First, a solution:
What Realtors can do to avoid a similar scenario: Work with lenders who have successfully closed at least five loans in the past twelve months of the type they are proposing. Work with lenders who have a reputation for ethical conduct. Choose your lenders based on factors other than glad-handing, happy talk or willingness to buy you lunch.

Take note of last-minute loan blowups and share that information with your business associates and clients. (I know many Realtors already do this when their client is proposing use of an on-line lender about whom the Realtor has already heard horror stories.) There are plenty of good lenders who would be happy to competently handle your deal, and there’s no reason for lenders who blatantly abuse their industry partners and clients to be making money.

What Buyers can do: ask lenders for names of satisfied clients who did the type of loan they are considering. This is perfectly reasonable. Don’t buyers and sellers ask Realtors for testimonials from happy clients? (ed. note: one of my more favorite questions of late is, “tell me about one of your dissatisfied clients, and why they were so dissatisfied”)

We’ve never seen a lender hauled before a panel of their peers on ethics charges (as happens in the Realtor community) though there’s certainly been ample cause. That’s unfortunate, but forewarned is forearmed.
Now, the tale:

Buyer (happens to be first-time but that doesn’t matter) and Seller enter into a contract, after two Realtors spend the usual hours marketing, showing, driving, negotiating and doing paperwork …

Buyer is going to do an FHA loan. They’re so popular now, for good reason. Buyer is hooked up with a lender. Don’t know how they connected, whatever, but if it was his Realtor who referred him to the lender we hope she’s learned a lesson.

The lender is not FHA approved. He’s pretty sure he will be, soon, so he originates the loan. Home inspection, appraisal done and paid for. Commitment letter issued (hearsay, I didn’t see it). Two weeks prior to closing the lender apparently gets worried that this FHA approval isn’t going to come through. It likely never will.

He contacts at least two local FHA lenders and attempts to refer the deal to them. One of them turns it down flat and the other takes the application, runs it through his underwriting system and can’t get an approval.

The lender doesn’t notify the borrower or Realtors at this or any point. Now we get into hearsay, in italics.

Two days prior to closing the lender told the borrower that they didn’t qualify for FHA (they didn’t, but the lender didn’t even have the option. If they’d been an experienced FHA lender they’d have know he didn’t qualify). The rate went from about 6% to 7.75 or higher. Closing costs/payment also went way up.

This is the problem with hearsay but you get the idea. The lender had flipped the loan to FNMA/conventional, got what’s called an expanded approval, which has high rates and high PMI. The payment was at least $200 higher and this was an “affordable” home.

On closing day the listing agent went to the closing table with the sellers expecting to sign. They were at the table when they found out the buyer’s loan wasn’t going to close.

At that point one more FHA-experienced lender was called in and ran the loan through his underwriting system- it wasn’t approved.

The listing agent is out all her marketing time and expense. The seller has lost valuable marketing time and now has a stale listing if they didn’t before. The buyer’s agent is out all the hours spent driving around a client who didn’t qualify, negotiating, doing paperwork etc. The potential buyer is out appraisal fee, cost of home inspection, maybe more, and has given up the lease on his rental unit so doesn’t have a place to live.

Oh, also, the lender didn’t get paid his commission. He put all these people’s time and money on the line in the slim hope that he might get paid. They all got screwed by this industry partner. (Sorry for the salty language.)

This is an easy problem to avoid. There are a lot of lenders out there now who don’t have what it takes to manage the current market. They might not be able to do the loan and not even know it. They might be able to but not know how. I hate to see you guys lose time and money. We are all in the same boat. There are a lot of good lenders who can get deals closed in this lending environment and will tell you if it’s not going to work.

I hope you can make this into a cautionary tale to help your readers- buyers, sellers and Realtors. Let me know if you have questions or need a referral to the other lenders or Realtors involved. I’m not sure they’d talk but I’d hope they would, to help someone else avoid a similar problem.

This story originally appeared on RealCentralVA.com and appears here by request.

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Kaine is proposing a statewide 25-cent increase in the grantors tax, which is now 10 cents per $100 of assessed value, that owners pay on the sale of a house.

First, the grantor’s tax is paid based on the sales price of the house, not (thanks, Danilo) or the assessed value (still not corrected five days after the original article was published).

Nuts and bolts - currently the median price in the Charlottesville area is about $275,000. Thus, the grantor’s tax paid by the seller on that particular transaction would be about $275 - and that’s a lot of money! If the tax is increased to 25 cents $687.50. Note also that this tax is paid only when a property sells (which is happening less and less frequently).

Make no mistake - Virginia’s (and the localities’) transportation systems need help; they need maintenance and they need new infrastructure - roads, bike paths, rail lines - but taxing only one segment of the population that uses the system is wrong. It is difficult to get hard, accurate data on what percentage of people in this area own their homes, but let’s assume it’s anywhere from sixty to seventy percent. Thirty to forty percent of people in the area won’t pay this tax, yet they will still use our roads, buses, etc. This is not a question of fair, but one of whether this is a reasonable proposal.

One reason that the grantor’s tax is proposed is because it is a bit of a hidden tax - it’s just another one of those fees that gets thrown together on the HUD-1 at closing. In the hot market, no one questioned the tax; now every nickel counts.

Why not a broad-based tax that everyone would pay (gas tax), other than lack of political and intestinal will and fortitude?

To target one segment of the population for a tax that needs to be focused on the entire population, regardless of the state of the housing market, is not right.

The best prediction from the Washington Post article goes to lobbyist Charlie Davis -

“At the end of the day, maybe putting a ‘lockbox’ on transportation funds, maybe a local taxing authority, but that is it. Give Kaine credit for pushing for something. The Republicans can be tagged as obstructionists but . . . Kaine came back with almost the identical plan that was shot down last year, so which is more foolhardy? But the session will provide ample opportunity for a lot of social interaction to discuss the presidential campaign and enjoy some wonderful cuisine at the Capitol snack bar.”

And he’s probably right.

Related posts -

Whom should we tax?

A few Transportation bills

Text of Governor Kaine’s speech to the General Assembly

Transportation talk revs up in Richmond

Too funny not to post - Copy of the Republican Transportation Plan

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Justice Department officials and others who have tracked the case said the agreement will result in more choices and better service for consumers, as well as lower costs because of competition over commissions. Many online firms offer savings because they provide limited services.

To start -

1) What business does the government have in regulating free enterprise?

2) Nothing is preventing others from starting their own MLS.

3) I’d like to know how much this investigation/suit/settlement cost the taxpayers.

4) Those who think the Realtor business isn’t competitive doesn’t know what they’re talking about.

Download the proposed settlement here (and actually read it!)

The Real Estate Bloggers write what I was thinking:

The amazing thing about monopoly and governmental lawsuits against companies over the issues of technology is that by the time the slow gears of justice run their course, the battle has long been over.

This is the case of the NAR. The opening of the MLS systems to online and virtual real estate companies has long been over. The bigger battle will be the viability of maintaining an expensive MLS in the age of Trulias and Zillows.

Zillow and Trulia and Cyberhomes and Roost, etc. didn’t exist in 2004.

And the XBroker wrote the headline I wish I’d written - DOJ vs NAR Lawsuit Turned Into an Exercise in Irrelevancy

Where will we go from here? Realtors will keep competing, buyers will keep searching online, sellers will still think that print advertising works (it does, but not to sell houses), and technology will continue to change at a pace much faster than behemoths like the NAR or the incompetents within our federal government can handle.

Innovation was just fine before the government stepped in, thank you.

Next up - the DOJ should go after Google for having the most dominant search engine.

——————

More coverage:

Agent Genius

Joe at Sellsius provides a legal perspective

An MLS perspective by Michael Wurzer

Bloodhound

Redfin

The original article appeared on Jim Duncan’s blog, RealCentralVA.com and has been republished here at VARBuzz by request.

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Any serious reduction in American driving will require more than this — it will mean changing how and where many of us live.

My belief is this - properties that are closer to urban cores - roughly defined as having a coffee shop/grocery store/park/gathering place - will appreciate at a greater rate than those that require more driving to get to said urban centers.

Using back-of-the-napkin math - if when gas costs five bucks a gallon -

If driving to the store/work/etc costs an additional ten to fifteen dollars for those properties not close to urban centers, and the properties the are close to urban centers are able to save that gas money - isn’t it reasonable to conclude that that theoretical savings of three to five hundred dollars a month would then be applicable to one’s mortgage payment?

I am seeing a contraction of the geographic area I service, and clients are now asking more and more about bikeabilty, walkability and public transport. Higher gas prices are likely to impact our business in fundamental ways - among them -

- Business models - buyers pay up front or do more legwork on their own. Hybrid Redfin models or derivations thereof may become more popular and prominent.

- Denser suburbs and fewer exurbs

- Increased taxes - property tax and sales tax - to increase infrastructure, thus affecting affordability

- Fewer Realtors and real estate agents as more discover that the Realtor pot of gold is harder to find.

- MLS’s may have to change their restrictions on neighborhood and area photos and videos - consumers (and Realtors!) want to see more than what is currently offered. If MLS’ want to remain the primary point of contact, they will have to adapt and provide more. Including or excluding properties without physically visiting properties will be more and more important.

- More boutique brokerages will emerge and thrive as the cost of doing business becomes too great for many of the bigger brokerages.

When we are looking back at this recession in five years with the benefit of hindsight, what opportunities will we be thankful we took advantage of? What opportunities will we wish we had seen and seized?

A question for the Virginia Realtors - are you seeing this trend happen now? Are you seeing your market area contract due to gas prices’ precipitous increase?

Could Realtors use this opportunity to advocate for alternative methods of transportation in new developments? Just a thought.

* Don’t shut down as soon as you see Paul Krugman’s name. Sure, the NYTimes has a unique slant, but that doesn’t necessarily mean the information presented in this article is not relevant, applicable and true.

The original article by Jim Duncan on 20 May 2008 on Agent Genius

Related reading:

Could Higher oil prices be a good thing?

High Gas prices are good

Downtown Real Estate Bypasses Housing Crisis: Gas Prices Are Making City Centers More Attractive

The Oil-to-Mortgage-Rates Chain Reaction

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It’s not just technology — it’s a cultural shift in how Realtors work. Technology is easy; how this and the next generation of Realtors accept and implement it is often the deal-killer.

The past few weeks have brought more technologically-savvy clients my way. Not unsurprisingly, both have used Google tools to help themselves (and me) Here’s what I want -

First - why Google? Because it’s free and accessible. Did my clients both seek out Realtors to help them relocate to my area? Yes.

The first buyers interviewed a couple of Buyers Agents and ended up selecting me. As part of the process, they emailed me a published Google Doc with their already-trimmed-down list of specifications - preferred location, what they want to be close to, what their needs and wants are and their “would like to haves.”

The second buyers, through the process of our working together and narrowing down their search area/criteria, emailed me a link one day to a Google My Map with the things that are important to them. Schools, gym, grocery store, specialty grocery store, kids’ activities - and oh, yeah - houses pulled from Google Base - were all on the map.

I want the consumer’s search to be as powerful as mine, while keeping all the protected information necessarily behind “Realtor” lines (lockbox codes for generic lockboxes, alarm codes, “seller is out of town,” etc.)

I want background checks on Realtors to validate their ability to keep safe said private information.

I want the search to allow overlays of important data - crime, Walk Score, GIS information, neighborhood boundaries, and more, and I want to be able to share that search with my clients, readers, customers - and allow them to better narrow their searches, thereby allowing me to help them best - by listening and interpreting and advising.

Good Realtors do more than just search for homes - interpretation, guidance, advice, negotiation - client representation - is far more specialized than search.

(Posted here at request)

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1. Call to Order – Chair Suzy Stone
2. Approval of Minutes
3. 2008 General Assembly Up-Date

a. 2008 VAR Legislative Agenda

b. Impact Fee bill

4. 2008 Voting Record

a. Staff Overview

b. Staff Recommendations

5. 2009 VAR Legislative Agenda

a. Timeline

b. Issues

i. License prohibition of convicted felons

ii. Recordation tax / grantor tax assessments – stated consideration

6. 2008 Virginia Housing Commission Work Schedule

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Don’t be misled by the title “The Real Estate Channel” - it is a fill-in for what is a yet-to-be-determined name for what used to be the “Gateway.” Virginia was well-represented by Bob Blount and Tom Innes on the Presidential Advisory Group* that deliberated over and ultimately delivered the following report linked here (PDF).

Rather than explain what it “is” read the Questions and Answers document - I have omitted some of the questions to focus on those below that highlight the basics, MLS’ and cooperation and compensation. If you have further questions, please ask.

—————

“Q. 1 My MLS meets my needs. I don’t need information about property outside my market area. Why should I support TREC?

A. Comprehensive real estate information currently exists but that information is not always analyzed, categorized, or readily available in an easy-to-use, trusted format focused on the needs of REALTORS®. Consumer-focused real estate websites are gathering more and more information and REALTORS® will come increasingly to rely on those websites. Without convenient, immediate access to information to analyze/interpret for their clients and customers, REALTORS® will no longer be at the center of real estate transactions. TREC will also enable REALTORS® and MLS participants to access essential information about properties in their market area which may be “just outside” the area served by their MLS, and TREC information will be richer and deeper than what is available in MLS compilations.

Q. 3 How will TREC help me make money?

A. Time is money. TREC will ensure that REALTORS® and MLS participants have immediate access to the information they need to serve clients and customers in a “member-focused” format. Much of the information that TREC will deliver will not be otherwise available conveniently or economically.

Q. 4 How does TREC differ from Realtor.com?

A. TREC is not advertising and will not be publicly accessible; TREC will be revenue neutral and will not sell ads to its users.

Q. 6 What about cooperation and compensation?
A. Accessing TREC will not involve offers of cooperation or compensation. Cooperation is a Code of Ethics issue. All REALTORS® cooperate with other licensees except in those rare instances where cooperation is not in a client’s best interests. Cooperative compensation is an MLS issue. TREC is neither an MLS or an association of REALTORS®.

Q. 8 How will TREC impact current MLS vendors?
A. Data standardization may create a more competitive market for MLS.

Q. 10 Is TREC a national MLS?
A. No.

Q. 12 Will the public have access to property data through TREC?
A. No.

Q. 13 Can a property owner opt-out of having their property included in the TREC database?
A. No. TREC is not an MLS and is not an advertising vehicle. Information from the TREC database will not be publicly available on the Internet as are listings on MLS “public sites” or the Internet sites of third-party aggregators (e.g. realtor.com).

Q. 16 What control will individual MLSs have over the rules if they participate in TREC?
A. MLSs will retain complete control over their own rules and regulations, including the authority and responsibility of enforcing those rules.

Q. 18 Who is the “real estate community” that will be involved in TREC? Are they Zillow, Trulia, Google et al.?
A. No. The “real estate community” is MLSs and local and state associations of REALTORS.

Q. 20 How will the integrity of data in TREC be ensured?
A. TREC will rely on – and its success will depend on – quality data being provided
by MLSs and other information sources. Stringent technology safeguards will be
implemented to foreclose the possibility of unauthorized access.

Q. 23 How will duplication of property listings be avoided on TREC?

A. Every parcel of real property will be included on TREC – irrespective of whether it is currently available for sale or lease. Those available for sale or lease will be identified (“flagged”) accordingly.

Q. 24 How will NAR benefit?
A. TREC represents an opportunity for NAR to better serve its members and to facilitate a more efficient real estate marketplace. TREC will keep REALTORS® at the center of real estate transactions. TREC is revenue neutral and costs will be no more than what is necessary to develop and operate TREC. It will not be a revenue source for local associations, state associations or the National Association.
Copyright NATIONAL ASSOCIATION OF REALTORS®”

—————-

Know this - where we started with this project and where we are today is very, very different.
To get to where we are today, read some of the background on how we got where we are today.

FBS blog
RealCentralVA
BHB
Agentgenius

*The author of this post, Jim Duncan, was also a member of the PAG.

Technorati Tags: NAR, real-estate, realtor

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From a great post by Jillayne Schlicke at RCG about potential RESPA reform.

Sections 8 and 9 of RESPA say we are not to give or receive an item of value in exchange for a referral of a federally related loan. We = any person that earns a fee on the sale or refinance of a one-to-4 family, owner occupied, federally-related loan. Realtors and mortgage lending workers have tremendous power to influence the direction of business for third-party vendors to companies such as title insurance, escrow, home inspectors, home warranty, hazard insurance, private mortgage insurance, appraisers, attorneys, and so forth. For example, title insurance companies do not chose to spend their advertising dollars on general public promotions because a title company can have a much stronger effect on market share by focusing on the people who are in a direct position to refer lots of business: Mortgage lenders and Realtors.

Naturally, there are exceptions:

Nothing in this section shall be construed as prohibiting (1) the payment of a fee… (2) the payment to any person of a bona fide salary or compensation or other payment for goods or facilities actually furnished or for services actually performed, (3) payments pursuant to cooperative brokerage and referral arrangements or agreements between real estate agents and brokers, (4) affiliated business arrangements so long as (A) a disclosure is made of the existence of such an arrangement to the person being referred and, in connection with such referral, such person is provided a written estimate of the charge or range of charges generally made by the provider to which the person is referred.

However, this possible arrangement is codified in the Virginia Association of Realtors‘ standard Contract to Purchase.

BROKERS: LICENSEE STATUS: (a) Listing Company and Selling Company may from time to time engage in general insurance, title insurance, mortgage loan, real estate settlement, home warranty and other real estate-related businesses and services, from which they may receive compensation during the course of this transaction, in addition to real estate brokerage fees. The parties acknowledge that Listing Company and Selling Company are retained for their real estate brokerage expertise, and neither has been retained as an attorney, tax advisor, appraiser, title advisor, home inspector, engineer, surveyor or other professional service provider.

Consumers (and Realtors) should question everything. Why this product? Mr. Realtor - why are you recommending your “in-house” lender?

What am I missing here? Are these types of entanglements kosher/ethical/”ok so long as I get my cut?” Has the real estate business become so intertwined and commingled with the various, disparate yet related, services that these types of arrangements are in fact, good for the consumer?

Technorati Tags: ethics, real-estate, realtor

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1.  Single Agency? -  Licensees can only be one type of agent (seller or buyer agents) but not both.

2.  Transaction Management Agents - licensees do not represent either side but merely perform ministerial duties.

3.  Optional  Designated Agency -  Either seller or buyer  choose to hire an agent from another agency to represent them in a transaction so as to avoid dual agency. This would not be mandatory in the event the seller and buyer elect to work with the listing office after full disclosure is made.

There’s a lot to be said about each of the above but they all involve radical changes to our business practice.  These changes, I  believe, would probably result in a significant drop in the number of active licensees as it will become harder to be successful and, therefore, less profitable for those who don’t adapt. We’ll only be eligible for one side of any transaction and that could mean a drop in income unless volume is increased.  It will also probably mean considerably less income for professional organizations due to significant drops in membership.

Does it look now like the movement for the elimination of dual and designated agency will come from the Realtor community?  There is no ground swell from membership so why would leadership seek to rock the boat?

In the end, like a lot of other things, it all boils  down to money…surprise!…..surprise!

That’s why I believe that the impetus for radical change, if at all, will not come from within the industry.  Like a lot of other things, such as all of the legal  requirements for the various disclosures we have to make, consumer demand can and probably will be an effective impetus for change at some time.    Who knows when?

On the other hand, I do believe that  improvements can be made in the existing laws governing the way dual and designated agency are practiced in our state.  Such changes might also lead to further adjustments down the road.

For example, let’s remove the words “represent” or “client” when referring to any agent or seller/buyer involved in a dual agency situation.  Those words imply advocacy as they do for attorneys and other professionals.  I don’t know what word can be inserted in its place but I’m sure there is an appropriate word that conveys the proper explanation of the ministerial services performed by the licensee.

Next, require “informed written consent” from  the seller or buyer to either dual or designated agency.  This means that somehow, perhaps in a disclosure, the seller and buyer are fully informed as to how the “representation” they originally agreed to retain will change if they agree to permit “their” agent to act as a “dual” agent.  It should attempt to explain with examples what the agent can and cannot now do for them and that his/her role will be reduced to a ministerial role without advocacy.  It should explain what he/she can and cannot do on behalf of the other party in any potential transaction and should be as specific as necessary to get the point across that an agent would be acting in violation of the law if he/she offered any advice regarding value, price, negotiation strategy, etc to either side.

Next, listing agreements and buyer agency agreements should not be permitted to include obligations for sellers and buyers to agree to dual agency in advance.  They should inform sellers and buyers of the potential for that situation to arise with detailed  explanations as outlined above but not bind them in advance to something completely out of context at that moment.  New home buyers, for instance, have no clue of the implications of what they are agreeing to.  The client should have the option to choose to have other representation without penalty at such time as the offer of dual representation is made to them.  Actually, this will also serve as a protection for the licensee if handled properly.

That also means that a written offer to change to dual representation should be made before any substantive discussion is conducted with a buyer client on a property listed by the buyer agent.  Even if agreed to by the buyer client, the seller should then be presented with a written offer of dual agency before a showing can take place with the same agent.  Of course, both offers of dual agency will contain the informed disclosure information.

Perhaps there are much better adjustments that can be made, however, the purpose of these suggested procedures is to make sure that both sellers and potential buyers be given the opportunity to understand and either accept or deny the use of dual agency by their mutual agent in advance of any services provided by the agent in connection with a potential transaction involving the two.  Anything  that helps accomplish this is a move in the right direction.  That’s about all we can hope for at this time.

Will these changes take a lot more of the agent’s time and effort?  Yes, but they are appropriate, in the best interests of all clients, and are the fair price paid for a choice to act as a dual agent. They will also, in my opinion, serve to protect the agent if properly complied with.

—

The preceding was written by Joe Vita.

Part 2 of 2.
Part 1 is here.

Technorati Tags: agency, dual agency, real-estate, realtor

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Who benefits from Dual Agency? The Realtor.

One of the primary values a Realtor brings to a transaction is representation - representation of his client’s best interests. How can a Realtor advocate for the best interests of both parties and still maintain the perception of fairness and full representation? In my mind, there is a difference between treating all parties fairly and honestly and being able to advocate with 100% vigor for one party.

Realtors practice dual agency all the time - successfully. Never had I had someone remark how much they appreciated their agent representing both sides. I have been told numerous times by clients how they perceived their agent in a shady, less-than-honest manner because that agent had both the buyer and seller.

Dual agency devalues Exclusive Representation.

In a divorce, would you have the same attorney represent both parties?

I am privileged and please to have found a member of the VAR Policy Board is another vehement advocate against Dual Agency. What follows is an email from Joe Vita, an Exclusive Buyer’s Agent in Lexington and Rockbridge County.

—————————————-

While it may seem like an easy issue for people like you and I to address and defend, it would take quite a lot to get the majority of Virginia’s agents to go along with the abolition of dual agency.  While the problems with dual agency are easy to identify, the solution will be complicated.

I know that there are members of the Real Estate Board that recognize the problems with dual agency as it seems to come up at seminars they have conducted at VAR’s meetings as one of the most serious and common complaints about agents they receive.  But I don’t know if they have ever given any serious thought to a proposal to eliminate of dual agency.  While they could be the source of some change themselves, it is much more likely that either consumers or VAR would have to drive the agenda.

I doubt very seriously that VAR’s leadership has ever considered it for a minute as there isn’t any impetus coming from membership that I am aware of at this time .

I don’t know if any legislators are even aware of any problems with dual agency or would care about it unless a demand for change came from the public or VAR.

I’m not aware of any consumer organizations in our state that have expressed concern about it but believe that there are national groups that may be concerned.  I suppose that a consumer’s revolt could occur but it doesn’t look like something that will be coming down the road any time soon.

I’m not aware of the federal government getting interested in this area of our business practice though they always seem to be looking into something involving our business practices.
MLS operations appear to be their soup du jour.

So, it would appear that unless at least one of the five main sources for change decides that it is in their best interest to get behind the eradication of dual agency, it will not get done.

Part 2 to be published on Thursday.

Part 2 is here.

Technorati Tags: agency, dual agency, real-estate, realtor

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