Does Facebook’s move into real estate signify the end of the Realtor?

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Social media has long been involved in real state. Aren’t all your real estate agent contacts your “friends” on Facebook? Aren’t you connected with them on LinkedIn? Don’t you regularly see their listings on all your social media outlets?  But the plot thickens!

According to a November 13 story in HousingWire, Facebook announced last week that it is significantly expanding the real estate listings section on its Marketplace, which is Facebook’s attempt to take on Zillow, Trulia, Realtor.com, Redfin, Craigslist, eBay and other e-commerce platforms.

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The HousingWire story, which you can read here, reports that Facebook currently allows individual homeowners to list their homes for sale on Marketplace. The new development is that Facebook is significantly expanding the real estate listings section on Marketplace. The new feature is said to be “rolling out gradually” and is currently only available via the mobile app in the United States.

And, according to the same report, Facebook is going full force into rental listings via partnerships with Apartment List and Zumper.

Facebook plans to upgrade its platform to include custom filters for location, price, numbers of bedrooms and bathrooms, rental type, square footage and pet friendly designations. Also included will be the ability to upload 360-degree photos for individual rental listings. When the potential renter selects a property, he or she will complete s contact form on Marketplace, and the property manager or agent will contact him or her directly.

Facebook says it will not participate in any transactions. It will simply connect the parties. Real estate agents are probably safe for now, but it’s a brave new world out there as social media infiltrates all aspects of our professional and personal lives! Dirt lawyers who fail to embrace social media may be left behind sooner rather than later.

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A recorded power of attorney may not be necessary to establish agency where real estate is involved

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In a recent South Carolina Court of Appeals case*, a mother was held to be bound by the actions of her wheeler-dealer son who appeared to act in her behalf buying and selling properties in Laurens County.

Frank Lollis lived with and took care of his mother, Kathleen Lollis, and managed real estate transactions for the family. The attorney who handled these transactions testified that he saw Frank sign his mother’s name and that he thought he recalled Frank showing him a power of attorney.

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Lisa and Dennis Dutton, plaintiffs in this case, suing to enforce contracts Frank signed, testified that Frank had said he had a power of attorney. At trial, following Frank’s death, Mrs. Lollis denied the existence of the power of attorney.

Lisa Dutton testified that she had known Frank for nineteen years and had done a lot of real estate business with him and his family. She said that all of the locations where she had lived for the ten years prior to the trial were related to the Lollis family and every time she purchased property that was titled in Mrs. Lollis’ name, she dealt with Frank and his attorney. She said she “never had an issue” until she tried to obtain a deed to enforce a contract at issue in this case.

Frank’s attorney testified that Frank did a lot of his business in cash and always carried a lot of cash. Frank typically bought property in other individuals’ names and signed their names to documents, including not only his mother, but a former employee. The attorney signed an affidavit to the effect that Frank explained his “checkered past” required him to operate in the names of other individuals. The affidavit further stated that Mrs. Lollis knew Frank titled properties in her name.

Frank was diagnosed with cancer, and when he became increasingly ill, he asked his attorney to prepare a power of attorney for his mother naming his sister as the attorney-in-fact. After Frank’s death, the Duttons unsuccessfully attempted to obtain the deed to consummate the contract Frank had signed in his mother’s behalf. This lawsuit followed.

The case contains a detailed discussion of the law of agency in South Carolina. Real estate lawyers should know that their clients can become bound by their actions even in the absence of a recorded power of attorney because agency is a question of fact that does not necessarily depend upon an express appointment and acceptance.

An agency relationship is frequently implied or inferred from the words and conduct of the parties and the circumstances of the particular case. The Court of Appeals stated that agency may be proved circumstantially by the conduct of the purported agent exhibiting a pretense of authority with the knowledge of the principal.

The doctrine of apparent authority provides that the principal is bound by the acts of his agent when he has placed the agent in such a position that persons of ordinary prudence, reasonably knowledgeable with business usages and customs, are led to believe the agent has authority and they can deal with the agent based on that assumption.

This rule is based on public policy and convenience to provide safety for third parties.  In this case, the attorney testified that the mother was “fully aware that Frank was buying and selling property in her name” and was “transacting business in her name.” Lisa and her husband testified that Mrs. Lollis was present when they made some payments to Frank. Mrs. Lollis never objected and even retrieved the receipt book for Frank on a few occasions.

Lisa testified (1) Frank told her he had a power of attorney; (2) Lisa relied on Frank’s representation; and (3) she would not have entered into the contract and made payments had she known Mrs. Lollis would not acknowledge the existence of the contract. Dennis testified that (1) he believed Frank was acting on his mother’s behalf; (2) he relied on the course of dealing established in a number of transactions; and (3) if he had known Mrs. Lollis was not going to honor the contract, he would not have entered into it nor made payments.

The Court said that Mrs. Lollis’ knowledge that her son was buying and selling real estate in her name and her tacit acceptance of this practice placed Frank in such a position that the plaintiffs were led to believe he had the authority to act. The plaintiffs dealt with Frank based on that assumption. The preponderance of the evidence, according to the Court, shows an agency relationship between Mrs. Lollis and Frank as well as his apparent authority to sell. Frank’s actions were binding on his mother.

*Lollis v. Dutton, South Carolina Court of Appeals Opinion No. 5522 (November 1, 2017)

Day of the Dead: Director Cordray didn’t get his Halloween wish

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President Trump signed the legislation repealing the CFPB arbitration rule

As we discussed in this blog last week, the United States Senate recently voted to dispose of a Consumer Financial Protection Bureau (CFPB) rule that allowed consumers the right to bring class action lawsuits to resolve financial disputes. Under that rule, banks and credit card companies could not use mandatory pre-dispute arbitration clauses in the fine print of credit card and checking account agreements.

Day of the DeadThe vote was 51-50 with Vice President Pence casting the deciding vote. The vote in the Senate followed a previous vote with the same result in the House of Representatives, leaving only the stroke of President Trump’s pen to finalize the repeal.

After the Senate’s vote, CPBP director Richard Cordray released a statement stating the action was “a giant setback for every consumer in the country.” “Wall Street won”, he said, “and ordinary people lost.”  Interestingly, Director Cordray wrote a letter directly to President Trump on October 30 pleading with him to save the arbitration rule.

The letter said, “This rule is all about protecting people who simply want to be able to take action together to right the wrongs done to them.” It also appealed to President Trump’s support of veterans and lower income Americans by saying, “I think you really don’t like to see American families, including veterans and service members, get cheated out of their hard-earned money and be left helpless to fight back.”

The letter obviously had no effect. President Trump signed the law on November 1 to the delight of banking and business groups. Director Cordray said, “In signing this resolution, the President signed away consumers’ right to their day in court.”  The Trump administration, however, is clearly in favor of dismantling regulatory efforts it believes may put a damper on the free market in any way.

Trick or Treat!

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Senate votes to rescind CFPB class action rule

Is this action scary for consumers?

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The United States Senate voted last week to dispose of a Consumer Financial Protection Bureau (CFPB) rule that allowed banks and credit card companies to use mandatory pre-dispute arbitration clauses in the fine print of credit card and checking account agreements to deny consumers the right to bring class action lawsuits to resolve financial disputes.

The vote was 51-50 with Vice President Pence casting the deciding vote. Lindsey Graham voted against the repeal. The House of Representatives had already voted to rescind the rule, and President Trump is expected to sign the bill into law.

When the rule was passed last year, CFPB Director Richard Cordray said the purpose was aimed at giving consumers more power by discontinuing the abusive practice of banks inserting arbitration clauses into their contracts for consumer financial products and services and literally “with the stroke of a pen” blocking any group of consumers from filing class action lawsuits. He also said CFPB’s research indicated that these “gotcha” clauses force consumers to litigate over small amounts ($35 – $100) acting alone against some of the largest financial companies in the world. Consumers are forced, he said, to “give up or go it alone.”

After the Senate’s vote last week, Director Cordray released a statement stating the action was “a giant setback for every consumer in this country.”  “Wall Street won”, he said, “and ordinary people lost.”

HousingWire reported on October 30 that Director Cordray wrote a letter directly to President Trump pleading with him to save the arbitration rule. According to the HousingWire report, the letter said, “This rule is all about protecting people who simply want to be able to take action together to right the wrongs done to them.” It also said, “I think you really don’t like to see American families, including veterans and service members, get cheated out of their hard-earned month and be left helpless to fight back.”

Time will tell whether the President will listen to Director Cordray. But it is clear that the CFPB continues its efforts to shake up the market. It has also been clear up to this point Republicans are seeking to dismantle those efforts that they feel hurt the free market.

SC Supreme Court tells Kentucky lawyer what she’s NOT gonna do….

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I’ve blogged before about Mike Goodwin, the “Bow Tie Comedian” based here in Columbia, who entertained us during lunch at Chicago Title’s seminar last year. I highly recommend Mike if you need a comedian suitable for a family audience. A joke that bubbled up through his very funny presentation was a line his mother used to keep him on the straight and narrow during his childhood, “what you NOT gonna do is…..”

 

For example, she would say, what you NOT gonna do is to stand there and hold that refrigerator door open while you try to decide what you want to eat. During one lull in the laughter, Mike said to us, “what you NOT gonna do is sit there and not laugh at my jokes.” (So we laughed.)

Mike’s tag line kept coming to me as I read In the Matter of McKeever, a September 20, 2017 South Carolina disciplinary case where a Kentucky lawyer was permanently debarred from seeking any form of admission to practice law (including pro hac vice admission) in South Carolina.

The Court clearly told McKeever what she’s NOT gonna do in the Palmetto State!

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McKeever engaged in several interesting and dangerous courses of action in South Carolina. One of the most damaging to her position seemed to be failing to respond to the disciplinary charges or to participate in the disciplinary proceedings in any way. The Court held this failure to be indicative of a disinterest in the law. No lawyer should ever be found to be disinterested in the law if she wants to continue to practice in this or any state!

Other activities were equally dangerous. McKeever and her husband left Kentucky in the midst of a foreclosure of their $1 million home loan. She arrived in Charleston and came into contact with Betty McMichael who owned two properties, 991 Governors Road where she resided, and 986 Governors Road, which she rented out.

McMichael faced foreclosure on both properties, and McKeever offered her legal representation despite not being licensed in South Carolina. McMichael repeatedly declined the offer but ultimately agreed to an arrangement, after repeated phone calls and visits, that allowed McKeever and her family to live at 986 Governors Road.

I hear the Supreme Court say, “what you’re NOT gonna do is to enter into an improper fee arrangement where the scope of the legal representation and the basis of the fee are not clearly explained to the client.) I also hear the Court say, “what you’re NOT gonna do is to create a conflict of interest by taking a possessory interest in property that is the subject of litigation.”

Later McKeever induced McMichael to execute a quitclaim deed in favor of Bondson Holdings, a “fictitious entity” owned by McKeever and her husband. (I can’t even put to paper the words the Court really wanted to use for this bit of deception.)

The saga continued with delay tactics, frivolous and meritless legal positions, false statements to courts, threatened civil actions and criminal prosecutions against opposing counsel, the presiding judge and the clerk of court. The Court was not amused and, in addition to the permanent debarment, reserved the right to void the deed after other proceedings involving the property are finally resolved.

I recommend the case as interesting reading in classic hutzpah and failing to follow any rules.

CFPB announces top TRID mistakes

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cfpb-logoWe’re learning for the first time what the CFPB considers the top mistakes being made by lenders in mortgage originations under TRID. CFPB’s September 2017 Supervisory Highlights reports on the Bureau’s first round of mortgage origination compliance examinations. Prior to these examinations, the Bureau refused to provide a grace period for lender compliance but stated publicly that it would be sensitive to the progress made by lenders who focused on making good faith efforts to comply with the rule.

Some of these mistakes may be attributed, at least from the viewpoint of the lenders who were pinpointed by CFPB, to settlement service providers (real estate lawyers in South Carolina), so we should pay close attention to this list. Failure to pay attention to it may place some of us squarely on lenders’ naughty lists.

This report indicates most lenders were able to effectively implement and comply with the rule changes, but the examiners did find some violations. The following list contains the most common mistakes:

  • Amounts paid by the consumers at closings exceeded the amounts disclosed on the Loan Estimates beyond the applicable tolerance thresholds;
  • The entity or entities failed to retain evidence of compliance with the requirements associated with Loan Estimates;
  • The entity or entities failed to obtain and/or document the consumers’ intent to proceed with the transactions prior to imposing fees in connection with the consumers’ applications;
  • Waivers of the three-day review period did not contain bona fide personal financial emergencies;
  • The entity or entities failed to provide consumers with a list identifying at least one available settlement service provider in cases where the lender permits consumers to shop for settlement services;
  • The entity or entities failed to disclose the amounts payable into an escrow account on the Loan Estimate and Closing Disclosure when consumers elected to escrow taxes and insurance;
  • Loan Estimates did not include dates and times at which estimated closing costs expire; and
  • The entity or entities failed to properly disclose on the Closing Disclosures fees the consumers paid prior to closing.

The report boasts that the CFPB examiners worked in a collaborative manner with one or more of the entities to identify the root causes of the violations and to determine appropriate corrective actions, including reimbursements to consumers.

The report also covered the Bureau’s supervisory activities outside the mortgage origination arena and indicated nonpublic supervisory resolutions have resulted in total restitution payments of approximately $14 million to more than 104,000 consumers during the review period (January through June, 2017). The CFPB also touted resolutions of public enforcement actions resulting in about $1.15 million in consumer remediation and an additional $1.75 million in civil penalties during the review period.

Despite the notion that the CFPB may be in disfavor in the Trump administration, it remains a powerful body in our industry. Compliance with its directives is crucial to remain in the residential closing business at this point.

What should dirt lawyers do about the Equifax data breach?

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Protect yourself! Advise your clients!

Everyone should have heard about the Equifax data breach at this point, but have you taken any action to protect yourselves and your clients in the face of it?

Equifax has created a website that allows individuals to determine whether their information has been compromised and allows them to sign up for a free year of credit monitoring. Originally, the fine print on this site indicated taking advantage of the free-year credit monitoring service would result in a waiver of legal rights against the company, but I understand the company folded under extreme pressure and removed this language. In any event, please read the fine print since it is apparently changing as this story unfolds.

This website indicated my information had been stolen as well as my husband’s and several colleagues at work. I recommend that you check here to find out whether you need to take further action.

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What action should you take?  I am already a member of a credit monitoring service, so I did not sign up for the free year with Equifax. Regardless, I prefer to keep my legal rights intact. I may need those rights! You may decide to take advantage of the service. You may decide to bite the bullet and sign up for an independent credit monitoring service, and you may decide to remain with that service for more than a year.

What else can be done? I have read many news articles and opinion pieces on this matter and decided to have my credit reports frozen with TransUnion, Experian and Equifax.  You may want to take that action, too, so I have linked those websites for you.

Consider this. If your name, address and social security numbers were compromised, this information is not going to change and the potential financial devastation is not going to resolve itself in the span of one year. Everyone who was compromised will need to be vigilant about checking and credit card accounts indefinitely.

As a real estate lawyer, you may want to advise your clients, as a service to them, about this conundrum and the actions they may be able to take to protect themselves. You may also want to reach out to your real estate agents and lender contacts to ask them to spread the word. Assuming a leadership role in this situation will serve those who rely on you well and will set you apart as a professional who works diligently to protect those who need protection.