Author: ft Editorial Staff

California housing outlook

A brief look at recent economic trends affecting real estate. The real estate recession is here Like the rest of the nation, California is feeling the burn of the real estate recession. As lenders pull back from the more risky mortgage loans in response to investor alarm, the number of construction starts is estimated to fall approximately 20%. In conjunction with months of existing unsold new construction, foreclosures continue to contribute to the rising housing inventory in the state. This will cause housing prices to drop as sellers will be forced to make greater price concessions in order to “compete” with the high supply of housing.The markets least affected by the decline in sales and housing prices are in the Los Angeles, Santa Cruz, Santa Barbara, and San Francisco counties. The relatively high prices of housing in those counties insulate them from some of the effects of the recession as slow markets tend to have a greater effect on lower-priced, lower-income communities with little or no ability to buffer economic shocks. Data from Wells Fargo Economics suggests that housing-related industries, including construction and mortgage banking, will be shedding more workers as the year goes on in order to adjust to the declining demand for housing, thereby slowing down payroll growth in California by more than half a percentage...

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Required disclosures on seller carrybacks

This article reviews the financing disclosures agents must make to buyers and sellers in carryback transactions. Mandated notices A seller is willing to help finance the sale of his one-to-four unit residential real estate by carrying back a note and trust deed, sometimes called an installment sale or credit sale.   The seller’s listing agent locates a qualified prospective buyer. The agent prepares an offer on a purchase agreement form and presents it to the buyer for his approval and signature since the buyer is not represented by an agent.   The terms offered for payment of the purchase price include a note and trust deed, to be signed by the buyer in favor of the seller, for the amount of the price remaining to be paid after the down payment and an assumption of the existing loan on the property.   A Seller Carryback Disclosure Statement is attached to the purchase agreement as an addendum. The addendum, prepared by the agent, contains numerous statements on the financial, legal and risk-of-loss aspects of the carryback note and trust deed.   The information entered in the carryback disclosure statement is based on the terms of the purchase offer, the title conditions, the activities to be undertaken in escrow and information obtained from the buyer.   However, the agent’s disclosures regarding other important aspects of the carryback paper which are not...

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Grant deed vs quitclaim deed

This article discusses the two most common types of deeds used to convey property interests and their characteristics. The deeds of conveyance Real estate solely owned as separate property by a married individual is sold. Before issuing a title insurance policy to insure the conveyance of marketable title to the property against any potential community property claim of the seller’s spouse, the title insurance company requests that the spouse join in the grant deed by signing it as the spouse of the grantor. The spouse signs the grant deed for the sole purpose of releasing any community property interest possibly acquired as a result of the marriage — even though the spouse acquired no interest in the real estate, as reflected by the record title. After closing, the buyer of the property discovers a tenant who holds a lease which was not agreed to in the purchase agreement as a condition to title nor referenced in the grant deed. As a result, the buyer incurs money losses to relocate the tenant. Meanwhile, the seller dies but is survived by the spouse who joined in the conveyance. The buyer now seeks to collect his tenant relocation expenses from the seller’s spouse for breach of the implied covenant in the grant deed signed by the spouse. The implied covenant warrants the grantor has not encumbered title to the property in any...

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Form 426 – Modification of the note

This article discusses the typical modifications of a note and reviews the use of a note modification agreement and the modification of note forms. Later changes in note provisions   A promissory note is written evidence of a promise made to repay a loan or pay a carryback installment debt. The provisions in the note determine a borrower’s or buyer’s debt payment schedule and interest obligations.   During the term of a promissory note, a lender or carryback seller and the owner of the secured real estate may agree to modify, add or rescind one or more of the note’s provisions. Any modification of a note requires mutual agreement between the debtor (borrower or buyer) and the creditor (lender or carryback seller) and consideration given in exchange for allowing the modification. [See Form 426 accompanying this article]   Modifications of a note secured by a trust deed usually arise out of a financial necessity experienced by the owner of the secured property.   The modification of a promissory note is a transaction controlled by rules of contract law. Thus, a written contract, in this example a note, can be modified by:   ·     a written agreement; or   ·     an oral agreement. [Calif. Civil Code §1698]   However, for an oral modification to be enforceable, both the lender and the borrower must put the oral modification into effect by...

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Declaratory relief prevents more costly litigation

This article explores the use of a declaratory relief action to resolve a real estate dispute before performing the contract or employing other remedies which would be expensive to reverse. Disputes resolved before closing A buyer is interested in purchasing an unimproved parcel of real estate on which to build a residence as allowed by zoning. Before the buyer and seller enter into a purchase agreement, a neighbor informs the seller’s listing agent a written agreement between the prior owners of the neighbor’s property and the seller’s property prohibits the construction of any improvements on the seller’s property. However, the agreement is not recorded and the seller was previously unaware of the existence of the use restriction. The agent believes the agreement is not binding since it was not recorded and the seller acquired the property without knowledge of the use restriction. Before closing, the buyer is advised of the agreement and requests the neighbor’s permission to build improvements on the property. The neighbor refuses to grant the buyer permission, claiming the agreement is a covenant running with the land which is binding on all subsequent owners, including the buyer. No one wants escrow to close due to the uncertainty that the property can be used as expected. To resolve the dispute over the use restriction agreement, the buyer and seller join together and file an action against the...

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[M]ost people join CAR in order to obtain the forms, not for the other services. And if there were any viable choices for agents, CAR would immediately suffer as much as a 40% to 50% loss in membership. […] CAR owns the “for profit” company that produces their software, with top officers in CAR sitting in top management spots in ZipLogix. This is the living, breathing definition of a conflict of interest. […] On their website they parade their forms software as “free” when cost of their forms software for non-members as a percentage of their actual membership cost speaks for itself.

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