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Remember to “spring your clocks forward” by 1 hour on March 8, 2020!  This is great news for people who love evening daylight and the start of spring.  But, it brings an interesting twist for Wisconsin Realtors.

CST

The new Wisconsin WB-11 Offer to Purchase defines deadlines as expiring at “11:59 p.m. Central Standard Time.”   Central Standard Time is our time zone in the winter months.  Starting March 8th and continuing all summer, Wisconsin will be using Central Daylight Time.  Arguably, this means that deadlines in the Summer months expire at 10:59 p.m.

What should Realtors do about the time change?  Enjoy the evening sun and try not to work past 10:59pm.  You will avoid this weird time zone glitch and you will get a better night sleep.

Spring

Thanks to Evan Swain of Keller Williams for his brilliant insights on this topic!

Happy Spring and don’t forget to spring your clocks forward at 2a.m. on March 8th. 

Time to Refinance?

Is it time to refinance your mortgage?  Probably!

The rate on a 30-Year Mortgage has steadily dropped from already low rates. Although rates can vary by region and lender, the national average has dropped from  nearly 4.5% to under 3.5% over the last 6 months.

Mortgage Rates

The drop in mortgage rates corresponds with a recent drop in the 10-Year Treasury Bond.  The market for these bonds does not directly effect mortgage rates, but it is good indicator of their direction.  In fact, movement of the 10-Year Treasury Bonds almost exactly mirrors movement of 30-Year Mortgage rates over the past 5 years:

COMPARISON

As of February 24, 2020, the yield on the 10-Year Treasury bonds were near record lows.

Does this suggest record low mortgage rates?

Yes!  The current mortgage rates are already near record lows.

Will mortgages rates drop further (don’t they drop when the bonds drop)?

Not Necessarily.  Mortgage rates are not directly effected by bond rates — there are many factors that determine mortgage rates.  And, a drop in bond rates may reflect market conditions that are already “baked in” to current mortgage rates.

The recent precipitous drop in bonds may be largely a reaction to the coronavirus, and fears of its effects on the global economy.  Yet, those fears and the current bond yields at least hint at a continuation of low rates, if not a drop in rates.

Disclaimer – if we could predict where mortgage rates will go, we would be on a tropical beach, not writing this blog.  Rates could go up or down. Mortgage rates are already CRAZY LOW and its probably time to refinance if you haven’t already!

Digital Closings

Imagine signing all of your closing documents for the purchase or your house from the comfort of your couch.  Digital closings are coming and this could soon be a reality.

What is a Digital Closing?

A digital closing is a broad term that can include a number of differedigitalnt scenarios, ranging from the review and signing of a few documents on a computer or tablet to signing all documents remotely on a computer. A digital closing simply means a closing where at least some documents are signed electronically.  There are 3, broad categories of digital closings:

Hybrid Closing:  Some documents are signed electronically while others are signed on paper. This typically occurs in person, at the title company, and may include a traditional notarization or an electronic notarization.

Fully Electronic Closing:  All documents are signed electronically, including the use of in-person electronic notary.  The closing occurs in-person, usually at the title company.

Remote Electronic Closing:  The entire closing occurs remotely, via video, with a remote online notary (RON).

So, when can we do an electronic closing?  Some Hybrid closings are already happening. But, there are still challenges before the industry can implement more extensive use of electronic or remote electronic closings. These challenges include technology of lenders, title companies, and consumers; security and privacy concerns; and the interaction of state and federal laws.

Homestead Title recently participated in the American Land Title Association and Mortgage Banker’s Association’s Digital Closing Boot Camp.  Our take away: Digital closings are coming, but not tomorrow and not in a tidal wave.  Digital closings will soon become another tool in our tool box, giving consumers more options. Remote Electronic Closings are a more distant reality in Wisconsin.  Most importantly, we learned that Homestead Title is more prepared than most in the industry.

Look for more information about digital closings and options to make the closing experience easier, smoother, and more convenient.

 

Intro To FIRPTA in Wisconsin


This is the first in a series of videos explaining FIRPTA — the Foreign Investment in Real Property Tax Act.
Firptapicforblog

Virtually all real estate transaction in Wisconsin involve the standard WB forms approved by the State.  Unique forms apply to different kinds of properties, including:

  • WB-11 for Residential;
  • WB-14 for Condominiums;
  • WB-13 for Vacant Land;
  • WB-15 for commercial property;
  • WB-16 for a business with real estate.

Licensed Realtors are required to use these forms, and most attorneys and FSBOS also use them.

Using the wrong form can lead to confusion, misunderstandings and liability for the parties and their Realtors.  As a title company, we’ve seen hundreds of transactions where the parties used the wrong form, many of which have turned into ugly disputes. Here are three examples:

Incorrectly Using The WB-11 on the Purchase of a Condominium:

When Realtors fail to use the WB-14 form on a condo, the offer can overlook critically important things like: rights or ownership in Parking and Storage Units; association fees and assessments; and the buyers’ right to rescind the offer after receipt of condo disclosure documents.  Using the WB-11 means that the parties may not be aware of these rights and may not adequately disclose or even transfer storage or parking units. Disputes over these issues can lead to failed closings and lawsuits.

Incorrectly Using The WB-11 on the Purchase of a Business and Real Estate:

When Realtors fail to use the WB-16 form on the purchase of a business, they overlook various business issues; environmental issues; and the value of the non-real estate assets, such as inventory, accounts receivable, and good will.  The WB-11 is missing these critical terms and contingencies, and a buyer can have serious liability based on these oversights.  That liability is heightened when the transaction involves more complicated and expensive commercial or business issues.

Incorrectly Using The WB-11 on a Vacant Property

The WB-11 does not address important considerations relating to vacant land, such as future uses, maps and surveys, and environmental considerations.  Using the wrong form can mean buyers are unable to do the proper due diligence or protect themselves with important contingencies.

Consequences of Using the Wrong Form

In the worst case scenario, using the wrong form can lead to a lawsuit and serious liability for the parties and their Realtors.  Even without a lawsuit, Realtors can be subject to discipline by the DSPS for violating REEB 16 (use of approved forms) and Wisconsin Statute 452.133(1)(b) (the duty to provide brokerage services with reasonable skill and care).  When representing a seller, Realtors should insist that the Buyer and their agent use the correct form.  When drafting offers, Realtors must use the correct form and should seek guidance if they are unsure.

Attorney Peter Zarov represents brokerages and Realtors throughout the State of Wisconsin.  His practice specializes in real estate, brokerage, and title issues.

 

Who Must Sign What?

One of the most common mistakes that sellers and Realtors make is having the wrong people sign documents.  This can cause major problems, liability, or the loss of a Realtor’s commission. Sellers and Realtors often sign incorrectly because they don’t realize who really owns the property, who can sign on behalf of entities or estates, and who must sign.

It is important that Realtors and their Sellers understand exactly who must sign documents. The following is a brief summary of scenarios and rules in Wisconsin.  For more detailed discussion and answers, contact Homestead Title.

First, all sellers must sign all “conveyance” documents.  This means they must sign the deed and closing documents and they also must sign the offer to purchase and other contract documents.

Multiple Owners

If multiple people own the property, they ALL must sign the offer to purchase and all closing documents. It is not uncommon for sellers or their Realtors to cut-corners an allow only one owner to sign the offer, intending that the others will sign at closing.  An offer to purchase is not valid and enforceable if only some of the owners sign.  A Seller could be stuck with an unenforceable contract and Realtors risk violating their ethical and statutory duties by not assuring that all owners sign.

Trusts

If a property is owned by a trust, the trustee(s) must sign.  The Trust agreement will name the trustees and determine exactly who must sign.  A trustee can almost never delegate their authority either informally or by power of attorney.  Trust agreements rarely allow delegation or power of attorney signatures.

 Corporations or LLCs

Property owned by Corporation or LLC requires the signature of an authorized representative.  In each case, that will be determined by the corporate documents or agreements.  For most corporations, the president, secretary, or other officer can sign.  LLC’s must sign documents by either a manager or managing member(s).  The LLC Operating Agreement will determine which person must sign.  As with Trusts, it is almost never acceptable to delegate signing duties by power of attorney.

Deceased Individuals

When a property owner dies, it is critical to determine who must sign any sale documents.  Some properties are owned with “survivorship rights,” meaning that the deceased person’s property rights automatically transfer to another person (usually a spouse).  In other cases, the deceased person’s interest must be conveyed by a person appointed by the probate court.  In those cases, the court must appoint a personal representative or special administrator who has the authority to convey the property on behalf of the deceased person’s estate.  When addressing the sale of a deceased person’s property, it is wise to consult with a title company and/or attorney.

Married Couples

Under Wisconsin law, property that is solely owned by one spouse as a “homestead” or residence, cannot be sold without the other spouse’s signature.  This is called the “alienation of homestead rights.”  Both spouses must sign even if (a) the other spouse has never owned the property, (b) there is a marital agreement, or (c) there is a pending divorce.  When parties are selling a house in which either spouse lives as a residence, they almost always need both spouses to sign the deed and offer to purchase.

Power of Attorney

A power of attorney is a document that allows one person to sign on behalf of another.  This document must be approved by the title company and buyer’s lender and can only be used for living, individual people.  A power of attorney cannot be used for a dead person and can almost never be used for a trust, corporation, or other legal entity.

Guardianship

A guardianship exists when a court determines that someone is unable or incapable of making decisions or handling their own affairs.  The Court appoints a guardian to oversee the affairs of that person, known as the ward.  The ward cannot sign contracts or documents and all documents must be signed only by the Guardian.  In addition, the court will need to approve any sale, including its specific terms.  A commission agreement or offer to purchase signed by a ward that is subject to a guardianship is void and unenforceable.

Each of these topics are subject to in-depth analysis, rules, and occasional exceptions.  Attorney Peter Zarov is available to discuss these and often teaches courses to Realtors and Brokerages on proper signatories and assuring avoiding the consequences of having the wrong person sign.  Please contact us for information on courses and materials.

Sitting at the closing table, the closing officer turns to the seller with a smile and asks, “Have you done any construction, work, or improvements on the property in the last six months?”

The seller replies, “just the floors, some drywall, painting, electrical and plumbing work.  It was about $5,300 and I paid for most of it.”

Ohhh boy!  The title company cannot close without assuring that all contractors were paid and waived their rights to put a lien on the property. The closing is delayed!

Owner’s Affidavit and Construction Liens 

While the title company can search for most liens, some liens are hidden or “secret.”  Construction liens are one such “secret lien.”

If a contractor does work on a property, they can file a construction lien for the amount they are owed.  They have six months after the last time they performed work to file the lien.  But, the lien is effective as of the date the contractor started work.  So, if an electrician rewired the attic a week before closing, he can file a lien 6 months later but that lien will be effective as of a week before closing — before the buyer purchased the property.  In other words, the buyer will purchase a property with a lien against it!

lienguy

In order to insure against this happening, the title company asks the seller to swear in an Owner’s Affidavit that no work, labor, or improvement was done in the last 6 months.  And, if any such work was done, the title company will ask for signed lien waivers from each contractor.

Realtors and Sellers Should Be Prepared

Sellers and their Realtor should be prepared with lien waivers for any work done prior to closing.  Addressing this issue for the first time at the closing table can lead to delay or even cancelling the closing.  Realtors should communicate to sellers that they will need all lien waivers and that a cancelled check or PIF invoice likely is not enough (although, some title companies will accept those if the amount is very small).  By avoiding surprises and preparing the seller for closing, the Realtor will assure a smooth closing, a happy client, and avoid delays.

As always, if you have questions about this or other title issues, call Homestead Title and we’ll guide you through.