Unusual Facts Lead to Unprecedented Victory for Lender

By Gary Torrell

I’d like to discuss a recent case where unusual facts and aggressive actions, led to an almost unheard-of victory for one of our lender clients.

Many homeowners miss a monthly mortgage payment or two, then make it up. But when three to five consecutive payments are missed, the lender often attempts to collect or reach a loan modification with the borrower and, if that process is unsuccessful, the lender begins to foreclose.

California and federal laws (including bankruptcy) protect homeowners and can delay a foreclosure for six months to over a year. During this time the borrower often stays in the house without making any mortgage payments. Sometimes (but rarely) the lender tries to have a state court receiver appointed to take possession during the foreclosure, but many courts won't force a borrower out until after the foreclosure. All in all, it is often a long and arduous ordeal before the lender can take possession of the property. And that’s what makes this particular case so unusual.

In this case, the owner of a luxury estate didn’t pay the loan, refused to allow the lender to inspect the property and delayed the foreclosure by filing a lawsuit and personal bankruptcy. After getting bankruptcy court relief, the lender obtained a court order forcing the homeowner to allow a property inspection, but he refused and went so far as to feign an injury to postpone the inspection. When we requested proof of the injury, the borrower couldn’t deliver.

Meanwhile, the lender caused a trustee to be appointed in the bankruptcy case to investigate and possibly care for the home. Thinking he may be able to sell it for more than the liens, the trustee inspected the property. Imagine the trustee’s surprise when he discovered the borrower no longer lived there and, presumably out of spite, had removed all appliances and stripped the fixtures, sinks, etc.

Following this discovery, the trustee agreed to cooperate with the lender. We filed an ex parte application in state court and presented this sequence of events as evidence the lender should be allowed to take possession immediately, without appointing a receiver and before finishing the foreclosure. While the case was strong, decisions of this kind are practically unheard of, but in this case the court agreed.

In 30 years, this is the first time I’ve seen a court award possession of a home to the lender before completing the foreclosure. This just goes to show how creative and aggressive legal tactics can make the difference.

IRS Offers Clean Slate for Undeclared Foreign Accounts

By Mayer Nazarian

If the tax status of your undeclared overseas accounts is keeping you up at night, effective July 1st Uncle Sam may have just issued you a “Get Out of Jail Free Card.” The IRS has announced a big change to their Offshore Voluntary DisclosureProgram (OVDP), making it easier than ever for those with undeclared offshore accounts to reach tax compliance.

Over the past seven to eight years, the IRS has stepped up their enforcement of auditing individuals with over $10,000 in accounts overseas. Under previous programs, even voluntarily coming forward and declaring the overseas accounts could carry a penalty of 27.5% the highest value of the undeclared accounts. But in an effort to encourage more Americans to come clean, the new program drastically reduces the penalty to 5% for domestic taxpayers, and even 0% for those living abroad.

The IRS explains that these new procedures are intended for U.S. taxpayers whose failure to disclose their offshore assets was clearly non-willful. “This opens a new pathway for people with offshore assets to come into tax compliance,” said IRS Commissioner John Koskinen. “The new versions of our offshore programs reflect a carefully balanced approach to ensure everyone pays their fair share of taxes owed. Through the changes we are announcing today, we provide additional flexibility in key respects while maintaining the central components of our voluntary programs.”

Some examples may include those who have been on or recently returned from an assignment overseas for an extended period of time, those who have recently immigrated to the United States and still have accounts overseas, first or second-generation citizens who may have accounts set up by their parents, and perhaps older citizens who may have forgotten about overseas assets. Thanks to these new procedures, individuals in these situations will have a much easier time coming forward and clearing the record, rather than being lumped in with those intentionally hiding their overseas accounts.

For more information on the changes to the new OVDP, click here or contact me at Valensi Rose, PLC.

Demanding Transparency from your Broker

By Gary Torrell

When traversing the complicated transition into home ownership, buyers often view their real estate broker as a trustworthy, impartial advocate. While brokers offer helpful advice throughout the process, it’s important to recognize the economics of the situation: brokers are only paid when they make a sale, and thus are biased towards closing the deal. And when one broker represents both buyer and seller, a buyer may need to take extra steps to ensure transparency.

A recent court decision over the sale of home in Malibu dealt with the broker’s liability in reporting the size. A salesperson for a brokerage firm listed a home with “approximately 15,000 square feet of living areas.” A couple made an offer to purchase the property. While the deal was in escrow, the buyers hired an inspector to measure the size, and found the property was smaller than listed. After they pulled out of the deal, the property was re-listed as before while omitting the details about the smaller measurements. A second buyer, relying on the measurements in the listing, sued the broker, after entering into escrow and finding the property measurements to be inaccurate.

In the suit, the second buyer contended the broker owed him a fiduciary duty. The court found in favor of the buyer, since the broker chose not to inform buyer of the more recent size.

In the that case, the second buyer entered the deal based on the listed square footage declared by the broker, only bringing in their own home inspector once they suspected something was amiss. It’s important to recognize that when listing a home, brokers will often rely upon — and recommend — their own trusted home inspectors. To level the playing field, buyers should retain their own reputable, licensed building contractor with at least ten years’ experience as a general contractor to do the inspection.

Most home sales in California are based on standard contracts drawn up by the broker group, designed to protect the broker from liability and ensure they receive their commission. Whether buying or selling, the broker’s contract is their “home court advantage.” Hiring your own lawyer to review the contract before signing can help you understand the agreement and potentially save a big headache later on.

Buying a home can easily be the largest transaction of your lifetime, so it’s important to go in knowing your rights, and how to ensure a fair deal. For more advice on protecting your interests in the real estate process, read up on how to avoid eight common mistakes when buying and selling your house.