My Story: Nicholas Strom

My Story: Nicholas Strom

Get to know a little more about Fowler St. Clair attorney Nicholas Strom. He focuses on real estate, title issues, and civil litigation. 

The Early Years

I grew up in South Bend, Indiana, and was blessed with two loving parents and three younger siblings. 

Despite coming from modest means, my parents were able to put me through Catholic schools. I am grateful for the impact my Catholic education had on my life, both personally and professionally. 

College, Law School, and Chicago

I graduated from the University of Notre Dame (Go Irish!) and then attended law school at Valparaiso University in Northwest Indiana after receiving a full-tuition scholarship and living stipend. 

Law school was a good next step given my love to read, enjoyment of debate and because I graduated with a history degree and job prospects for historians is somewhat limited. 

Like many others, I met my wife during college, although the meeting was unorthodox. 

While in college, I worked as a handyman for the Brothers of Holy Cross at Notre Dame. While there, I met and befriended Jeff Heinz, a Chicago fireman who was earning his Master’s Degree in Theology at the university.

I thought he was studying to be a priest.

One day while we were eating lunch, he pulled a picture of a beautiful girl out of his pocket and asked what I thought.

I immediately realized this was his daughter, and knew I had to play my cards right. This was her dad after all.

One of the Holy Cross brothers took pity on me and managed to introduce me to Alison soon after that, and the rest is history. Five years later, we were married in 2012 and moved to Chicago to start a whole new chapter together.

A chapter neither of us could have anticipated.

Quadruplets and Our Move to Arizona

NIcholas Strom and Allison with Quadruplets 2021

In 2016, Alison became pregnant with quadruplets. This came as a shock. Of course, we were exuberant and overjoyed. Friends dubbed me the “Quadfather,” and Alison and I could not have been happier. However, there were also fears that came with a high order multiple pregnancy. 

Soon after Alison became pregnant, we realized that high order multiple pregnancies are high risk for the mother and the unborn children. After research, Alison learned that the world’s leading high order multiple expert Dr. John Elliot was in Phoenix. 

Taking no chances, Alison and her dad relocated to Phoenix starting in October 2016 to work with Dr. Elliot, while I commuted back and forth from Chicago. 

Our children were born in 2016 at St. Joseph’s in Phoenix. Our children were Dr. Elliot’s 108th set of quadruplets the same year the Cubs won the World Series after a 108-year drought! 

Alison and I fell in love with the Phoenix area and wanted to raise our children near our Arizona relatives. 

In 2020, we moved to the Valley and believe we made the best decision possible about where to raise our family. 

My Focus at Fowler St. Clair

My current practice focuses on real estate, title issues, and civil litigation. 

I find great satisfaction in helping clients resolve issues quickly and economically. 

My parents were mom and pop real estate investors while I was growing up so I was able to see firsthand all the issues, and related stresses (financial and otherwise) that arise in real estate and litigation. 

These childhood experiences impacted me and I am always cognizant of the burdens my clients face. 

My representation focuses on being a trusted advisor that can walk my clients through what is too often a Byzantine labyrinth of complex law. 

Outside of work, I chase my quadruplets!

Real Estate Wholesaling in Arizona? New Regulations for Investors—HB 2747

Real Estate Wholesaling in Arizona? New Regulations for Investors—HB 2747

If you’re a real estate investor or involved in real estate wholesaling in Arizona you’ll want to be informed about new legislation soon to be enacted.

What is HB 2747 (Wholesale real estate buyers; disclosure)?  

House Bill 2747 (“HB 2747”) is a bi-partisan bill in the Arizona Legislature that will likely be signed into law by the Governor.  HB 2747 places disclosure requirements on buyers who enter into residential purchase agreements/contracts in the real estate market and then assign the contracts (i.e., “wholesalers”).  

What property is subject to HB 2747’s disclosure requirements? 

The disclosure requirements found in HB 2747 will apply to “residential real property,” which is defined as “real property with fewer than five (5) dwelling units.”  This means that any residential property up to a four-plex will fall within the law’s requirements.  

Residential vs Commerical Property

An apartment complex with five (5) or more units will not be subject to the law.  And it appears commercial property will not be subject to the law.  However, a strict reading of the definition of “residential real property” could lead to a different conclusion.  

Commercial Property

Technically, commercial property is “real property with fewer than five dwelling units” as commercial property contains no dwelling units.  This strict reading will likely not control as HB 2747 uses the term “residential” so any reasonable interpretation will exclude commercial property.  

Vacant Land

The same cannot be said of vacant land that is zoned for residential use.  Vacant land is normally treated differently than real property containing an actual residential structure.  The sale of vacant land generally requires a different contract, disclosures, and due diligence.  In practice, it is not considered residential property.  It is considered vacant land. 

Unfortunately, the simple and vague definition of “residential real property” found in HB 2747 appears to encompass vacant land that is zoned for residential use as it would be residential real property with less than five dwelling units.

Who is subject to HB 2747’s disclosure requirements?  

HB 2747 applies to a “Wholesale Buyer” and “Wholesale Seller.”  

Wholesale Buyer vs Wholesale Seller

A “Wholesale Buyer” is defined as “a person or entity that enters into a purchase contract for residential real property as the buyer and assigns that same contract to another person or entity.”  

A “Wholesale Seller” is defined as “a person or entity that enters into a purchase contract for residential real property as the seller that does not hold legal title to that real property and that assigns that same contract to another person or entity.”  

Basically, the “Wholesale Buyer” and “Wholesale Seller” are the same.  The term “Wholesale Seller” and its definition is confusing and vague.  Essentially, the “Wholesale Seller” is the assignor of a residential purchase contract.  

In a true wholesale transaction (as opposed to a double escrow), a “Wholesale Buyer” never enters into a “purchase contract for residential real property as the seller.”  Instead, an assignment is executed with the “Wholesale Buyer” as the assignor.  This is a completely different document than a purchase contract.  Now, in a double escrow transaction, the buyer under the original contract will enter into a purchase contract for the same property as the seller with a third-party buyer.  

Change of Sides in a Transaction

However, the buyer who is now the seller under the purchase contract with a third-party buyer for the purpose of a double escrow will likely never then assign that same contract to another person or entity.  

Basically, a strict reading of the definition of “Wholesale Seller” does not require any disclosures from an assignor of a residential real estate contract as such person or entity is “not entering into a purchase contract for residential real property as the seller” nor would it require disclosures from a  buyer who is attempting a double escrow as such buyer (who is now the seller under the second contract) will not be assigning the purchase contract with the third-party buyer.  

Weakness of Language

While the language for “Wholesale Seller” is not well crafted and clearly written by someone who has no actual knowledge of how real estate wholesale transactions work, I recommend that the disclosures required by HB 2747 be followed by an assignor of a residential real estate contract or a buyer who is entering into a purchase contract with a third-party buyer for the purpose of a double escrow.  

I do not believe the requirements of HB 2747 apply to novations as the seller and buyer are entering into a direct contract that simply replaces the original contract.  There is no assignment of the original contract and no contract between the original buyer and the third-party or end buyer.  

What are HB 2747’s disclosure requirements?  

A “Wholesale Buyer” must “disclose in writing to the seller that the buyer is a wholesale buyer.”  This honestly is not much of a requirement and will not require any significant change to the purchase contract.  

Most wholesale purchase contracts contain an assignment clause that allows the buyer to assign the contract.  As such, the only revision will be to add the statement “Buyer is a Wholesale Buyer” at the beginning of the assignment clause.  

A sample assignment clause with the disclosure may read “Buyer is a Wholesale Buyer and may assign this Contract or any of its rights hereunder to any person, partnership, corporation or other entity without notice to Seller or Seller’s consent.”  

Disclosure Requirement

A “Wholesale Seller” must “disclose in writing to the buyer that the seller is a wholesale seller that holds an equitable interest in the real property and that the wholesale seller may not be able to convey title to the property.”  

The assignment of a real estate purchase contract in and of itself is likely a disclosure of this nature.  However, when a statute prescribes specific disclosure language, I recommend that the actual language as shown in the statute be used.  

Inserting this language in the assignment should not be problematic as the assignee is generally aware of the fact that the assignor does not hold legal title to the property.  Inserting this language in a purchase contract with a third-party buyer for a double escrow may be a little more problematic.  

End buyers in a double escrow transaction tend to be less experienced with these types of transactions and may be concerned with the insertion of the disclosure language in the contract.  To ease these concerns, HB 2747’s disclosure language could be followed by a statement explaining why the seller may not be able to convey title (i.e., because it is contingent upon the current owner conveying free and clear title to the seller, etc.).    

What are the consequences of a violation of HB 2747?  

If a “Wholesale Buyer” fails to make the disclosures required by HB 2747, “the seller may cancel the contract for sale at any time prior to the close of escrow without penalty and may retain any earnest money paid by the Wholesale Buyer.”  

Essentially, the seller may cancel the purchase contract and retain the earnest money.  The language “at any time prior to the close of escrow” is important.  If the transaction closes with a contract that does not have HB 2747’s disclosure language, the seller cannot later come back and set aside such a transaction.  

Basically, “no harm no foul” if a transaction closes without HB 2747’s disclosure language.  

If a “Wholesale Seller” fails to make the disclosures required by HB 2747, “the buyer may cancel the contract for sale at any time prior to the close of escrow without penalty and shall be refunded all earnest money paid by the buyer.”  

This allows the assignee or end buyer to terminate the assignment (or purchase contract in a double escrow) and receive a return of the earnest money even if it is designated as non-refundable.  Similar to the failure of a Wholesale Buyer to make the requisite disclosures, there is “no harm no foul” if a Wholesale Seller fails to make the HB 2747 disclosures to an assignee or end buyer and the transaction closes.  

Presently, HB 2747 does not contain any fines, penalties, or civil liability for its violation.  The only consequence is the cancellation of the transaction prior to closing and loss of the Wholesale Buyer’s earnest money or the refund of the earnest money to an assignee or end buyer.

Is HB 2747 now a law?  

No.  It will only become law when signed by the Governor.  As it is a bi-partisan bill, it will likely be signed.  Even though HB 2747 is not presently the law, it is recommended that wholesale real estate investors/wholesalers begin the process of updating their contract documents so as to comply with HB 2747 so that they are in a position to comply if and when HB 2747 becomes the wholesale real estate law so as to avoid a disruption in their business and affect their real estate license.   

I will continue to monitor the status of HB 2747 and will provide an update as to if and when it becomes law or will become effective. 

DISCLAIMER: This is for informational purposes only.  It is not legal advice and does not create an attorney-client relationship.  None of the information contained herein should be acted upon without seeking specific legal advice.  Anyone receiving and reviewing this information should seek specific legal advice from an attorney regarding their specific situation.

3 Real Estate Legal Issues Facing Brokers

3 Real Estate Legal Issues Facing Brokers

Sean St Clair presents three common Real Estate legal issues in transactions that can be overcome with proper training.

1. Fiduciary Duty
2. Springing Power of Attorney
3. Heirs and Probate

Video 1: Dealing with Real Estate Agency Law and Fiduciary Duty

When we deal with agency, we are looking at the Commissioner’s Standards and the first thing that we have to look at is A.A.C. R4-28-1101, and this deals with two things.  

  1. This deals with the fiduciary duty that you owe to your client.  If you are the listing agency, your client would be anyone that owns the property or has an interest in the property. 

  2. If you are representing a buyer, then your client would be the person or entity that is going to purchase the property.  

While you owe a fiduciary duty to your client, you also owe a duty to treat all parties to the transaction fairly.


Video 2: Agency Law: Use of Power of Attorney

Another real estate legal issue deals with the use of a power of attorney.

Is that a valid power of attorney being used to purchase the property in the name of the principal?  

You have an agent that is showing up and saying, “I have this power of attorney.  It allows me to act on behalf of this person, and I can buy this property in their name.” 

We need to know if this is a valid power of attorney.  

There are two types of powers of attorney.  

  1. Immediate Power:  Immediate Power of Attorney is when the power given to the agent is vested at the time that the power of attorney document is signed.

  2. Springing Power: Springing power occurs when the principal is deemed to be incompetent, 

The Dangers of Springing Power With a Real Estate Transaction

With the springing power you may have a situation where the agent thinks that they have the right because Mom or Dad is incompetent or has a disability or something. 

But in order for that power to spring forward you normally need some form of doctor’s note or analysis or opinion in which to invoke that power.  

Is a title company likely going to close if you have a springing power but no doctor’s note?  No. 

Now you have a buyer that may be unable to perform in the transaction.  

Spring Power of Attorney with a Trust in a Real Estate Transaction

Same with a trust.  You may have multiple trustees, successor trustees and those powers arise under certain circumstances. 

So we need to know if this trustee is purchasing the property in the name of this trust. 

Are they able to purchase it or is there something more that we need to allow them to do so.


Video 3: Real Estate Law: The Advantages of Probate

Probate is another common real estate legal issue. Following are a few of the advantages of probate.


Heirs do not have to go on title.  

When I read the Estate of Brooks case, it was almost like a lightbulb went on when I thought about it.  

I realized even though there are processes potentially that are faster and cheaper than a probate:

  • A beneficiary Deed
  • An Affidavit of Succession to Real Property

These two items may not always be the best mechanism for the parties involved.  You can learn more about Affidavits of Succession and Beneficiary Deeds on this blog and video.

Disadvantages

If all you are wanting to do is liquidate the real estate and sell it, and you have no intention of putting it in your name and using it, utilizing it, or renting it you may want other options. 

Whatever the case is, a beneficiary deed or an affidavit of succession is not the way to go from an heir’s standpoint.  

This is because you are putting them on title to the property and now they are the party that is selling the property with all of the liabilities associated with not only selling it, but owning the property.  

Solution 1: Informal Probate Reduces Personal Liability

It could be worth paying more and waiting a couple of weeks longer, to do an informal probate. This way the personal representative can sell the property in their capacity as personal representative.  

The only liability is that of the estate and no one else.  

Solution 2: Probate Eliminates Creditor Claims

The other advantage of probate is it can eliminate creditor claims through notice.  

You have the opportunity to provide notice of probate. Perhaps there are creditors that exist, but what happens if you provide them notice and they don’t respond?  They don’t make a claim. 

In that case, you can eliminate that debt and you don’t have to satisfy it.

My Story: Sean St Clair

My Story: Sean St Clair

Get to know a little more about Sean St. Clair.

Sean is a founder and co-managing partner of Fowler St. Clair.

Growing Up

I grew up in Downey, California, a working-class suburb of Los Angeles. I always wanted to work in a position helping people, but never wanted to be an attorney. 

I was going to be the first in my family to graduate from college, which seemed like a major accomplishment and the thought of an additional three years for law school was overwhelming. 

College, Internship and Bank Robbery

I enjoyed government and politics, so I decided to major in political science with a public affairs emphasis. My goal was to work in local government. In my senior year of college, I became the first-ever paid intern with the Orange County Housing Authority. I enjoyed my time at the housing authority, but I started to realize that dealing with the red tape of government may not be for me.

I also worked part-time as a bank teller during college and had discussions with my branch manager about entering the management program upon graduation. After being in a take over bank robbery, I decided working in a bank may also not be the best (or safest) career option.   

The Path to Law School Thru Las Vegas

Majoring in political science meant that many of my classmates were preparing to attend law school. They were always talking about their scores on the Law School Admission Test (the “LSAT”). Those closest to me know that I am highly competitive. Learning of my classmate’s scores, I decided to take a practice LSAT to find out first-hand just how good their scores were. 

The LSAT takes about 3 hours so I needed to find a quiet location with no distractions for that length of time. Some people may have chosen the library or even their bedroom, but I chose a hotel room in Las Vegas. While my friends were out having fun, I decided to lock myself in the hotel room for 3 hours to take the practice LSAT.

I scored fairly well on the practice test. Based upon that score, I realized I would be accepted to some decent law schools. And, my options would significantly increase if I was able to improve my score by taking a prep course. It was at this point that law school seemed like a possibility. 

I took the prep course, improved my score, and ended up in law school at Arizona State University.

Working After Law School

Upon graduating from law school, I worked as a law clerk for the Honorable William Garbarino of the Arizona Court of Appeals. I then worked for two medium-size law firms and one small law firm before starting Fowler St. Clair with my good friend Andy Fowler. 

sean st clair casual pic sitting on a bench

My Focus at Fowler St Clair

My current practice primarily focuses on title and probate matters involving real estate. This niche provides the most fulfillment I have had in my 15 years of practice. My clients come to me because they are not able to sell their home or property due to an issue with the title or the death of an owner and I am able to solve the problem so that they can sell their home. 

There is no better feeling than providing a title company with the documents it needs to close escrow for a client. 

In addition to helping my clients sell their homes, I use my legal skills to protect and improve the human rights of men and women in Malawi, Africa. 

After discovering the injustices occurring in Malawi as a result of a mission trip, I started a nonprofit organization called Missional Law (missionallaw.org). Missional Law works with legal professionals in Malawi to secure the release of men and women who have been wrongfully arrested or detained in Malawi’s prisons. 

Missional Law also works with local villages to educate the chiefs and headmen on the issues of child marriage and violence against women.

Outside of work, I enjoy spending time with my wife, Julie, and our two children. Also, having played golf in college, I still fuel my competitive flames by playing in amateur golf tournaments throughout Arizona.

What are iBuyers and How Will They Affect your Real Estate Sale

What are iBuyers and How Will They Affect your Real Estate Sale

iBuyers are a common trend in our real estate industry. iBuyers are companies that will buy homes for cash without those homes ever going onto the open real estate the market.

The most common and well-know iBuyers are:

What are the advantages of Selling to an iBuyer

There are a number of advantages to selling a home to iBuyers.

These include not having:

  • To stage the property
  • To maintain the property in a showing condition
  • Buyers coming in and out of the property
  • To worry about scheduling those showings with the buyers.

Closing Date Flexibility

iBuyers can also be flexible with closing dates.

For example, if you need to move quickly due to employment relocation, an iBuyer can generally close escrow rapidly because they are purchasing the property in cash.

Another example deals with purchasing a new home build. If you don’t know exactly when the builder will complete your new home, but you want to know that your existing home is sold, you can work with an iBuyer to schedule the closing date of your existing home to correspond with the closing date of your new home.

What are Concerns of Selling to an iBuyer

While there are several advantages to selling a home to iBuyers, there are also some concerns.

The primary concern is who is representing you as the seller in the transaction.

Real Estate Agent Represents the iBuyer

iBuyers employ licensed real estate agents. These licensed real estate agents are the ones that are drafting the contract, drafting the clauses for the contract, negotiating the contract, and making sure that the iBuyer is represented in the transaction. 

These licensed real estate agents DO NOT represent the seller.

In this video Sean St. Clair explains the pros and cons of working with an iBuyer

iBuyer’s Have Attorneys

Additionally, iBuyers have attorneys on retainer or they employ in house counsel. These attorneys are reviewing the purchase contracts and clauses to make sure they are acceptable, and they are reviewing any other documents that are being provided to the seller as part of the transaction. And what are those attorneys doing? They are making sure that the iBuyer is protected in the transaction.

iBuyer’s Choose the Title Company

Finally, the iBuyer is generally the one who is going to choose the title company. This is the escrow agent who will be closing the transaction. The title company chosen by the iBuyer is generally one the iBuyer uses on a regular basis and with whom the iBuyer has a relationship.

Once again, where is the representation and protection for the seller in the transaction?

Seller’s Real Estate Representation

Sometimes the seller is represented by a licensed real estate agent in the transaction and, in that circumstance, has more protection. However, what about the circumstance where the seller notices the advertising of an iBuyer on a billboard, television, or radio and decides to contact the iBuyer directly and enter into the transaction without a licensed real estate agent?

In that situation, the seller should seek legal advice before entering into the purchase contract with the iBuyer or signing any documents with the iBuyer.

This can be accomplished by having the attorney review the documents and meeting with the seller, whether by phone, in person, or even through a video conference like Skype.

Together, the attorney and seller would go over the purchase contract and other documents to make sure that the seller fully understands and appreciates the legal ramification of the documents that they are being asked to sign. The attorney will also look at the documents and make sure there is nothing out of the ordinary or that would be detrimental to the seller in the transaction.

At Fowler St. Clair, we are experienced in representing Arizona real estate buyers and sellers. We also have an office in Alpharetta, Georgia representing real estate buyers and sellers. If you’re considering working with an iBuyer, contact us to discuss your options.

Homeowners Association Problems: Dealing with an Overbearing HOA

Homeowners Association Problems: Dealing with an Overbearing HOA

Are you dealing with Homeowners Association problems? If so, you need to know the following:

  1. The HOAs Rights
  2. Your Homeowners Rights
  3. Arizona Laws governing Homeowners associations
  4. How to replace an overbearing HOA
  5. Getting Legal Advice to Deal with an HOA

HOA Rights

Homeowners Associations have the right to govern some community rules. However, there are state and federal laws restricting what they can do.

HOA’s Have the Right To:

  1. Set reasonable rules that comply with local and federal law
  2. Impose financial penalties for non-compliance
  3. Collect unpaid fees
  4. File lawsuits against defaulting owners
  5. Enforce the governing documents

More importantly, homeowners have certain rights. It’s important to know your rights when dealing with an overbearing HOA.

Homeowners Rights

As an owner, you have the right to:

  1. Have free access to your own property
  2. Fair treatment (non-discrimination)
  3. Call for the enforcement of the governing documents
  4. Review the HOA’s Records. Including annual budgets; meeting minutes; vendor contracts; tax returns; membership lists; and financial statements.
  5. Be a part of hiring or calling for a competent, responsive, transparent and, accountable HOA board.
  6. Be a part of community governance, by volunteering, attending and speaking at meetings. Or by joining or being elected to the board.
  7. Appeal decisions of the HOA when provided with notice of an alleged violation.
  8. Modify your property for access for people with disabilities. In accordance with the Americans with Disabilities Act.
  9. Display the American Flag on your property.

These two lists are not all-inclusive. Homeowners and HOA’s may have other rights granted to them by law.

 

Arizona Laws governing homeowners associations

You should learn what the laws are governing the conduct of associations.

If you review the statutes found online, starting at A.R.S. §33-1801. yYou will probably see statutes and regulations that your association is violating.

Some of the highlights of these statutes are:

  1. Late Fees. The maximum late fee that an association can charge is $15.00 or ten percent (10%) of the amount due, whichever is greater.

  2. Property Transfer Fee. The maximum total amount that the association can charge related to the transfer of the property is $400.00. This amount can only be charged upon the successful closing of an escrow. Therefore, a property transferred without the employment of an escrow company is not subject to the transfer fee. (Note: if there are pre-paid or back-owed regular HOA dues to be paid at closing, those amounts are usually not covered by this limit.)

  3. Notice of Violation. Upon written request, within ten (10) business days from the date of a notice of violation, the association must provide the homeowner with certain information.

    This includes:

    1. the specific provision of the CC&Rs that are alleged to have been violated
    2. the first and last name of the person that reported the violation.

  4. Partial Payments. An HOA cannot refuse to accept a partial payment of the amounts owed to the association.

    The association must apply all payments to the member’s account. This must be done in the following order:

    1. Unpaid assessments
    2. Late fees
    3. Costs of collection
    4. Attorneys’ fees and costs.

The homeowner may also direct a payment to be applied to a certain specified item.

real estate lawyer
 

Replacing an Unreasonable Management Company

As a homeowner, you can lobby for the replacement of the current management company. If the company is overbearing, hiring a more reasonable one may help.

Licensing of HOA Management Companies

Unfortunately, there are no licensing requirements for HOA property managagers.

This means that anyone can start a property management company for HOAs regardless of experience. And, as with any profession, some management companies are better than others.

Many times it is the property management company that is the one that is overbearing. Terminating the property management company may improve the culture of the community.

HOA Board Members

Usually, individual homeowners who serve on community boards are hard-working and well-meaning volunteers. They’re genuinely trying to create, maintain or re-create a great community for all homeowners.

Occasionally, problems are caused by an individual or group of board member who are out of line.

Resolving Issues with an HOA

Whether the problem is the management company or the Board members themselves, the solution is a long-term project, not a short-term fix.

Replacing the management company takes time and you might need to be a member of the HOA Board to make this happen. At a minimum, you’ll need a group of homeowners willing to support the effort to replace the management company. HOAManagement.com has a list of companies by state.

Replacing individual HOA Board members also takes time. This is because you’ll need to launch your effort when there’s an open Board seat up for election. You’ll also need to find a candidate willing to run and serve.

Getting Legal Advice for Dealing with an HOA

Would you like more advice or advice personalized for your situation? We offer creative fee arrangements, including some types of flat fee billing.

We also offer some types of “pay-as-you-go” or “unbundled legal services.”

Learn more about those here, and then give us a call.

We’ll be happy to speak with you about handling your homeowners association problems.

For more information on homeowner’s association email or give us a call.