Are You Paying Attention

Daily I receive phone calls from agents who are having issues keeping their license. It has nothing to do with disciplinary action and it has everything to do with paying attention to DPOR’s requirement for re-licensure.

It’s somewhat disconcerting when an agent does call days before the expiration date of their license trying to get help sorting out what they need and how to get it. FAAR’s Real Estate Career Academy holds routine classes and is becoming one of the most relied upon real estate school in Virginia. RECA’s staff is happy to help, but what we’re finding is that agents are taking classes from many different sources and not really creating a plan for how these credits will be obtained.

Keeping Track

A current trend has been agents calling about classes they’ve taken through a “coaching” program, settlement company or vendor touting that they are giving credit. The agent then finds that the class wasn’t really approved, doesn’t meet their required hours or that the credits never get filed. This results in agents panicking at the last minute trying to make up their hours. Here’s an example: Agent sees a free Ethics class offered by a vendor or coaching service who is using education as a way to introduce their service. The agent takes the one hour class and doesn’t follow up to see if the credits were applied. The agent also forgets that they need a minimum of three hours for Ethics. On top of that 3 hour requirement, if the agent is a REALTOR®, then they also have to take NAR Ethics training.  RECA and most other schools have incorporated these classes into one, three hour session to meet all your requirements.  Association schools work hard to present meaningful training in an easy to use program.  It’s why most classes are three hours.

Things to Watch Out For

Here are a few questions to ask when you are planning to take a class:

1.)  Is the course covering required CE/PL topics?

2.)  Does the marketing reflect the category of training?

3.)  Is the instructor qualified in the topic they are teaching?  (Such as a technology vendor offering a Fair Housing class…)

4.)  Are the topic hours taught meeting the minimum required hours for the catagory? (If you are taking an Ethics class, does it meet the 3 hour requirement set out by DPOR)

5.)  Is the education really designed to benefit you as a practitioner, or solicit business from you?

6.)  Do you already have the class or topics that are being offered?

7.)  Has the school shown a history of follow-up and dependability in submitting your credits to DPOR?

There are a number of good real estate schools in Virginia that offer quality training.  If you are in doubt, please give staff a call at your local Association and they’ll be happy to help you!

There have been some significant changes to the Property Owner Act in Virginia. Lem Marshall, VAR’s Special Legal Counsel, held this in-service for REALTOR® Members to be up to date on these important changes. This revised legislation is important to ALL practitioners and everyone should review this video and materials.

Click the slide, below to get started

Confusion

Recently, while teaching an Ethics class, I realized that there is still a lot of confusion about the level of confidentiality in an offer to purchase. Certainly we all know that Contracts, once ratified, are confidential; but what about the Buyer’s Offer to Purchase the property? The short answer? Absent an agreement between buyer and seller, there is no requirement for the Seller or Listing Agent to keep an offer confidential. It is the property of the Seller, once delivered

How Does This Effect the REALTOR?

If I am Buyer’s Agent and call you, the Listing Agent to ask about the presence of other offers – you can tell me that there are offers pending AND any and all of the details of such offers. Surprised? So are a lot of other REALTORS. That is why the Code of Ethics have made it a requirement to disclose to the purchaser that the offer may not be confidential. Absent an agreement to keep the offer confidential, the Listing Agent, with permission from the Seller, could send copies of your offer to purchase to any buyer agents who are being encouraged to write superior offers.

In 2006, the REALTOR Code of Ethics was updated to bring clarity to this issue.

Standard of Practice 1-13

When entering into buyer/tenant agreements, Realtors must advise potential clients of:

1) Realtors company policies regarding cooperation;

2) the amount of compensation to be paid by the client

3) the potential for additional or offsetting compensation from other brokers, from the seller or landlord, or from other parties

4) any potential for the buyer/tenant representative to act as a disclosed dual agent, e.g., listing broker, sub-agent, landlords agent, etc., and

5) the possibility that sellers or sellers representatives may not treat the existence, terms, or conditions of offers as confidential unless confidentiality is required by law, regulation, or by any confidentiality agreement between the parties.

(Adopted 1/93, Renumbered 1/98, Amended 1/06)

Standard of Practice 1-15

Realtors, in response to inquiries from buyers or cooperating brokers shall, with the sellers approval, disclose the existence of offers on the property. Where disclosure is authorized, Realtors shall also disclose whether offers were obtained by the listing licensee, another licensee in the listing firm, or by a cooperating broker

(Adopted 1/03, Amended 1/06)

Note that in Standard of Practice 1–15, the REALTOR is advised that they must disclosure the other offers (with seller’s approval). The REALTOR must also tell the inquiring Buyer Agent who the author of the Offer to Purchase is. This is important to the Buyer Agent, in that a Dual Agent writing an offer; or Designated agent in the same office writing an offer may have benefits they can negotiate away to position their offer better.

Supporting Statutes?

There are currently no statues in Virginia protecting the Buyer’s Offer to Purchase in this regards. Since I am not an attorney, I asked Lem Marshall, the Legal Counsel for the Virginia Association of REALTORS where I could find something other than the Code of Ethics, to support this. Are there any statues that give me permission to release this information? Here is his answer:

I know that this adds yet one more disclosure to your daily activities, but for too long Listings Agents have been under the false thought that they must keep these offers and their existence secret. No longer. The REALTOR acting on behalf of the Seller is required to do everything in their power and within the context of real estate legislation to ensure the Seller gets the best possible offer.

The Story

I had a client call me the other day… his story was similar to many we have all heard over the last year and a half. He had been trying to sell his investment property for over two years but was very resistant to dropping the price, which he recognized was necessary to get any offer of purchase. His life savings had been depleted trying to keep current on this property and he had reached the end of the line. He was depressed, frustrated and resigned to losing the property and taking a credit “hit”. The bottom line for him was whether he should he “go to the trouble of trying for a short sale” or just “let it go to foreclosure”. He definitely wanted the easier road, which he thought would be a foreclosure. The consequences would be similar between the two . . . . right?

What do Lenders Say?

I flashed back to about two weeks prior when I was teaching a Short Sale and REO Transaction class for a local lender. The Senior Loan Officer had some material to share with us. First, she showed us actual credit reports of clients who had gone through a Short Sale. There was a “Before” and “After’ credit report for the same borrower. The Short Sale basically dropped this borrower’s credit score by one hundred (100) points. The mortgage also showed as “Paid in full but settled for less than was owed.”…. Okay, this was kind of what we would have anticipated and is certainly consistent with the information we have received from the lending institutions over the last year. Then we see the real show stopper. The Loan Officer hands out the new Fannie Mae underwriting guidelines that go into effect May 31, 2008. Guess what? The rules have changed.

REALITY BITES

The reality for my client on the phone becomes painfully clear. My advice: You better find a good agent who is competent and experienced in handling a Short Sale transaction. Under the new Fannie Mae guidelines the effect of a Foreclosure on a borrowers’ credit worthiness is substantial, devastating and decisive. A Short Sale may reduce your clients’ credit score and will stay with them for about a one year or twelve month period of time. For all our clients who have “let it go to foreclosure”, I have some very, very bad news. Effective May 31, 2008, according to the Fannie Mae guidelines, a client who has filed a foreclosure will be “ineligible” for a period of five years. That is FIVE YEARS (5 years) for a foreclosure compared with a one year “ineligible” for a Short Sale. That difference is significant and will have an immediate effect on our business.

Don’t be Surprised

It should be no surprise to us that the lending guidelines would adjust. We should have all seen this coming, right? Certainly the prior estimates of a 2 year credit hit for a Short Sale as compared to a 3 year hit for a Foreclosure were astonishing and somewhat unbelievable, leaving many of us to wonder if the effect of either outcome made no significant difference to our Seller, then why did it matter which outcome they pursued? The implementation of these new guidelines solidifies the rules and changes the desired outcome for many of our Sellers. As a result, I think we will all become experts on the Short Sale transaction.

Here starts a series to help inform you of the real estate changes taking affect July 1^st, 2008 as passed and approved by the Virginia General Assembly and Governor Kaine.  It will be a five part series starting with the changes made to the Property Owners Association Act (POA) and Condominium Act (COA); bill number is HB 516. 

The POA/COA Change 

One of the two corner pieces to this legislation was the creation of the Virginia Common Interest Community Board.  The Board will consist of appointees who will investigate complaints about community association manager who will now have a licensure requirement through DPOR; the only exception to licensure is if the POA/COA doesn’t contract out to management and does not pay a staff to run the association. 

The second largest change to the POA/COA is to the fee structure and delivery of the disclosure packet.  The new law will now permit sellers, or their agents, to request electronic delivery of the disclosure packet; they can also request two additional recipients to receive the electronic packet at no additional charge. 

The NEW Fee Structure 

The POA/COA is no longer allowed to charge fees beyond its declaration of covenants and restrictions or else provided by law.  The limits are not to go beyond: 

$100 for a property inspection 

$150 for two copies of the disclosure packet in hard copy, and 

$125 for two electronic copies 

$50 for an expedite fee 

$25 for an additional hard copy 

$50 for a post-closing fee 

No more than the actual cost of a commercial delivery service for hand delivery; i.e. UPS, FedEx, etc. 

Also, 

For no more than $50, an update, delivered within 10 days of a written request, may be requested if a packet or resale certificate was issued within the previous 12 months. 

Fees are not paid up front but are deferred to the time of closing 

These changes only apply to associations who have hired a management company or have a full-time staff. 

Come back to FAAR Forum to hear about changes to AVM’s, the Wet Settlement Act, listing and leasing agents disclosure, firm ownership, vested rights, and overcrowding enforcement.