other Brick and Mortar Retailers/Tenants. As if the one-two punch of increasing competition with online stores and sagging attendance at malls couldn’t get worse, retailers in shopping centers are now dealing with the inability to get supplies from Asia, plus declining sales, as consumers opt to avoid mass public places. COVID-19 could push buyers out of public malls and even further into the reclusiveness of e-shopping. In the heat of tenants demanding rent abatements, reductions, and less hours, the Singapore government offered a 15% property tax rebate to landlords. Tenants here in the U.S. may wish to look closely at their lease agreements force majeure (or acts of god) clauses very closely, as a diving board for discussions with their landlords.

Steps Taken by Landlords and Convention Centers. Several major office landlords are stepping up efforts to keep buildings clean and sanitary by disinfecting frequently touched surfaces such as: tabletops, doorknobs/handles, and elevator buttons; and installing hand-sanitizing dispensers at entryways, lobbies, and throughout buildings. A number of conferences and events have been cancelled. In China, landlords are offering discounts to tenants who sign long-term contracts.

Employer Response to COVID-19: Companies have shut factories, canceled conferences, drastically scaled back non-essential employee travel, required self-quarantine upon return, held board meetings via mass video conferencing, allowed employees to work remotely, bolstered IT, focused on keeping “critical operations” running, instituted layoffs, and have been curious about how to address the infectious disease with suspected employees in light of HIPPA. In major cities, employers are paying for taxis to have employees avoid public transportation like buses, trains and subways. JP Morgan Chase allowed 12,000 employees to work remotely which has the added benefit of testing their communications in the event of widespread disruption.

COVID-19 as a Contractual Defense. Health and safety of clients and staff are a priority. Therefore, the legal defenses of act of god, force majeur, impossibility, and commercial frustration are certainly going to be tested as cancellations, terminations, and non-performance of contractual obligations mount.

Triggering Insurance Coverage. Others may look to the wording of their insurance policies for coverage. Business Interruption coverage could be triggered if a disease’s outbreak at an insured location results in people choosing not to patronize a business. Previously coverage was found for cases of SARs, bird flu, and Zika, but again that was based on the specific wording of the policy. Trade disruption insurance (TDI) focuses on loss of earnings, extra expenses and contractual penalties incurred as a result of delays or disruptions in trade. Employees traveling on business into infected areas or those stationed permanently or semi-permanently in high-risk areas would be the most likely to make convincing cases for worker’s compensation coverage. If buying travel insurance, since insurance guards against future unknown events, find out first whether there is an exclusion for infectious disease, pandemics, or COVID-19.

Real Estate Stocks. Real estate is generally seen as a safer investment, but with tourism down and people staying clear of public places, there has been massive selloffs. Airbnb froze all business in Beijing for two months. Hotels and shopping malls have been hard hit, and for whatever reason even self-storage REITS suffered a significant decline.

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] Center for Disease Control – About MERS

[2] Vox – Why new diseases keep appearing in China

[3] NAR – Profile of International Transactions in U.S. Residential Real Estate – 2019

[4] Market Watch – What the Fed’s surprise interest rate cut means for mortgage rates

[5] World Health Organization – Q&A on coronaviruses (COVID-19)

[6] New York Times – Surfaces? Sneezes? Sex? How the Coronavirus Can and Cannot Spread

[7] Journal of Hospital Infections – Persistence of coronaviruses on inanimate surfaces and their inactivation with biocidal agents

[8] WSJ- Airport Shops Suffer Crisis as Coronavirus Upends Travel

RON’s finally here! – Sign/Notarize Documents Worldwide

I jokingly say now, “We can now close a real estate deal even for an astronaut in outer space!” Effective January 1, 2020, Florida passed game-changing legislation easing notary roadblocks by allowing buyers and sellers to have their signatures notarized wherever they are in the world.

Florida Chapter 117 Part II, now permits us as specially licensed Remote Online Notaries (dubbed “RON”), to use audio/visual technology to notarize documents. In other words, we no longer need a signer “physically present” before us as notaries in order to notarize a document. Documents can be signed and notarized digitally without being in the same room, building, state, or even the same country. This is amazing for international, military, and out-of-state clients!

RON Qualifications. Becoming a RON requires: an additional two (2) hour notary course; $25,000 E&O insurance; $25,000 bonding; and the use of a third-party provider of: audio-video communication technology, credential analysis, and government ID verification. §117.225.

Limitations. RON can perform all functions of a notary except marrying individuals. §117.209

How to do a RON (Checklist)? The RON must: (1) be physically in Florida but signers (referred to as “principals” or any witness to a principal) may be anywhere; (2) record the audio-video conference using real-time, two-way communication by electronic means where participants are able to see, hear, and communicate with one another; (3) At the commencement of the recording advise the signer the RON will be notarizing; (4) Provide a general description or identification of the records to be signed; (5) Ask Where are you currently located? If the signer is not in Florida, confirm the signer wants the notarization performed by a Florida Notary and under Florida law; (6) confirm the signers’/witnesses’ identity by either: attesting to personally knowing the signer; or from the signer: (i) remotely presenting a government issued ID and confirming their identity; and (ii) passing a “credential analysis” (where a 3rd party verifies the government-issued ID’s validity); and (iii) passing an “identity proofing” (where a 3rd party verifies the signer’s identity through questions or via biometric verification); and (6) Obtain a declaration from the signer that their signature is knowingly and voluntarily made. §§117.265117.245117.209117.201.

“Identity Proofing” the signer. To verify the signer’s identity who is not personally known to the RON, the signer must within two (2) minutes correctly answer four (4) out of five (5) questions formulated from public or proprietary data sources, and will be given five (5) possible answer choices per question. If the signer fails, the signer may be offered one (1) additional attempt, and during that attempt, the signer may not be presented with more than three (3) questions from the prior attempt. §117.295

Additional questions for signers. The RON may want to ask: Who is in the room with you?, Are you under the influence of any drug or alcohol today that impairs your ability to make decisions?, Do you have any physical or mental condition or long-term disability that impairs your ability to make decisions?

Witnesses. A witness can be physically with the principal signer or can also be present using audio-video technology. If the witness is remote from the principal signer then, (1) the RON needs to verify the witness’ ID just like any other signer; (2) the witness must hear the principal signer say that the principal has signed the electronic record; (3) the witness must verbally confirm they are a resident of and currently physically located in the US or its territory. §117.285

Notary block. RONs must use an electronic notary seal identifying the RON as an “online notary.” §117.265. The traditional notary block has been changed for all types of notaries (not just RONs) in that it must now state whether the signer was physically or virtually present§117.05 Examples are shown below for different types:


FOR ACKNOWLEDGEMENTS BY AN INDIVIDUAL:

STATE OF FLORIDA

COUNTY OF   ________

The foregoing instrument was acknowledged before me by means of ? physical presence or ? online notarization, this ______ day of ______, 20___, by _____________________________, and who: is personally known to me; or produced as identification ___________________.

                                              (Signature of Notary Public – State of Florida)

(Print or Stamp Commissioned Name of Notary Public)

                        (State “Online Notary” if that is the case)


FOR ACKNOWLEDGEMENTS IN A REPRESENTATIVE CAPACITY:

STATE OF FLORIDA

COUNTY OF   ________

The foregoing instrument was acknowledged before me by means of ? physical presence or ? online notarization, this ______ day of ______, 20___, by _____________________________, as _____________________ (type of authority) for _________________________ (name of party on behalf of whom instrument was executed) and who: is personally known to me; or produced as identification ___________________.

                                              (Signature of Notary Public – State of Florida)

(Print or Stamp Commissioned Name of Notary Public)

                        (State “Online Notary” if that is the case)


FOR OATHS OR AFFIRMATIONS:

STATE OF FLORIDA

COUNTY OF   ________

Sworn to (or affirmed) and subscribed before me by means of ? physical presence or ? online notarization, this ______ day of ______, 20___, by _____________________________ who: is personally known to me; or produced as identification ___________________.

                                              (Signature of Notary Public – State of Florida)

(Print or Stamp Commissioned Name of Notary Public)

                        (State “Online Notary” if that is the case)


Charges. RON may charge up to $25 per online notarization §117.275§117.05(2), plus $20 per transaction record for making and delivering electronic copies of a given series of related electronic records, except if requested by: (a) A party to the electronic record, or (b) In real estate transactions, the title agent, settlement agent, or title insurer who insured the electronic record or engaged the online notary public with regard to such transaction. §117.255

Record keeping. The RON must keep detailed electronic journals and retain the audio-video recording thereof for ten (10) years. §117.245.

Applicable law. The online notarization’s validity will be determined by Florida law, regardless of the signer’s location. §117.209.

Employer Liability. In addition to notaries being liable for their actions an “employer of a notary public shall be liable to the persons involved for all damages proximately caused by the notary’s official misconduct, if the notary public was acting within the scope of his or her employment at the time the notary engaged in the official misconduct.” §117.05(6).

What if the RON messes up (defenses)? While there may be ramifications for the RON not being allowed to notarize anymore, “Any failure to comply with the online notarization procedures … does not impair the validity of the notarial act or the electronic record that was notarized, but may be introduced as evidence to establish violations of this chapter or as an indication of possible fraud, forgery, impersonation, duress, incapacity, undue influence, minority, illegality, unconscionability, or for other evidentiary purposes.” §117.265

* Additional notarial requirements apply for wills under chapter 732, trusts with testamentary aspects under chapter 736, health care advance directives, waivers of spousal rights under §732.701 or §732.702, and powers of attorney authorizing transactions in §709.2208.

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.” ®

Homestead + 14 Other Property Tax Exemptions

Do I qualify?  If by January 1, your property is either your permanent home, or the permanent home of a person who is legally or naturally your dependent, you may qualify for up to $50,000.00 of Homestead Exemption to reduce your property tax bill.

How many properties? If you or your spouse have a homestead exemption on another property, you’re personally ineligible.

Filing Deadlines?  For 2020 exemptions, file between March 2, 2019 and March 1, 2020.  But, if you can show inability to timely file or other extenuating circumstances, late filings for 2020 may be allowed up to September 18, 2020.  For 2019 exemptions, you’re too late (that deadline ended March 1, 2018).

How to file? Online in Miami-DadeBroward, and West Palm Beach.

Who files?  For married couples (“Tenants by the Entirety”) or Joint Tenants with Right of Survivorship (“JTWROS”), any one owner may qualify for 100% coverage.  For owners such as Tenants in Common (e.g. co-owners by percentage), each occupying owner must file according to their proportional interest (e.g. $40,000 property with residing owner’s interest being 25%, means $10,000 of homestead exemption is all that is applied).

Portability?  Owners can transfer their “Save Our Homes” benefit earned on a previous homestead property to their new homestead property. If you are applying for a new homestead exemption and held a homestead exemption on a previous property within the last 2 tax-years in Florida, you should also submit a portability application with your homestead application.

Other Property Tax Exemptions? 

(1) “Granny Flat Exemption” – 20% of improvement;

  • Homesteaded property owners adding living quarters for a parent or grandparent can have all or part of the value of this new construction deducted from the assessment. General requirements: Parent or grandparent not an owner; 62 or older as of Jan. 1; No residency benefit elsewhere, Max reduction allowable is 20% of the total assessed value as improved; Granny Flat Applications is due by March 1st and must be renewed annually.

(2) Widow – $500

  • Florida grants an additional $500 exemption to widows and widowers. Submit a copy of the deceased spouse’s death certificate. If the surviving spouse remarries, they are no longer eligible to receive the additional exemption. You must be a widow/widower prior to January 1st of the tax year. Nice try but Divorced persons do not qualify for the exemption.

(3) Seniors with low income (< $30,174/yr)

  • Seniors 65+ with income below the limit set by the Florida Department of Revenue. The income limitation amount is available in mid-January of each year. In 2019 the income limit was $30,174 (excluding tax-exempt bond interest and non-taxable social security income). Copies of Federal 1040 or Social Security 1099 Form may be needed. Must be renewed annually.

(4) Blind – $500

  • Blind persons may qualify for an additional $500 exemption, verification required.

(5) Total Disability (no wheelchair) – $500

  • Civilian property owners with a total and permanent disability but who do not require a wheelchair for mobility, and exceed an income limit may be eligible for an additional $500 exemption. They must be currently certified to be totally and permanently disabled by a physician licensed in this state, or by the Social Security Administration.

(6) Total Disability (wheelchair bound) – 100%

  • Civilians who are totally and permanently disabled and confined to a wheelchair.

(7) Veteran (Disability is 10% or more) – $5,000

  • $5,000.00. If service-related disability is to a degree of 10% or more and incurred during a period of wartime service or by misfortune before January 1. Surviving spouse (who has not remarried) may also claim this exemption.

(8) Veteran and spouses (Total Disability) – 100%

  • Any honorably discharged veteran with a service-connected total and permanent disability, surviving spouses of qualifying veterans and spouses of Florida resident veterans who died from service-connected causes while on active duty as a member of the US Armed Forces.

(9) Veteran (Combat wounded) – Equal to % of combat related disability

  • Additional discount from the amount of property taxes on the homestead of a partially or totally permanently disabled veteran, age 65+ as of January 1, and whose disability was combat-related. Total exemption from property taxes equal to percentage (%) of combat-related disability.

(10) Veteran – Deployed Military

  • US Service members of any branch of the U.S. Military, Coast Guard and Florida National Guard deployed during the preceding calendar year on active duty outside the United States. Must be renewed annually. Total exemption to an additional percentage assessed value, based upon the percent of the prior year deployed overseas.

(11) Veteran’s Surviving Spouse – 100%

  • Full homestead property tax relief to the surviving spouses of military veterans who die from service-connected causes while on active duty.

(12) First Responder and spouse (Total Disability)

  • First responder (law enforcement, correctional, firefighter, emergency medical technician, or paramedic) employed by a Florida Agency when he or she was injured who is totally and permanently disabled as a result of an injury or injuries sustained in the line of duty receives ad valorem tax relief equal to the total amount ad valorem taxes owed on homestead property. The exemption carries over to the benefit of the surviving spouse who does not remarry.

(13) First Responder’s Surviving Spouse – 100%

  • Full homestead property tax relief to the surviving spouses of surviving spouses of police, fire fighters and other first responders who die in the line of duty who die from service-connected causes.

(14) Historic Property.

  • National or Florida Registers Historic Properties may qualify for special exemptions related to the assessed value.

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.” ®

Pocket Listings: Real Estate’s Dark Web

In the 1800’s, real estate agents trying to sell property held physical gatherings, sharing information about real estate in return for commissions and discussing “wants and needs.” Today, real estate professionals desiring to sell property, known as a “listing agent,” utilize an arsenal of tools. A good listing agent will counsel a seller who is willing to listen by: analyzing comparable property prices; realistically pricing the property for sale; developing comprehensive marketing plans; and discussing staging, improving, decluttering, photographing, videoing, and showing the property. In order to attract the most amount of buyers, listing agents typically publicize the property for sale by “listing” it in a Multiple Listing Service (the “MLS”) the official directory for all properties and land for sale. There are over 800 MLS in the US.

Pocket Listings however, also known as whisper or off-market listings, are where the property is marketed for sale but not publicly on the MLS. It may sound counter-intuitive to a seller, but there are pluses and minuses.

Seller Advantages: Test the waters with a “Coming Soon,” without going live on the MLS publicizing how many “days on market” it sat stale. The longer a property sits, the less a buyer will offer, and the more it looks like damaged goods. Help determine a realistic price and avoid being listed too long at an unreasonably high price. Sellers/landlords, may want secrecy and not want tenants or certain competitors to know the property is for sale, or may not want to sell to certain competitors. Seller already has a potential buyer but wants to seek higher bids without losing their potential buyer. The allure and mystique of a prestigious exclusive private sale. Developers who have design renderings but an unfinished project can start to market early. No for sale sign, open houses, or broker tours. If there is only one real estate agent, the commission paid may be slightly lower.

Seller Disadvantages: Only one solo agent trying to sell the property, so more leg-work. Unlikely to generate multiple offers, thus no bidding wars, and less competition. Less visibility, marketing is inefficient word-of-mouth, blasted only to inner circles and internally within the brokerage, and no walk in traffic generated by lawn signs. Good if someone has a buyer right at that moment otherwise, out-of-site-out-of-mind. Implications of fair housing violations and discrimination against minorities. “Coming soon” notices have been criticized for, while not “officially sharing the listing, as conflictingly encouraging a real estate agent to seek a double-sided commission.

Other hiding places: The internet changed the landscape for member only access to MLS and now websites like ThePLSZillowZenlist, and Hidden Listings are examples of places buyers can find off-market houses including For-Sale-By-Owners (phonetically known in the industry as / ‘Fizz-Bows’).

National Association of Realtors. To combat a chronic lack of inventory, encourage consumer fairness, and foster a level playing field, in November, the NAR voted 729-70 to restrict realtors who are members of a MLS, from participating in pocket listings by requiring they be listed on the MLS within one (1) business day of being marketed to the public. New MLS Statement 8.0, NAR Handbook on Multiple Listing Policy reads:

“Within one business day of marketing a property to the public, the listing broker must submit the listing to the MLS for cooperation with other MLS participants. Public marketing includes, but is not limited to, flyers displayed in windows yard signs, digital marketing on public-facing websites, brokerage website displays, digital communications marketing (email blasts), multi-brokerage listing sharing networks, and applications available to the general public.”

The policy becomes effective January 1, 2020 and implementation by each local MLS is required by May 1, 2020 to allow for technology changes and education. NAR’s website also provides answers to questions regarding the new rule’s interpretation and exclusions which are not readily apparent.

Loopholes.   First, the new rule does not apply to commercial properties.  Secondly, on its surface the new rule effectively eliminates pocket listings, but agents are still able to market the property within their brokerage before it comes on the market, which is a big advantage to the big brokerage houses over the boutique firms.  If office exclusive listings are displayed or advertised to the general public, however, those listings must also be submitted to the MLS for cooperation.

Section 1.3 Exempt Listings

If the seller refuses to permit the listing to be disseminated by the service, the participant may then take the listing (office exclusive) and such listing shall be filed with the service but not disseminated to the participants. Filing of the listing should be accompanied by certification signed by the seller that he does not desire the listing to be disseminated by the service.

Seller’s choice. Some believe it should be a seller’s choice on how they want to market their property, and use of the MLS should not be forced upon anyone. It must be selfishly noted that, the NAR has its own self-serving interest to push as many people to use the MLS as possible, in order to increase the network’s value.

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.” ®