July 1 means we’re half-way through 2008. It also means there are several new laws, rules and regulations going into effect that impact the real estate business in Virginia. Here are some of the highlights in case you missed them in earlier VAR communications:

1. A bushel of new Virginia laws affecting real estate professionals will be enforced beginning tomorrow. You can download a convenient two-sided legal-size summary (PDF) of the new laws to get more information. If the print is too small for your taste, try the whitepaper version (PDF).
2. Changes to the laws governing property owners associations passed in the 2008 Virginia General Assembly (also effective beginning July 1) are so sweeping, we’ve created a special webcast with VAR’s special counsel Lem Marshall to address them. Watch it here.
3. Related to the property owners association act, VREB has just released an FAQ document about the Common Interest Community Board and the Office of the Common Interest Community Ombudsman. Download it (PDF) here.
4. All real estate brokers with VREB license renewals due on or after July 1, 2008 must complete eight hours of broker management and agent supervision CE in their two year renewal cycle. Download a letter (PDF) from VREB for full details.
5. The IRS raises its mileage reimbursement rate tomorrow to $0.585 per mile.
6. Tomorrow (but not before), you can toast all these new rules and regulations with a glass of sangria at your favorite Spanish tapas restaurant. That’s right, Virginia restaurants can serve drinks that mix beer or wine with liquors without fear of prosecution beginning tomorrow.

It would appear that Gov. Kaine thinks so. (thanks to Richmond Sunlight for pointing out this article)

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

This post is a more extensive version of an article by the same name that ran in the May/June issue of Commonwealth Magazine. This entry is also available as a 325k PDF download.

In a wonderful scene in The Godfather, Don Corleone has convened a meeting to negotiate a peace among the warring crime families. He begins his address to the assembled mob bosses by asking: “How did things ever get so far? I don’t know. It was so – unfortunate – so unnecessary.”

It’s hard not to think of that sentiment when we examine the housing crisis we now face in so much of the country, and in so many parts of Virginia.

How did things ever get so far?

The question invites a history lesson, one that informs so much of what we must do – and must not do – to see our way through.

As we try to make sense of our predicament, it is useful to understand the principal ingredients to economic policy, especially fiscal policy (established primarily by Congress and the president in formulating tax, regulatory and other economic policy) and monetary policy (established by the Federal Reserve through its control of money supply and interest rates). It is the interplay of policy decisions in these areas that provided the fertile ground for the highly questionable decisions of lenders, borrowers and investors that led to the current unpleasantness. So join me in an interesting stroll through recent economic history for the context that we need to understand how REALTORS® should act both individually and as an association in the light of current events.

The power of the Fed

First, however, a brief explanation about how the Fed affects interest rates and money supply. Interest rates are set mainly through the Fed’s (more…)

It all started with a simple question to VAR legal guru Lem Marshall concerning a proposed major change to our county zoning ordinance. Without getting into all the details of the zoning change, suffice it to say this is a major change for our county from a fairly simple two acre minimum building lot to the sliding scale as shown.

STANDARD SUBDIVISIONS
Parcel Acreage # Lots
4 -10acres = 2 lots 140.01 - 180 = 10 lots
10.01 - 20 = 3 lots 180.01 - 220 = 11 lots
20.01 - 30 = 4 lots 220.01 - 260 = 12 lots
30.01 - 40 = 5 lots 260.01 - 320 = 13 lots
40.01 - 60 = 6 lots 320.01 - 380 = 14 lots
60.01 - 80 = 7 lots 380.01 - 440 = 15lots
80.01 - 100 = 8 lots 440.01 - 500 = 16lots
100.01 - 140 = 9 lots 500.01=16 lots+ 1/100 acres

Lem: Our county is about to pass this new sliding scale zoning: http://www.co.rockbridge.va.us/pubhearings/JPH080501.pdf. We need to know our obligations as REALTORS® for disclosure – how they are different – what about existing listings – what about under contract properties …

Lem’s quick response:

I don’t see that it’s the listing agent’s job to do the buyer’s due diligence as to zoning or the suitability of the land for buyer’s purposes.

The agent of the buyer buying development property, on the other hand, should be up to speed on this kind of change, and bring it to the attention of the buyer client. But even then the contract (if one has been entered into) should speak to buyer’s obtaining certain assurances as to zoning and planning approval, and if the buyer has not already reserved that due diligence right, he’s in trouble even before this change.

Like all land-use issues, the commercial broker needs to be able to guide buyers in the basics of due diligence (assuming the buyer is not represented by competent real estate counsel) and to suggest the appropriate provisions be included in the offer. Otherwise, I don’t see the need for any special disclosures, especially by the listing agent.

I’m relieved to check this off my “to do list” and report back to our Association Board of Directors Lem’s note along with my thoughts “…seems to follow along with the “Buyer Beware.”

But not so fast, we have member questions & further concerns. The following are excerpts from a string of emails that I found to be a very interesting lesson on Agency.

Member concerns & questions:

We need to get our membership educated on the new law and how it will affect our business practices. We need to be sure that we do not expose ourselves to an liability for passing along incorrect information to sellers or buyers.

Lem, I’m very concerned about liability for our agents on either side of any transaction and believe that disclosure backed up by documentation is need for this to work.

Lem’s Response:

Pursuant to what requirement do sellers and listing agents have to inform buyers about zoning issues? There has never been such a requirement, and the latest changes to the Code of Virginia make specifically clear that land use issues are beyond the disclosure obligations of listing agents. See Section 54.1-2131.

This is the buyer’s responsibility. Any buyer who buys land to build on should not expect seller or the seller’s agent to determine and inform buyer about how many lots can be carved out of the land purchased. This is the buyer’s responsibility, and the buyer’s alone. (Buyer agents might have some responsibility to alert buyers to the need to check, but even our buyer agents are not expected to be zoning experts.) This information is available from the locality, and if the buyer wants it, that’s where he gets it. He and the buyer agent can determine the role the buyer agent is expected to play, but to my mind, the proper role is not to play zoning expert, but to remind the buyer (if he needs reminding) that the buyer needs to do due diligence about the suitability of the property for the buyer’s purposes.

I would even go further. Listing agents who take it upon themselves to make representations about zoning may do so, but they do so at their considerable risk. If they’re going to render zoning opinions to the buyer, they had better be right. Why would they take on this responsibility?

Further member concerns:

Actually, I’m relieved to know that there is no requirement that listing agents reveal in advertising or mls listings the maximum number of building rights a parcel may have by law and that buyer agents may direct their clients to do their own due diligence in that regard.

I don’t see this as a zoning issue. When a seller, for instance, wants to sell off a portion of his property he will have to clearly state how many building rights are going to convey with it… When it comes to advising a seller client about a suggested listing price or a buyer client on an appropriate offer amount, shouldn’t agents consider this type of information? Should we direct our clients to produce this information for us before we can provide such advice?

Isn’t this information a material fact about a property just like some uncommon easements (mineral rights) or covenants (conservation easements)? If not, please help me to understand why it isn’t. I know a number of experienced agents who see this just as I do.

Is it possible that we practice the profession locally a bit differently than some in other parts of Virginia?

Lem’s response

I think I understand what you’re saying about the importance of the zoning/building lot issue, but where I think we’re getting crossed up is in determining whose responsibility it is to protect the buyer here. Certainly listing agents need to be able to counsel sellers about their affairs in this regard, and buyer agents need to be able to help buyers. But the original inquiry was as to whether listing agents have a duty to buyers to disclose how many houses can be built on a particular piece of land being sold. Ultimately, this is a land-use and zoning issue, because the number of units that can be built on a particular lot is a function of the zoning ordinance you are dealing with. (Building density is always a zoning issue.) I don’t know how else to say it except that sellers of real estate and their agents have no duty to make determinations and then representations to buyers about land-use issues.

Section 54.1-2131 B of the Code of Virginia provides: “A licensee engaged by a seller shall disclose to prospective buyers all material adverse facts pertaining to the physical condition of the property which are actually known by the licensee. As used in this section, the term ‘physical condition of the property’ shall refer to the physical condition of the land and any improvements thereon, and shall not refer to: … (ii) matters relating to governmental land use regulations ….”

I think this is the main confusion. What you say about the advice agents are expected to give their clients is true, but you shouldn’t take it further to impose on listing agents an obligation to do land-use due diligence for buyers. If it’s in the seller’s interest for the listing agent to be involved in the buyer’s affairs, so be it. But the legal duty just isn’t there, other than as necessary to achieve the seller’s objectives. And as I said earlier, there’s substantial risk in making zoning and other land-use representations to anybody.

A member’s conclusion:

It isn’t the listing agent’s responsibility to disclose to a prospective buyer how many building rights a listed property may have just as it isn’t the buyer agent’s responsibility to do the same for his client. If needed, they should both refer their clients to the appropriate authorities or professionals for accurate information.

As agents we all strive to serve our clients to the best of our abilities. The member questions were all good questions, coming from a seasoned agent that works hard for their clients. They take the time to get to know the clients requirements and use for the property, they take their responsibility and duties to their client seriously. This exchange illustrates just how easy it is to overstep our agency obligations; not only exposing ourselves to unnecessary liability but also actually not representing our clients best interest.

Moral of the story : Be the source of the source not the source.

Note: Bold and italics added by Candy Lynn for emphasis.

Have you seen this article in the Washington Post?

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.

Paul Krugman validates* what I’ve been saying to clients/readers/prospects for some time.

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

Originations and loans are both way up. From the National Mortgage News Daily Briefing:

Federal Housing Administration single-family mortgage originations took off
in the first three months of this year, as FHA applications doubled to 181,900
between Dec. 31 and the end of March, according to Department of Housing
and Development data.

The data also show that FHA-insured loans jumped by 64%, to 89,000,
from December to March. Mortgage banking consultant Brian Chappelle
estimates that FHA lenders are now taking 200,000 FHA mortgage applications
per month and insuring 100,000 loans per month.

There are concerns that the FHA might not be able to handle the increase in
business. But Mr. Chappelle said the FHA direct-endorsement lenders manage
the whole approval process. From an origination standpoint, "there are no
backlogs because the lender controls the process," he said. Mr. Chappelle
is with Potomac Partners in Washington.

This means that more than ever it’s important to keep up to date on what the FHA can do for you — heck, it’s your tax dollars at work!

Ergo, you should set aside some time and some popcorn and watch VAR’s webcast, "Mortgage Lending in 2008: Back to the Future, How FHA can help you and your clients."

Here’s the agenda for tomorrow’s PPAG meeting at VAR’s Headquarters. For those who don’t know, the PPAG committee helps to set the VAR’s legislative agenda for the Association. I’m looking forward to the discussion about convicted felons. If anyone ever has any questions, please let me know. A lot happens in these meetings that directly affect Realtors’ businesses; it’s incumbent on all Realtors to pay attention to what happens here.

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

As I change from my role as a REALTOR to an Education Director, I find that many agents struggle to understand the sometimes confusing requirements of renewing one’s license. For that reason, I am going to try and lay out how one might renew their license. The classes are available most everywhere, but knowing which ones will actually help you might be more of a challenge. I strongly recommend that REALTORS keep track of their own attendance and what CE/PL/Broker hours were applied.

As a reminder, licensees must renew their licensees at specific intervals. Renewals are every two years, on the last day of the month in the anniversary month of licensing. After July 1, 2008 all agents receiving their licenses after that date must obtain their 30 hours in the first 12 months.

In addition to the hours below, everyone must take 2 hours of Limited Services before their next renewal.

For Post Licensing Agents (everyone in the first renewal cycle)

Required Hours (30 hours)

3 Hours of Agency

3 Hours of Fair Housing

3 Hours Real Estate Law

3 Hours of Offer to Purchase

3 Hours of Ethics and Standards of Practice

15 Hours of Electives

For Continuing Education (everyone who has renewed at least once before)

Required Hours (16 Hours)

2 Hours of Fair Housing

3 Hours of Ethics

1 Hour Legal Update

1 Hour Agency

1 Hour Contracts

8 Additional Hours of Real Estate Related Topics

Broker Management Hours (8 Additional after initial 16 CE hours)

Must be 8 hours approved for Broker Management topics. All licensed Brokers, to include Associate Brokers must take these hours, if they are to renew their license in July 2008 or thereafter.

Ok, so now that you are reminded of the mandatory hours, how do you track it? Start at http://www.dpor.virginia.gov/regulantlookup.

When you open this web page, you’ll see:

Enter your name (or license number) and click on “Real Estate Individuals”. Choose “Search Licenses”.

Once the window opens, click on the “View Continuing Education Hours” link.

On the left you’ll see a breakdown of the required training hours. On the right you’ll see the summary of continuing education hours only if you’re a CE renewal. Post Licensing Agents will see the following blue space on the left:

Post Licensing agents need to click the “To review the specific Post License Education courses that you have completed, please click on the link”. Note that you need to ignore the hours on the right they do not apply, except for the Limited Services hours that will be shown here.

On this screen PL agents will see the school who granted the hours, the class title, the mandatory or elective category of the credits and the summary of hours. Note: I have been told that CE screen will one day be this useful.

This web page is very useful for keeping you on track, but it’s not easy to navigate. I hope this has made it a bit clearer for you.

If you have any problems finding certain hours, call VAR or the Education Director at your local association and they’ll be happy to help you develop a plan to get your required hours.

We just emailed the eighth edition Capitol Connections to the entire VAR membership, but point your browser over here if you’d rather read it online. All past editions from the 2008 session are available on the Capitol Connections page within the Legislative Affairs section of VARealtor.com.