Can Emails Create a Binding Real Estate Contract?

Question:  Can emails create a binding and legal real estate purchase and sale agreement?

That’s a unusual issue and was addressed recently when a court of appeal in New York, which held that emails between a buyer and seller might constitute a formal binding contract.

In that case (Stonehill Capital Management v. Bank of the West 28 NY3D 439, 2016) the court of appeal upheld a contract entered into by parties when the seller “agreed” to accepted the option bidders bid in an email that set forth all the material terms of the deal, including the sales price, specific loan to be sold, timing of the closing and manner of payment and wire transfer information.  In that email, the seller had stated that its acceptance “was subject to mutual execution of an acceptable [loan sale agreement],” which was never executed.

Nevertheless, the New York appellate court found that by establishing these elements, the requirement of “Statute of Frauds” was met.

Currently, there are no cases in California where a court has issued a similar decision on the issue.  However, this could happen if a California court of appeal finds so in a similar situation.

Sellers and buyers of real estate are cautioned that when emailing terms of a proposed contract, they do not establish their agreement to those terms.

It’s also important that real estate brokers and agents may not (unless they have specific authority to do so from their seller and buyer clients) enter into contracts on behalf of their principals (their clients).  That would be beyond the scope of the agency relationship.

Article by Harrison K. Long, real estate attorney at Orange County CA.  Member of the CA State Bar Association #69137.  A member and chairperson this year at Legal Affairs Forum for the California Association of Realtors.  Also a California licensed real estate broker #01410855.

Source of information for this article is Shannon Jones, expert California real estate attorney associated with CRELA, California real estate legal alliance.  This article is the providing of real estate information only and is not the providing of legal services.  If you encounter such an issue, you should consult with an experienced real estate attorney.

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When Real Estate Commission is Earned – California Law

Real estate law in other states of the U.S. have held that a real estate commission had been earned if a buyer was procured who made an offer that matched the price and terms specified in the listing agreement, or on other price and terms the seller might find acceptable.

According to those laws, a completed transaction was not a required condition for a real estate commission to be earned by the agent.

The California Appellate Court ruling in 2012 (RealPro, Inc. v. Smith Residual Company, Fourth Appellate District Court) changed that in CA.  In the RealPro case, the buyer had made a full-price, per the listing, $17 million offer on terms that the seller found acceptable. However, the seller then increased the listing price to $19.5 million. The buyer declined the price increase.  But after that the buyer’s broker, as a third-party beneficiary, sued for his commission.

The trial court in RealPro focused on that part of the listing that set forth price and terms, which said “$17,000,000 cash or such other price and terms acceptable to Sellers…” The court of appeal said that it would be a mistake to say that the listing was for $17 million. Rather, it “was for $17 million cash or such other price, plus terms acceptable to Sellers.”

The Appellate Court in RealPro further said, “we, like the trial court, conclude that the $17 million price was merely an invitation to submit offers.  Although RealPro submitted an offer to purchase the Property, such offer never materialized into a sale that would trigger RealPro’s right to a commission.”

That court of appeal in RealPro essentially said that it is a sale — not just an acceptable offer — that triggers a real estate commission.

The California Association of Realtors (CAR) was concerned about that new law and changed its Residential Listing Agreement (RLA) the next year to clarify.  That listing agreement form now reads in essence that a real estate commission is due if anyone procures a ready, willing, and able buyer(s) whose offer to purchase the Property on any price and terms is accepted by Seller, provided the Buyer completes the transaction or is prevented from doing so by the Seller.

There has been a recent court of appeal decision in CGI v. City of San Francisco and Ellis Parking with a new twist.  However, that decision has not been published and cannot be cited as authority.

By Harrison K. Long, real estate broker and Realtor® associated with HomeSmart Evergreen Realty, CALBRE #01410855.  Also an attorney member of the California State Bar Association #69137.

Source of information for is article by Bob Hunt, real estate broker and Realtor® who serves as a director of the California Association of Realtors® – who is also the author of his book “Real Estate the Ethical Way”. 

This article is for information only and is not the providing of legal services.  If you have questions about your situation involving real estate commissions, you should contact an experienced real estate attorney.

“When real estate commission is earned”

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Arbitration Clause Removed From California Listing Agreement

Arbitration Clause Removed From California Listing Agreement

[This article was written and published by Bob Hunt on May 22, 2017, and he authorized me to use and share it].

A few weeks from now the California Association of REALTORS® (CAR) will release the semi-annual update to its library of Standard Forms. CAR currently publishes more than 200 standard forms (e.g. purchase contracts, listing agreements, and disclosures). Not only is it virtually inevitable that changes and modifications will continually be needed, but also new laws and court decisions provide the need for yet more new forms.

Among those to be released this spring are nine different listing agreements (e.g. residential, commercial, vacant land) all of which have been changed in the same way. In each, an optional arbitration agreement between the seller and listing office has been removed and replaced by “language advising of the need to use separate arbitration agreement if both parties consent.”

Why would CAR remove the optional arbitration agreement? The official explanation is this: “The arbitration clause was removed from the listing agreements because some attorneys for sellers were using it to draw listing agents into contract disputes between buyers and sellers.”

To understand this explanation fully, we need to realize an important difference between the optional arbitration agreements in the CAR listing agreements and the ones in the CAR purchase contracts. The difference is this: the arbitration agreements in the purchase contracts are between the principals — buyer(s) and seller(s) — whereas the agreement in the listing agreement is between the agent and the principal — the listing office and the seller.

If both principals (buyer and seller) have signed the optional arbitration agreement in the purchase contract, then, if a dispute arises between them and should mediation fail, they will be required to submit to arbitration. Going to court is not an option. Not being a party to the contract, neither broker would be required to join that arbitration proceeding; though either could if they so choose.

One can see, then, why an attorney might want to use the listing arbitration agreement “to draw listing agents into contract disputes between buyers and sellers.”

There is, however, another reason that many listing brokers will be pleased to see the optional arbitration agreement removed from the listing agreement.

When arbitration agreements were first introduced into the various CAR contracts, many — probably most — California brokers welcomed that as one of the greatest cultural improvements since the catcher’s mitt, or sliced bread. They welcomed the notion of having disputes settled outside of the judicial process with all of its time-consuming frustrations and expenses.

But, over the years, brokers came to discover how badly they can fare in arbitration which can often be, well, arbitrary. Arbitrators do not have to follow the law. They can choose an outcome that they may perceive to be fair, even if it is not the one the law would provide. Many brokers have reached the conclusion that they are more likely to obtain a just decision in a court of law rather than in an arbitration. Moreover, an arbitrator’s decision is not subject to appeal, except in extreme cases of bias.

In short, over the years, many brokers have come to the conclusion that, should they become involved in a dispute with a principal, they are far more likely to get a fair shake in court than at the hands of an arbitrator.

But, some might ask, why remove the arbitration clause from the listing agreement? After all, it’s optional. Yes, it is optional; but, remember, the overwhelming majority of listing agreements are negotiated between sellers and individual agents who are representatives of the broker. Few agents have the faintest idea where their broker stands on arbitration (and shame on the broker for that). Fewer still, even if they did know the broker doesn’t want to commit to arbitration, would be comfortable telling their client that the broker doesn’t want to sign the arbitration clause. Better to take it out, and leave that conversation for another day. Or no day at all.

[Bob Hunt is a smart guy, good writer and a friend.  He’s a real estate broker and Realtor® who serves as a director of the California Association of Realtors®. Bob is also the author of his valuable book “Real Estate the Ethical Way”.] 

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PACE Financing of Home Improvements Can Be Dangerous for Homeowners

California real estate law

PACE financing – “Property Assessed Clean Energy (PACE) programs” – is one  way to finance energy-efficient home improvements.

However, such PACE financing can be dangerous for homeowners who should be very careful before making those decisions.

PACE financing in California attaches to the property in the form of a “property tax”.  Because this kind of financing involves a property tax, the companies administering the program need a city’s or a county’s tax-levying authority to market it to residents.

So PACE financing is available only where the city council or the county board of supervisors has granted this authority.

What problems are associated with PACE financing in California?

  • Predatory Lending: Qualification is based on home equity rather than on the borrower’s ability to repay, which violates the U.S. Department of the Treasury’s prohibition against predatory lending practices.
  • Structured as a Property Tax Assessment: Because the amount borrowed is structured as a property tax assessment, it attaches to the property itself rather than to the owner, which negatively affects the owner’s ability either to sell the property or to refinance it and restricts a potential buyer’s ability to qualify for a mortgage on the property.
  • “Super-Priority” Lien: The amount borrowed is structured as a “super-priority” lien on the property, which means that, in the event of default, the PACE loan takes repayment priority over even the first mortgage. This arrangement violates the conditions spelled out in most mortgage agreements, negatively affects the owner’s ability either to sell the property or to refinance it, and restricts a buyer’s ability to qualify for a new mortgage on the property.
  • No Proof of Benefit or Value: Because the energy-efficient home improvements financed with PACE programs are often sold without either a home energy audit or a third-party certification of their operational effectiveness, the homeowner has no basis for performing a cost-benefit analysis or for assessing the true value of the improvements.
  • No Utility Cost Offset: The homeowner is told that he or she will save enough on utility bills to cover the cost of the energy-efficient upgrades, but this utility cost offset seldom materializes. More often, the hapless homeowner ends up deep in the red.
  • Price Inflation: PACE contractors inflate their prices for energy-efficient renovations, often charging far more than fair market value.
  • No Financial Oversight: Most of the contractors pitching PACE financing options have no financial expertise, and their offers and promises are not currently being scrutinized by any financial institution or government agency.
  • High Interest Rates: The interest charged for PACE financing can be as much as twice the amount charged for a home equity loan or on loans obtained via other financing alternatives.
  • Inadequate Disclosure: Often the total cost (with applicable fees and interest), the yearly payment amount, the actual payoff schedule, and the anticipated payoff date are not properly disclosed up front.
  • Large Payoff Penalties: The penalties for early payoff are large and may include extended interest payments.
  • Harsh Late-Payment Penalties: Late payment or failure to pay is penalized in the same way as failure to pay property taxes and could result in foreclosure.
  • Automatic Default: A homeowner whose mortgage agreement specifically prohibits any other loan or lien from taking priority over the first mortgage–and most do–will be automatically in default. Thus, the lending institution holding the first mortgage can require accelerated payment or initiate foreclosure.

You as a CA homeowner should be aware of these problems and weaknesses of PACE financing of home improvements.  If you are having problems with legal issues regarding PACE financing of your home improvements, you should contact a real estate attorney in your community or geographic area.

By Harrison K. Long – real estate attorney and member of CA State Bar Association #69137.  Real estate broker – CALBRE #01410855.  Source of information is the California Association of REALTORs® and the Orange County REALTORs®.  This is for information only and is not the providing of legal services.

real-estate-attorneyFor further information and/or to arrange for professional legal services consultation, contact us by text or cell at 949-701-2515 – or by email at ExploreProperties@gmail.com.  Thank you.

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PACE Liens Financial Disclosure and 3-Day Rescission Right – New CA Law Effective Jan. 1, 2017

CA laws and Real EstatePACE Liens Financial Disclosure and 3-Day Rescission Right – New CA Law Effective Jan. 1, 2017

  • A property owner may not participate in a PACE lien program without delivery of a detailed financial disclosure document received before contractual consummation.
  • The disclosure document must contain a variety of notices and warnings including a notice that the property owner may not be able to refinance or sell without paying off the PACE obligation. The property owner also retains a 3-day rescission right detailed in a statutory form.
  • Statements as to increased value of the property cannot be made unless based on a valuation as specified.
  • Existing law requires home loans to be accompanied by the Truth in lending RESPA Integrated Disclosure (TRID), which is intended to allow an “apples to apples” comparison shopping of various loan products.
  • PACE transactions are technically not loans and are not required to be accompanied by a TRID disclosure.
  • Current law gives delinquent PACE assessments “super-priority” status, as part of the tax bill, over other recorded obligations; lenders require these “super liens” to be paid off before any new financing can be obtained.
  • Requires a TRID-like disclosure be provided to a property owner participating in a PACE program, a 3 day right of rescission, and a notice that the property owner may not be able to refinance or sell without paying off the PACE obligation.
  • Prohibits making monetary or percentage representations of increased value to a property owner regarding the effect the financed improvements will have on the market value of the property unless the estimate of market value is based upon either “an automated valuation model,” a broker price opinion or an appraisal by a licensed appraiser.

AB 2693 codified as Government Code § 53328.1 and Streets and Highways Code §§5898.15, 5898.16 and 5898.17.

By Harrison K. Long, real estate attorney at Orange County CA – Member of CA State Bar Association #69137.  Real estate broker – CALBRE #01410855.  Source of information is the California Association of Realtors and CA legislative and laws information.  This is for information only and is not the providing of legal services.

real-estate-attorneyFor further information and/or professional legal services consultation, contact Harrison by text or cell at 949-701-2515 – or by email at ExploreProperties@gmail.com.  

“PACE Liens Financial Disclosure and 3-Day Rescission Right – New CA Law Effective Jan. 1, 2017”

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Home Buyers and Sellers Need to Protect Themselves from Wire Fraud

Home Buyers and Sellers Need to Protect Themselves from Wire Fraud in real estate transactions.

Wire FraudThe legal staff at the California Association of REALTORS® (CAR) has provided a clear advisory (Wire Fraud Advisory, WFA form), which deals with the challenge presented by fraudulent hackers who like to get involved in real estate transactions.

The challenge: Fraudulent hackers like to get involved it legitimate real estate transactions.  They can sometimes gain access to the network of participants in a real estate transaction, which might be through an email account of the parties, escrow, other affiliated services such as title or home warranty.

Example:  Hackers send a fraudulent email and pose as one of the relevant parties (agent, escrow, title, etc) and issue false instructions as to where money is to be wired.  

The new CAR Wire Fraud advisory (WFA form) is one page and should make it easier to bring attention for the parties.  Here are the 5 specific recommendations of CAR form: 

  1. Obtain the phone number of the Escrow Officer at the beginning of the transaction.  
  2. DO NOT EVER WIRE FUNDS PRIOR TO CALLING YOUR ESCROW OFFICER TO CONFIRM WIRE INSTRUCTIONS. ONLY USE A PHONE NUMBER YOU WERE PROVIDED PREVIOUSLY. Do not use any different phone number included in the emailed wire transfer instructions.
  3. Orally confirm the wire transfer instruction is legitimate and confirm the bank routing number, account numbers and other codes before taking steps to transfer funds.
  4. Avoid sending personal information in emails or texts. Provide such information in person or over the telephone directly to the Escrow Officer.
  5. Take steps to secure the system you are using with your email account. These steps include creating strong passwords, using secure WiFi, and not using free services.

real estate transactionsThis advice is basic and should lead to improved security and positive results for those involved California in real estate transactions.

First advice is the best:  Obtain the phone number of the escrow officer at the beginning of the transaction – and then not to switch to another after possible fraudulent hacker persuasion.

Real estate agents should use the Wire Fraud Advisory (WFA form) early in their transactions, which should provide best information and make it clear for buyers and sellers.

It’s also important that California that real estate brokers make sure that the escrow providers they recommend for their clients have a private and secure system (such as platform for encrypting of messages and data) for communicating about procedure for wiring of funds.  

By Harrison K. Long, real estate attorney at Orange County CA – Member of CA State Bar Association #69137.  Real estate broker – CALBRE #01410855.  Source of information is the California Association of Realtors and CA legislative and laws information.  This is for information only and is not the providing of legal services.

real-estate-attorneyFor further information and/or professional legal services consultation, contact Harrison by text at 949-701-2515 – or by email at ExploreProperties@gmail.com.  Thank you.

“Home Buyers and Sellers Need to Protect Themselves from Wire Fraud”

Posted in California laws, California real estate, California real estate laws, Real estate guide, Real estate laws, Real estate representation, Real estate transactions, Residential purchase agreement, Security | Tagged , , , , , , , , , , , , , , , , , , | Leave a comment

New CA Law Requires Hosting Platform for Tourist or Transient Housing Marketplace

New CA real estate law requires a “hosting platform” to warn a tenant that subletting the tenant’s residence may violate his/her lease and could result in eviction.

Legislative Information header image: click to go to the home page

A “hosting platform” is a marketplace that is created to facilitate the rental of a residential unit offered for tourist or transient use for compensation to the offeror of that unit, and the operator of the hosting platform derives revenues, including booking fees or advertising revenues, from providing or maintaining that marketplace.

Airbnb is an example of such a platform.

This law requires a “hosting platform” to provide notice to an occupant listing a residence for short-term rental that states: “If you are a tenant who is listing a room, home, condominium, or apartment, please refer to your rental contract or lease, or contact your landlord, prior to listing the property to determine whether your lease or contract contains restrictions that would limit your ability to list your room, home, condominium, or apartment. Listing your room, home, condominium, or apartment may be a violation of your lease or contract, and could result in legal action against you by your landlord, including possible eviction.”

The notice must be in a particular font size and be provided immediately before the occupant lists each real property on the hosting platform’s Internet Web site in a manner that requires the occupant to interact with the hosting platform’s Internet Web site to affirmatively acknowledge he or she has read the notice.

CA Senate Bill 761. Codified as Business and Professions Code §§22590, 22592 and 22594. Effective date is January 1, 2016.

By Harrison K. Long, real estate attorney at Orange County CA.  Member of CA State Bar Association #69137.  Real estate broker – CALBRE #01410855.  Source of information is California Association of Realtors and CA legislative and laws information.  For further information and consultation, contact us at 949-701-2515.

“New CA Law Requires Hosting Platform for Tourist or Transient Housing Marketplace”

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Property Title Issues Are Important for CA Real Estate Investors

title insuranceProperty title challenges are important for CA real estate investors to consider:

  • Possible errors in public records
  • Unknown liens
  • Illegal deeds
  • Deeds of trust and chain of title
  • Missing heirs
  • Quitclaim deeds vs. grant deeds
  • Possible forgeries
  • Undiscovered encumbrances
  • Easements
  • Boundary line and survey disputes
  • Undiscovered wills
  • False impersonation of prior owner

If you are a California real estate investor, you should learn and understand your rights and responsibilities with legal issues – and your opportunity for success.

  • Avoid title problems
  • Purchase and sale agreements and transactions
  • Foreclosures
  • Deeds of lieu of foreclosure
  • Deed of trust sales
  • Best categories of residential property for investors
  • Landlord/tenant relationships
  • Investor and landlord disclosures
  • Leasing of homes and property
  • Relationships with tenants
  • Unlawful detainer actions
  • Cash for keys agreements
  • CA real estate laws
  • Landlord liability for pets and animals
  • Fair housing laws
  • Investor risk prevention and management
  • Land Use
  • Private property rights
  • Property co-ownership issues
  • Covenants running with the land
  • Litigation and dispute resolution

My legal service experience at Orange County CA includes representation of clients for many years with completion of more than 300 civil cases through jury and court trials and arbitration hearings.

  • Attorney member of the CA State Bar Association #69137
  • CA licensed real estate broker – CALBRE #01410855
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New CA Law Establishes Method for “Transfer on Death Deed”

California real estate law

New CA Law Establishes Method for “Transfer on Death Deed” – to Convey title to Real Property upon Death.

AB 139 was signed into law by the CA governor recently and allows an interest in certain real property to be transferred on death by recording a revocable “Transfer on Death” deed.
This would allow for planned transfer of ownership of that property interest to take place upon the death of the owner. 

People who are interested to use such and estate planning method in CA should work with an experienced attorney and/or estate planning professional before using such a deed.

Click here to see article by Bob Hunt about this new law and TRANSFER ON DEATH DEED

Orange County CA real estate investors need to know about legal issues for their buying, selling and leasing situations.  My legal service experience at Orange County CA includes:

  • Representation of clients for many years with completion of more than 300 civil cases through jury and court trials and arbitration hearings.
  • Attorney member of the CA State Bar Association #69137
  • CA licensed real estate broker – CALBRE #01410855
  • Now serving as risk management issues chairperson for “Transaction and Regulatory committee” at the California Association of Realtors.
  • Helping real estate investors with legal aspects of business and real estate situations

By Harrison K. Long.  This is for information only and is not the providing of legal services.  You should work with an attorney and estate planning professional before using such a Transfer on Death Deed.

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Real Estate Investors Want to Know What’s the Best Investment Category

Real Estate InvestingWhy SINGLE FAMILY HOMES are the best investment type of residential property for investors.

1. Expenses – single family homes usually have lower expenses per unit than multifamily.
2. Vacancy – tenants usually stay longer in single family homes than they do in multifamily, and single family homes also rent more quickly.
3. Tenant interaction – In a single family home, you usually don’t have to worry about tenants getting along.
4. Pride of ownership – Tenants often love that they have a home and will care for it.
5. Sale of the property – Single family home appeals to larger number of of buyers, including investors, and you can usually sell quicker for a solid price.

California real estate lawCONTACT ME ABOUT REAL ESTATE INVESTING AND LEGAL ISSUES:

  • Residential property investing
  • Landlord and tenant relationships
  • Tenant obligations
  • Home and Property Leasing contracts
  • Landlord disclosure obligations
  • Security deposits
  • Unlawful detainer actions
  • CA real estate laws
  • Fair housing laws
  • Purchase and sale transactions
  • Property management issues

money on house

  • As an experienced real estate and business attorney, I have represented clients for many years and completed more than 300 civil cases through trials and arbitrations.
  • Attorney member of the CA State Bar Association #69137
  • CA licensed real estate broker – CALBRE #01410855
  • Risk management issues chairperson, Transaction and Regulatory Committee, California Association of Realtors 2015.

By Harrison K. Long – Source of some information is article at BiggerPockets.com.  This is for information only and is not the providing of legal services.

Contact me for information and representation about your legal risks and opportunities as real estate investors and residential landlords.

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