As transactions get more complicated, all parties to a real estate transaction should educate themselves on issues that could cause potential problems from a risk management standpoint. California Association of REALTORS® assistant general counsel Gov Hutchinson and Silicon Valley Association of REALTORS® board attorney Dave Hamerslough alerted Silicon Valley REALTORS® to such issues this week, particularly issues involving disclosure, new regulations, short sales, foreclosures and REOs.
The legal experts reminded the 150 REALTORS® from the Silicon Valley Association of REALTORS® who attended the risk management seminar about the following new rules that could impact buyers and sellers:
Carbon Monoxide Requirement
A new law (SB183) requires every existing single-family residence to install or plug in a carbon monoxide device by July 1, 2011. All other residential units will have to have the detectors in place by January 1, 2013. Their installation is not a precondition of sale, but the Real Estate Transfer Disclosure Statement now includes a checkbox to indicate whether the seller has a carbon monoxide detector.
Lead-Based Paint New Renovation Rule
The U.S. Environmental Protection Agency's Lead Renovation, Repair and Painting Rule addresses remodeling and renovation projects disturbing more than six square feet of potentially contaminated painted surfaces for all residential and multifamily structures built prior to 1978 that are inhabited or frequented by pregnant women and children under the age of six. Such renovation needs to be under the supervision of a certified renovator. Among other things, the rule requires a cleaning inspection after the work is completed. Residents seeking more information on this rule should visit the EPA website at www.epa.gov.
Home Energy Rating System
The California Energy Commission has established regulations for a statewide HERS (Home Energy Rating System) program to certify home energy rating services. The new HERS regulations establish a systematic process for home energy ratings that provide homeowners and home buyers with information about the energy efficiency of the homes they live in or homes they are considering for purchase. While HERS is not a mandate, presenting a buyer with a HERS booklet satisfies a sellers' obligation to disclose information. For more information, visit www.CalCerts.com.
Throughout the seminar both Hutchinson and Hamerslough stressed that buyers and sellers need to understand there will be issues in transactions involving short sales and foreclosures. Distressed homeowners should seek the advice of a qualified tax advisor and real estate attorney before determining a course of action, i.e., whether to opt for a short sale, foreclosure, or bankruptcy.
Documentation is important, especially when it involves the removal of a financial contingency. A new statute provides that a lender who holds a first deed of trust on a home and agrees to a short sale is cannot seek any deficiency judgment, or attempt to obtain the balance of the loan from the seller/borrower. There is still some vagueness arising from the new law, so in a short sale agreement, sellers should always get written clarification that the lender is forgiving any balance remaining on the note, and that the lender is not going to pursue the seller/borrower for any more money. Lender' approval letters/term sheets should be reviewed by lawyers.
"It is always good practice to follow up in writing with the lenders and obtain clarification of any language that is ambiguous, uncertain, or is silent on the issue of further liability on the promissory note," said Hamerslough. "We all hear what we want to hear. Without a paper trail, you may have no chance to pursue your case."
The legal experts also underlined the importance of agents working together. "We need to do a better job of trying to keep deals together and try to look for solutions," added Hamerslough.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please email or call the SILVAR office at (408) 200-0100.