Generally. In its most basic sense, the OREF Sale Agreement is an offer to purchase property; it describes the price and terms of sale, the contingencies, the closing process, and the closing date.  Once signed by seller and buyer, the document is delivered to escrow and, in most cases, the earnest money is deposited in trust at the title insurance company.

The purpose of this article is not to discuss the different provisions in the Sale Agreement, but when it becomes “binding”. This is important because after it becomes binding three things occur: Continue reading “Oregon Contract Law: Offers, Counteroffers, And Their Withdrawal”

On January 18/22, the Treasury Department and the Internal Revenue Service issued their final regulations regarding the new 20 percent deduction on qualified business income created by the 2017 Tax Cuts and Jobs Act. Until the regs were finally published, there had been uncertainty about the interpretation of some provisions.

26 U.S. Code § 199A now permits owners of sole proprietorships, S corporations, or partnerships to deduct up to 20% of their earned business income. The purpose of the provision was to allow small businesses to keep pace with the tax cuts offered to corporations under the Act. Continue reading “Real Estate Professionals and the Qualified Business Income Rule”

Summary of Mediation & Arbitration under Sections 37-38.3 of the OREF Residential Real Estate Sale Agreement.

The 2019 OREF forms revisions did not make any major changes[1] to the alternative dispute resolution (“ADR”) provisions of Sections 37-38.3.

But before addressing the arbitration process, it is critically important for brokers and their clients to understand that mediation is an essential first requirement in the ADR process under the OREF Sale Agreement. Accordingly, I will address that process first, since the vast majority[2] of disputes are resolved at this stage. Continue reading “Oregon Real Estate Disputes – Litigation vs. Mediation & Arbitration (Part II)”

“Which is best? Which is fastest? Which is fairest? Which is the least expensive?” These, and many more questions have been asked over the years regarding the best method of resolving disputes. And oftentimes, the answer depends upon those you ask. So, let’s break the issue down to bite-size bits:

Defining the Terms.[1]  The term “litigation” generally denotes “court”. In its most basic format, there is a “plaintiff” (who is generally seeking a remedy either in damages, or  performance, or some other form of relief) and a “defendant” (who is resisting, or defending against the legal action). Continue reading “Oregon Real Estate Disputes – Litigation vs. Mediation & Arbitration (Part I)”

In its simplest form, an easement is a “right of use”.  The legal definition in ORS 105.170 is a bit more arcane:

Easement means a nonpossessory interest in the land of another which entitles the holders of an interest in the easement to a private right of way, embodying the right to pass across another’s land.

Holders of an interest in an easement means those with a legal right to use the easement, including the owner of the land across which the easement passes if the owner of the land has the legal right to use the easement.

Continue reading “QUERIN LAW: Statutory Easements Rights In Oregon”

The “procuring cause” rule is simple in theory, but complicated in application. It is used to determine a buyer broker’s entitlement to the “offer of compensation” (i.e. a percentage share of the commission offered by the listing broker on the multiple listing service). All Realtors® must publish an “offer of compensation” in their listings, so that other members are informed, up-front, how much they will received, should they produce a ready, willing and able buyer, who closes the transaction. Continue reading “QUERIN LAW: Realtor Commission Disputes and Procuring Cause Issues”

[Jack M.Guttentag is Professor of Finance Emeritus at the Wharton School of the University of Pennsylvania and author of The Mortgage Encyclopedia. Throughout his career, Professor Guttentag has been concerned with the difficulties faced by consumers in the home loan market.]

Question: What do home mortgage loans including second mortgage loans, retail installment loans, automobile loans, home improvement loans, and mobile home loans have in common – aside from being loans to consumers? 

Answer: The interest charge sometimes is calculated monthly and sometimes daily. With a monthly interest rate (MIR), the borrower is charged for each month whereas with a daily interest rate (DIR) the borrower is charged for each day.

Why is this distinction important? Because DIRs are a potential trap for unwary borrowers, countless numbers of whom have found themselves permanently indebted, usually with no understanding of how it happened. The problem has been entirely overlooked by regulators, including the Consumer Financial Protection Bureau.

An Example:

Consider a 30-year loan for $100,000 with a rate of 6%. The monthly payment for both a MIR and a DIR would be $599.56, part of which pays the monthly interest charge, with the remainder allocated to principal. To calculate the interest charge on an MIR, the annual interest rate is divided by 12, then multiplied by the balance at the end of the preceding month to obtain the interest due for the month. If the loan balance on the 6% MIR is $100,000, the interest due for the month is .06/12×100, 000 = $500. The principal is 599.56 – 500 = 99.56.

With a DIR of the same amount and same annual rate, the daily interest is .06/365×100,000 = $16.44. The interest due for the month is 16.44×30 = $493.3 or 16.44×31 = $509.64, resulting in principal of 106.56 or 89.92, depending on whether the month has 30 or 31 days. [MORE: Go to link here.]

See: ORS 314.258 and Oregon Administrative Rule 150-314-258.

Escrow companies are required to withhold a portion of a non-resident seller’s net proceeds from the sale of Oregon real property for transmittal to the Oregon Department of Revenue.

As a result, at the time of closing, all sellers of Oregon property are asked to provide escrow with one of the following: (a) proof of residency in Oregon; (b) a completed Department of Revenue Form in which the seller certifies that they are exempt from Oregon’s withholding law; or (c) other written assurance of Oregon residency.

If a seller is unable to establish that they live in Oregon full time, or they are not otherwise exempted, escrow is required to withhold the tax due. It is calculated based upon the least of the following three amounts: (a) 4 % of the sales price; (b) 8 % of the gain from the sale; or (c) the net proceeds distributed to the seller.

Escrow is not required to withhold for: (a) Sellers who are Oregon residents, or C corporations doing business in Oregon after the property sale; or (b) Pass-through entities such as certain partnerships, S-corporations, limited liability companies with more than one owner, limited liability partnerships, or certain trusts and estates. The statute contains several exemptions. ~Phil

[Jack M.Guttentag is Professor of Finance Emeritus at the Wharton School of the University of Pennsylvania and author of The Mortgage Encyclopedia. Throughout his career, Professor Guttentag has been concerned with the difficulties faced by consumers in the home loan market.]

The homeownership rate has been increasing recently following more than 10 years of decline.  According to the US Census, the rate peaked in the first quarter of 2005 at 69.1%, then declined to a low of 62.9% in the second quarter of 2016. It has been creeping up since then, reaching 64.2% in the first quarter of this year.

This may or may not be a good thing, depending on how many of the new owners are NOHOs – my term for people who should not be homeowners.

Defining a NOHO

The distinguishing feature of NOHOS that makes them poor homeowners is not their income, family structure, mobility, ethnicity, or where they live – rather, it is how they live. Where successful homeowners live with at least one foot in the future, and have learned how to delay some gratifications for future rewards, NOHOs live from day to day — or week to week, or month to month, depending on how often they are paid. Whatever they want, furthermore, they want it now. Typically, they have nothing left at the end of their pay period, and if they run out early, they have to scrimp or borrow, usually at high interest rates. [MORE: Go to Mortgaqe Professor link here.]

 

A few years ago, before the real estate market got crazy hot (and before we changed the OREF Sale Agreement form), it wa not unusual for a buyer to submit their preapproval letter to their seller, go under contract, and then try to find other lenders who might offer better rates or terms.

But in 2013, TRID[1] was enacted as a part of the government’s response to the 2007/8 Financial Crisis; Dodd Frank, the massive 2010 2,300 page rewrite of financial regulations (containing another 22,000 pages of administrative rules) was created, and the Consumer Finance Protection Agency, or “CFPB”, became its most prominent offspring. Continue reading “Why Oregon Homebuyers Should Shop Their Loans Before Going Under Contract”