LIEB BLOG

Legal Analysts

Friday, April 25, 2014

Is your buyer precluded from buying US Real Estate?

Is your buyer precluded from buying US Real Estate?

As previously posted on February 28, 2014:


Check with the Office of Foreign Assets Control at the US Treasury before you help your client buy.


To use the Office's search features by person and country, click Resources on the page and find the feature that fits your need.

Remember, The Office of Foreign Assets Control administers and enforces economic sanctions programs primarily against countries and groups of individuals, such as terrorists and narcotics traffickers. The sanctions can be either comprehensive or selective, using the blocking of assets and trade restrictions to accomplish foreign policy and national security goals.

So, its important to check the Office's Resources frequently as sanctions change and you need to know what the rules are today when working in real estate brokerage.
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Thursday, April 24, 2014

Guidelines Shifting for the Federal Loan Modification Program

Foreclosure , Foreclosure Defense
Guidelines Shifting for the Federal Loan Modification Program
Updates to the Making Home Affordable Handbook for the federal Home Affordable Modification Program are available here and will be effective July 1, 2014!

Top things you need to know about HAMP:
  1. The Home Affordable Modification Program (HAMP) is a federal program designed to help homeowners obtain affordable loan modifications.
  2. HAMP Tier 1 only applies to loans of principal residences.
  3. A HAMP Tier 1 mortgage payment must reflect 31% of the homeowner's gross monthly income.
  4. HAMP Tier 2 may apply to loans of principal residences or to loans of rental properties.
  5. A HAMP Tier 2 mortgage payment must be within the range of 25% to 42% of the homeowner's gross monthly income.
  6. A HAMP Tier 2 mortgage payment must represent a reduction of at least 10% of the original mortgage payment amount. 
However, Supplemental Directive 14-02 to the Making Home Affordable Handbook is drastically changing the requirements under HAMP Tier 2 to make it easier than ever to get a loan modification on a non-GSE rental property!

In Section 6.3.3 of Chapter II of the MHA Handbook, the post-modification principal and interest payment under HAMP Tier 2 must be at least ten percent less than the pre-modification principal and interest payment. To clarify, if the original monthly principal and interest mortgage payment is $3,000, then the modified monthly principal and interest mortgage payment under HAMP Tier 2 must be $2,700 or less according to the ten percent reduction rule. Under this Supplemental Directive, however, this required percentage is totally erased. Now, it is only required that the post-modification principal and interest payment be less than the pre-modification principal and interest payment, thus expanding the amount of homeowners eligible for HAMP Tier 2. In the past, many homeowners were ineligible because servicers could not reduce the principal and interest amount by the required percentage due to the default amount, monthly real estate taxes, property value, and other similar factors. Without a required percentage, servicers will have a much easier time reducing the post-modification principal and interest payment for more homeowners across the country.

However, it should be noted that servicers may require a minimum reduction as long as that reduction is not greater than ten percent. Servicers must include this minimum reduction in their written policy if they choose to do so.

Another important clarification is the modification of loans prior to the loss of good standing. If a homeowner would like to modify an already HAMP-Tier 1-modified loan and is not in default on that loan, he or she may be eligible for HAMP Tier 2 if it has been more than five years since the HAMP Tier 1 modification. Once a homeowner accepts a HAMP Tier 1 loan modification, he or she cannot obtain another one in the future if that loan goes into default again. HAMP Tier 2, however, would still be available to this homeowner as a loan modification option (even if the property is a primary residence) as long as it has been more than five years since the original HAMP Tier 1 modification date. Since the Home Affordable Modification Program is the federal program to help homeowners cure their default, it always has priority over Lender in-house modifications.

Also included in this Supplemental Directive are updated guidelines regarding post-modification counseling, assistance for homeowners with limited English proficiency, and notice of interest rate step-ups. Although these guidelines are important as well, it is crucial that real estate agents focus on the new HAMP Tier 2 guidelines, especially if their clients own rental properties that are in risk of default or are currently in default. The more knowledgeable you are able these guidelines, the more your clients will trust you in other aspects of real estate.

Again, these updated guidelines will be effective July 1, 2014, and it is important that you understand and prepare for these changes. 
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Friday, April 18, 2014

Brand New Fair Housing CE Course Offered in Southampton

Fair Housing , Hamptons CE Class
Brand New Fair Housing CE Course Offered in Southampton


Property Manager Liability: 

Requirements, Responsibilities and Fair Housing

Maximize your client's investment while minimizing your exposure to great liability. Be cautious, property management is a serious business that has many liability landmines for the weary. Do not just dabble in property management. Do not just help out a landlord brokerage client in dealing with their tenants. Learn why the Department of State considers property management to be a licensed activity in this State. Understand how to mitigate exposure to license law liability, premises liability, and fair housing liability. Get real life examples of what can go wrong. Most importantly, learn what must go into your Property Management Agreement and why a top property manager should get paid.

Credits: 3.0 CE Hours **Satisfies DOS Mandatory Fair Housing Requirement

Date: May 7th, 2014 in Southampton



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Tuesday, April 08, 2014

Fredrik’s Fiduciary Duty – Million Dollar Listing New York

Agency Disclosure , Fredrik Eklund
Fredrik’s Fiduciary Duty – Million Dollar Listing New York
Fredrik Eklund: Photo http://www.bravotv.com/


Spoiler Alert: The below is a legal analysis of Fredrik Eklund's role in the April 2, 2014 Season 3, Episode 1 of Million Dollar Listing New York.

The premier of this season of Million Dollar Listing New York, The City Will Eat You Alive, places Douglas Elliman's Fredrik Eklund, in an ethical quandary and he comes out looking as professional as ever while making the deal for his client and getting a commission along the way.

In the episode, "Fredrik lands his dream listing, only to find out that the seller may be his worst nightmare". The Seller is a micromanager; sound familiar? He knows what he wants, $9.5M, and he makes it clear that he doesn't want to be bothered for anything less. However, Fredrik got an offer of $8M.

What should he do?

As a Licensed Real Estate Salesperson in the State of New York, an agent can have one of five types of agency with differing corresponding Fiduciary Duties dependent on the applicable agency type, to wit:


  1. Seller's Agent
  2. Buyer's Agent
  3. Dual Agent
  4. Dual Agent with Designated Sales Agent
  5. Broker's Agent


An agency relationship means the duties of a licensed individual in representing the interests of its principal in this context. Here, Fredrik was clearly a Seller's Agent, as his interests were aligned with the Seller; he was trying to get the Seller the most possible money in the transaction. In fact, the Agency Disclosure Form in the State of New York, states as to a Seller's Agent, the following: "A seller's agent does this by securing a buyer for the seller's home at a price and on terms acceptable to the seller". Conversely in the situation displayed in the episode, where Fredrik was receiving the $8M offer at the restaurant, Fredrik was meeting with a Buyer's Agent who had previously viewed the property at a Broker's Open House. The Buyer's Agent was clearly aligned with the Buyer's interests, offering a significantly lower number than the Ask. In fact, the Agency Disclosure Form in the State of New York, states as to a Buyer's Agent, the following: "The buyer's agent does this by negotiating the purchase of a home at a price and on terms acceptable to the buyer". As a result, in the episode, the Buyer's Agent owed his Fiduciary Duties to the Buyer and Fredrik, the Seller's Agent, owed his Fiduciary Duties to the Seller.

To clarify, a Buyer's Agent and a Seller's Agent cannot work at the same brokerage company by operation of New York State Law. Instead, where two agents at the same company work an In-House Deal, representing the interests of different parties to the transaction, that type of agency is called a Dual Agent with Designated Sales Agent in New York State. However, where an agent represents the interest of the Seller and a different agent represents the interest of the Buyer there are two possible types of agency that can apply, with the dispositive factor as to the appropriate agency being whether the opposing agents work at the same brokerage company. If the agents work at the same brokerage company, the agency is called a Dual Agent with Designated Sales Agent. If the agents work at different brokerage companies, one agent would be the Seller's Agent and one agent would be the Buyer's Agent, which is the situation Fredrik was engaged in during this episode.

In a Dual Agent with Designated Sales Agent situation the agents have compromised Fiduciary Duties because they both report to the same supervisor. In fact, the New York State Agency Disclosure Form states, as to this conflict, the following: "The designated sales agent must explain that like the dual agent under whose supervision they function, they cannot provide undivided loyalty". Yet, Fredrik was a Seller's Agent, and as such, had the following Fiduciary Duties to his client, the Seller, including: (1) Confidentiality; (2) Obedience; (3) Loyalty; (4) Accountability; (5) Disclosure; and (6) Reasonable Care.

Which Fiduciary Duties were at play in the scenario faced by Fredrik when he received an $8M offer while his client didn't want to hear about anything below $9.5M?

Fredrik had two competing Fiduciary Duties in this scenario, one to be obedient to his Client's instructions and one to give full disclosure to his Client. So, on the one hand Fredrik had to listen to his client's direction to not bother him absent a full Ask offer, but on the other hand, Fredrik lacked the authority to reject the $8M offer without his Client's authority, which first required him to fully disclose the offer to his Client.

So what happened?

Fredrik chose right and advised his client of the offer in the face of knowing all the while that he was going to be lambasted for making the call. To know that Fredrik's decision was correct an agent only needs to do a Cost / Benefit Analysis of the choices. The worst case scenario in telling your client that they received an offer below the Ask is that they are unhappy and give you grief about wasting their time. However, the worst case scenario in not disclosing an offer to your Client is that the Client claims that you breached your Fiduciary Duties and makes a complaint to the Department of State charging you with a License Law Violation. In fact, the Department of State has previously suspended a real estate agent's license for a period of six months for failing to transmit an offer and also failing to provide an agency disclosure form in a matter called Lemcke v. Department of State. So, it seems like a rather simple choice for a real estate agent faced with this predicament.

In Million Dollar Listing the choice was not only the safest, but the best for the agent and the Client as well. You see, by making the call and engaging his principal, the Seller, Fredrik initiated a dialogue that resulted in a deal at $8.8M. A win for the Seller, Buyer and the agents involved.


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Wednesday, April 02, 2014

Title Insurance Reform in NYS Budget

Legal Updates , Title Closer
Title Insurance Reform in NYS Budget
Accordingly to a Press Release entitled, Governor Cuomo and Legislative Leaders Announce Passage of 2014-15 Budget, NYS now has significant changes to our title insurance industry.

Title insurance insures against defects in title to real property and is required if a purchaser obtains an institutional mortgage as part of their purchase of the real property. Some private lenders do not require title insurance. However, its always a good idea to not only get title insurance in the form of a lender's policy, but also to obtain a fee or homeowner's policy as well because purchasing property is quite expensive in this State and insuring that you own what you thought you bought is a great idea.

According to the Press Release, the Title Insurance Reform coming to NYS is as follows:

The Budget includes measures to provide stronger oversight for the title insurance industry, which will help better protect consumers and lower costs for New York homeowners. The Budget provides the Department of Financial Services (DFS) with authority to issue licenses to title insurance agents for the first time, just as it licenses all other insurance agents and brokers. Licensing will require agents to meet qualification standards and undergo regular training. DFS will also have the authority to monitor abuse by agents and to revoke licenses accordingly, as well as help root out conflicts of interest that drive up costs for homeowners. Together with other measures including regulations DFS will soon issue on title insurance, these reforms are expected to result in a 20 percent reduction in title insurance premiums and closing costs for new home purchases and a more than 60 percent reduction in costs on refinancing transactions.

 The 2 keys in this reform is:

  1. Licensing requirements for title closers
  2. Reduced costs of title insurance
As the Department of Financial Services issues the applicable Regulations we will update this blog with more information. 

Stay tuned. 
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Tuesday, April 01, 2014

April is Fair Housing Month

Fair Housing ,
April is Fair Housing Month
Today is the beginning of Fair Housing Month. The Fair Housing Act was enacted on April 11, 1968, making it unlawful to discriminate against any person based on race, color, national origin, religion, sex, familial status, or handicap in the sale or rental of a dwelling. Although brokers must comply with the Fair Housing Act every day, it is in the month of April that the Fair Housing Act should be commemorated. Print out the Fair Housing Declaration and hand it out to your fellow agents. Reread the Fair Housing Act, and do not forget to sign up and attend our Lieb School class on the Fair Housing Act on September 18, 2014 or December 10, 2014. 
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Monday, March 31, 2014

DECISION: The Alleged Effects of Mold on Human Health

Legal Updates , Mold is Money
DECISION: The Alleged Effects of Mold on Human Health
The alleged effects of mold on human health has been addressed by New York’s highest court, the Court of Appeals, on March 27, 2014 in Cornell v. 360 W. 51st St. Realty, LLC.

The facts of the case were that Ms. Cornell resided in an apartment from 1997 to 2003, after which time she vacated the property due to alleged health issues allegedly caused by mold and dampness in her apartment. She claimed to be dizzy, asthmatic and congested and was unable to function or sleep properly while in the apartment.

51st Street Corporation opposed her claim, arguing that Cornell was unable to prove a cause-effect relationship between mold and disease. Relying on a clinical immunologist as an expert, 51st Street Corporation demonstrated that the scientific community generally accepts that mold can cause disease through specific channels; however, none of Cornell’s symptoms can be directly linked to mold exposure.

In dismissing the complaint, the Court held: “Studies that show an association between a damp and moldy indoor environment and the medical conditions that [Plaintiff’s Expert] attributes to Cornell’s exposure to mold…do not establish that the relevant scientific community generally accepts that molds cause these adverse health effects.”

Brokers, keep this case in mind as you work with clients who have fears about the effects of mold on human health when they refuse to enter a property claiming to smell mildew.

As the Court explained, mold exposure is not established by the scientific community to create toxic effects, except for cases of ingestion. It only is shown to cause an immune response in allergic individuals. 
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Mortgage Finance Reform Advances in the Senate

Fannie Mae , Freddie Mac
Mortgage Finance Reform Advances in the Senate
The Senate is currently formulating its bipartisan plan to overhaul Fannie Mae and Freddie Mac in the Committee on Banking, Housing, and Urban Affairs. Chairman Tim Johnson (D-SD) and Ranking Member Mike Crapo (R-ID) have been working together to craft legislation that shifts the mortgage market to the private sector and creates the Federal Mortgage Insurance Corporation (FMIC) that will protect taxpayers from having to bear the costs if another housing bubble bursts in the future. FMIC will be an independent agency that supervises servicers and guarantors and provides insurance on mortgaged-backed securities. It will also create a mortgage insurance fund that funds insurance claims but only after the private sector absorbs the initial risk. The government will remain a guarantor of mortgages as a last resort.

In a news release, Mike Crapo explained, “This agreement moves us closer to ending the five-year status quo and beginning the wind down of Fannie and Freddie while protecting taxpayers with strong private capital, building the components for a stable secondary market and avoiding repeating the mistakes of the past. Government control of Fannie and Freddie with no private capital to protect taxpayers against losses is unacceptable.”

This legislation is only in its early stages, focusing on the necessity of a smooth and efficient transition to private lending and the continuing availability of the affordable 30-year mortgage. Brokers, change is coming to the mortgage market, and it is essential that you are knowledgeable every step of the way to a final bill. This legislation directly affects your occupation and your clients, so keep your eyes open for more advances in legislation.

Click here to read more on the Housing Finance Reform legislation. You may also follow S. 1217’s progress here on govtrack.us.  
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Friday, March 14, 2014

The Happiest Job in America? Being a Real Estate Agent.

Lieb School ,
The Happiest Job in America? Being a Real Estate Agent.
Around this time in 2013, Forbes reported that CareerBliss' employee-generated reviews determined that being a Real Estate Agent is the happiest career in America. Click here for the article. The results are old, but the underlying reasons are what interested me, not to mention they are still relevant today. Let's find out why being a Real Estate Agent is such a happy job:

The study asked employees to review ten factors that affect their workplace happiness:
  1. Relationship with boss
  2. Relationship with co-workers
  3. Work environment
  4. Job resources
  5. Compensation
  6. Growth opportunities
  7. Company culture
  8. Company reputation
  9. Daily tasks
  10. Control over which tasks to perform each day
Being a Real Estate Agent is not your typical 9-5 cubicle job where your job is to simply finish the work that is handed to you. Every agent knows that they are solely responsible for their success. As a Real Estate Agent, your rewards are proportional to your effort, professionalism, and skill. If you want to just "show up" and coast, you are going to fall flat on your face. On the flip side, if you want to be in control of your career, all of the tools are laid at your feet. 

When a Real Estate Agent joins a brokerage, they are giving away part of their hard earned commissions in exchange for the benefits being a member of a brokerage provides. When you look at the ten factors above, you see ten things which Real Estate Agents want in their careers, and ten things brokerages want to provide to help their agents succeed.

A Real Estate Agent at a major brokerage can check off each of the ten factors:
  1. A professional relationship with their boss who rises and falls with their agent's success.  
  2. A professional relationship with their co-workers who share the same goals and have the same desire to succeed. In addition, all the benefits which accompany having a large network of agents which makes it easier to connect buyers and sellers. Your co-workers are a resource to be utilized and respected. 
  3. A positive work environment which is a product of the other nine items on this list.
  4. Access to MLS or a similar listing service, a strong legal team, professional office space, advertising, brand recognition, and other brokerage specific resources which help you do your job better, faster, and more efficiently. 
  5. Compensation that rewards you for your work - your extra effort finds its way directly into your pocket. 
  6. Unlimited growth opportunity - the only ceiling is your own desire and will succeed. 
  7. A company culture that rewards success and promotes independence. 
  8. Brand recognition and reputation that lends itself to any agent who operates under their brokerage's umbrella.
  9. A work day which is almost never the same as the day before, or the next day. There are always new challenges to tackle and new faces to interact with. 
  10. Nearly completely autonomous control over what to do, when to do it, and how to do it. 
Brokerages - Think about what your agents want and how you can help them succeed. After all, their success is your success.

Real Estate Agents - Think about all the benefits your brokerage provides and make sure you are utilizing each them to their full extent.

Non real estate professionals - How can you incorporate some of the things from this list to make your work (or your employees) more enjoyable and more productive?

As for the unhappiest job in America, I guess CareerBliss forgot to interview Lieb at Law employees. 
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Sunday, March 09, 2014

Smart Home Must Haves

Real Estate Technology , Real Estate Tips
Smart Home Must Haves
Donald Bell of CNET goes through simple smart home upgrades that are must haves for those techies in the real estate world.

Mr. Bell discusses the best in smart lights, outlets, smoke detectors, thermostats and locks that will change your home and change your life.

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