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By Donna Ferrell, Broker | Broker in Los Angeles, CA
  • Protect Their Privacy

    Posted Under: General Area in 90015, Property Q&A in 90015  |  November 26, 2010 8:00 PM  |  333 views  |  No comments
    With federal legislation in the works, now's the time to revisit your company's policy for dealing with sensitive customer data.
    October 2010

    Having a policy in place for dealing with the sensitive personal information you collect from customers is more than just smart business. In most states, it’s the law, and soon, there may be a federal baseline requirement in place.

    So if you don’t have a corporate policy regarding customer data—or haven’t revisited your policy in a while—now’s the time to take action.

    In a survey conducted earlier this year by the NATIONAL ASSOCIATION OF REALTORS®, a quarter of REALTORS® said they collect Social Security numbers and 12 percent said they collect financial account numbers from customers.

    Yet more than half of all brokers said they had no privacy policy in place, and almost 60 percent of sales associates said they didn’t know whether their brokerage had a policy.

    More than 80 percent of practitioners weren’t sure whether their state had consumer privacy laws—even though nearly every state does.

    State laws typically cover specific types of data, such as personal health or financial information, and spell out what businesses must do in the event of a security breach. (To see what’s in effect in your state, visit the National Conference of State Legislatures Web site, www.ncsl.org.)

    Hot Topic on the National Level

    On top of those state laws, Congress and several regulatory bodies—including the Federal Trade Commission, Federal Communications Commission, and the U.S. Commerce Department—are working on new rules that will give consumers more control.

    In the House, Rep. Bobby Rush (D-Ill.) has introduced the Best Practices Act, H.R. 5777, which establishes consumer privacy rights and sets forth obligations for companies that collect sensitive data. If the bill passes, businesses that collect names, postal and e-mail addresses, phone numbers, Social Security numbers, and information that’s classified as a “unique persistent identifier” (for example, your computer’s unique address) must include a notice that explains what information is collected, what it’s used for, and who sees it. Also, businesses must allow consumers to opt out.

    Information that’s deemed sensitive—such as personal financial and health information—will be off-limits to you unless you get permission from your customer. Financial account information falls into this sensitive category.

    How Can I Prepare?

    The federal legislation is expected to move forward in 2011. But whether or not a new law results, privacy measures are likely to come out of the regulatory agencies. In the meantime, there are some common-sense steps you can take to get your policies in better shape.

    The Federal Trade Commission says a sound data security plan is based on these five principles:

    1. Take stock. What types of customer information are in your paper files and on your computer? You probably have bank statements and forms with clients’ Social Security and driver’s license numbers. Understand how this information moves into, through, and out of your business.

    2. Scale down. If you don’t have a legitimate business reason to have sensitive information in your files or on your computer, don’t keep it.

    3. Lock it. Be aware of physical security, electronic security, and the practices of your vendors. Decide which information should be password-protected and who can access it.

    4. Pitch it. Dispose of what you no longer need, but do so in a secure way. Documents containing personal information should be destroyed.

    5. Plan ahead. Create a plan for responding to security incidents. How will you notify people? What agency will you notify? What other actions will you take?

    The best time to start crafting a data security plan is the present. For more FTC resources on strengthening your policy, visit www.FTC.gov/infosecurity.

  • Connecting LA Real Estate--Probate Sale

    Posted Under: General Area in Los Angeles, Home Buying in Los Angeles, Home Selling in Los Angeles, Property Q&A in Los Angeles  |  October 15, 2010 3:00 PM  |  414 views  |  No comments

    Greetings, you are listing to Connecting LA Real Estate, where we talk about issues that affect you and your property. This show is brought to you by CALCO Management. and for those just tunning in,  CALCO is a full service management company, serving Residential, Commercial and Associations. CALCO has over 10 years. I am your host Donna Ferrell, and a little about me -- I am a Real Estate Broker and CEO of CALCO Management. I have over 16 years in the real estate field. I also want to thank those who are returning to the show again.

    We are a live show, and you can call in at 917-889-7210 for questions or comments. website www.blogtalkradio.com/myrealestateconnection

    Our show not only touches on HOA issues but other types of topics in the real estate industry. In the coming shows we are going to discuss the current market and some different programs that could help and what you can do about this situation.

    Today we are exploring the uncharted probate sales: WHAT IS PROBATE? Probate is a legal proceeding that is used to wind up a person's legal and financial affairs after death. In California probate proceedings are conducted in the Superior Court for the county in which the decedent lived, and can take at least eight months and sometimes as long as several years.

    WHAT HAPPENS DURING A PROBATE? The person who is nominated in the will as executor files a petition with the Superior Court asking that he or she be appointed as executor. If there is no will, the Probate Code provides a list of persons who have priority to petition to become administrator. The will also is filed with the petition, and notices are sent to the heirs and/or relatives to let them know when the hearing will be held. If there are objections to the petition, or if the validity of the will is contested, the hearing will be used to resolve any problems that have arisen. In some cases this may mean that the validity of the will is not upheld, or that some other person than the original petitioner is chosen to administer the estate. In most cases, however, there is no objection and the petition is granted. The executor then makes an inventory of the estate's assets, locates creditors, pays bills, files tax returns, and manages the estate assets. When all of the duties of the executor are completed, another petition is filed with the court asking that the estate be distributed to the heirs. If this petition is granted, the estate administrated is completed by distributing the assets to the heirs and filing final tax returns.

    HOW MUCH DOES PROBATE COST? California Probate Code section 10810 sets the maximum statutory fees that attorneys can charge for a probate. Higher fees can be ordered by a court for more complicated cases. The fees are four percent of the first $100,000 of the estate, three percent of the next $100,000, two percent of the next $800,000, one percent of the next $9,000,000, and one-half percent of the next $15,000,000. For estates larger than $25,000,000, the court will determine the fee for the amount that is greater than $25,000,000.

    California statutory fees used to compensate attorneys and executors in probate cases for various sizes of estates. If both the attorney and the executor receive a fee, the amount paid will be double that shown below.  The value of the estate is determined, in general, by the inventory for the estate.  (If an accounting of the estate has been waived, the total value of the estate for attorney's fees purposes is the inventory, plus gains on sales, minus losses on sales.)  Debts are not included in determining attorney's fees, and if a house is appraised at $1,000,000, for example, and it has a mortgage of $800,000, it is still considered a $1,000,000 asset for the purpose of calculating attorney's fees.

    The fee charged to file a probate petition is $355, but may be slightly higher in some counties due to surcharges.  There will be an additional $355 filing fee when the petition for final distribution is filed.

    APPRAISAL OF THE ESTATE: Estates are appraised by probate referees, who are appointed by the State Controller to determine the fair market value of the asset. The fair market value includes mortgages and other debts, which can result in an appraisal of the property that is higher than the equity that the deceased owned in the property. Probate referees receive a fee based on .1 percent of the assets that have been appraised.

    FEES CAN GO HIGHER: In probates that are complicated by lawsuits or tax problems, the attorney and executor can ask the judge to approve fees that are higher than those set by state law.

    COURT COSTS: In addition to the statutory fees, there are costs for appraisal fees, publication costs, and miscellaneous fees charged by the county. A typical estate might incur $1,000 to $3,000 in court costs and other required fees.

    ADVANTAGES OF PROBATE: The proceedings are controlled by a judge, who can decide disputes between heirs or between the heirs and the executor. Creditors are required to submit their claims against the estate within a four-month period, provided they have been notified of the probate. The executor is required, in most cases, to prepare an accounting and report of the executor's activities.

    DISADVANTAGES OF PROBATE: The cost is usually much higher than would be required for the administration of a living trust for an estate valued at the same amount. It usually takes longer to probate an estate than to administer a trust. Most estates don't need the supervision of the court unless disputes occur. 

    Buying a Probate Property

    To Qualify a Borrower...Whats Needed?

    The answer, you probably correctly guessed, depends on the loan the borrower is applying for and how they intend to hold title. Those persons wishing to borrow as an estate fiduciary will be pleased to learn that equity and the condition of the real property will be the primary factors used qualify them for a loan; their credit and income are less important under these circumstances.

    Borrowers who will ultimately vest title as an individual at time of funding and who want the best rate and terms will want to qualify for a conventional mortgage. Borrowers who have some credit problems and/or hard to prove/limited income may still qualify for a mortgage at attractive rates and terms, however, these terms will not be the same as for borrowers with established, perfect credit and significant income from documented sources.

    What is important to understand is that the loan applicant must meet the minimum requirements in each category; it rarely will help to fit into a given program if any single guideline is not met, even if certain other guidelines are exceeded.

    Character and Credit

    Credit repositories like Experian (formerly TRW), Equi-Fax and Trans Union are reporting agencies and never make any lender recommendations, favorable or otherwise. They merely provide a history (if a credit history exists) of the applicant's credit experiences, as reported, to the various subscribing creditors. Not all credit information will be reflected on all credit reporting agencies and likewise, not all information present may be accurate. In the case of the later, the burden of proof, unfortunately, rests on the applicant to correct the erroneous data.

    If credit is often a good predictor of an applicant's future payment habits, how can derogatory credit be interpreted? One of the surest ways to see if the problem is/was driven by a certain event or the normal payment habits for the applicant. The lender will review the credit report to determine if the timing is grouped, isolated late charges, collections, if the bills were medical related, a bankruptcy (if a 13, was the plan completed?), or a foreclosure. It may surprise some to learn that a client with a prior bankruptcy who kept a mortgage current is held in fairly high regard among lenders.


    How the applicant makes a living is not as important as how they are paid, how much, the likelihood of their continuing to receive the same or more income and if it is verifiable. Wage earners tend to have an easier time proving income. Some complexities arise when qualifying self employed applicants who tend to make substantial deductions from income taxes. Also, in the ever-changing employment environment, more persons are employed as consultants.

    Debt Ratios

    Formulas called debt ratios can neatly calculate the availability of income to make payments on monthly housing expenses (mortgage, taxes, insurance, utilities, upkeep, etc.) and other consumer debt (credit cards, auto loans, etc). Conventional and other institutional lenders will use these formulas to qualify a borrower. Equity lenders, however, will not weigh debt ratios importantly when qualifying the borrower. These lenders will adjust the amount they may lend downward on a particular home if the applicant's situation warrants it.


    What is the applicant's likelihood to survive a financial setback or reversal? Possessing a savings account having at least a minimum of one or two months mortgage payments may be required for certain loan programs. The lack of such funds may raise other lending concerns.

    Down Payment or Equity Source

    If the proposed loan is intended to fund the purchase of property, it is presumed that, under most all conventional lending guidelines, the borrower will be required to ultimately have a certain percentage of protective equity in the subject property. This could be as low as 3-5% for certain programs to as much as 20% or more, depending on the applicant's situation.

    In the case of a probate estate "buy-out" the applicant is typically an heir who desires to buy out other heirs' interests, but puts no cash of their own into the transaction. This can be documented in such a manner as to should the distributive share as a paper down payment. Gifts from others can also be documented, such as a parents help with a down payment.

    The Security

    Since the security for any mortgage is the real estate, it comes to reason that lenders will pay close attention to the property and the improvement. Lenders will scrutinize the property value, protective equity, and determine a maximum loan-to-value ratio ("LTV") that they will limit their loan to. Another big factor is the propertys marketability which refers to the probability that a property can be resold in the event it reverts to the lender.

    Property Types

    •   Single Family Residence or "SFR" are the most marketable properties and the least likely that an owner would prefer lose and lenders will usually make the highest "LTV" loans.

    •   Condos and townhouses are frequently more difficult to sell qualify for high LTV loans.

    •   Small residential units (duplex, triplex or four plex) may still fit the conventional lending guidelines to qualify for up to 90% LTV loans IF the owner resides in one of the units.

    •   Five residential units+ are considered investment income property. Loans go to 75% max.

    •   Mixed use (residential & commercial) are treated on case-by-case basis; expect 65% LTV

    •   Commercial properties run a wide variance and can command 50-90% LTV financing.

    •   Vacant land, mountain cabins, homes in graffiti war zones can be very hard to finance.  

    Property Quality Grades (for Improved Properties)

    These classifications relate primarily to the original design, the quality of construction, age and condition of a property. While not a universal classification system used by all lenders, the following basic A-D guidelines help to better communicate the grade of the subject property.

    "A" properties generally refer buildings that are of a superior design and construction and are maintained accordingly. This would be appropriate for a building that consisted of very high grade finishing materials like marble and granite and is maintained to the highest standard, such one would find in high rent urban and exclusive communities.

    "B" properties are well built and well maintained, but are not gold-plated trophy buildings or mansions. These properties are very appealing and often command high rent, but not "A" grade due to age, management, location or a lack of grandeur.

    "C" properties are average in design, appeal and construction and are maintained sufficiently to satisfy most lenders. Properties in this category may show some wear but nothing major.

    "D" properties may be older (pre-WWII) or just poorly maintained and threadbare. Also in this category may be Sub-standard properties which may well require modernization, rehabilitation, seismic upgrading or other work to comply with lender's guidelines.

    Q & A About Mortgage Financing for Probate Estates and Trusts

    Q. If I sign for a mortgage loan on property owned by the estate as executor of administrator, am I personally liable for this loan?

    A. No. You are responsible to the estate in your fiduciary capacity that you sign, i.e., as the personal representative of the estate, but a late payment (nor a default) will affect your personal credit history. This does imply that you have certain duties to act in a responsible manner with the money the estate has borrowed, maintain a high level of trust for the benefit of all parties concerned (including the attorney, creditors and bonding company, if applicable). You must plan to be accountable for how you use the loan proceeds.

    Q. Can I use the money for myself?

    A. If you are borrowing as a fiduciary, the money belongs to the estate until the court permits some or all of the proceeds to be distributed. If you are borrowing individually and signing for your loan personally, title to the property will have been put in your name on or prior to your loan having been completed. In that case, any proceeds (cash out) is yours to use as necessary unless, as condition of receiving that loan, the lender limits how the funds are to be used.

    Q. What arrangements can be made if the executor or administrator cant afford to make monthly payments?

    A. One of the benefits of using equity financing is that it often permits more flexibility in structuring a repayment plan. For instance, an estate with sufficient equity in the property may borrow and request that future payments from several months to years be made in advance to insure that payments are provided for, until other arrangements are made.

    Q. Are mortgages assumable?

    A. Mortgages made to executor, administrators or other fiduciaries may be assumed or payments taken over by heirs, but not usually by third parties. Some FHA loans made to individuals to purchase estate property may be assumable after qualifying and a small fee.

    Q. Can I buy out another heir when I dont have any cash for a down payment?

    A. You may be able to buy the property from the estate using your distributive share in the estate or trust (your inheritance). Heirs can sometimes use this share just like a down payment, depending on the value of this share relative to the loan youll need and your ability to qualify for a loan (just like any other buyer). Every estates situation is unique, so your chances of obtaining financing will largely depend on how much you equity you will ultimately have in this property, your credit and income strength as a borrower, and the level of experience and understanding your lender has in obtaining financing.

    --Close show--

    Well that’s all the time we have. I want to thank all you who listened today. This show is brought to you by CALCO Management. Remember that we are on every Saturday at 11:00 pacific time. Bringing you topics that affect you and your property.  Remember to visit our website at www.calcopm.net for updates and news.

  • Connecting LA Real Estate --203k Program

    Posted Under: General Area in Los Angeles, Property Q&A in Los Angeles  |  October 15, 2010 2:56 PM  |  367 views  |  No comments

    --Start intro--- Open show--

    Greetings, you are listing to Connecting LA Real Estate, where we talk about issues that affect you and your property. This show is brought to you by CALCO Management. and for those just tunning in,  CALCO is a full service management company, serving Residential, Commercial and Associations. CALCO has over 10 years. I am your host Donna Ferrell, and a little about me -- I am a Real Estate Broker and CEO of CALCO Management. I have over 16 years in the real estate field. I also want to thank those who are returning to the show again.

    We are a live show, and you can call in at 917-889-7210 for questions or comments. We may go a bit longer today as we have much to cover, if we run over it will still record and you can listen on our website www.blogtalkradio.com/myrealestateconnection

    Our show not only touches on HOA issues but other types of topics in the real estate industry. In the coming shows we are going to discuss the current market and some different programs that could help and what you can do about this situation The Federal Housing Administration (FHA), which is part of the Department of Housing and Urban Development (HUD), administers various single family mortgage insurance programs. These programs operate through FHA-approved lending institutions which submit applications to have the property appraised and have the buyer's credit approved. These lenders fund the mortgage loans which the Department insures. HUD does not make direct loans to help people buy homes.

    The Section 203(k) program is the Department's primary program for the rehabilitation and repair of single family properties. As such, it is an important tool for community and neighborhood revitalization and for expanding homeownership opportunities. Since these are the primary goals of HUD, the Department believes that Section 203(k) is an important program and we intend to continue to strongly support the program and the lenders that participate in it.

    Many lenders have successfully used the Section 203(k) program in partnership with state and local housing agencies and nonprofit organizations to rehabilitate properties. These lenders, along with state and local government agencies, have found ways to combine Section 203(k) with other financial resources, such as HUD's HOME, HOPE, and Community Development Block Grant Programs, to assist borrowers. Several state housing finance agencies have designed programs, specifically for use with Section 203(k) and some lenders have also used the expertise of local housing agencies and nonprofit organizations to help manage the rehabilitation processing.

    The Department also believes that the Section 203(k) program is an excellent means for lenders to demonstrate their commitment to lending in lower income communities and to help meet their responsibilities under the Community Reinvestment Act (CRA). HUD is committed to increasing homeownership opportunities for families in these communities and Section 203(k) is an excellent product for use with CRA-type lending programs.

    If you have questions about the 203(k) program or are interested in getting a 203(k) insured mortgage loan, we suggest that you get in touch with an FHA-approved lender in your area or the Homeownership Center in your area.


    Section 10 1 (c) (1) of the Housing and Community Development Amendments of 1978 (Public Law 95557) amends Section 203(k) of the National Housing Act (NHA). The objective of the revision is to enable HUD to promote and facilitate the restoration and preservation of the Nation's existing housing stock. The provisions of Section 203(k) are located in Chapter II of Title 24 of the Code of Federal Regulations under Section 203.50 and Sections 203.440 through 203.494. Program instructions are in HUD Handbook 4240-4. HUD Handbooks may be ordered online from The HUD Compendium or from HUDCLIPS.  

    203(k) - How It Is Different

    Most mortgage financing plans provide only permanent financing. That is, the lender will not usually close the loan and release the mortgage proceeds unless the condition and value of the property provide adequate loan security. When rehabilitation is involved, this means that a lender typically requires the improvements to be finished before a long-term mortgage is made.

    When a homebuyer wants to purchase a house in need of repair or modernization, the homebuyer usually has to obtain financing first to purchase the dwelling; additional financing to do the rehabilitation construction; and a permanent mortgage when the work is completed to pay off the interim loans with a permanent mortgage. Often the interim financing (the acquisition and construction loans) involves relatively high interest rates and short amortization periods. The Section 203(k) program was designed to address this situation. The borrower can get just one mortgage loan, at a long-term fixed (or adjustable) rate, to finance both the acquisition and the rehabilitation of the property. To provide funds for the rehabilitation, the mortgage amount is based on the projected value of the property with the work completed, taking into account the cost of the work. To minimize the risk to the mortgage lender, the mortgage loan (the maximum allowable amount) is eligible for endorsement by HUD as soon as the mortgage proceeds are disbursed and a rehabilitation escrow account is established. At this point the lender has a fully-insured mortgage loan.

    Eligible Property

    To be eligible, the property must be a one- to four-family dwelling that has been completed for at least one year. The number of units on the site must be acceptable according to the provisions of local zoning requirements. All newly constructed units must be attached to the existing dwelling. Cooperative units are not eligible.

    Homes that have been demolished, or will be razed as part of the rehabilitation work, are eligible provided some of the existing foundation system remains in place.

    In addition to typical home rehabilitation projects, this program can be used to convert a one-family dwelling to a two-, three-, or four-family dwelling. An existing multi-unit dwelling could be decreased to a one- to four-family unit.

    An existing house (or modular unit) on another site can be moved onto the mortgaged property; however, release of loan proceeds for the existing structure on the non-mortgaged property is not allowed until the new foundation has been properly inspected and the dwelling has been properly placed and secured to the new foundation.

    A 203(k) mortgage may be originated on a "mixed use" residential property provided: (1) The property has no greater than 25 percent (for a one story building); 33 percent (for a three story building); and 49 percent (for a two story building) of its floor area used for commercial (storefront) purposes; (2) the commercial use will not affect the health and safety of the occupants of the residential property; and (3) the rehabilitation funds will only be used for the residential functions of the dwelling and areas used to access the residential part of the property.

    Condominium Unit

    The Department also permits Section 203(k) mortgages to be used for individual units in condominium projects that have been approved by FHA.

    The 203(k) program was not intended to be a project mortgage insurance program, as large scale development has considerably more risk than individual single-family mortgage insurance. Therefore, condominium rehabilitation is subject to the following conditions:


    Owner/occupant and qualified non-profit borrowers only; no investors;


    Rehabilitation is limited only to the interior of the unit. Mortgage proceeds are not to be used for the rehabilitation of exteriors or other areas which are the responsibility of the condominium association, except for the installation of firewalls in the attic for the unit;


    Only the lesser of five units per condominium association, or 25 percent of the total number of units, can be undergoing rehabilitation at any one time;


    The maximum mortgage amount cannot exceed 100 percent of after-improved value.

    After rehabilitation is complete, the individual buildings within the condominium must not contain more than four units. By law, Section 203(k) can only be used to rehabilitate units in one-to-four unit structures. However, this does not mean that the condominium project, as a whole, can only have four units or that all individual structures must be detached.

    Example: A project might consist of six buildings each containing four units, for a total of 24 units in the project and, thus, be eligible for Section 203(k). Likewise, a project could contain a row of more than four attached townhouses and be eligible for Section 203(k) because HUD considers each townhouse as one structure, provided each unit is separated by a 1 1/2 hour firewall (from foundation up to the roof).

    Similar to a project with a condominium unit with a mortgage insured under Section 234(c) of the National Housing Act, the condominium project must be approved by HUD prior to the closing of any individual mortgages on the condominium units.

    How the Program Can Be Used

    This program can be used to accomplish rehabilitation and/or improvement of an existing one-to-four unit dwelling in one of three ways:


    To purchase a dwelling and the land on which the dwelling is located and rehabilitate it.


    To purchase a dwelling on another site, move it onto a new foundation on the mortgaged property and rehabilitate it.


    To refinance existing liens secured against the subject property and rehabilitate such a dwelling.

    To purchase a dwelling and the land on which the dwelling is located and rehabilitate it, and to refinance existing indebtedness and rehabilitate such a dwelling, the mortgage must be a first lien on the property and the loan proceeds (other than rehabilitation funds) must be available before the rehabilitation begins.

    To purchase a dwelling on another site, move it onto a new foundation and rehabilitate it, the mortgage must be a first lien on the property; however, loan proceeds for the moving of the house cannot be made available until the unit is attached to the new foundation.

    Eligible Improvements

    Luxury items and improvements are not eligible as a cost rehabilitation. However, the homeowner can use the 203(k) program to finance such items as painting, room additions, decks and other items even if the home does not need any other improvements. All health, safety and energy conservation items must be addressed prior to completing general home improvements.

    Required Improvements

    All rehabilitation construction and/or additions financed with Section 203(k) mortgage proceeds must comply with the following:

    A. Cost Effective Energy Conservation Standards

    (1) Addition to existing structure. New construction must conform with local codes and HUD Minimum Property Standards in 24 CFR 200.926d.

    (2) Rehabilitation of Existing Structure. To improve the thermal efficiency of the dwelling, the following are required:

    a) Weatherstrip all doors and windows to reduce infiltration of air when existing weatherstripping is inadequate or nonexistent.

    b) Caulk or seal all openings, cracks or joints in the building envelope to reduce air infiltration.

    c) Insulate all openings in exterior walls where the cavity has been exposed as a result of the rehabilitation. Insulate ceiling areas where necessary

    d) Adequately ventilate attic and crawl space areas. For additional information and requirements, refer to 24 CFR Part 39.

    (3) Replacement Systems.

    a) Heating, ventilating, and air conditioning system supply and return pipes and ducts must be insulated whenever they run through unconditioned spaces.

    b) Heating systems, burners, and air conditioning systems must be carefully sized to be no greater than 15 percent oversized for the critical design, heating or cooling, except to satisfy the manufacturer's next closest nominal size.


    B. Smoke Detectors. Each sleeping area must be provided with a minimum of one (1) approved, listed and labeled smoke detector installed adjacent to the sleeping area.

    Determining Upon One or Two Appraisal Reports

    The appraiser must provide an opinion of the After-Improved value of the subject property, and in some cases, may be directed by the lender to provide the As-is value.

    In those cases for which both As-is and After-improved values are required, the valuation analysis may consist of either one or two separate appraisal reports.

    The number of appraisals depends on the complexity, scope and lender review of the proposed rehabilitation and nature of the work.

    A. As-is Value. A separate appraisal (Uniform Residential Appraisal Report) may be required to determine the as-is value. However, the lender may determine that an as-is appraisal is not feasible or necessary. In this instance, the lender may use the contract sales price on a purchase transaction, or the existing debt on a refinance transaction, as the as-is value, when this does not exceed a reasonable estimate of value.

    Further, on a refinance transaction, when a large amount of existing debt (i.e., first and second mortgages) suggests that the borrower has little or no equity in the property, the lender must obtain a current as-is appraisal on which to base the estimated as-is value.

    On a refinance, the borrower may have substantial equity in the property to assure that no further down payment is required on the new loan amount. In some cases, the borrower will not have an existing mortgage on the property. In this case, the lender should obtain some comparables from a real estate agent/ broker to estimate an approximate as-is value of the property.

    Another way of establishing the as-is value is to obtain a copy of the local jurisdiction tax valuation on the property.

    B. Value After Rehabilitation. The expected market value of the property is determined upon completion of the proposed rehabilitation and/or improvements.

    For a HUD-owned property an as-is appraisal is not required and a DE lender may request the HUD Field Office to release the outstanding HUD Property Disposition appraisal on the property to the lender to establish the maximum mortgage for the property. The HUD appraisal will be considered acceptable for use by the lender if. (1) it is not over one year old prior to bid acceptance from HUD; and (2) the sales contract price plus the cost of rehabilitation does not exceed 110 percent of the "As Repaired Value" shown on the HUD appraisal. If the HUD appraisal is insufficient, the DE Lender may order another appraisal to assure the market value of the property will be adequate to make the purchase of the property feasible. For a HUD-property, down payment for an owner-occupant or non-profit organization is 3.5% of the accepted bid price of the property and 100 percent financing on all other costs.

    Recently Acquired Properties

    Homebuyers who purchase a property with cash can refinance the property using 203(k) within six (6) months of purchase, the same as if the buyer purchased the property with a 203(k) insured loan to begin with. Evidence of interim financing is not required; the mortgage calculations will be done the same as a purchase transaction. Cash back will be allowed to the borrower in this situation less any down payment and closing cost requirement for the 203(k) loan. A copy of the Sales Contract and the HUD-1 Settlement Statement must be submitted to verify the accepted bid price (as-is value) of the property and the closing date.

    Architectural Exhibits

    The improvements must comply with HUD's Minimum Property Standards (24 CFR 200.926d and/or HUD Handbook 4905.1) and all local codes and ordinances. The homebuyer may decide to employ an architect or a consultant to prepare the proposal. The homebuyer must provide the lender with the appropriate architectural exhibits that clearly show the scope of work to be accomplished. The following list of exhibits are recom mended, but may be modified by the local HUD Field Office as required.

    A. A Plot Plan of the Site is required only if a new addition is being made to the existing structure. Show the location of the structure(s), walks, drives, streets, and other relevant details. Include finished grade elevations at the property corners and building corners. Show the required flood elevation.

    B. Proposed Interior Plan of the Dwelling. Show where structural or planning changes are contemplated, including an addition to the dwelling. (An existing plan is no longer required.)

    C. Work Write-up and Cost Estimate. Any format may be used for these documents, however, quantity and the cost of each item must be shown. Also include a complete description of the work for each item (where necessary). The Rehabilitation Checklist in Appendix 1 of Handbook 4240.4 REV-2 should be used to ensure all work items are considered. Transfer the costs to the Draw Request (form HUD-9746-A).

    Cost estimates must include labor and materials sufficient to complete the work by a contractor. Homebuyers doing their own work cannot eliminate the cost estimate for labor, because if they cannot complete the work there must be sufficient money in the escrow account to get a subcontractor to do the work. The Work Write-up does not need to reflect the color or specific model numbers of appliances, bathroom fixtures, carpeting, etc., unless they are nonstandard units.

    The consultant who prepares the work write-up and cost estimate (or an architect, engineering or home inspection service) needs to inspect the property to assure: (1) there are no rodents, dryrot, termites and other infestation; (2) there are no defects that will affect the health and safety of the occupants; (3) the adequacy of the existing structural, heating, plumbing, electrical and roofing systems; and (4) the upgrading of thermal protection (where necessary).

    Maximum Mortgage Amount

    The mortgage amount, when added to any other existing indebtedness against the property, cannot exceed the applicable loan-to-value ratio and maximum dollar amount limitations prescribed for similar properties under Section 203(b). The down payment requirements are the same as under the Section 203(b) program. The Mortgage Payment Reserve is considered a part of the cost of rehabilitation for determining the maximum mortgage amount.

    The form HUD-92700 (Maximum Mortgage Worksheet) must be used to determine the maximum mortgage amount.

    A. Maximum Mortgage Calculation


    Based on the lesser of:

    1) The existing debt on the property before rehabilitation, plus the estimated cost of rehabilitation and allowable closing costs or

    2) The lesser of the As-Is value plus rehabilitation costs or 110 percent of the After-Improved value multiplied by the appropriate LTV factor.

    NOTE: If the property was owned less than one year, the acquisition cost plus the documented rehabilitation costs must be used.


    The maximum mortgage amount is based on the lesser of 1) or 2) of the below multiplied by the appropriate LTV factor.

    1) The As-is value or the purchase price of the property before rehabilitation, whichever is less, plus the estimated cost of rehabilitation or

    2) 110 percent of the After-Improved value of the property.

    Principal Residence (Owner-Occupant) & HUD Approved Non-Profit Organization. For purchases with 203(k) financing: the maximum mortgage amount is to be based upon the HUD estimate of value in 1) or 2) above, less the statutory investment requirement. For refinances under the 203(k) program: the maximum mortgage amount is to be based upon 97/95/90 percent of the HUD estimate of value in 1) or 2) above.

    B. Cost of Rehabilitation. Expenses eligible to be included in the cost of rehabilitation are materials, labor, contingency reserve, overhead and construction profit, up to six (6) months of mortgage payments, plus expenses related to the rehabilitation such as permits, fees, inspection fees by a qualified home inspector, licenses and consultant and/or architectural/engineering fees. The cost of rehabilitation may also include the supplemental origination fee which the mortgagor is permitted to pay when the mortgage involves insurance of advances, and the discounts which the mortgagor will pay on that portion of the mortgage proceeds allocated to the rehabilitation.

  • Connecting LA Real Estate--Rogue Board Members

    Posted Under: General Area in Los Angeles, Property Q&A in Los Angeles  |  October 15, 2010 2:52 PM  |  456 views  |  No comments

    Greetings, you are listing to Connecting LA Real Estate, where we talk about issues that affect you and your property. This show is brought to you by CALCO Management. and for those just tunning in,  CALCO is a full service management company, serving Residential, Commercial and Associations. CALCO has over 10 years. I am your host Donna Ferrell, and a little about me -- I am a Real Estate Broker and CEO of CALCO Management. I have over 16 years in the real estate field. I also want to thank those who are returning to the show again.

    We are a live show, and you can call in at 917-889-7210 for questions or comments. website www.blogtalkradio.com/myrealestateconnection

    Our show today is on Rogue Board members, what effects he/she can have on the Association, and what you can do about this situation.

    According to the American Heritage dictionary, “Rogue” is defined as an unprincipled, deceitful and unreliable person.  If anyone believes that the dictionary definition of a rogue sounds a little harsh, try substituting with more familiar terms, such as undisciplined, unethical, or NOT a team player.

    Now, having a roguish manner in some situations might be quite charming, but such a characteristic is NOT considered a good attribute for a position that involves overseeing or managing the investment owners have in their respective property in a homeowners association. Seriously, there is seldom anything more disruptive to the Board than a member who refuses to operate within the Association’s governing documents, and the accepted guidelines of the Board.

    What do you considered “rogue” behavior?  It can encompass a lot of things. 

    Rogue Board members are those who frequently operate beyond any legal authority, using implied authority --instead to bully and intimidate other Board members, the Association’s property manager, and homeowners. -- It is not uncommon for the rogue to push a personal agenda that is sympathetic to a special interest group with whom he or she may have ties within this group.  The rogue Board member is one who often refuses to support majority decisions of the Board, and works openly and subversively to disrupt and undermine the Board’s authority when the majority decisions conflict with his or her own interests or preferences.

    The rogue, in spite of an often over-inflated opinion of his or her own abilities and contributions to the Board and the Association, may be very convincing.  He/she is not above seeking temporary alliances that will further his/her own agendas.  As the definition implies, the rogue does not subscribe to a code of ethics, favoring taking whatever actions to further his/her cause at hand.  Rules are made to be broken, especially when the rules hedge the rogue’s agenda.

    Let me give you some examples.  A rogue board member can be one that, without the rest of the board's knowledge, bind the association to a contract.  The board member can do it maliciously, knowing fully well he doesn't have the board's consent to enter into an agreement. Or he can do it inadvertently, by making promises the vendor reasonably believes can be relied on, but that he has no authority to make. Now, the board may have preliminarily given that individual the authority to pursue the matter but NOT to bind the association to the deal. However it comes up, the question isn't whether the person actually had the authority to bind the association. It's whether the vender reasonably believed that person had that authority. If so, the contract is binding.

    A worse scenario is when a Board members break the Associaton’s rules themselves, yet selectively enforce and fine homeowners for breaking other rules.  We all know the strength and success of an HOA relies heavily on the members of the Board.  And sadly, often times it is individuals with agendas and power seekers who end up on HOA Boards, rather than those who responsibly assume the welfare of the homeowners and their largest investment, their homes.

    You ask, “How does a rogue get elected to the Board?”.   The rogue typically find his or her way to the Board following a period of Association’s unrest    due to some controversial issues that arise in the Association.  The rogue often appears to be very informed and have strong opinions on these types of controversial issues, and he or she usually manipulates and/or capitalizes on any community’s unrest on these issues.  Now, it’s important to note that, in most cases, the rogue is not elected with the homeowners’ knowledge that he/she is rogue, but instead because he/she is often seen as an individual who can get things done or someone who effectively captures the trust and confidence of others.  Another perception is that he/she can usher in the much-needed changes, especially for certain special interest groups within the Association.

    As you know, the board of directors is elected by the homeowners, usually based on leadership qualities that they have observed first hand or from a brief written synopsis of a board member applicant’s past business and community experiences. A successful board works together by listening to owners AND one another, then making decisions that will be in the best interest of the association. Disrupted meetings and delayed decision-making can result in unnecessary additional cost to the association, especially if the rogue member does not participate at the meeting according to his or her job description as outlined in the association’s bylaws.

    These days, it's getting tougher and tougher to recruit good board members in HOAs. One has to ask what makes people serve when board members all over the state of California face thankless service, undeserved criticism, false assumptions, low (actually no) pay, sometimes long hours, the need to solve often complicated and difficult decisions, bad press and threats of being sued by every disgruntled homeowner. Board member liability is a big issue. So what protection is there?


    Civil Code Section 1365.7 provides some protection for "volunteer" board members (those who are not working for the developer and who own only one or two units and not more)in residential CIDs (common interest developments). The condition is that an association must carry policies of insurance providing coverage for general liability and individual liability of officers and directors of the association for negligent acts or omissions. The statute wording means essentially that a board member cannot be sued personally for amounts up to the Association's coverage but there are other conditions as well.


    There are other requirements of course. The protection is not intended for rogue directors. The actions of the board member (1) must be performed within the scope of the director’s or officer's association duties, (2) must be performed in good faith, and (3) must not be wanton, willful, or grossly negligent.

    Good faith is determined by motive and intent. Most board members are well-intentioned (in spite of what you read in the media). Sometimes that is hard to determine for sure, but it is easy to claim innocence, so a lack of good faith would have to be fairly obvious. The scope of duties could be generally defined but there are situations where the lines blur. For example, what if a board member is out walking the neighborhood looking for rules violations and confronts an owner about the car parked on the lawn, and thereafter the confrontation elevates to a fist fight. What if a board member causes a contractor to leave the site by trying to micromanage the work, after the board member has been warned by the other Board members and the association's attorney that they are not to interfere with or have contact with the contractor. What if a Board member is sued for defamation for bad-mouthing a contractor? What if the Board member misspends association funds (like the one who bought himself an expensive airplane ticket to return early from visiting his father to attend a controversial association meeting). Are these examples performance of the duties or acting within the scope of what would be expected of a board member? Willful and wanton behavior is an act that is intended to or likely to cause distress or harm of some kind. Gross negligence is a lot worse than ordinary negligence. Making a mistake such as poor budgeting is usually ordinary negligence, but making a mistake involving conduct that one knows is wrong, is against the law, or is ill advised crosses the line.

    A board member with a rogue personality can spell disaster for the board and the association because he or she usually 1) does not recognize or acknowledge the importance and value of the board of directors as an entity, 2) does not understand his or her role as a board member, 3) has a personal agenda and will try to promote his or her own ideas at any cost, and 4) expects the rest of the board members to agree with his or her viewpoint.

    When an individual becomes a member of the board of directors and exhibits such rouge qualities the balance of the board must be strong and continue to act in the best interest of the community.  If the board sits by and allows a misbehaving director to go unchecked, it could be viewed as an endorsement of the misconduct. In addition to possibly moderating the errant director’s behavior, by taking steps to correct this situation may minimize or eliminate the association’s potential liability created by the rogue director’s unauthorized actions.

    Restating the association’s mission at board and annual meetings will reinforce the mission of the association. Using various words (i.e. fiduciary responsibility, business judgment rule, discrimination, related party transactions, liability) when discussing various topics, may help temper a rogue board member.

    Reviewing the Directors and Officers or Professional Liability insurance coverage with the board members is an eye opener in some situations. Understanding that professional liability coverage responds to decisions made in good faith. versus those that are knowingly detrimental and not in the best interests of the association, can encourage board members to think twice before making a decision.

    In the case of the rogue board member not responding to any attempts by the board of directors or manager to defuse potential problems, several other avenues may be discussed. The board of directors may go into executive session to discuss the board’s concerns and the possible liability to the association that may arise from the rogue board member’s actions. The board may also elect to discuss the issue with its legal counsel for recommendations on how to further handle the situation and put the board member on notice that such behavior and/or actions will not be tolerated.  A censure is a public reprimand of a director for unacceptable conduct which may include personal attacks against fellow directors or homeowners, disruption of meetings, breach of confidences, interference with association operations, breach of fiduciary duties, improper behavior with association vendors or employees, undisclosed conflicts of interest, and the like.

    In any event, the board of directors must address a rogue board member at the onset of the inappropriate behavior to avoid damaging the association’s reputation, legal standing, and, ultimately, its values and effectiveness.


    Apathy is particularly damaging where the rogue Board member is causing detrimental results to the Association with his/her rogue actions. You might already know that a lot of HOA’s lack the system of checks and balances necessary to provide oversight and accountability. There are no provisions in the CC&Rs that address these issues. Sometimes, the only measure of oversight and accountability that can be brought to bear on a rogue board has to come from the homeowners themselves.  If their presence is not felt, abuses will occur.


    What makes good people so averse to this civic responsibility? A lot of it has to do with prior commitments of work and family. Sometimes, it’s the fear of public humiliation a homeowner might experience if the heartfelt opinions they express at an association meeting are not shared by others. Other times, it’s outright fear of Board retaliation. Some homeowners are concerned about keeping a low profile where the Board was concerned. They’d openly express dissatisfaction in private but were unwilling to be seen as opposed to the Board member’s actions in public.

    Dealing with rogue board members is one of the most frustrating and difficult issues any community can confront.

    If your Board is not doing anything about the rogue Board member, the first step is to make sure the rest of the board understands their responsibilities and that they do not sheepishly abdicate their voices and authority to a powerful person who might not have the best intentions.  The Board should discuss the issue with its legal counsel for recommendations on how to further handle the situation and put the rogue board member on notice that such behavior and/or actions will not be tolerated.

    After that is done, the Board should advise all association vendors (pool company, etc.) who can and can't speak on behalf of the association and put those vendors on notice that they are not to take direction from anyone else and if they do so they do so at their own risk.

    If that doesn't solve the problem, check your CC&R’s for how the membership
    can remove a director with or without cause by means of a recall election. Remember your CC&R’s, and Davis Sterling can be the best guide for all your decisions. When a Board acts in good faith, outcome is always positive.

  • HAFA?

    Too many American homeowners with financial challenges fall victim to foreclosure instead of selecting and pursuing a foreclosure alternative that would better suit their families both emotionally and financially.

    Information on government intervention, recent legislation, Treasury programs, along with media coverage and political campaigning, leaves not only the homeowner, but also the overall Real Estate Industry in a state of confusion.

    As of July 2010 sources indicate The situation we are seeing is the worst housing crisis since the Great Depression with 7.4 million families in trouble.


    ï‚· 6.3 million U.S. homeowners are not current on their mortgage


    ï‚· In addition, 1.1million REO properties


    ï‚· 3.2 million HAMP-eligible 60+ day delinquent loans


    ï‚· Of that 3.2 million, 1.7 million Borrowers are likely to be eligible for HAMP modifications


    ï‚· As of May 2010, there are 340,000 active permanent modifications


    ï‚· The total U.S. delinquency rate was 9.2% in May 2010


    ï‚· The foreclosure inventory rate remained stable from the month prior at 3.18%, so that in total, the national non-current loan rate, which reflects both foreclosures and delinquencies, came in at 12.38%*


    ï‚· Any Borrower who either fails or is denied a loan modification is someone who should consider foreclosure alternative options.


    Prior to 2009, major federal program aimed at homeowners in distress was the Mortgage Forgiveness Debt Relief Act of 2007 (H.R. 3648).  In early 2009, the Obama Administration and Treasury Department launched the Nationwide “Making Home Affordable” program for distressed homeowners.


    New Programs for those that qualify are:


    HARP – the Home Affordable Refinance Program. This program was announced in April of 2009, and extended through June 30, 2011.


     HAMP – The Home Affordable Modification Program. This program was also announced in February 2009 and will remain available through December 31, 2012. HAMP helps homeowners retain their homes through loan modifications.


     HAFA –The Home Affordable Foreclosure Alternatives for both the Non-GSE (Government Sponsored Entity) loans as well as those for both Fannie Mae and Freddie Mac (GSE) loans.


    HAMP and HAFA – the primary programs affecting real estate professionals – are not mandated for the entire market.

    The programs are mandatory for servicers who have signed participation agreements and as of March 2010, over 100+ servicers who represent more than 90% of all U.S. residential home loans being serviced are participating.

    Who Are The Programs Intended To Help?


    Distressed Borrower


    First priority has been the Distressed Borrower. Too many Borrowers have now depleted their financial fortitude with no where to go, and often no way to financially support themselves as a result of continued economic decline. The government recognizes this challenge and knows that if they do not find a way to help support financial stability economic decline, it will continue and become a financial burden of all tax payers beyond today‟s current projections.




    Lenders have known that Foreclosure Alternatives, in these market conditions, are the right course of action. The challenge has been, the level of financial losses facing these institutions without intervention. On their own, the losses would be so significant it would create greater instability and insecurity opening our nation‟s largest institutions to takeovers, bankruptcy and ultimately the crumbling of our nation‟s finances.


    The HAFA program complements the HAMP program by making the transition into a short sale easier for the Borrower if they do not qualify for a loan modification.

    The goal for the Borrower is primarily home retention using either a HAMP or Non-HAMP modification. That is generally the first preference and focus of the program.

    If the HAMP modification effort fails, HAFA is required to be considered and offered by participating servicer. The Borrower who meets eligibility criteria for HAMP is still able to say „no‟ (or not respond) to a modification offer from the servicer and proceed directly to HAFA if they are eligible for HAFA. This would potentially be the case for a person who was laid off and is unemployed and who needs to relocate to take advantage of a new job opportunity.


    What Is HAFA?

    HAFA is a government program that provides financial incentives to Borrowers, servicers and investors who utilize a foreclosure alternative (short sale or deed-in-lieu) instead of a foreclosure sale to transfer ownership.



    Ultimately, foreclosure alternatives such as those mentioned above reduce the need for expensive foreclosure proceedings for the investor and the potential harmful effects a foreclosure would have on the Borrower.

    The pre-foreclosure options typically help maintain the condition of the property and therefore, the preservation / value of the property by minimizing the time a property could potentially be vacant and subject to vandalism and deterioration through lack of maintenance.

    Finally, pre-foreclosure options generally provide a substantially better outcome for investors and communities through lower loss severities for investors and fewer vacant properties for communities.


    What Is Treasury Supplemental Directive 09-09?

    The Treasury Supplemental Directive 09-09 provides guidance to servicers for adoption and implementation of HAFA for first lien mortgage loans; however, the Supplemental Directive only applies to loans that are not owned or guaranteed by Fannie Mae or Freddie Mac.


    Why?Those of you who are working in the short sale market know that short sales and deeds-in-lieu are often complex transactions requiring coordination and cooperation among servicers, appraisers, Borrowers (i.e. sellers), buyers, real estate brokers and agents, title companies, and often mortgage insurance companies and subordinate lien holders.

    The short sale transaction has been dealing with the situation of very long delays in approvals as well as very high rates of failure. However, the HAFA Directive has created a standardized process, with specific documents and timelines for eligible short sale and deed-in-lieu transactions. HAFA was created to make the entire process easier for all involved.

    The Relationship Between HAMP And HAFA

    The HAFA program complements the HAMP program by making the transition into a short sale easier for the Borrower if they do not qualify for a loan modification.

    The goal for the Borrower is primarily home retention using either a HAMP or Non-HAMP modification. That is generally the first preference and focus of the program.

    If the HAMP modification effort fails, HAFA is required to be considered and offered by participating servicer. The Borrower who meets eligibility criteria for HAMP is still able to say „no‟ (or not respond) to a modification offer from the servicer and proceed directly to HAFA if they are eligible for HAFA. This would potentially be the case for a person who was laid off and is unemployed and who needs to relocate to take advantage of a new job opportunity.


    Borrower Benefits

    The Borrower who has already explored all other options at retaining their home and failed, now have a chance at a pre-foreclosure transition with financial support. Although the actual credit rating impact varies by Borrower based on other extenuating circumstances, pursuing a HAFA short sale or deed-in-lieu could result in a less negative credit impact.

    An important component of the HAFA program is that future liability for the first and second liens must be released allowing a fresh start – in other words, no deficiency.


    Borrower Responsibilities

    The Borrower must sign a listing contract and cooperate fully with the process of selling their home. Things that are important are accessibility, the MLS, lockboxes and overall cooperation with showing appointments.

    Additionally the Borrower is ultimately responsible for delivering clear and marketable title which means dealing with things like HOA fees, tax issues and so on.

    One of the most important things about HAFA is that the Borrower must keep the property in good condition. That means they are not to remove attached items or do any damage at all to the property during the process.

  • Lead Paint New EPA Regulations

    Posted Under: General Area in Los Angeles, Home Buying in Los Angeles, Home Selling in Los Angeles  |  September 5, 2010 10:05 AM  |  448 views  |  No comments

    Lead paint that went into effect on April 22 of this year. Under the Residential Lead –based Hazard Reduction Act of 1992, Congress required EPA to develop regulations to address renovation, repair and painting, “RRP” for short, in single and multi family housing unit built before 1978.  This new federal rule aims at reducing exposure to toxic lead-paint chips and dust, and requires renovators to be trained and certified in EPA-approved methods of containing and cleaning up work areas.  This rule recently went into effect on April 22, 2010.

    Let me go over the dangers of lead paint…

    • Lead Poisoning can cause significant injury, especially to young children and pregnant women.  Children typically get exposed to lead as toddlers while crawling on floors and standing near old windowsills.  The chipping, peeling and/or cracked paint is then ingested by the child through normal hand-to-mouth activity.  A child can also be exposed to lead while placing his/her mouth on toys painted with lead-based paint.  Other sources of childhood lead poisoning are lead-based candy, lead-based pottery, spoons, forks, plates and other utensils.

    • Lead poisoning can cause significant neurological injuries to the developing brain of a child or fetus.  Children with blood lead levels (BLL) below 10 micrograms per deciliter have been found to lose IQ points.  Increasing BLL’s cause brain-related injuries such as attention deficit hyperactivity disorder (ADHD) and hearing impairment.  When lead is absorbed into the body, it can also cause damage to other vital organs, like the kidneys, and blood. At very high levels, lead poisoning can cause encephalopathy, convulsions, stupor, coma and/or death.  Some symptoms of lead poisoning may include headaches, stomachaches, nausea, tiredness and irritability. But the scary thing is children who are lead poisoned may also  show no symptoms at all until it’s too late.

    • Adults are typically exposed to lead either through working in industries where lead occurs in the work place or while living through repairs and/or renovations at their home or apartment.  Adults (and children) can be exposed to substantial amounts of lead through breathing in lead-contaminated dust that can occur in the work place and/or the renovated home.  Home repairs of older dwellings (built before 1978) must be undertaken in a way that contains the lead-based paint that is present.

    Adults can also suffer from lead poisoning.  Brain-related injuries in adults include dizziness, fatigue, irritability, problems with concentrating, weakness, malaise, decreased libido and impotence.  At higher levels lead poisoning in adults can result in significant impacts on the kidneys, heart, reproductive and endocrine system.

    So, to reduce these dangers, effective April 22nd of this year, under the EPA’s Lead Based Paint Renovation, Repair and Painting requirements, firms paid to perform work which “disturbs” paint in pre-1978 residential housing must be EPA certified and all individuals performing the work must either be certified renovators or must have been trained by a certified renovator.

    In addition, all renovations must be performed according to EPA lead-safe standards and practices. The law defines renovations very broadly to include most repairs, remodeling, and maintenance activities, including paint scraping, window replacement, and carpet removal (which can disturb painted baseboards), etc.  Additionally, electrical, plumbing and carpentry work could also be subject to the law. 

    It is also important to know that workers will not be “grandfathered in” if they are in the middle of the RRP project. Work on the project must stop and all workers must be trained and certified.

    The rules apply only to licensed contractors.  Do-it-yourselfers will still be able to do RRP work on their own without being trained or certified and without getting fined.  Of course, we always recommend that homeowners associations hire only licensed contractors to prevent any liability to the associations, should these contractors somehow hurt themselves while doing the work for the associations.

    There are some exemptions to the law’s requirements, including the following:

    • Housing built in 1978 or later.  This is because nine out of 10 homes built before 1940 still contain lead paint, according to the EPA.  The soft metal was frequently used as a primary ingredient in oil-based house paint until the 1950s and 1960s, when it was replaced with titanium dioxide and latex paints became more available.

    • Housing for elderly or disabled persons, unless children under six reside or are expected to reside there.

    • Zero bedroom dwellings (studio apartments, dormitories, etc.).

    • Housing or components declared to be lead-free by a certified inspector or risk assessor.

    • Minor repair and maintenance activities that disturb 6 square feet or less of paint per room inside, or 20 square feet or less on the exterior of a home or building. However, minor repair and maintenance activities do not include window replacement and projects involving demolition or prohibited practices.

    And where the firm doing the work obtains a signed statement from the owner that all of the following are met, then the training, certification and work practice requirements of the rule do not apply:

    • The renovation will occur in the owner’s residence

    • No child under age 6 resides there;

    • No woman who is pregnant resides there;

    • The housing is not a child-occupied facility; and

    • The owner acknowledges that the renovation firm will not be required to use the work practices contained in the EPA rule.

    For licensed contractors and firms, this new federal rule means  that firms must register with EPA and pay a fee. Individuals must take a one-day training course from an EPA-accredited training provider to become a certified renovator. Renovator training is also via “e-learning”; this option allows trainers to provide much of the course content on-line, making it more convenient for many renovators. EPA certification is good for five years.

    The new rule calls for applying protective plastic sheeting to floors and other surfaces and extending the sheets a minimum of six feet in all directions from the location where the existing paint will be disturbed.  Affected areas must be misted with water to minimize dust, and components must be pulled apart instead of pounded or hammered to prevent the spread of debris.  Power sanders and grinders must be fitted with HEPA vacuum attachments to capture dust, and heat guns must be set below 1,100 degrees Fahrenheit.  Workers are advised to wear respirators and disposable suits, gloves and shoe covers.

    In addition to ensuring that EPA-approved procedures are followed, certified renovators must check to see whether dust, debris or residue is present after the job is done.  Then they are required to wipe disposable cleaning cloths, both wet and dry, over floors, countertops, windowsills and other surfaces and compare the cloths with a card distributed by the EPA.  If the cloths match or are lighter than the color of the card, they indicate that the surfaces are considered adequately cleaned of dust, which could contain lead.

    As part of the rules, contractors are required to keep records of a renovation project for three years to prove that their work was performed according to EPA-approved methods.

    It is important that you know that there are severe penalties for violations of this law, including fines of up to $32,000 per violation, per day.

  • Bravo NAR Bravo!

    Posted Under: General Area in Los Angeles  |  July 15, 2010 9:41 AM  |  510 views  |  2 comments
    This is a huge deal. I see many fine Realtors get the shaft for the fact they are gay or lesbian. I am so proud to be part of such a fine organization. Real Estate has a very strong stigma of being stuffy and narrow-minded. This goes to show things are changing.

    NAR http://www.realtor.org/rmodaily.nsf/pages/news2010051701?opendocument
    Board Approves Sexual-Orientation Protections

    The NATIONAL ASSOCIATION OF REALTORS®' Board of Directors, which met on Saturday at the tail end of the Midyear Meetings & Trade Expo in Washington, D.C., approved a rule that bans REALTORS® from denying equal professional services to a customer on the basis of sexual orientation.

    The board amended Article 10 of the Code of Ethics, which addresses "duties to the public." That part of the Code already prohibits REALTORS® from discriminating against customers on the basis of race, color, religion, sex, handicap, familial status, or national origin. Standard of Practice 10-3 was also amended to prohibit discrimination on the basis of sexual orientation in any advertisements for selling or renting property.

    The change, met with applause, was passed unanimously by the Professional Standards Committee earlier in the week.The measure will now go before the NAR Delegate Body for approval at NAR’s annual conference in November.

    Many other agenda items also were discussed and acted upon at the board meeting. Here's a roundup of the highlights:

    Realtors Property Resource.Despite the tough economy, NAR continues to focus resources on keeping its members central to the transaction well into the future by moving forward with two Second Century Initiatives, the Realtors Property Resource (RPR) and REALTOR® University. RPR will contain deep information on every property and parcel of land in the country. About 1,000 NAR members are currently testing the software in 12 beta markets, said RPR CEO Dale Ross. Members are also testing the applications that will deploy the data on handheld devices. Once testing is completed, those 12 markets will be the first in which the database is rolled out. NAR continues to buy and license the public record data that will comprise the core of the database. The goal is to overlay all that data with data from MLSs. Ross emphasized that RPR will not license or syndicate MLS data. The information will be used solely for creating deep analytical reports — the hallmark of the product — for use by REALTORS®. Full roll-out is expected to take five to six years.

    REALTOR® University.REALTOR® University is NAR's initiative for raising the bar in the profession by undertaking an accredited, degree-granting university. A blue-ribbon panel started work earlier this year on the initiative, which will result in a master's degree program with majors in real estate sales and marketing, real estate brokerage, and appraisal, among others. It’s expected to take two to three years for the institution to become accredited. "If you want the 'university' attached to REALTOR®, you have to play by (academia's) rules," said Richard Rosenthal, CRE, of Venice, Calif., NAR’s liaison for special projects. Students will access the REALTOR® University curriculum online. In addition to master's degrees, the university will eventually feature internship and job-placement programs, as well as an applied research center.

    NAR financials strong. Although it’s been a difficult two years, NAR remains in strong financial shape. The association’s 2009 financial statements received an unqualified opinion of conformance with Generally Accepted Accounting Principles from accounting firm Crowe Horwath LLP, according to Treasurer James L. Helsel Jr. In addition, 2010 membership stands at 1,079,000, nearly 2 percent above budget. Against this backdrop, the Board voted to maintain NAR dues at $80 and keep the Public Awareness Campaign special assessment at $35 for the three-year budget cycle, 2011–13.

    2011 Leadership. The board recognized the association’s 2011 slate of officers:
      President: Ronald Phipps, Warwick, R.I.
      President-elect: Maurice “Moe” Veissi, South Miami, Fla.
      First Vice President: Gary Thomas, Aliso Viejo, Calif.
      Treasurer: Bill Armstrong, Damascas, Md.
      The Treasurer seat was contested: Armstrong was elected over Mike McGrew of Lawrence, Kan., by ballot during the meeting.

    Professional standards, MLS policy changes. In addition to the vote to ban discrimination on the basis of sexual orientation, the Board passed a number of policy changes.
    • Established authority of MLSs to require, as a matter of local discretion, submission of photographs, drawings, or renderings of listed property as a condition of inclusion in MLS.
    • Established authority of MLSs to require, as a matter of local discretion, submission of legally required seller disclosure forms as a condition of inclusion in the MLS.
    • Clarified that, if time on market and price change information are collected by the MLS, those fields cannot be treated as confidential and may be provided to clients and customers; however, MLSs may prohibit inclusion of time on market and price changes in advertising, including IDX, by other participants.
    • Amended the Code of Ethics and Arbitration Manual to give associations discretionary authority to refund portions of parties’ filing fees if the dispute is successfully resolved through mediation.
    • The directors also amended MLS policy statement 7.23. MLSs that permit listing participants to communicate to other participants how reductions in gross commissions will be apportioned between listing and cooperating participants in a short sale will now have additional discretionary authority to require listing participants to give cooperating participants written notice of the total reduction in gross commissions, and the resulting reduction in cooperative compensation.
    • Work group will be formed to look at two IDX-related issues: whether national franchise organizations should be permitted to index IDX listings and whether RSS feeds can include IDX listings.

    Keeping ethical standards high. In a separate measure, the Board took action to apply the same ethical standards to REALTOR® association that apply to their members. Under the change, associations are prohibited from making false or misleading statements about other associations. The board also approved procedures for addressing accusations of violations.

    Distinguished Service Awards. The 2010 Distinguished Service Award recipients were announced. Joe Hanauer, CIPS, CRE, of Laguna Beach, Calif., and Fred Prassas, CPM, GRI, of La Crosse, Wis., will be formally recognized at the 2010 Annual Meeting in New Orleans in November.

    Legal action funding.Funding of $178,983 was approved for four cases involving a commission dispute, whether administrative fees charged by a brokerage violates RESPA, the legality of a brokerage’s mortgage lending and title operations, and defense of a patent-infringement case.

    REALTORS® Federal Credit Union.The REALTORS® Federal Credit Union, launched last year, has $60 million in deposits, making it bigger than almost 80 percent of all credit unions after just one year, reported Tom Glatt, CEO. Other stats: 133 local associations, 24 state associations, and 18 MLS have their funds on deposit with the credit union, accounting for about $30 million.

    REALTOR.com Update.The official property listing site remains far above its competition in site traffic, recording 12 million unique users in April. That was a record in the 14-year site history, according to NAR’s Move Inc. board representative Cathy Whatley. (Move Inc. operates REALTOR.com on behalf of NAR.) The site enjoyed 24 percent growth over last year. With 17.5 million visits and 400 million page views each month, the site is seeing serious engagement, says REALTOR.com President Errol Samuelson said in a report to the board. REALTOR.com’s iPhone app, the fastest growing iPhone app in the real estate space with more than 700,000 downloads, gives mobile users access to all listings at the site. Consumers can add their own notes on each property, share properties with their listing agent, and post listings to Twitter and Facebook.

    REALTORS® Political Action Committee.Donations are more than halfway toward the association’s goal for 2010 and stand at 9 percent over where donations were at this time last year, said Chris Polychron, CRS, GRI, NAR’s political fundraising liaison. The number of major donors is up 3 percent, said Phil Smaby, GRI, RPAC Major Donor Council chair. Smaby announced a goal of having 1 percent of members reach major donor status by 2015.

    Broker Involvement Program. Membership in the program—which enables real estate agents to learn about legislative Calls for Action directly through their broker—has increased to more than 4,000, with 400 applications for brokers pending, said Bob McMillan, Member Mobilization liaison. The goal is to sign up 6,000 brokers by the end of the year.

    Call for Action.The Board was advised of an NAR Call for Action today on two issues of concern mainly to practitioners working with investors. NAR will be asking members to urge their members of Congress not to penalize real estate partnerships in proposed tax changes to the carried interest of general partners in investment partnerships, and to vote against changes to Form 1099 filing requirements that could impose a substantial administrative burden on rental property owners.

    President Vicki Cox Golder exhorted members to participate in the CFA even if the issue doesn’t concern them directly. “Just because an issue doesn’t impact you,” she said, “it’s still important you respond because the next issue that comes up could impact you.”

    —Robert Freedman, Stacey Moncrieff, and Brian Summerfield, REALTOR® Magazine
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