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Anecdotes

By David Soble 15 Aug, 2017

The “ Great Recession ” in 2008 has had a lingering effect on how banks lend money to small business owners  and entrepreneurs.  Gone are the days when small businesses have  fast access to bank credit at competitive interest rates. Instead, alternative non-bank lenders, led by companies such as On Deck, Yellowstone, and Cash King, are filling the lending void, growing rapidly on the backs of unwary small business owners.

Here are 5 things small business owners should consider before taking out an “alternative” business loan:


1. Rates That Make Former Sub-Prime Mortgage  Lenders Blush.  High rate loans are the rule rather than the exception for alternative lending sources.  These lenders are not banks and therefore are not federally regulated, unlike companies that provide loans to consumers.   Instead these loans are often  funded by private investors selling credit at effective annual rates that commonly exceed 30%.

2.  Non -cancellable Daily ACH’s.  Since alternative business lenders don’t look at individual or business credit ratings, their risk of not getting paid back is high. They rely on a business’s cash flow only and expect to be paid daily rather than monthly, by using a non-cancellable automatic payment deduction (“ACH”) out of the borrower’s account. The lender can immediately call a loan in default should a business owner fail to replenish their designated account. This exposes the borrower to litigation and further expenses.  Borrowers should be confident that they can meet their daily, rather than monthly, obligations.

3. Arbitration.  Alternative loan contracts generally have expensive arbitration clauses where the debtor agrees to forgo the traditional legal process for a binding decision from designated arbitrators. Arbitration clauses are not favorable to borrowers. They often dictate where a legal case can be heard, usually in a creditor friendly state far removed from the borrower. This creates added expenses to a case even before it’s heard on the merits.   Arbitration decisions usually cannot be appealed (“ binding arbitration ”).  Finally, professional arbitrators have been criticized for having biases in favor of lenders since successful arbitrators make their living from work referred to them by the lending industry.

4. Consent Judgments.Many lenders have business borrowers essentially endorse a “consent judgment” before the the ink is even dry on the original lending agreement.  In a consent judgment, the borrower admits to a default and to the terms of a judgment against them, waiving any legal protections that they might otherwise have.    Lender’s will say that this instrument is harmless and only used in the event of an actual default.  It’s a disturbing trend because it sets the borrower up for failure and legally neutralizes them. (Imagine a hospital locating a corn beef stand next to the cardiac care unit or meeting a bank’s REO bank officer right after you close on the purchase of your home.)

5.  Personal Guarantees.While the business loan is given to the business in name, the small business owner often personally guarantees the payments in the event that their business fails. Personal  loan guarantees are an integral part of the lending agreement, so borrowers should think carefully before signing. Lenders will look to the former business owner to make payments long after a business closes it doors.

Alternative business loans appeal to business owners because the loan process is much  faster than traditional lending sources (some lenders say a loan approval can be given in less than 48 hours) and there are no personal credit requirements.  If you don’t need the money  “yesterday” (these type of lenders anticipate that you do) then one should seek assistance through a non-profit dedicated to helping business owners in all areas of business and finance, a SBA lender ( Small Business Administration ), or the assistance of a knowledgeable business attorney who can help you negotiate a far better loan agreement.

About the Author:  

 Since 1990, David Soble   has represented lenders, loan servicers, consumers and business owners on residential and commercial real estate, finance and contract issues. He has been involved in thousands of real estate transactions and has been responsible for billions in real estate loan portfolios throughout his career. 

By David Soble 15 Aug, 2017

According to business periodicals such as  Entrepreneur Magazine , Inc. and  Forbes , with the beginning of each year comes an increase in new business start-ups.  Perhaps this is because people are seeking an increase or alternative means of income,  job independence, or a more rewarding career. Whatever the reason, since the  Great Recession  of 2008, new business filings trend upwards this time each year.  

Regardless of the time of year,  new business owners tend to overlook 3 important considerations that expose them to financial risk and legal liability.  They are:   

1. Meet  Filing  Requirements.  Corporate filing and licensing is a mundane but necessary task.  Without proper paperwork, a business may not have “standing” to bring a suit in court because they are not recognized as a legal entity authorized to perform business.  Seeking to collect past monies owed or to enforce a contract?  “ Lack of standing ” is a valid defense to a lawsuit  On another note,  if you intend to conduct business in another state, you must also meet that state’s corporate filing requirements as well.

2.Create A Meaningful Operating Agreement.   Creating a business entity without an operating agreement falls short of good business planning. Failing to detail your own operating agreement generally means that in the event of a dispute or corporate governance problem,  less favorable ‘boiler -plate” language from a legal form “factory” or state statutory language could be substituted and control how your business relationships operate -contrary to your initial intent. This is especially true where multiple owners are involved as disputes will  invariably arise.  

If a business relationship falls apart (The  Small Business Administration  statistics state that one-third (⅓) of all new businesses close in the first 5 years) it’s best that business owners have predetermined  termination terms in their operating agreement, as opposed to having terms imposed upon them by statute or third parties such as an arbitrator.

3. Read and Understand  Contract  Terms .  Conducting business on a handshake, however sincere, is a thing of the past and impractical in today’s fast -paced global economy.  Business owners encounter contracts in all forms: service agreements, leases, loan agreements, guarantys,  joint ventures, co-marketing, purchase agreements and client agreements are to name but a few. Reading through just one of these documents can be daunting and time consuming.  Most “boiler -plate” contracts are drafted by attorneys and have extensive and onerous “default” provisions.  Don’t “ sign on the bottom line” until you have read your contract for meaning.  If you don’t understand how a contract provision affects you and your legal rights, then by all means consult with your own attorney–not a real estate or leasing agent,  not your cousin in law school, and certainly not ‘their’ attorney.  Consult with your  O-W-N  attorney.  And do it before, not after, you sign a legally binding document.

Never is the old adage, “an ounce of prevention is worth a pound of cure” more appropriate than in today’s business climate.  Experienced business and real estate attorneys regularly address countless variables experienced by businesses just like yours.  Many attorneys will provide new entrepreneurs with a free initial consultation and it’s a solid business decision to take such a meeting.

About the Author:  Since 1990, attorney  David Soble  has been responsible for billion of dollars in real estate and finance matters representing the interests and legal needs of both small business owners and consumers alike. David can be reached at 888-789-1715.

Disclaimer: You should not rely or act upon the contents of this article without seeking independent legal advice from a qualified attorney.

By David Soble 01 Aug, 2017


I just read about a tragic and avoidable event that happened last week. According to The Washington Post, a Manhattan couple jumped to their deaths from the ledge of their 9th floor apartment. The couple, a chiropractor and his wife, reportedly left a suicide note citing their ever increasing debts as the reason for their despair.  Apparently, they were good people; They were well liked by their friends and patients. They are survived by their two children. ( See The Washington Post, July 29, 2017 .) 

After reading this article, I was immediately taken back to the events of 2008 and the devastating financial wake of the Great Recession. Many businesses and lives were ruined - all because of debt.  I know. As the chief enforcer / attorney for several national lending institutions, I was in the thick of it.  I was responsible for the collection of billions in defaulted loans and my job was to vigorously pursue delinquent debtors and ‘cure’ non-performing loans.

Even in today’s economy there are still people who struggle financially for a number of reasons that include, but are not limited to, underemployment and stagnant wages.  Here are 5 things I wish to impart to those who are burdened with mounting debt and the ever-advancing debt collectors:  


1. Communicate. While it may not feel good,  keeping the lines of communication between creditor and debtor benefits both parties.  Believe it or not, banks and creditors want to work out payment arrangements as opposed to litigation.   Ignoring and avoiding creditors gives a creditor no alternative but to escalate a collection action. This increases debtor anxiety and reduces opportunities for a reasonable settlement.

2. Contact a professional early in the process.

For those who are uncomfortable with negotiations or confrontation,  contacting a professional about a debt issue may be the answer.  For small loan balances, reach out to a non-profit credit or debt counselor early in the process. Larger note obligations or guarantees require the attention of a seasoned professional.

I am frequently retained by clients only after they have already been “steam rolled” by their creditor. These clients thought they could “go it alone.”  I can tell you that cleaning up a legal and financial mess after the fact is far more challenging and expensive than when someone comes for legal advice at the onset of their problem.  (See my article, “Just What Is The Law of Holes?” at  http://bit.ly/prholes ).  Dealing directly with a creditor without proper representation is not the best approach and most often costs a debtor more money in the long term.

3. Don’t bring a knife to a gunfight.

The American Bar Association lists over 75 practice areas of law. Not all attorneys specialize in debt or loan law.  Speaking with the appropriate attorney can prevent costly mistakes. While at the banks,  there were many occasions  that I had the pleasure of sitting across the table from a debtor’s divorce attorney or personal injury attorney. It made my job easy and I welcomed them.  The old adage,   “don’t bring a knife to a gunfight” is never more true than in lending and finance law where debt agreements are usually complex and highly regulated.

4. Beware of  scam artists - they’re everywhere .

Avoid individuals and companies that aren't properly credentialed and that have not been rated by their industry peers.  In fact,  when it comes to consumer issues, almost all professionals working with the public require a state or federal license. Verifying an adviser’s competence and reputation should be a debtor’s top priority.  Today as  I sit to write this article,  The Washington Post features an article about how a California modification scam recently swindled thousands of homeowners out of their home equity, and many lost their homes because of it. Remember:  “Trust but verify.”

5. It really will be okay.   Sure it sounds simplistic and trite, but with the right professional guidance and some patience,  the sting of debt issues subsides over time. There are many ways to successfully approach serious debt issues without filing bankruptcy, such as seeking a court ordered installment payment plan, graduated settlement options, structured debt forgiveness,  and being declared ‘uncollectable.”   To learn more about these and other options one has to actively seek help. (According to a CreditCards.com poll, 85 percent of respondents said they were unlikely or somewhat unlikely to talk with a stranger about credit card debt -- a subject that is more taboo than religion, politics, salary and love life details.)  

Conclusion. Nothing is more professionally and personally gratifying than helping a business owner or individual through the darkness that is mounting installment or revolving debt. I have ushered thousands of people through their debt issues, without bankruptcy, and after they successfully enter into a negotiated settlement, the difference in their demeanor is truly night and day. Once debt problems are resolved, it is as if you can see the heavy financial burden lift off a client’s shoulders. I only wish the poor couple from Manhattan could have known this relief as well. R.I.P.

About the Author: Since 1990, Michigan attorney  David Soble  has represented lenders, loan servicers, consumers and business owners with legal matters related to finance and real estate.  He has been involved in thousands of real estate transactions and has successfully negotiated and saved millions for his clients.

Disclaimer: You should not rely or act upon the contents of this article without seeking advice from your own, qualified attorney.

 


By David Soble 30 Jun, 2017


 This week, the FBI and local law enforcement officials raided the business offices of realtor Ralph Roberts .  Roberts is the subject of an ongoing criminal investigation and several news probes.  In controversy is his alleged ‘misuse’ of the Michigan public administrator system. It’s supposed that Roberts finds properties of deceased homeowners, uses a public administrator to open an estate in probate court,  and then bills the estate for his sales commissions and other “services.”

 At first blush, I find Robert’s alleged sales practices ignoble, to say the least.   But until the authorities release more of their findings, I am not convinced that this contentious salesman has done anything illegal.  What this investigation does confirm however,  is that in the business of real estate, people are always looking for another ‘angle’ to make ‘big’ money, and every so often, they will knowingly cross the line to the detriment of unwitting homeowners.  

 Here 7  things you can do to protect your real estate from “charlatans’ and (frankly) from yourself: 

      1.    Say no to blank documents.  Never sign any blank documents. If you are unsure, make a large “X”on the blank page, and then sign beneath it.  Similarly always retain a copy of your signed contracts.

      2.   Know before you sign. In the real estate business, written contracts define relationships, obligations and one’s legal rights.   If you read a contract and don’t understand it, don’t sign it. Also, never rely on an explanation of “how things work” from the party who stands to benefit from your lack of knowledge.

     3.     “Fake” attorneys . Similar to the preceding paragraph, don’t accept legal advice from someone who is not a licensed attorney.  Accountants, doctors, real estate agents, mortgage brokers, or the county clerk are not attorneys and cannot dispense legal advice or draft legal documents.  In other words, ignore the outside chatter of your “mother’s friend’s sister’s son.” Odds are (1)  they aren’t an attorney, (2) their situation has a different set of facts and is not completely on point, and (3) they won't be there for you when @#$%@# hits the fan. 

     4.     Record your property interest. Always record your property deed with the county in which your property sits. Holding onto an unrecorded deed does little good to notify the world that you have ownership in a particular piece of real estate.  If you ‘snooze’ and don’t record your property interest, you can ‘lose’ your property rights. 

     5.     Save the D.I.Y. for Home Depot.  Drafting your own deeds or other legal documents without the proper language and legal guidance is a recipe for disaster.  Unwinding a real estate transaction (or any contract for that matter)  involving a person(s) that you have grown to hate, can be very expensive and emotionally draining. It only becomes worse when you find out that your D.I.Y. contract inadvertently gave another party more legal rights and protections than you gave yourself.    

     6.     Open your mail, @#$% - it.  Unless you’re a clairvoyant, open your mail.  Important legal notices that affect legal rights come in the mail. They aren’t often texted.  Legal processes have sensitive timelines.  Miss a legal deadline and it becomes almost impossible and very expensive to reinstate your rights.   People pay more attention to what they’re going to “binge watch” on Netflix than they do to their legal rights. Give your legal issue the proper attention it deserves so that later on you don’t have to devote all of your time, energy and money to cleaning up a legal mess.  

      7.  Consult with an attorney before “Google.” Our property laws are deeply rooted in centuries of legal history and case law. Lawyers devote years of their lives to their legal education and to their practice to perfect their craft.  One or two Google search results cannot adequately address a legal problem.  Consult with an attorney who specializes in your area of concern.

      Bonus Item.   In the real estate business, nothing of value is free. There is tremendous value in seeking “preventative” legal advice, but beyond that and above all else, when it comes to all of those “great” real estate deals that your friend or family member has turned you on to...remember this one axiom, ”nothing of value is free..”..repeat….”nothing of value is free”  ..”.nothing of value is free....”

 

       About the Author:   Since 1990, Michigan real estate and finance attorney David Soble has represented lenders, business owners and individuals in real estate, loan, and contract matters.  He has structured countless real estate transactions worth millions,  and has successfully saved millions of dollars for his business and consumer clients.

       Disclaimer: You should not rely or act upon the contents of this article without seeking advice from your own, qualified attorney.

 


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Anecdotes

By David Soble 15 Aug, 2017

The “ Great Recession ” in 2008 has had a lingering effect on how banks lend money to small business owners  and entrepreneurs.  Gone are the days when small businesses have  fast access to bank credit at competitive interest rates. Instead, alternative non-bank lenders, led by companies such as On Deck, Yellowstone, and Cash King, are filling the lending void, growing rapidly on the backs of unwary small business owners.

Here are 5 things small business owners should consider before taking out an “alternative” business loan:


1. Rates That Make Former Sub-Prime Mortgage  Lenders Blush.  High rate loans are the rule rather than the exception for alternative lending sources.  These lenders are not banks and therefore are not federally regulated, unlike companies that provide loans to consumers.   Instead these loans are often  funded by private investors selling credit at effective annual rates that commonly exceed 30%.

2.  Non -cancellable Daily ACH’s.  Since alternative business lenders don’t look at individual or business credit ratings, their risk of not getting paid back is high. They rely on a business’s cash flow only and expect to be paid daily rather than monthly, by using a non-cancellable automatic payment deduction (“ACH”) out of the borrower’s account. The lender can immediately call a loan in default should a business owner fail to replenish their designated account. This exposes the borrower to litigation and further expenses.  Borrowers should be confident that they can meet their daily, rather than monthly, obligations.

3. Arbitration.  Alternative loan contracts generally have expensive arbitration clauses where the debtor agrees to forgo the traditional legal process for a binding decision from designated arbitrators. Arbitration clauses are not favorable to borrowers. They often dictate where a legal case can be heard, usually in a creditor friendly state far removed from the borrower. This creates added expenses to a case even before it’s heard on the merits.   Arbitration decisions usually cannot be appealed (“ binding arbitration ”).  Finally, professional arbitrators have been criticized for having biases in favor of lenders since successful arbitrators make their living from work referred to them by the lending industry.

4. Consent Judgments.Many lenders have business borrowers essentially endorse a “consent judgment” before the the ink is even dry on the original lending agreement.  In a consent judgment, the borrower admits to a default and to the terms of a judgment against them, waiving any legal protections that they might otherwise have.    Lender’s will say that this instrument is harmless and only used in the event of an actual default.  It’s a disturbing trend because it sets the borrower up for failure and legally neutralizes them. (Imagine a hospital locating a corn beef stand next to the cardiac care unit or meeting a bank’s REO bank officer right after you close on the purchase of your home.)

5.  Personal Guarantees.While the business loan is given to the business in name, the small business owner often personally guarantees the payments in the event that their business fails. Personal  loan guarantees are an integral part of the lending agreement, so borrowers should think carefully before signing. Lenders will look to the former business owner to make payments long after a business closes it doors.

Alternative business loans appeal to business owners because the loan process is much  faster than traditional lending sources (some lenders say a loan approval can be given in less than 48 hours) and there are no personal credit requirements.  If you don’t need the money  “yesterday” (these type of lenders anticipate that you do) then one should seek assistance through a non-profit dedicated to helping business owners in all areas of business and finance, a SBA lender ( Small Business Administration ), or the assistance of a knowledgeable business attorney who can help you negotiate a far better loan agreement.

About the Author:  

 Since 1990, David Soble   has represented lenders, loan servicers, consumers and business owners on residential and commercial real estate, finance and contract issues. He has been involved in thousands of real estate transactions and has been responsible for billions in real estate loan portfolios throughout his career. 

By David Soble 15 Aug, 2017

According to business periodicals such as  Entrepreneur Magazine , Inc. and  Forbes , with the beginning of each year comes an increase in new business start-ups.  Perhaps this is because people are seeking an increase or alternative means of income,  job independence, or a more rewarding career. Whatever the reason, since the  Great Recession  of 2008, new business filings trend upwards this time each year.  

Regardless of the time of year,  new business owners tend to overlook 3 important considerations that expose them to financial risk and legal liability.  They are:   

1. Meet  Filing  Requirements.  Corporate filing and licensing is a mundane but necessary task.  Without proper paperwork, a business may not have “standing” to bring a suit in court because they are not recognized as a legal entity authorized to perform business.  Seeking to collect past monies owed or to enforce a contract?  “ Lack of standing ” is a valid defense to a lawsuit  On another note,  if you intend to conduct business in another state, you must also meet that state’s corporate filing requirements as well.

2.Create A Meaningful Operating Agreement.   Creating a business entity without an operating agreement falls short of good business planning. Failing to detail your own operating agreement generally means that in the event of a dispute or corporate governance problem,  less favorable ‘boiler -plate” language from a legal form “factory” or state statutory language could be substituted and control how your business relationships operate -contrary to your initial intent. This is especially true where multiple owners are involved as disputes will  invariably arise.  

If a business relationship falls apart (The  Small Business Administration  statistics state that one-third (⅓) of all new businesses close in the first 5 years) it’s best that business owners have predetermined  termination terms in their operating agreement, as opposed to having terms imposed upon them by statute or third parties such as an arbitrator.

3. Read and Understand  Contract  Terms .  Conducting business on a handshake, however sincere, is a thing of the past and impractical in today’s fast -paced global economy.  Business owners encounter contracts in all forms: service agreements, leases, loan agreements, guarantys,  joint ventures, co-marketing, purchase agreements and client agreements are to name but a few. Reading through just one of these documents can be daunting and time consuming.  Most “boiler -plate” contracts are drafted by attorneys and have extensive and onerous “default” provisions.  Don’t “ sign on the bottom line” until you have read your contract for meaning.  If you don’t understand how a contract provision affects you and your legal rights, then by all means consult with your own attorney–not a real estate or leasing agent,  not your cousin in law school, and certainly not ‘their’ attorney.  Consult with your  O-W-N  attorney.  And do it before, not after, you sign a legally binding document.

Never is the old adage, “an ounce of prevention is worth a pound of cure” more appropriate than in today’s business climate.  Experienced business and real estate attorneys regularly address countless variables experienced by businesses just like yours.  Many attorneys will provide new entrepreneurs with a free initial consultation and it’s a solid business decision to take such a meeting.

About the Author:  Since 1990, attorney  David Soble  has been responsible for billion of dollars in real estate and finance matters representing the interests and legal needs of both small business owners and consumers alike. David can be reached at 888-789-1715.

Disclaimer: You should not rely or act upon the contents of this article without seeking independent legal advice from a qualified attorney.

By David Soble 01 Aug, 2017


I just read about a tragic and avoidable event that happened last week. According to The Washington Post, a Manhattan couple jumped to their deaths from the ledge of their 9th floor apartment. The couple, a chiropractor and his wife, reportedly left a suicide note citing their ever increasing debts as the reason for their despair.  Apparently, they were good people; They were well liked by their friends and patients. They are survived by their two children. ( See The Washington Post, July 29, 2017 .) 

After reading this article, I was immediately taken back to the events of 2008 and the devastating financial wake of the Great Recession. Many businesses and lives were ruined - all because of debt.  I know. As the chief enforcer / attorney for several national lending institutions, I was in the thick of it.  I was responsible for the collection of billions in defaulted loans and my job was to vigorously pursue delinquent debtors and ‘cure’ non-performing loans.

Even in today’s economy there are still people who struggle financially for a number of reasons that include, but are not limited to, underemployment and stagnant wages.  Here are 5 things I wish to impart to those who are burdened with mounting debt and the ever-advancing debt collectors:  


1. Communicate. While it may not feel good,  keeping the lines of communication between creditor and debtor benefits both parties.  Believe it or not, banks and creditors want to work out payment arrangements as opposed to litigation.   Ignoring and avoiding creditors gives a creditor no alternative but to escalate a collection action. This increases debtor anxiety and reduces opportunities for a reasonable settlement.

2. Contact a professional early in the process.

For those who are uncomfortable with negotiations or confrontation,  contacting a professional about a debt issue may be the answer.  For small loan balances, reach out to a non-profit credit or debt counselor early in the process. Larger note obligations or guarantees require the attention of a seasoned professional.

I am frequently retained by clients only after they have already been “steam rolled” by their creditor. These clients thought they could “go it alone.”  I can tell you that cleaning up a legal and financial mess after the fact is far more challenging and expensive than when someone comes for legal advice at the onset of their problem.  (See my article, “Just What Is The Law of Holes?” at  http://bit.ly/prholes ).  Dealing directly with a creditor without proper representation is not the best approach and most often costs a debtor more money in the long term.

3. Don’t bring a knife to a gunfight.

The American Bar Association lists over 75 practice areas of law. Not all attorneys specialize in debt or loan law.  Speaking with the appropriate attorney can prevent costly mistakes. While at the banks,  there were many occasions  that I had the pleasure of sitting across the table from a debtor’s divorce attorney or personal injury attorney. It made my job easy and I welcomed them.  The old adage,   “don’t bring a knife to a gunfight” is never more true than in lending and finance law where debt agreements are usually complex and highly regulated.

4. Beware of  scam artists - they’re everywhere .

Avoid individuals and companies that aren't properly credentialed and that have not been rated by their industry peers.  In fact,  when it comes to consumer issues, almost all professionals working with the public require a state or federal license. Verifying an adviser’s competence and reputation should be a debtor’s top priority.  Today as  I sit to write this article,  The Washington Post features an article about how a California modification scam recently swindled thousands of homeowners out of their home equity, and many lost their homes because of it. Remember:  “Trust but verify.”

5. It really will be okay.   Sure it sounds simplistic and trite, but with the right professional guidance and some patience,  the sting of debt issues subsides over time. There are many ways to successfully approach serious debt issues without filing bankruptcy, such as seeking a court ordered installment payment plan, graduated settlement options, structured debt forgiveness,  and being declared ‘uncollectable.”   To learn more about these and other options one has to actively seek help. (According to a CreditCards.com poll, 85 percent of respondents said they were unlikely or somewhat unlikely to talk with a stranger about credit card debt -- a subject that is more taboo than religion, politics, salary and love life details.)  

Conclusion. Nothing is more professionally and personally gratifying than helping a business owner or individual through the darkness that is mounting installment or revolving debt. I have ushered thousands of people through their debt issues, without bankruptcy, and after they successfully enter into a negotiated settlement, the difference in their demeanor is truly night and day. Once debt problems are resolved, it is as if you can see the heavy financial burden lift off a client’s shoulders. I only wish the poor couple from Manhattan could have known this relief as well. R.I.P.

About the Author: Since 1990, Michigan attorney  David Soble  has represented lenders, loan servicers, consumers and business owners with legal matters related to finance and real estate.  He has been involved in thousands of real estate transactions and has successfully negotiated and saved millions for his clients.

Disclaimer: You should not rely or act upon the contents of this article without seeking advice from your own, qualified attorney.

 


By David Soble 30 Jun, 2017


 This week, the FBI and local law enforcement officials raided the business offices of realtor Ralph Roberts .  Roberts is the subject of an ongoing criminal investigation and several news probes.  In controversy is his alleged ‘misuse’ of the Michigan public administrator system. It’s supposed that Roberts finds properties of deceased homeowners, uses a public administrator to open an estate in probate court,  and then bills the estate for his sales commissions and other “services.”

 At first blush, I find Robert’s alleged sales practices ignoble, to say the least.   But until the authorities release more of their findings, I am not convinced that this contentious salesman has done anything illegal.  What this investigation does confirm however,  is that in the business of real estate, people are always looking for another ‘angle’ to make ‘big’ money, and every so often, they will knowingly cross the line to the detriment of unwitting homeowners.  

 Here 7  things you can do to protect your real estate from “charlatans’ and (frankly) from yourself: 

      1.    Say no to blank documents.  Never sign any blank documents. If you are unsure, make a large “X”on the blank page, and then sign beneath it.  Similarly always retain a copy of your signed contracts.

      2.   Know before you sign. In the real estate business, written contracts define relationships, obligations and one’s legal rights.   If you read a contract and don’t understand it, don’t sign it. Also, never rely on an explanation of “how things work” from the party who stands to benefit from your lack of knowledge.

     3.     “Fake” attorneys . Similar to the preceding paragraph, don’t accept legal advice from someone who is not a licensed attorney.  Accountants, doctors, real estate agents, mortgage brokers, or the county clerk are not attorneys and cannot dispense legal advice or draft legal documents.  In other words, ignore the outside chatter of your “mother’s friend’s sister’s son.” Odds are (1)  they aren’t an attorney, (2) their situation has a different set of facts and is not completely on point, and (3) they won't be there for you when @#$%@# hits the fan. 

     4.     Record your property interest. Always record your property deed with the county in which your property sits. Holding onto an unrecorded deed does little good to notify the world that you have ownership in a particular piece of real estate.  If you ‘snooze’ and don’t record your property interest, you can ‘lose’ your property rights. 

     5.     Save the D.I.Y. for Home Depot.  Drafting your own deeds or other legal documents without the proper language and legal guidance is a recipe for disaster.  Unwinding a real estate transaction (or any contract for that matter)  involving a person(s) that you have grown to hate, can be very expensive and emotionally draining. It only becomes worse when you find out that your D.I.Y. contract inadvertently gave another party more legal rights and protections than you gave yourself.    

     6.     Open your mail, @#$% - it.  Unless you’re a clairvoyant, open your mail.  Important legal notices that affect legal rights come in the mail. They aren’t often texted.  Legal processes have sensitive timelines.  Miss a legal deadline and it becomes almost impossible and very expensive to reinstate your rights.   People pay more attention to what they’re going to “binge watch” on Netflix than they do to their legal rights. Give your legal issue the proper attention it deserves so that later on you don’t have to devote all of your time, energy and money to cleaning up a legal mess.  

      7.  Consult with an attorney before “Google.” Our property laws are deeply rooted in centuries of legal history and case law. Lawyers devote years of their lives to their legal education and to their practice to perfect their craft.  One or two Google search results cannot adequately address a legal problem.  Consult with an attorney who specializes in your area of concern.

      Bonus Item.   In the real estate business, nothing of value is free. There is tremendous value in seeking “preventative” legal advice, but beyond that and above all else, when it comes to all of those “great” real estate deals that your friend or family member has turned you on to...remember this one axiom, ”nothing of value is free..”..repeat….”nothing of value is free”  ..”.nothing of value is free....”

 

       About the Author:   Since 1990, Michigan real estate and finance attorney David Soble has represented lenders, business owners and individuals in real estate, loan, and contract matters.  He has structured countless real estate transactions worth millions,  and has successfully saved millions of dollars for his business and consumer clients.

       Disclaimer: You should not rely or act upon the contents of this article without seeking advice from your own, qualified attorney.

 


By David Soble 14 Jun, 2017

HOW TO LOSE $1,729,631

Over the last two months, several clients  ( prior to hiring me)  lost a combined total of  $1,729,631 because  (for whatever their reason), they failed to file  their real estate documents publicly with the county recorder.  Their   property rights   as evidenced by various deeds, trusts, assignments, land contracts, mortgages, and liens,  simply went unnoticed.  Most of the properties were lost to the taxing authorities or through foreclosure, because the clients were never notified of a property auction.   Other properties were sold or mortgaged to third parties who had no idea that my clients also had prior property claims.  Whatever the cause,  $1.7 million is an alarming figure when the solution against such loss is so easy.

MULTIPLE TRANSFERS

Nationwide, state property laws encourage, but do not require, anyone with property interests to record them in their county recording office.   Recording   real estate transfer documents protect against situations where the same property interest is transferred multiple times, (ie. seller grants a mortgage for the same property to two different lenders).  State laws all but determine which party’s interest prevails based upon when a deed, a mortgage or other documented interest is filed with the recording office.  The laws predominantly favor those who properly record their property interests over those who don’t.  

NOTICE TO THE WORLD

Recording real estate documents into a property’s ‘ chain of title ’  provides “notice to the world” (known as “constructive notice”) of one’s property interest.  By not appearing in the title chain,  interested parties will   not receive legal notices concerning the property, such as tax notices or lien filings.  More importantly, in almost all instances, good faith purchasers, lenders and other lien holders who are unaware of prior outstanding, but unrecorded property interests, have superior claims when challenged by property owners who failed to record their property interest.  

WHO AND WHAT SHOULD BE   FILED

The list is not exhaustive, but generally all real estate deeds need to be filed. Where land contracts are concerned, it is important that the buyer have a Memorandum of   Land Contract recorded.  Too often is the case where a seller has sold a property out from underneath a land contract buyer, all because no evidence of the sale was ever recorded with the county.  Most title or closing agents will file real estate transfer documents as part of their business for a small fee.   Lastly, mechanic liens, judgment liens or claim of liens against a property need to be recorded in a timely manner to be effective.  If you are unsure about filing requirements, contact a real estate attorney.  

CONCLUSION: SHOW UP!

Remember, in order to protect your property interests against title claims or loss, it’s important that your real estate documents show up  in the public  records 100% of the time.

About the Author:  Since 1990, attorney   David Soble   has represented lenders, loan servicers, consumers and business owners in real estate, finance and compliance matters. For over 25 years, he has been involved in thousands of real estate transactions and has successfully negotiated and saved millions for his business and consumer clients.

Disclaimer: You should not rely or act upon the contents of this article without seeking advice from your own, qualified attorney.

By David Soble 14 Jun, 2017

With the steady influx of property investors seeking to stake their claim in the phoenix that is  Detroit , comes various investment property management challenges.   Listed here are 5 common problems that new real estate entrepreneurs face when moving to sever the property rights  of a delinquent property owner or tenant:  

1. The Tenant /  Occupant  Won’t Leave.  Avoid ‘self- help.’   Landlord  ‘self-help’ for locking out an occupant is, with rare exception, illegal and has serious financial and legal consequences. The same is true for investors who seek to extinguish a mortgage or  land contract .  An eviction action is required when the former homeowner or perhaps event their tenant, remains in the property after the foreclosure redemption expires. The mere fact that the redemption period has expired does NOT give the lender rights to enter the property.  Shutting off utilities or changing door locks is considered ‘self help” and can expose an investor to liability in actions of trespass, property damage, and even emotional distress.    

Solution:  Legally sever the possessory interest  by filing an action for eviction and secure a judgement and writ for eviction. I know of  several cases where an investor is ready to close on the sale of their property, only to be sued by a former owner or tenant whose legal interest in the property had not been properly extinguished.

2.The Former  Property Owner  or Occupant Files  Bankruptcy .   Equally as serious as landlord ‘self help’ is when a creditor violates an automatic stay after the tenant or homeowner files bankruptcy.   An automatic stay halts all collection activities and this includes eviction and foreclosure actions.  The ‘stay’ has to be lifted by a federal court order. Creditors, such as landlords and mortgagees, who knowingly violate a bankruptcy stay face severe fines, sanctions, and attorney fees. They may even have to pay damages.  

 Solution:  Once notified of an occupant’s bankruptcy, stop any and all collection efforts until you have a signed order “lifting the stay”. When in doubt, consult with legal counsel.

3. Failing to Understand Choices of Rights and  Remedies.   Investors, particularly those who purchase out of state properties,  should know what type of property interest they hold and the legal rights that the interest affords.  In Michigan,  mortgage holders do not have a fee simple interest in a property, only a lien interest. So when a former property owner abandons the collateral, an investor cannot legally sell the home until they foreclose out the homeowner’s interest or unless they obtain a Deed in Lieu of foreclosure.

More importantly, investors need to know which legal process to use in order to accomplish a specific goal.  For instance, in a land contract matter, a judicial sale can be used to preserve a deficiency for a vendee’s default, whereas a land contract forfeiture gives the land contract vendor possession only.

Solution:  Investors should consult with a real estate attorney licensed in the  state where they plan to invest and clarify their legal rights before they engage in purchasing investment properties or pursuing legal action.    

4. Property Tax   Foreclosure .   It is not uncommon for investors to run up against property tax foreclosure deadlines as delinquent taxes are an inherent part of purchasing distressed properties.  Until proper due diligence is performed, it makes little economic sense to initiate any legal actions  for foreclosure, eviction or forfeiture, if the property would only be lost to tax sale before an investor’s legal action is completed.  

 Solution: Perform a title search and make arrangements to pay the taxes before initiating legal action.

 5. Deeds in Lieu of Foreclosure .   A Deed in Lieu of Foreclosure (“DIL”) is a deed executed by the homeowner that satisfies a loan in default in exchange for the mortgage holder to forgo the foreclosure process.   However, taking a DIL without performing a title search or without drafting the proper supporting documents is rife with problems.

First, a DIL is similar to quitclaim deed in that the mortgagee takes title to the property with all liens, encumbrances and assessments that the former property owner  incurred on the property.  Sometimes the amount of liens are so excessive that it makes more sense for the investor to foreclose on the property and pursue a deficiency action against the former property owner.  

Second,, specific legal provisions are required in the DIL documents, without which,  an investor can experience difficulties foreclosing out subordinate lien interests or in obtaining title insurance for a later sale of the property.  

Solution: Perform a title search and if you plan to take a DIL, don’t do so without having a qualified attorney first prepare DIL documents.

6. Boilerplate or Self -Generated Documents.    There is an old adage that ‘ a contract is valid until someone legally challenges it.’  Property investors are often surprised to learn that their self- prepared documents may actually violate federal or state laws. Unfortunately they only discover this at court placing their own legal interests  in jeopardy. Indiscriminately using online or “boilerplate” forms to  prepare a land contract, private mortgage, or lease back can be legally hazardous.   For instance, selling back a property to a former homeowner raises federal compliance issues under RESPA (Real Estate Settlement Procedures Act) and leasing back a property to a former homeowner creates a landlord / tenant relationship that ironically requires the investor to obtain a certificate of occupancy and make city required repairs on the former homeowner’s home.

Solution: Rely on an experienced real estate lawyer to review and draft the state- specific contracts that will be used in property transactions.  It will reduce future legal headaches, losses, and uncertainties.    

Conclusion:  Don’t be the ‘Test Case.”  When in doubt of how to legally proceed with severing a former property owner’s rights, it is best for the new real estate investor to seek out an experienced real estate lawyer.  

 

About the Author: Since 1990, attorney David Soble has represented lenders, loan servicers, consumers and business owners in real estate, finance and business matters. He has been involved in thousands of real estate transactions and has successfully negotiated and saved millions for his business and consumer clients alike.

Disclaimer: You should not rely or act upon the contents of this article without seeking advice from your own, qualified attorney.

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