home buyer recourse
What is “usury”, and how are you protected from it?
In making of loans to conventional real estate buyers and “flippers”, investors should remember that for most private transactions, California enforces its usury law against excessive interest charges, with certain exemptions for seller carry back loans, and loans “made or arranged” by a licensed broker.
Usury is defined as charging a rate of interest in excess of the legal limit, and for personal, family or household purposes it is 10% per year, and for loans for “any other purpose”, the legal rate is either 10% per year, or 5% per year plus the federal discount rate that exists on the 25th day of the month preceding the date of the loan contract or date the loan was made, whichever is greater. The rate is set by California’s constitution, but there are exceptions for federal banks, credit card companies, and other institutional lenders, including the VA and FHA.
Investment loans used to purchase, build or improve real estate, also known as “hard money loans”, are considered loans for “any other purpose” and are subject to the higher of the 10% rate or the rate based upon the federal discount rate. Continue reading
With Deception, Comes Consequence
For transactions with a middleman that deceives both the seller and buyer, section 3543 of California’s Civil Code can break the tie where both parties are negligent, stating where one of two innocent persons must suffer by the act of a third (i.e., middleman), he, by whose negligence it happened, must be the sufferer. Huh? What does not mean in simple English?
In other words, if both parties are negligent in closing a sale after being deceived by the middleman, the one who is more responsible for the loss must suffer and bear the loss. That appears easier to understand, but the application of section 3543 depends on the facts.
First, being the victim of deception can be interpreted as negligence or unreasonable conduct, a rather sad commentary on our internet society that almost demands that you mistrust, confirm and verify everything you may be told. So it may not be enough to prevail by claiming there was no resisting the false promises or conduct of the middleman. Continue reading
Q: I purchased a home that has a pool and the seller’s agent informed me that there did not appear to be any visual defects, and my own agent told me that he was not aware of any problems with the pool that I should insist on being repaired before the close of escrow, even though the pool was only half full of very dirty water and it did not appear to have the filter equipment operating for some time. I did not insist on filling the pool up or checking its operation and after I purchased the house, I learned that the overflow pipe discharged onto the slope below my house that is off my property, and the city has required me to install a sump pump overflow system at significant cost. Do I have any rights against the seller’s agent or my own agent? Continue reading
Q: I recently purchased a residence and I signed a standard California Association of Realtors Residential Purchase Agreement. I now believe that there are defects in the home that were not disclosed to me by the seller and I want to file a lawsuit and recover my attorney fees. The Agreement has a provision for mediation, but do I need to request mediation before filing a lawsuit?
A: It depends. There is no requirement to mediate before filing a lawsuit against the seller or any broker involved in the transaction, unless there has been an agreement to arbitrate. If the parties agree to arbitrate and one of them files a lawsuit, the other party can file a motion with the court to stay the lawsuit and compel the arbitration.
However, pursuant to paragraph 26(A) in the recently revised C.A.R. Residential Purchase Agreement, both the buyer and seller agree to mediate any dispute or claim arising between them out of the Agreement, or any resulting transaction, before resorting to arbitration or court action. The mediation provision applies even if the parties have not agreed to arbitrate. The buyer and seller also agree to mediate any disputes or claims with brokers who agree in writing to such mediation prior to, or within a reasonable time after, the dispute or claim is presented to the Broker. Except under certain circumstances described below, any party who commences a lawsuit or arbitration without first attempting to resolve the dispute through mediation, or refuses to mediate after a request has been made, is not entitled to recover attorney fees even if they prevail. Continue reading