Steven Kitnick's Blog

How Do I Know if the House I'm Renting is in Foreclosure?

Steven Kitnick (Steven Kitnick Seminars, LLC) — Mon, 27 Jul 2009 19:34:53 -0500

Ask Steve!

How can I find out if the house I'm renting is in foreclosure?

Tina L. Carson City, NV

Contact a local title company and ask them to check their Notice of Default list, or go to: www.rentalforeclosure.com. On May 20th, 2009 President Obama signed Public Law 111-22 "Protecting Tenants in Foreclosure Act. You should also note that the Nevada Legislature's AB140 Sections 2 and 6.7 which goes into effect on October 1^st, 2009, requires that if a sale of property is a residential foreclosure, a separate notice must be served upon any tenant or subtenant. All the Best!

Steven Kitnick, CSP, CNE, GRI, RRG

Las Vegas, NV

For Steve's Online & Classroom Continuing Education Classes, go to: www.StevenKitnickSeminars.com

How do I Know if My Seller/Borrower has a FannieMae or FreddieMac Loan?

Steven Kitnick (Steven Kitnick Seminars, LLC) — Tue, 21 Jul 2009 21:12:41 -0500

Ask Steve!

"Is it true that FannieMae has told banks (loss mitigators) to pay listing agents their commission on short sales?" What about FreddieMac? How do I know if my seller/borrower has a FannieMae or FreddieMac loan? Mike D. Las Vegas, NV
Yes! According to FannieMae, "preforeclosure sales may not be conditioned upon a reduction of the total commission to be paid to the real estate to a level below what was negotiated by the listing agent with the borrower, unless the fee exceeds 6% of the sales price of the property in aggregate." The policy went into effect on March 1st, 2009. For FannieMae Loans go to: http://loanlookup.fanniemae.com/loanlookup. We're waiting for FreddieMac to make a similar announcement. For FreddieMac loans go to: https://ww3.freddiemac.com/corporate

Steven Kitnick, CSP, CNE, GRI, RRG

Steven Kitnick Seminars, LLC

Las Vegas, NV

www.NevadaCE.com

Click Here for Information on our next Certified Short-Sale Professional Designation Course

Steven Kitnick offers in-class continuing education and training for Nevada real estate licensees, as well as online courses for licensees & pre-licensees throughout the United States. Visit: www.NevadaCE.com

Why Would a Seller Want to do a Short-Sale?

Steven Kitnick (Steven Kitnick Seminars, LLC) — Tue, 21 Jul 2009 10:19:13 -0500

Ask Steve!

Why would a seller want to do a short-sale?"

Bernard E.
Las Vegas, NV

The seller can avoid having a foreclosure on their credit report; conceivably live in the property "mortgage free" during the lengthy short-sale process; and it's the "right thing to do" when in default. Walking away from the property is irresponsible and unfair to the lender. The short-sale is a respectable option*.

Steven Kitnick, CSP, CNE, GRI, RRG

Steven Kitnick Seminars, LLC

Las Vegas, NV

www.NevadaCE.com

*Taken from The Certified Short-Sale Professional Student Workbook ~ Section 2-2 How Do Sellers Benefit?

Click Here for Information on the August 7th Certified Short-Sale Professional Designation Course

Earnest Money Deposit Language for the Short-Sale Contract

Steven Kitnick (Steven Kitnick Seminars, LLC) — Sat, 04 Jul 2009 14:33:58 -0500

Leslie Carver, Team Carver, Prudential Americana Group, REALTORS, Henderson, NV, and a Certified Short-Sale Professional, includes the following contract language when representing a buyer. This language allows a buyer to cancel the contract and receive their earnest money deposit ("EMD") back with written request, but without a signature from the seller(s) after an agreed-upon time period has elapsed.

Earnest Money Deposit Language for the Short-Sale Contract:
If Seller is unable to perform _____ days* after acceptance of offer, Buyer has the option to cancel this transaction for any reason and receive a full refund of earnest money deposit without any further signatures required. Escrow Holder, Equity Title of Nevada, is not to be held liable or responsible for any loss or damage which Buyer(s) or Seller(s) may sustain by reason of the above addenda to the contract, nor for failure of any of the conditions of this escrow, nor for the recovery of said money for any reason whatsoever should this transaction cancel under the terms above. All parties hereto are aware and understand that Equity Title of Nevada will follow the instructions to cancel this transaction and all other instructions as it relates to the cancellation upon written instruction from the Buyer(s) to proceed with the cancellation and return of the earnest money as set forth.

*The amount of time given is determined by you! This language should be in an Addenda to the original offer.

This clause commits the buyer to the purchase of the potential short-sale for the time period specified without fear of an earnest money deposit dispute arising during that period. This clause should also assure the listing agent that the buyer is commited to purchasing the property and will "hang in there" for at least a fixed period of time. Las Vegas area listing agents who are ignoring or circumventing their MLS rules related to the status of their listings, eg. ER (Available) or C (Contingent) should take heed of this clause.

Steven Kitnick, CSP, CNE, GRI, RRG

www.NevadaCE.com

www.Shop.StevenKitnickSeminars.com

Is Countrywide Going After Sellers/Borrowers for Deficiency Judgments in Nevada?

Steven Kitnick (Steven Kitnick Seminars, LLC) — Wed, 22 Apr 2009 22:59:21 -0500

Nevada is a "recourse" loan state. It is not a "walk away state." Creditors could "go after" borrowers/sellers and seek a judgment for any deficiency for a home loan. Here's what two Certified Short Sale Professionals had to say when I asked them whether Countrywide or any other lenders were seeking deficiency judgments in Las Vegas, Nevada. According to Don Lainer of the Platinum Elite Team at Prudential Americana Group, REALTORS, "No bank is doing anything systematically or consistently for that matter. The negotiation skills of the listing agent will be pivotal to the seller's results. At this time, we are not experiencing any issues with Countywide regarding this matter." Leslie Carver of Team Carver also at Prudential Americana Group, REALTORS stated that, "I haven't had Countrywide or any lender go after my clients, yet. Countrywide seems way too overwhelmed to go after borrowers/sellers." Caution! Do not advise clients on this matter. In the case of a short sale, be sure to negotiate with all lienholders that the money they receive in the "short payoff" will be in FULL SATISFACTION of the debt, and that they therefore waive any right to seek a deficiency judgment. Clients should always consult with legal and tax professionals in this matter.

How to Get Your REO Offer Accepted!

Steven Kitnick (Steven Kitnick Seminars, LLC) — Thu, 09 Apr 2009 17:31:24 -0500

Allan Herman from RE/MAX Benchmark in Las Vegas, NV says, #1 WORK WITH A SERIOUS BUYER! If you're working with "a low ball artist" it's time to move on. Most offers are selling right around 97% to 98% of list price. Educate your buyer on what properties are selling for. Show them the recent closings to support your claim. #2 DON'T BE AFRAID TO HAND DELIVER YOUR OFFER! But also, send your offer via email just in case your offer gets lost in the shuffle. #3 TRY TO BUILD A RELATIONSHIP WITH THE LISTING AGENT! It's a lot more difficult with "the heavy hitters." Although the decision rests with the asset manager, if you're on good terms with the listing agent and there's two offers that are similar, your personal relationship may get your offer accepted. #4 MAKE YOUR OFFER AS SIMPLE AS POSSIBLE! Remember, your probably competing with multiple offers, so the more you ask - the harder it's going to get your offer accepted. Make sure you explain that to your client. #5 SELL YOUR CLIENT TO THE LISTING AGENT! If your client is a cash buyer provide the written and verifiable documentation. If your client is financing the tranaction and they have a 800+ FICO score, let the agent know! If you've closed deals with your client before, let the listing agent know! #6 BE PERSISTENT! Keep following up with the listing agent (phone calls, emails, knocking on their door) regarding the status of your offer. The listing agent wants to work with an agent who takes care of business. #7 MAKE SURE THE OFFER IS COMPLETE! A signed purchase agreement that includes an earnest money deposit. If financing or cash, then a pre-approval letter and/or proof of funds. #8 KEEP THE CLOSE OF ESCROW DATE SHORT! The longer the escrow, the more the bank loses. #9 TAKE INVENTORY OF THE PERSONAL PROPERTY! Before you write an offer, make sure you have a detailed list of the personal property set forth in the purchase agreement. When performing a final walk-thru verify all items are still on the property. Many properties have been vandalized. #10 TYPE YOUR OFFER! It's far more professional to have a type written purchase agreement than a handwritten one.

Short-Sale Listing Agents May Be Misusing Nevada Forms!

Steven Kitnick (Steven Kitnick Seminars, LLC) — Sun, 01 Mar 2009 17:44:22 -0600

Some short-sale listing agents may be circumventing the intent of NRED Form 636 and 637 which went into effect under SB69. They are presenting offers directly to the seller's lienholders. Their intent appears to be avoiding having an offer presented and accepted by their seller's subject to lienholder(s) approval, thus, requiring them to place the listing in a contingent status, according to local MLS rules. Consider the following: Nevada Real Estate Division (NRED) Form 636 Waiver Form states, "In representing any client in an agency relationship, a real estate licensee has specific statutory duties to the client. Under Nevada law, only one of these duties can be waived. NRS 645.254 requires a licensee to "present all offers made to or by the client as soon as practicable." This duty made be waived by the client. Last May 2008, it came to my attention that some Nevada real estate licensees were using Form 636 so they could submit offers directly to the Seller's lienholder(s). According to Mr. Jan Holle, Compliance/Audit Investigator/Nevada Real Estate Division, "The intent of Form 636 was to allow limited service brokerages to be in compliance with NRS 645 that states 'All Offers Must Be Presented.' The intent of Form 637 was to allow a mechanism for a buyer's agent to deal directly with a seller if this was in agreement with the seller and the seller's agent." The question was posed, "so the seller signs NRED Form 636 which allows the listing agent not to present all offers. Who presents the offer to the seller? Mr. Holle stated, "It could be the buyer's agent or an unrepresented buyer. In the case of a buyer's agent presenting the offer - Form 637 Authorization To Negotiate Directly With Seller would need to be in place along with Form 636. If a buyer was unrepresented, Form 637 would not be required... there could be many scenarios depending upon whether or not there are licensees involved on the buyer's side, seller's side, or both, and what type of services are provided by the brokerage(s). NRED Compliance/Audit Investigator Jan Holle was asked about this scenario: The seller is represented by a full service brokerage. The listing agent has the seller sign Form 636 only! The listing agent places the listing in the MLS and then advertises it in various media. The agent receives an offer from a buyer's agent to purchase the property. How does the seller know of the offer, receive the offer, or respond to the offer, since they waived a duty owed to them to have offers presented to them? The buyer's agent can not talk to the seller without written permission from the seller and their broker. Mr. Holle's reply to this scenario was, "Using the form [636] in this manner and having the seller's agent receiving the offers was not the intent of the waiver. Using this form in this way could place the seller's agent in violation of NAC 645.632 as he/she for whatever reason is receiving the offers. If the seller's agent is receiving offers, then it is his/her duty to have the seller respond to the offer, and provide the buyer or buyer's agent with written notice of acceptance or rejection per NAC 645.632. If the seller has waived the right for the seller's agent to present all offers than the seller's agent should not be receiving the offers. If the seller has waived the right for the seller's agent to present offers than the MLS should state that buyer's agent is to present offers to the seller. If the form [636] is not being utilized correctly, then the Division should be notified via a complaint form."

12 QUESTIONS TO ASK THE SHORT SALE LISTING AGENT

Steven Kitnick (Steven Kitnick Seminars, LLC) — Fri, 20 Feb 2009 19:56:23 -0600

According to Kathryn Bovard, Broker/Manager of Prudential Americana Group, REALTORS in Las Vegas, NV, one of the best advice tips she's seen comes from PAGR agent Debbie Tuttle.

"12 Questions to Ask The Short Sale Listing Agent"

Have you ever closed a short sale before?
How do you handle offers? Do you submit them all to the bank, not having your sellers sign (which, in effect, means there is no valid offer and acceptance) and let the bank figure it out? Or do you use multiple offer protocol, notify all agents to submit their highest and best offers, review them with the seller, have the seller accept or counter the best offer and them submit to the bank(s) for acceptance?
Have you requested and received the short sale package from the bank, including the hardship letter?
And more importantly, has the seller completed the hardship package? Have you confirmed receipt of the package from the bank?
What communication, if any, have you had with the bank?
Has the bank approved the list price?
Have you received any other offers that you are waiting to hear back on from the bank? Has the property been approved for a short sale prior and not closed?
Does the loan have PMI (mortgage insurance) which may require another level of approval or a pre-payment penalty?
Is there 1 or 2 deeds of trust? Any other liens?
What is the name of the bank(s)? Is the loan FHA or VA - again may require additional levels of approval?
How long do you estimate that the lender will take to provide an answer to an offer?
How far away from foreclosure is the seller? Has a Notice of Default or Notice of Sale been filed?

Receiving the answers to these key questions should help you through the rough waters of short sales and into the smoother sailing escrow process.

21 Ways to Get Your REO Offer Get Accepted!

Steven Kitnick (Steven Kitnick Seminars, LLC) — Sat, 14 Feb 2009 12:18:44 -0600

Las Vegas, Nevada's Prudential Americana Group, REALTORS Sahara Office Broker/Manager KathrynB@PrudentialAmericanaGrp.com recently attended a National Real Estate Institute "Negotiating Bank Owned Properties Seminar" and condensed the highlights. #1 KEEP IT SIMPLE - This is not the time to write a novel. REO offers are sent electronically and are usually reduced down to the net. #2 CLOSE OF ESCROW - Try to close on or before the 25th of the month. It takes about 3 days for bank wires. Banks are assessed handling charges on the first. If they have not received the check before the end of the month ("EOM"), then there's an additional for them. #3 LIMIT CONTINGENCIES - Most banks will not accept a sale of another property contingency. #4 DO NOT ASK "WHAT WILL IT TAKE." Do not ask the listing agent "what will it take." Listing agents do not know what the asset manager will accept. #5 ASSIGNEE - Most banks will not allow a buyer to assign the contract. #6 AGENT/PRINCIPAL COMMISSION - Most banks will not pay a commission when an agent is acting as a principal ("Buyer") in the transaction. #7 BUYER LOAN PRE-APPROVAL - Banks prefer buyer pre-approval from banks rather than mortgage brokers. #8 TITLE INSURANCE - Sellers are not required to pay for title, so if the buyer wants to pay all the costs, then they can dictate the title company. #9 HOMEOWNER'S ASSOCIATION ("HOA") - Banks will bring HOA current. Make sure to address it in your offer. #10 EXPECT A COUNTEROFFER - Even if you come in at full list price, expect a counter. Counsel your buyer to expect it. However, you should still offer your "highest and best" offer to eliminate competition. #11 ALWAYS RE-COUNTER - Always keep in the game and re-counter. #12 MULTIPLE OFFERS - When there's multiple offers and you receive a "highest and best" request from the bank, it is usually a 24-hour timeframe, but, always check with the listing agent. #13 ASSET MANAGERS ARE NOT EMOTIONALLY VESTED - Asset managers usually have 400-500 files to process and get off their desks. #14 TIMEFRAMES - Response time may vary from 24 hours to two weeks. #15 AS-IS - The Bank's position is that they're responsible for only known conditions. Be sure to read their AS-IS addendum carefully. Pay particular attention to a clause that states "if repairs exceed 5% of value, the property reverts to "as-is." #16 EXTENDING THE CLOSE OF ESCROW - If you extend the close of escrow ("COE"), make sure to extend the financing contingency, otherwise the earnest money deposit ("EMD") goes "hard." #17 DUE DILIGENCE PERIOD -Try to limit the "Due Diligence Period" to 3 days. #18 LICENSED INSPECTOR - Document your repair list by sending an inspection report to the listing agent. Your chances are fairly good that they will be taken care of. # 19 REPAIR WORK CREDIT - The buyer's lender will probably not allow for work repair credit at close of escrow. CERTIFIED FUNDS FOR "EMD" - Most banks will not accept bank wired earnest money deposit. They will ask for certified funds. #21 OFFERS ARE ACCEPTED ON THE "NET" - Make sure that everything you want the Bank ("Seller") to pay for, has the exact dollar amount specified.

MORTGAGE FORGIVENESS DEBT RELIEF ACT EXTENDED!

Steven Kitnick (Steven Kitnick Seminars, LLC) — Sat, 14 Feb 2009 11:29:22 -0600

The Mortgage Forgiveness Debt Relief Act of 2007 was extended for 3 more years! The Act now extends through 2012 under the Emergency Economic Stabilization Act. In addition to calendar years 2007-2009, the Act now includes 2010-2012! Additionally, you should tell your clients to ask their tax attorney or CPA if they might qualify for Canceled Debt & Mortgage Forgiveness under IRS Code 108 (a)(1)(B) Section 1401 - Insolvency exception, aka "Insolvent Debtor Clause" Remember: Never give tax or legal advice! Advise your clients or prospective clients to seek the counsel of caring and competent professionals.

P.S. Take a look at Mortgage Workouts, Tax-Free for Many Homeowners

Steve Kitnick

Steven Kitnick Seminars, LLC

www.StevenKitnickSeminars.com

Earnest Money Deposit Dispute - CASE STUDY

Steven Kitnick (Steven Kitnick Seminars, LLC) — Tue, 10 Feb 2009 19:35:00 -0600

CASE STUDY: My fiance & I live in Las Vegas NV. We were planning to use his VA benefits to obtain a VA-guaranteed loan. However, during the underwriting process he got laid off. This occured during our 10-day "due diligence period." I immediately applied for, and was pre-qualified for a VA-guranteed loan with the same lender . At that point, we submitted a new contract on the same house, in my name, honoring the same timelines in my fiance's contract. While my loan was in underwriting , my due diligence expired. Four days after the due diligence expired, I was denied the loan. Meanwhile, my fiance secured a new job in the same line of work and the lender issued a new pre-qual letter. Our real estate agent had the listing agent to ask the seller if he would be willing to let us place yet another offer on the property using my fiance again. The seller said he would reject the offer. He also indicated he had no intention of refunding the earnest money on my existing purchase agreement, even though he received a copy of my lender's loan denial. OPINION: First of all, I am not a lawyer and I can't give you legal advice! This is for general information purposes only! Only a judge can determine who is entitled to your earnest money deposit based upon the facts of your case. However, look at your purchase agreement! Did you and the seller agree to go to mediation at your local Realtor association in the event of a dispute on the contract? If you used the Greater Las Vegas Association of Realtor's Residential Purchase Agreement, you'll find that clause in Paragraph 17. You mentioned you were past your "due diligence period." The "due diligence period" is a separate time frame for certain things to be accomplished (See: GLVAR RPA Paragraph 12). If the subject property is in a Common Interest Community (CICA, aka HOA), you have another separate time frame running co-temperaneously (See: GLVAR RPA Paragraph 8). Just because you may have been past the timeframes in those paragraphs (or others) doesn't mean other contingencies and timeframes are no longer in effect! Having not read your contract, was your offer contingent upon obtaining financing, a standard clause in most contracts? If so, were there any specific timeframe outlined in your agreement? If so, did you at any time waive the financing contingency? Do you know the specific reason why the seller won't release your earnest money deposit other than his frustation? Most states have laws governing money held in escrow, and the duty of a party to a real estate transaction to executve documents to release the monies held, except for a "good faith" reason. In Nevada, we look to NRS 645A.175 - You'll find information on my blog. RECOMMENDATION: Contact your agent and broker and tell them to prepare a rescission (cancellation) that includes a clause that instructs the escrow holder to release the total amount of your earnest money to you. Then, tender that rescission and instruction to the seller. In other words, you must make a written demand for your earnest money. If the seller refuses, find out the applicable law that applies in the state where the escrow is held. If outside Nevada, ask the escrow holder's attorney the applicable law, cite the sosurce, and send a copy of it to the seller and their broker. You can also file complaints with the real estate division and with the local association of Realtors against the agents and brokers in this matter, if you feel they haven't done the right thing. And, once again, you can apply for mediation at the Association if that provision was agreed to in your contract. If not, there's always small claim court. Best of Luck!

Short Sales - HUD

Steven Kitnick (Steven Kitnick Seminars, LLC) — Wed, 24 Sep 2008 13:02:38 -0500

Recenty, I was asked whether HUD has specific requirements for an FHA-insured Short Sale. According to Sue Goad Sue@GoadTeam.com with Century 21 Infinity/The Goad Team in Las Vegas, NV, " The process tends to be about 30 days longer as the bank gives their approval, and then Fannie Mae gives their approval. So, it's almost like having to wait a second time around. In addition, you should note that as agents we're never in contact with Fannie Mae directly. The bank requests the Fannie Mae approval, and then issues their short sale approval. In my experience, they have NOT generally had special requirements that differ from the traditional short sale guidelines with most banks, but the last Fannie/Freddie backed loan that I had was a couple of months back. They want the offer to garner the bank a certain percentage of what the property is worth, etc."

Deficiency Judgments in Nevada - Time Period

Steven Kitnick (Steven Kitnick Seminars, LLC) — Mon, 28 Jul 2008 12:09:56 -0500

What is the time period in which a lienholder [beneficiary, lender] of a deed of trust has to file for a deficiency judgment in Nevada? I've "seen" materials and "heard" that they have 90 days from either a judicial or non-judicial sale. However, the only documented information is the Nevada Revised Statutes which states "... within 6 months." See the citation below!

NRS 40.455 Deficiency judgment: Award to judgment creditor or beneficiary of deed of trust.

1. Upon application of the judgment creditor or the beneficiary of the deed of trust within 6 months after the date of the foreclosure sale or the trustee's sale held pursuant to NRS 107.080, respectively, and after the required hearing, the court shall award a deficiency judgment to the judgment creditor or the beneficiary of the deed of trust if it appears from the sheriff's return or the recital of consideration in the trustee's deed that there is a deficiency of the proceeds of the sale and a balance remaining due to the judgment creditor or the beneficiary of the deed of trust, respectively.

Short Sales and IRS Tax Liens

Steven Kitnick (Steven Kitnick Seminars, LLC) — Thu, 03 Jul 2008 19:34:32 -0500

According to Darrell Walker of Keller-Williams Realty Las Vegas, if the tax lien on the property is unenforceable, meaning, the IRS can not collect because the value is not there, the IRS can issue a release of the tax lien. The purpose of attaching the tax lien to the property is, if the property is sold any proceeds would payoff the IRS, as well as the lien holder. However, if the property is sold short, then the IRS is out of luck and can release the tax lien. The person is still held responsible for the tax liability. If they have other properties, the IRS could and probably would transfer the tax lien [see: IRC 301.63251 Release of lien or discharge of property]. I recommend you consult with a tax attorney.

Investigating the Condition of the Property (Nevada)

Steven Kitnick (Steven Kitnick Seminars, LLC) — Fri, 06 Jun 2008 16:43:25 -0500

Effective July 1st, 2007, a new provision of Nevada law [see: NRS 645.252 (4c)] stated that unless otherwise agreed upon in writing, an agent owes no duty to "conduct an investigation of the condition of the property which is the subject of the real estate transaction." The key word is "investigate." A dictionary definition of the word "investigate" means to "search into so as to learn the facts; inquire into systematically." In that sense, agents are not required to "investigate" the condition of the property. The new law helps to clarify to the consumer that a licensee does not have the expertise to inspect the property, and has no obligation to do so. However, consider the Duties Owed by a Nevada Real Estate Licensee that states, "A Nevada real estate licensee shall disclose to each party to the real estate transaction as soon as practicable any material and relevant facts, data or information which licensee knows, or with reasonable care and diligence the licensee should know about the property." Although, licensees are not required to conduct an "investigation of the condition of the property," licensees are required to use "reasonable skill and care." What are the duties in your state?

Contract Clauses for Short Sales - Buyers

Steven Kitnick (Steven Kitnick Seminars, LLC) — Mon, 02 Jun 2008 20:49:47 -0500

An unqualified Buyer, in any transaction or market, should never be permitted to tie up a Seller's property. This maxim has never been more true! Most experts agree, in most cases, the Seller and the Seller's agent should not believe the Buyer, the Buyer's agent, or the Buyer's lender/mortgage broker as to the loan qualification of a prospective Buyer/Borrower. The Seller, the Seller's lender/mortgage broker, and their agent, should qualify the prospective Buyer/Borrower themselves. Consider the following contract clause in a potential short sale or any sale! "Within ___ business days from acceptance of this offer, Buyer or Buyer's authorized agent shall provide Seller, Seller's lender/mortgage broker, or Seller's authorized agent with a written letter from Buyer's lender/mortgage broker stating that based upon a loan application and credit report, that the Buyer is pre-approved for the loan outlined in this Agreement. Buyer or Buyer's authorized agent shall also provide the Seller, Seller's lender/mortgage broker or Seller's authorized agent with written and verifiable documentation showing that the Buyer has the necessary funds to close escrow. Within ___ business days from Seller, Seller's lender/mortgage broker, or Seller's authorized agent receipt of Buyer's financial and credit information stated herein, the Seller, at Seller's sole discretion, may terminate this Agreement if in the Seller's opinion the Buyer does not have the creditworthiness to qualify for a loan from a third party. In that event, Buyer's Earnest Money Deposit, if any, shall be returned to the Buyer."

Short Sales and Opening Escrow

Steven Kitnick (Steven Kitnick Seminars, LLC) — Sun, 25 May 2008 16:04:34 -0500

Is it in your clients best interest to open escrow immediately following an accepted offer that is contingent upon the Seller's lienholders approval to the Seller's satisfaction? If not, try this Short Sale Contract Clause - "Upon Seller receiving written notification of their lienholder(s) approval of the short sale to the Seller's satisfaction, Seller or their authorized agent shall provide Buyer or Buyer's authorized agent written notification of said approval within ___ business day(s). Escrow shall then be opened within ____ business day(s) upon Buyer or Buyer's authorized agent receiving said notice."

Short Sales & Earnest Money Deposit (EMD)

Steven Kitnick (Steven Kitnick Seminars, LLC) — Sat, 26 Apr 2008 00:17:38 -0500

When a buyer makes an offer on a potential "short sale" property, should the buyer put up an earnest money deposit (EMD) at the time of the offer, or rather within a specified time period after the lender approves the sale? If so, a contract clause might read: "Buyer shall deposit S__________ in certified funds with the escrow holder within _____ business days from buyer or buyer's authorized agent receipt of the seller's lien holder(s) written approval of the short sale to the seller's satisfaction".

Short Sales & Deficiency Judgments in Nevada

Steven Kitnick (Steven Kitnick Seminars, LLC) — Mon, 21 Apr 2008 19:46:52 -0500

Can a lender seek a deficiency judgment against a borrower/seller in a short sale transaction? YES! According to Christine Zambrano Gilbert, Esq., General Counsel for Realty Executives of Nevada, deficiency judgments are allowed in the State of Nevada , as they are in most states. However, the borrower/seller and lender can agree in a written document that the lender will not seek a deficiency judgment. A real estate licensee should advise their client to obtain legal advice and assistance from an attorney. [see: NRS 40.451]

Contract Clauses for Short Sales

Steven Kitnick (Steven Kitnick Seminars, LLC) — Thu, 13 Mar 2008 16:37:22 -0500

Here's some contract clauses you may find helpful:

1. This sale is contingent upon lender approval of a short sale and seller's satisfaction.

2. Buyer and Seller acknowledge that the short sale process may be lengthy, and there may be substantial delays in the closing process while the lender evaluates the acceptability of a short sale.

3. Buyer acknowledges that if the lender does not approve the short sale, Buyer will be unable to close escrow under the purchase agreement. Buyer understands that any dollar amount spent in the course of buyer's due diligence period shall not be refundable. In other words, Seller will not pay any costs associated with buyer's due diligence.

4. Buyer agrees to cooperate in the short sale process, at no cost to Buyer, except as specifically set forth in this agreement.

5. Buyer is aware that this transaction is contingent upon the Seller's lender (s) agreeing to take a sum less than what is necessary to fully satisfy the Seller's loan obligations. Since it is the lender's intent to obtain the highest price for the property, the lender will evaluate all offers. Consequently, if the lender approves the Buyer's offer, said approval may not occur until at or near the close of escrow date. If Buyer no longer desires to wait for the lender (s) approval, Buyer and Seller agree, that Buyer may give Seller written notice of cancellation and Seller agrees to accept Buyer's notice and refund Buyer's earnest money deposit, if any.

If you have other contract clauses for short sales, please post them here!

The Eleven Things Everyone Should Know About Earnest Money Deposits (Nevada Law)

Steven Kitnick (Steven Kitnick Seminars, LLC) — Tue, 11 Mar 2008 21:17:10 -0500

The Eleven Things Everyone Must Know About Earnest Money Deposits
by Steven Kitnick

Earnest money is the deposit paid by a prospective Buyer as evidence of their "good-faith" intentions to complete the real estate transaction. The Buyer is promising to be diligent in their efforts to fulfill the terms of the Residential Purchase Agreement ("RPA"). Additionally, if the Buyer and Seller agree, the earnest money deposit ("EMD") may also serve as a source of payment, and act as the Seller's sole legal recourse, as "liquidated damages," should the Buyer default, that is, fail to perform in accordance with the terms of the "RPA".

Earnest money deposits are not required for the creation of a valid and binding "RPA". However, it is rare that a "RPA" does not include an "EMD".  The reason for this is that an "EMD" demonstrates to the Seller that the Buyer is serious about his/her offer. Although the amount of the earnest money deposit varies, it is usually enough to motivate the Buyer to take whatever steps that are necessary to perform as outlined in the "RPA" in the time-frame specified.

The general rule with respect to "EMD" is that the Buyer is entitled to a return of the "EMD" if the transaction does not close through no fault of the Buyer. Conversely, the Seller is entitled to the "EMD" if the Buyer breaches the "RPA".  However, when a real estate transaction fails, both the Buyer and Seller may claim a right to the "EMD".

When a dispute arises here are The Eleven Things Everyone Must Know About Earnest Money Deposits.

1. The "EMD" may be deposited with an escrow/title company handling the transaction. They are a neutral third party that follows the
Buyer and Seller joint written instructions.

2. The real estate brokers and their agents have no authority over the escrow/title company. Thus, they have no authority to direct the payment of the "EMD" to either the Buyer or Seller.

3. If the transaction is cancelled, the right to the "EMD" will depend on whether there was a default under the terms of the contract, and if so, who is the party in default.

4. The "RPA" contains a default provision that everyone should be familiar with because it will dictate what happens in the event the Buyer or Seller defaults.

5. Neither the escrow/title company nor the brokers or agents have the authority to decide who defaulted under the terms of the contract. Only a court of law can make that decision.

6. The Buyer and Seller may have agreed to mediate before pursuing legal action. However, if mediation failed or if there was no obligation to mediate, a party may pursue the other in court.

7.  If a dispute arises regarding who is entitled to the "EMD", the escrow/title company will usually hold the "EMD" until the Buyer and Seller reach a mutual agreement or until they are presented with a court order directing payment.

8. If the court concludes one party is entitled to the "EMD", it will enter a judgment in their favor. The prevailing party can present that judgment to the escrow/title company, which will honor it.

9. The escrow/title company may also file an interpleader action asking the court to accept the money and distribute it to the rightful
claimant. If the real estate broker is holding the "EMD" in their trust account, they may initiate the interpleader action.

10.  The Buyer and Seller must have a "good-faith" dispute because each have a duty to execute documents necessary to release money deposited in escrow. Nevada Revised Statutes Chapter 645A.175 states if a party refuses to execute the document necessary to release the money within 30 days after the escrow agent makes a written request for the execution, the party injured by the failure of the other party to execute the document may collect from that party actual damages of not less than $ 100 nor more than one percent of the purchase price, whichever is greater, the "EMD" deposited in the escrow, and reasonable attorney's fee.

11.  Real estate brokers, their agents, nor the escrow agents can offer legal advice. If any party has questions regarding their legal rights, they should seek the advice of an attorney.

Remember: It is better to compromise because the costs incurred often exceeds the amount of the "EMD" and attorney's fees.

Steven Kitnick offers continuing education courses for Nevada real estate licensees. Visit:  www.NevadaCE.com

Nevada Supreme Court Decision Affects Seller's Real Property Disclosure (SRPD)

Steven Kitnick (Steven Kitnick Seminars, LLC) — Sat, 11 Aug 2007 20:22:32 -0500

On July 26th, 2007 the Supreme Court of the State Of Nevada in Nelson v. Heer held that appellant Nelson "did not have a duty under NRS Chapter 113 to disclose the prior water damage or the possible presence of mold." The reasons cited were as follows: " Under NRS 113.140, a seller of residential property is required to disclose to potential buyers only those defects of which the seller is aware. NRS 113.100 (1) defines "defect" as "a condition that materially affect the value or use of residential property in an adverse manner." Since appellant Nelson had repaired the prior water damage, it was no longer considered to be a "defect." Moreover, since "she was not aware of the presence of any elevated amounts of mold," the Court held that "Nelson did not have a duty under NRS Chapter 113 to disclose the prior water damage or the possible presence of mold."

Question: Given the Supreme Court's Decision, why should a Seller disclose "previous moisture conditions and/or water damage" or "previous fungus or mold," if repairs have been performed and there no longer exists "a condition that materially affects the value or use of residential property in an adverse manner?"

Shouldn't we recommend to the Nevada Real Estate Division (NRED) a change in the SRPD - Form 547 to reflect the Supreme Court's Decision?

Steve Kitnick
Steven Kitnick Seminars, LLC
http://www.nevadace.com/