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The self isolation and quarantines of the coronavirus/Covid-19 pandemic creates challenges and disruptions, including in real estate.  The title and mortgage industries are putting forth efforts to overcome these challenges.

Remote Digital Closings May be Available Soon!

A major effort is underway from title underwriters, legislatures, and administrative agencies to allow “Remote Online Notaries,” (RON) in Wisconsin.  This would allow for fully remote, digital closings without the need to leave home. While it would primarily be available to Sellers, some Buyers can also sign remotely.

E-signing2

Buyers with a loan will need their lender approval to conduct a fully digital closing.  Lenders have many considerations and challenges, including investors, underwriters, mortgage insurance, and legal issues. Some may not be able to offer this service right away and others may allow only certain documents to be signed digitally.

Homestead Title is already conducting digital, remote closings for “Cash” Buyers (where none of their documents are notarized and there is no lender).

Look for important updates on Digital Closings in the coming days.

 

Homestead Title has implemented a plan to maintain day-to-day operations in response to the Coronavirus (COVID-19) pandemic.

Homestead will continue normal operations, without disruption, during these challenging times. We do not anticipate any delays or cancellations as a result of temporary changes to our business. The majority of Homestead’s team will work remotely from home over the coming weeks. Phone and Email will operate as normal and we are available to help.

Closing officers will be available in our office for any scheduled sale or refinance. We will operate with minimal, in-office staff and appreciate your patience and understanding.

We are committed to supporting and serving our employees, their families, and all those involved in our real estate and title insurance transactions.  As we monitor developments and guidance from public health professionals, we will make any necessary adjustments.

Tips for a Healthy Real Estate Closing:

  1. Only Signors in the Closing Room: Homestead will not allow anyone in the closing room other than necessary signors (Buyers, Sellers, and their attorneys).  We urge Lenders and Realtors not attend closing and will ask them to wait in our outside lobby.
    1. We will include Realtors and Lenders on all questions by phone.
    2. We will overnight commission checks at no cost to the Realtor or their broker.
  2. Sign Separately and Social Distancing: We encourage Buyers and sellers to sign at different times.  We are waiving Seller pre-sign fees until at least June 1, 2020.  Alternatively, we encourage Buyers to arrive on time and Sellers to arrive 35 minutes after the start of closing.  This will allow for minimal contact and more “social distancing.”
  3. Remote or Digital Closings: When possible, Homestead will offer remote or digital closings.  Remote notarization is not yet legal in Wisconsin, so fully digital closings are rarely an option other than for cash purchasers. We will explore all options to accommodate our customers and protect the well-being of our community.
  4. Clean Office Space:  We are providing clean pens and separate paperwork to minimize contact between people. We are wiping down all surfaces with disinfectant wipe throughout the day.
  5. When to Avoid Closing: If any Buyer or Seller is sick,  in contact with anyone diagnosed or suspected of having Covid-19, or has traveled internationally in the last 14 days, please contact us for alternative closing options
  6. Celebrate: We are excited to help you buy, sell and refinance. Yet, we will be refraining from hand shakes, high fives, and other close celebrations.  These are scary times, but together we can do this!

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.

As of July 1, 2018, Wisconsin home owners must use a new Real Estate Condition Report (referred to as the RECR).  If you are a Realtor, attorney, or for sale by owner (FSBO) seller, you should be aware of the changes.

recrcover

Wisconsin law has long required that sellers provide a disclosure report identifying various conditions of the property.  This applies to almost all residential properties with only a few exceptions.  Unfortunately, the form can be confusing, disorganized, and hard to use.  As of July 1st, a new form will be used that is intended to be easier, clearer, and less confusing.

THE NEW RECR

Many of the changes appear fairly minor, but the intent is to make the entire form clearer and easier to use.

Questions v. Statements: First, the seller now must answer questions instead of agreeing or disagreeing with a statement.  Thus, “I am aware of . . . ” is replaced with “Are you aware of . . . ”  New check-boxes are available, rather than lines.recr2

Categories and Sections: Second, the form is now organized by category, with disclosures for “Structural and Mechanical” issues, “Environmental” issues, “Well, Septic, and Storage Tanks,” “Taxes, Special Assessments, Permits, etc.,” “Land Use,” and “Additional information.”  In the old form, any “Yes” response would be explained at the very end of the form.  In the new form, explanations are to be provided at the end of each category or section.

Realtor Disclosure: For Realtors, there is a new and helpful disclosure.  Realtors should always tell their sellers that they are prohibited from offering advice or guidance on how to fill out the RECR or what is or is not a defect.  The new disclosure provides just that: “Real estate licensees may not provide advice or opinions concerning whether or not an item is a defect for the purposes of this report or concerning the legal rights or obligations of parties to a transaction.”

New Disclosures:  The new form contains a number of new disclosures including:

  • Rented items such as water softeners;
  • Water quality issues including unsafe lead levels;
  • Meth labs and the manufacture of methamphetamine and other toxic substances;
  • The existence of conservation easements;
  • Burial sites;
  • Insurance claims filed within the last 5 years;
  • Agreements that would bind the future owner (leases, electric cooperatives, etc.)
  • How long the owner has owned the property.

Be cautious when relying on the internet to find the RECR.  Many sites have the old form available.  As of July 1, 2018, all Realtors, Attorneys, and Sellers should be using the new form.  Your Realtor or Brokerage should have the new forms and you can also find the text in the Wisconsin Statutes here.