Lyon Spring 2014 Legal Update

According to the Civil Code, the new TDS form must be used for all transactions starting January 1, 2014.

The best risk management procedure is for sellers to complete their TDS in person rather than completing and signing electronically.

Regarding taxation on short sales, the following statement is true for sellers of 1 to 4 residential properties: “There is no “Forgiveness of Indebtedness” or “Capital Gains” tax because of new IRS and FTB policy.”

Regarding owner-carry loans (“OC”) on residential 1 to 4 properties after the Dodd-Frank Act was passed, all such sellers have to make a determination whether the borrower is capable of re-paying the loan.

Regarding the 2014 Water-Conserving Plumbing Fixtures law requiring the replacement of “non-compliant plumbing fixtures,” all owners of single-family residences must comply if they “alter or improve” the property with a permit after January 1, 2014, unless the City has a stated exemption.

The flood insurance law which resulted in huge premium increases on the sale of a property in a FEMA “A” or “V” zone, as shown on a NHD report, was recently modified to provide that a sale no longer triggers a premium increase, but premiums can increase by as much as 25% per year over the next three years.

CalBRE will be checking agent websites for the employing broker’s CalBRE license number in addition to the agent’s license number.

If an agent has his/her own corporation, it is okay to use that corporate name in working for the broker on real estate transactions.

If an agent communicates with a client by text, and if the text contains important information or advice, it is best to follow up with the client by sending an e-mail.

Referral fee agreements from one salesperson to another are okay if they are in writing.

It is advisable for an agent to agree to accept a referral from an internet referral broker so long as the agent agrees to the online “terms and conditions.”

When presenting an offer to a seller of an off-market property, you should present a commission agreement at the same time as the offer.

When writing an offer on an off-market property, it is a good idea to get a Buyer Representation Agreement prior to writing and presenting the offer to the seller.

Buyer representation agreements are like listing agreements in that they are enforceable and must be signed by the buyer to be effective.

If a buyer’s agent presents an offer to an off market seller, they are entitled to compensation because they are the “procuring cause” even if the seller has not signed a compensation agreement.

Sharp offers or relative bids should not be written because they are illegal.

When a listing agent receives a sharp offer/relative bid in a multiple-offer situation, the seller must accept that offer because it is always the highest price.

The contingency for the sale of buyer’s property (form COP) is a complicated form and should be reviewed carefully before allowing either the buyer or seller to sign.

When showing property with dangerous conditions to buyers, if the listing agent gives a verbal warning to look out for dangers, that is sufficient.

The best way to remove contingencies is with a contract addendum.

When a buyer decides to buy a property “non-contingent,” it is good risk management to give the buyer a “Market Conditions Advisory” form and confirm in an e-mail that the buyer has made the decision to proceed without contingencies after having been warned of the dangers by his/her agent.

It is advisable for listing agents to provide their sellers with a “Seller Advisory re TDS” prior to sellers completing their TDS disclosures, and also to go through it with them so that they understand their disclosure obligations.

In a mixed-use building with 1 to 4 residential units, a seller doesn’t have to complete a TDS because the property has non-residential uses as well.

If an agent hires a photographer to shoot photos of his/her listing, that agent automatically owns those photographic images.

When taking a listing, it is okay to use the MLS photographs from the previous listing agent.