April/May 2012 by Jermaine Hawkins

VOLUME XLVI Number 3

The Maryland Association of REaltors®

APRIL / MAY 2012

www.mdrealtor.org

The Voice for Real Estate in Maryland ®

p 12

Consumer Website: WWW.MARYLANDHOMEOWNERSHIP.COM

p 8

Legal Developments in Fair Housing

“Fair Housing Lives in Maryland”

2013 Calendar Contest

p 17

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President’s Perspective Patricia Terrill

xxx

M A R Y L A N D R E A L T O R ® April/May 2012

April / May 2012

F eature s

8 Legal developments in fair housing

14 Maryland realtors® promote fair housing Fair Housing Protected Classes in Maryland

12 table of contents

17 “Fair housing lives in maryland” 2013 Poster Contest 20 Call for entries MAR Prestigious Awards

D epartment s

3 President’s perspective

6 MAR 2012 LEADERSHIP TEAM

22 R egulation News REALTORS® Support Family Farm in Court 23 MARYLAND REAL ESTATE COMMISSION NEWS Maryland Code of Ethics Revision 24 RESIDENTIAL SALES Home Sales Increase in February 28 snippets & Industry tips

30 MRIS UPDATE Keeping Up With Keystone 32 commercial Connection

34 From the hotline When in Doubt...Disclose

M A R Y L A N D R E A L T O R ® April/May 2012

2012 Maryland Association of REALTORS® Leadership Team

Maryland Association of REALTORS® 200 Harry S Truman Parkway | Suite 200 Annapolis, MD 21401-7348 800.638.6425 | www.mdrealtor.org

Patricia A. Terrill

Carlton J. Boujai Jr.

President Prudential Carruthers REALTORS® 7500 Coastal Highway Ocean City, MD 21842-2937 410.524.7000 Fax 410.524.5695 pat.terrill@gmail.com

President - Elect EXIT Realty Prosperity Group 5300 Westview Drive Suite 105 Frederick, MD 21703-8339 301.698.8700 carltonboujai@mris.com

Editor Deborah L. Hager | debbie.hager@mdrealtor.org

Advisory Committee Ron Howard | Co-Chair Lynette Bridges-Catha | Co-Chair Yolanda Muckle | Vice Chair

Advertising & Publication Design J. Russell Boyce

Carole A. Maclure

Secretary RE/MAX 100 10665 Stanhaven Place White Plains MD 20695-3062 301.843.5100 russboyce@remax.net

Treasurer Greater Capital Area Association Pioneer Realty Inc. 17304 Evangeline Ave. Olney, MD 20832-2928 301-648-1282 maclure7@aol.com

Art Comp & Design Alison Cooper | Senior Designer 1921 York Road, Timonium, MD 21093 410.252.4027, x103 | alison@acd1.com

Mission Statement The Maryland Association of REALTORS® exists to support all segments of its membership and their specialties. The Maryland Association of REALTORS®, through collective efforts with local boards/associations and the National Association of REALTORS®: ■ Develops and delivers programs, services and related products that

maintain and elevate the high standards of the real estate business and the professional conduct of its practitioners; ■ Assists members in ethically and professionally serving the public; ■ Promotes and preserves the right to own, transfer and use real

property; and ■ Protects the right of members to conduct business within a framework

of fair and reasonable laws and government regulations. In principle and in practice, the Maryland Association of REALTORS® values and seeks diversity and inclusive participation within the field of real estate and recognizes each member as a unique individual.

Cathy A. Werner Immediate Past President RE/MAX American Dream 9414 Belair Road Baltimore, MD 21236-1504 410.529.7900 Fax 410.529.7906 cwerner@remax.net

M A R Y L A N D R E A L T O R ® April/May 2012

Mary C. Antoun Chief Executive Officer Maryland Association of REALTORS® 200 Harry S Truman Parkway, Suite 200 Annapolis, MD 21401-7348 800.638.6425 mary.antoun@mdrealtor.org

Maryland REALTOR® (USPS 0016-017) is published bimonthly by the Maryland Association of REALTORS®, 200 Harry S Truman Parkway, Annapolis, MD 21401-7348. Periodical postage paid at Annapolis and additional mailing offices. Postmaster send address changes to: Maryland REALTOR ®, 200 Harry S Truman Parkway, Annapolis, MD 21401-7348. Member subscriptions of $3.81 are paid with annual dues. This publication is designed to provide accurate and authoritative information regarding the subject matter covered. It is offered with the understanding that the publisher is not engaged in rendering professional advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought. Articles that appear in Maryland REALTOR® are an informational service to members. Their contents are the opinions of the authors alone and do not necessarily represent those of the Maryland Association of REALTORS®. Permission to reprint articles appearing in Maryland REALTOR® magazine must be requested in writing. Also include purpose for request. While this magazine makes a reasonable effort to establish the integrity of its advertisers, it does not endorse advertised products or services unless specifically stated. ©2010 Maryland Association of REALTORS®, Inc.

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Legal Developments in

FAIR

Housing

When ‘Source of Income’ is a Protected Class Under Fair Housing Law:

Currently, 12 states, the District of Columbia and several Maryland localities prohibit housing discrimination based on source of income. This topic has raised many questions among real estate professionals.

M A R Y L A N D R E A L T O R ® April/May 2012

Fair Housing Act The 1968 Fair Housing Act makes it illegal to make housing decisions based on one of seven protected classes: race, color, sex, national origin, religion, handicap and familial status. Two additional protected classes were added in 1988: families with children and those with disabilities. States and localities can expand the number of protected classes beyond the When source of income is a protected class, rental providers may not refuse to rent to a person with a Section 8 voucher merely because the person participates in the Section 8 program. However, Section 8 is a voluntary, federal rental assistance program, and it is considered a business decision of a private property owner to enter into a contract with HUD that includes very specific terms and conditions for property maintenance and administration. Recognizing the regulatory burden that the program places on private owners, Congress specifically made participation in the program voluntary.1

minimum federal protections; Maryland has added marital status and sexual orientation. In recent years, largely in an effort to address the affordable housing shortage, several states (and localities including Montgomery, Howard, Frederick counties, City of Frederick and City of Annapolis) now categorize ‘source of income’ as a protected class. At this writing, the 2012 Maryland General Assembly is considering

REALTORS join the National Multi Housing Council and the National Apartment Association in taking the following position regarding interpretation of source of income as a protected class: Such protection should not be interpreted to compel a property owner to contract with the federal government via participation in the Section 8 program.2 ®

legislation that would define ”source of income” to include any lawful source of money paid directly or indirectly to, or on behalf of, a renter or buyer of housing, including government or private assistance, alimony, child support or other compensation or benefit. That includes low-income housing assistance

Typically, rental professionals apply uniform (nondiscriminatory) screening criteria, credit requirements and previous rental history to all applicants. However, if a seemingly neutral policy always excludes a certain protected class, it may be deemed to violate the Fair Housing Act (FHA).

certificates and vouchers issued under the United States Housing Act of 1937, commonly known as Section 8 housing subsidies or the Housing Choice Voucher program.

M A R Y L A N D R E A L T O R ® April/May 2012

President’s Perspective

Continued from page X

A successful voucher discrimination claim requires landlords to eliminate their no-voucher policies to promote equal access to housing between people who pay rent with vouchers and those who pay with more traditional forms of income.

Refusal to rent to certificate and voucher holders may have a discriminatory impact under the FHA regulations. If a landlord were to refuse to rent to Section 8 certificate and voucher holders as a subterfuge for refusing to rent to an applicant (for example) of a certain race, national origin, sex and/or the presence of children in the family, that refusal would likely be a violation of FHA rules. Even if the landlord’s refusal were not intentionally designed to keep protected class members out of his buildings, but had that effect, such refusal also may be a violation, regardless of the owner’s reason for a denial.3 A successful voucher discrimination claim requires landlords to eliminate their no-voucher policies to promote equal access to housing between people who pay rent with vouchers and those who pay with more traditional forms of income.4 Proponents of ‘source of income’ protection argue that people with vouchers face discrimination similar to the discrimination families with children once faced: landlords refused to rent to them, thereby reducing the quantity and quality of their housing options.5

M A R Y L A N D R E A L T O R ® April/May 2012

Source of Income and Disparate Impact Analysis: One way in which injured parties have dealt with discrimination is by bringing disparate impact claims. In such cases, a prima facie case of discrimination is established by showing that the challenged practice of the defendant actually or predictably results in illegal discrimination. This analysis focuses on facially neutral policies that may have a discriminatory effect. Federal courts allow claims under the Fair Housing Act on a disparate impact theory by analogizing FHA to Title VII employment claims, because both share a goal of reducing discrimination.6 While this theory has been applied to employment policies and practices, it is unclear whether Congress intended the same theory to be applied to housing. A new HUD policy on disparate impact standards, proposed in November 2011, will, if adopted, implement HUD’s interpretation of the FHA, prohibiting housing practices that have a discriminatory effect, even where there is no intent to discriminate. In other words, FHA rules can be violated by facially neutral practices that have a disparate impact on protected classes.

There are several approaches to determine liability under a disparate impact claim. HUD has proposed applying a three-step so-called “burden shifting” approach. Once a plaintiff has shown a practice to have a disparate impact on a protected class, the defendant would have the burden of proving the challenged practice is necessary for legitimate, nondiscriminatory interests. A plaintiff could still prevail, however, by demonstrating that another policy or decision could serve these legitimate nondiscriminatory interests in a less discriminatory manner.7 Housing providers, lenders and local municipalities are concerned over potential changes to the treatment of disparate impact. Potentially, it could affect zoning ordinances, multifamily development, resident screening, credit scoring, mortgage lending and more.

Sources: 1. http://www.nmhc.org/Content/ContentList.cfm?NavID=599 2. http://www.nmhc.org/Content/ContentList.cfm?NavID=599 3. MAR Legal Hotline FAQs 4. Tamica Daniel, Bringing Real Choice to the Housing Choice Voucher Program: Addressing Voucher Discrimination Under the Federal Housing Act, 98 Geo. L.J. 769, 792 (2010). 5. [See Isabelle M. Thabault & Eliza T. Platts-Mills, Discrimination Against Participants in the Housing Choice Voucher Program: An Enforcement Strategy, 15 POVERTY & RACE 11, 11, 13 (2006), available at http://www.prrac.org/ newsletters/janfeb2006.pdf; see also Stephanie Brien, Legal Housing Discrimination?: Racine-Area Landlords Can Deny People on Housing Assistance, THE JOURNAL TIMES, Aug. 11, 2008, available at http://www.journaltimes.com/news/local/ article_0bd4abbe-ef04-5f5c-88f1-03aaed0e1389.html.] 6. Daniel, supra at 793. 7. http://www.nmhc.org/Content/ServeContent.cfm?isPrinterFriend ly=1&ContentItemID=6417

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EQUAL HOUSING OPPORTUNITY

M A R Y L A N D R E A L T O R ® April/May 2012

Joan Osten so Association (left), Executive Offi cer of Prince of REALTO ®, of Prince G George’s C R ounty eorge’s Cou S , and Alease Bow les nty Associa tion of REA (right), President LTORS ®

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Buzz Ma

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Mary Antoun, CEO, Maryland Assoc

A sea of umbrellas on Law

yer’s Mall in Annapolis

M A R Y L A N D R E A L T O R ® April/May 2012

Jamie Gregory, Deputy Chief Lobbyist for th Association of e National REALTORS® joins rallying in support of M the Save MD MID campaign arylanders

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DC Associatio n of REALTO ® RS Executive attends rally O supported by many DC mem fficer Ed Krauze bers.

Senator Nancy Jacobs, District 34, Cecil and Harford Counties, speaks on behalf in support of Save the MID

Rick Rall, chai rman of the M AR Legislativ President Pat e Committee Terrill engage and 2012 the crowd.

t ® cameraman abou TORS speak to D reduction. A group of REAL MI the t ins aga rally the importance to

2008 MAR Pr esid reporter. Carro ent and current Treasurer spea ll County Asso looks on. ciation membe ks to an NPR r Janice Kirkne r

MAR President Pat Terrill thanks over 400 MAR members and MD homeowners for traveling to Annapolis to rally against the reduction of the Mortgage Interest Deduction

rd County As Jim Skirven, Howa ” “Save M-D, M-I-D

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MAR Lobbyist Bi the need to be ll Castelli explains the need active in parti to rally and str cipating in th to action. esses e Association’s calls ® M A R Y L A N D R E A L T O R April/May 2012

Maryland REALTORS Promote

Frederick County

St. Mary’s

Caroline Howard

Somerset

Baltimore City

Carroll

Dorchester Allegany

Worcester

Harford

Talbot

Calvert Cecil

Baltimore County

City of Annapolis

City of Frederick

Queen Anne’s

Washington

Montgomery Wicomico

Kent

Garrett

Charles

Anne Arundel

Prince George’s

FAIR HOUSING PROTECTED CLASSES IN MARYLAND 14

M A R Y L A N D R E A L T O R ® April/May 2012

Apartment building owners who have not been involved in the design and construction of units may be held liable under the Fair Housing Act for continuing to offer units that are inaccessible to people with disabilities. [National Fair Housing Alliance vs. S.C. Bodner Co., et al.; February 17, 2011, U.S. District Court for the Southern District of Indiana] Reasonable accommodation may be granted to a disabled veteran to keep a small dog in a rented condominium unit to help him cope with the effects of depression and anxiety disorder. The consent decree requires implementation of a new reasonable accommodation policy that does not charge pet fees to owners of service or assistance animals and does not require them to purchase liability insurance. [HUD vs. Fox Point at Redstone Association, Inc.; February 27, 2012, U.S. District Court for the District of Utah]

The new federal Equal Access to Housing Rule (effective March 2012) applies in Maryland to certain federal housing and related programs: •

Owners and operators of HUD-assisted or HUD-insured housing are prohibited from discriminating against an applicant of a residence based on sexual orientation or gender identity.

•

L enders offering Federal Housing Administration (FHA)-insured mortgages are prohibited from considering sexual orientation or gender identity in determining a borrower’s eligibility.

•

T he definition of “family” is clarified to ensure that otherwise eligible participants in any HUD programs will not be excluded based on marital status, sexual orientation or gender identity.

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M A R Y L A N D R E A L T O R ® April/May 2012

FAIR HOUSING PROTECTED CLASSES IN MARYLAND

President’s Perspective

Continued from page X

FEDERAL PROTECTION race, color, national origin, sex (gender), religion, familial status, physical or mental disability

City/County

Additional Protections Afforded by Laws of Counties/ Incorporated Cities in Addition to Federal and State Laws

Allegany X Anne Arundel

City of Annapolis

lawful income

Baltimore County Baltimore City

age, creed age, ancestry, gender identity or expression

Calvert X Caroline X

ADDITIONAL STATE PROTECTION marital status, sexual orientation

City/County Howard Kent

Additional Protections Afforded by Laws of Counties/ Incorporated Cities in Addition to Federal and State Laws age, creed, gender identity or expression, occupation, personal appearance, political opinion, source of income age, ancestry

Montgomery

age, ancestry, family responsibility, gender identity, presence of children, religious creed, source of income

Rockville

age, ancestry, creed, presence of children

Carroll X

Prince George’s

age, occupation, personal appearance, political opinion

Cecil X

Queen Anne’s

Charles X

Saint Mary’s

Dorchester X

Somerset X

Cambridge age, ancestry, creed, use of guide dog by the blind

Talbot X

Frederick County

age, source of income

City of Frederick

source of income

Garrett X Harford

Washington X Hagerstown

age

Wicomico X Worcester X

age, creed, occupation, personal appearance, political opinion

“X” indicates that this county has no additional protected classes other than those recognized under the state and federal laws. * Equal Access to Housing Rule (March 2012) extends protection for sexual orientation and gender identity to HUD-assisted or HUD-insured housing and FHA lending. Age Discrimination Act of 1975 prohibits discrimination on the basis of age in programs or activities receiving federal assistance.

M A R Y L A N D R E A L T O R ® April/May 2012

“Fair Housing Lives in Maryland” 2013 Poster Contest Each year, members of the Maryland Association of REALTORS® (MAR) Equal Opportunity/Cultural Diversity Committee partner with local schools and organizations to encourage and promote understanding of equal opportunity in housing through a Poster Contest. The theme for the poster drawings is “Fair Housing Lives in Maryland.” Winners are chosen from entries submitted by the MAR local boards and associations. Fourteen winners were chosen, including one to appear on the cover of a colorful calendar.

REALTORS® to express their professional commitment to Fair Housing. It has become popular with schools and communities as well as the real estate profession as a highly effective way to raise public awareness of the laws prohibiting housing discrimination. And it celebrates our commitment to making housing available to all. The more than 12,000 free calendars are distributed statewide and nationally to promote the principles of Fair Housing.

Students from around the state in grades K-8 are eligible to participate. They are asked to illustrate the theme and what it means to them. Winners are awarded with certificates and a gift card co-sponsored by BB&T Bank. Winners, their family members, faculty, REALTORS® and dignitaries will be invited to attend a recognition ceremony at the Maryland Statehouse. This April marks the 44th anniversary of the enactment of the federal Fair Housing Law, Title VII of the Civil Rights Act of 1968, prohibiting discrimination on the basis of race, color, creed, national origin, sex, familial status and handicap and encourages fair housing opportunities for all. The Calendar Poster Contest is a visible way for Maryland

Calendar Contributions: Join your colleagues by giving a contribution to help defray the 2013 calendar production costs. Your name and company will appear on the “contributor” recognition page of the calendar. 12,000 calendars will be distributed. Find the Contribution form: www.mdrealtor.org/housing&statistics/ fairhousing/fairhousingcalendarsponsorship.”

Katelynn Cherry • Mid-Shore Board 4H Saddle & Paws Club • 5th Grade Mariclare Anderson Pen-Mar Regional Association Home School • 4th Grade

M A R Y L A N D R E A L T O R ® April/May 2012

Sara Miller Greater Capital Area Association St. Elizabeth School • 5th Grade

Rhiannon Elder Southern Maryland Association Town Creek Elementary • 3rd Grade

Alexis Phillips Greater Baltimore Board Mars Estates PAL Center • 6th Grade

Megan Despres • Harford County Association • William Paca/Old Post Road Elementary • 4th Grade

Kerri Kordyban • Garrett County Board Broadford Elementary School • 4th Grade

Alexander Michel Howard County Association Harpers Choice Middle School • 7th Grade

Alexander McCullough Coastal Association The Salisbury School • 4th Grade

Jasmine Hill• Cecil County Board Elkton Middle School • 7th Grade

Saja Kharma • Prince George’s County Association • Thomas Johnson Middle School • 8th Grade

Stepanie Edsall • Anne Arundel County Association • St. Martin’s Lutheran School Grade Kindergarten

Jennifer Dinterman Frederick County Association Walkersville Middle School • 8th Grade

Dustin Oddis • Carroll County Association Friendship Valley Elementary School 4th Grade

M A R Y L A N D R E A L T O R ® April/May 2012

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MAR PRESTIGIOUS AWARDS

ALL FORMS CAN BE PRINTED, COMPLETED, AND SUBMITTED ONLINE, TO MAR. MAR takes great pride in awarding industry honors to outstanding practitioners in the real estate field. The awards are presented during the Annual Conference in Ocean City. We encourage all Maryland REALTORS® to apply. To learn more about each award, go here: www.mdrealtor.org/ Events/2012AnnualConference/AwardApplications/AwardsSummary

Do you serve your Community? Tell us about it, apply for the MAR Community Service Award or nominate a fellow REALTOR® that you know is working hard giving back to their Community. This award honors individual REALTOR® members who give unselfishly of their time to assist the communities in which they live and work. There is no limit to the number of entries that can be submitted from one Association or firm in this category. All nominees submitted to Associations must be submitted to MAR. DEADLINE - June 29, 2012

Special note: Local Associations are encouraged to continue awarding the Distinguished Sales Associate (DSA), if desired.

The REALTOR® of the Year (ROTY) Award recognizes REALTORS who provide continuous, dedicated service to the industry to enhance the quality of the profession. One ROTY application is required to be submitted by each local Association to be entered in the MAR competition. ONE (1) COLOR PHOTO (any size) in digital format must accompany the entry form to be used for promotional purposes. The recipient of the State Award will represent Maryland at a recognition ceremony during the NATIONAL ASSOCIATION OF REALTORS® (NAR) Annual Convention. DEADLINE - JUNE 24, 2012

The Community Service and REALTOR® Excellence (CARE) Award - DEADLINE - June 29, 2011 – The CARE Award - is presented to Local Associations for its member’s collective community service and charitable actions. The award was developed to raise the profile of REALTORS® and the REALTOR® organization by focusing on Associations that have demonstrated an extraordinary record through direct local Association community service involvement. The activities complied by the Association may include endeavors by individual REALTORS® groups, teams, offices who volunteer in their communities. If you volunteer for charities within your community, please contact your local association. Submissions are made through the MAR local Associations.

M A R Y L A N D R E A L T O R ® April/May 2012

Recognition is a positive reward for a job well done. It is vital that we honor those individuals who have given outstanding service to the real estate industry and the Local Associations. If you have comments or questions, please contact the MAR Communications Department at 800-638-6425. ADDITIONAL AWARDS (Selected at the State level)

“Mar Volunteers: we want you!” Building on the Strength of our Members Committee Year: 2012 - 2013 EASY ON-LINE FORM – NOW AVAILABLE

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GO TO MAR’S WEBSITE – www.mdrealtor.org – and click on “MAR Volunteers We Want You!” SIGN UP — Please be sure to give us 2, but no more then 3 committees that you are interested in serving on, every attempt will be made to accommodate your request for at least one committee

assignment (some committees may have specific member qualifications). COMPLETE AND SUBMIT – It’s that easy!You will be emailed an “Instant Confirmation” when your form is successfully submitted.

DEADLINE: Wednesday, May 9, 2012 REMINDER — ALL CURRENT COMMITTEE MEMBERS MUST COMPLETE A FORM Committee selections are prioritized by qualifications and date received You will receive a letter confirming your committee appointment by August 24, 2012.

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Regulation News Mark Feinroth, Esquire

REALTORS® Support

Family Farm in Court The Maryland Association of REALTORS® will help defend eastern shore

proving that the Hudsons’ poultry farming caused water pollution that

farmers sued by environmental activists under provisions of the Clean

flowed into the Pocomoke River. If the Waterkeeper Alliance succeeds, the

Water Act. The case has important land use implications and could have a

Hudsons and Perdue will be liable for the Waterkeeper Alliance’s attorney

significant impact on farm community property values.

fees in addition damages and their own legal bills. It appears likely that the Hudsons will have no alternative but to declare bankruptcy if they lose this

The case was filed in Baltimore U.S. District Court against Perdue Farms,

case. On the other hand, the Waterkeeper Alliance has relied in part on law

Inc. and Alan and Kristin Hudson. The Hudsons are contract farmers for

students from the University of Maryland to pursue this legal action.

Perdue on a 293 acre farm just outside Berlin, Maryland. In 2009, a local representative of the nationwide non profit Waterkeeper Alliance was

Last October, the Coastal Association of REALTORS® brought the Hudsons’

conducting an aerial survey of the Eastern Shore and noticed a large pile of

case to the attention of the MAR Legal Action Fund Committee. The

material that looked like chicken manure alongside a drainage ditch on the

Committee administers a dedicated fund set aside to assist in court cases

Hudsons’ farm. The drainage ditch feeds into a tributary of the Chesapeake

that could have an impact on the real estate industry. On the Eastern Shore

Bay, the Franklin Branch of the Pocomoke River. Water samples from

of Maryland, where agriculture is an important component of the economy,

ditches adjacent to the Hudson Farm taken soon after the aerial survey were

a test case like the law suit against the Hudsons could undermine property

found to contain high levels of pollution, which the Waterkeeper Alliance

rights of farmers and thereby destabilize the real estate market in our region.

eventually claimed were a product of the Hudson Farm poultry operation. MAR’s Executive Committee approved the Legal Action Fund The pile of material thought to be chicken manure proved to be a treated

recommendation to make a $25,000 contribution to the Hudson Farm

sludge product obtained from the Ocean City wastewater treatment facility.

defense fund as an expression of support for the role of farming in our local,

A fine levied against the Hudsons by the Maryland Department of

state and national real estate industry. For additional information regarding

Environment was reversed because the material was legally obtained and

the case of Assateague Coastkeeper, et. al v. Alan and Kristin Hudson Farm,

intended for use to balance the PH of soil.

et. al. or the Maryland Association of REALTORS® Legal Action Fund, please contact mark.feinroth@mdrealtor.org.

The trial in this case has been postponed and will not be rescheduled until

the parties participate in a settlement conference now set for late in March.

Mark Feinroth, Esquire, Director of Legal and Regulatory Affairs

If the case goes to trial, the Waterkeeper Alliance will have the burden of

Maryland Association of REALTORS®

M A R Y L A N D R E A L T O R ® April/May 2012

Maryland Real Estate Commission News Katherine Connelly

Maryland Code of Ethics

Revision

The Real Estate Commission has finalized amendments to two provisions

The revised Code of Ethics also requires a licensee to disclose his status

of the Code of Ethics regulations governing licensee conduct.

when selling or leasing property owned by the licensee, an immediate family member of the licensee or an entity in which the licensee has an

The first change is to the section of the Code of Ethics addressing

ownership interest. Employees of licensed real estate professionals and

“Relations to the Public” (COMAR 09.11.02.01). The paragraph that

brokerage companies are also required to disclose their employment when

prohibits discrimination against any person or group of persons on the

selling or leasing property they own.

basis of characteristics that include race, color, creed, religion, national origin, sex, handicap and familial status was updated to coincide with

The ethics regulation will now require an employee of a real estate

all other Maryland anti discrimination law and now refers to State

licensee or brokerage company to disclose that employment to the seller

Government Article §20-402. This modification has the effect of

or lessor when purchasing or leasing a property.

adding “sexual orientation” to the protected classifications; any future changes in this statute will automatically be incorporated into the

These revisions became effective March 19, 2012. The regulation allows

regulation by reference.

the licensee or employee to provide the notice to prospective buyers or renters through a multiple listing service advertisement. The regulation

The Commission’s second Code of Ethics modification, in the section

does not require either use of an MLS or that the new notice appear in the

“Relations to the Client,” (COMAR 09.11.02.02) alters the disclosure

MLS listing. It does however require that the notice be in writing.

requirements for licensees and employees of a licensee. The new rule requires a licensee seeking to acquire an interest in real estate to provide

Please feel free to contact me if you have any questions regarding these

a written disclosure of the licensee’s licensing status to the seller or lessor

revisions to the Code of Ethics or any matter involving the Real Estate

not later than the time an offer is submitted. The same disclosure is

Commission. I can be reached by email at kconnelly@dllr.state.md.us.

required by the licensee when the licensee is representing a member of the licensee’s immediate family or an entity in which the licensee has an ownership interest.

Immediate family is defined in the regulation as

Katherine Connelly is the Executive Director of the Maryland Real Estate Commission For more information, visit http://www.dllr.state.md.us/license/mrec

licensee’s parent, grandparent, spouse, domestic partner, child, child’s or stepchild’s spouse.

M A R Y L A N D R E A L T O R ® April/May 2012

Residential Sales Anirban Basu

Home Sales Increase

in February

After last year’s economic soft patch and innumerable disappointments, most economic indicators suggest that the U.S. economy is pushing ahead in 2012 despite a sea of headwinds. The Bureau of Labor Statistics reported that the nation added 227,000 jobs in February, after adding 284,000 new jobs in January. Unemployment is down to 8.3 percent, falling for five consecutive months through January of this year. Despite a growing labor force, unemployment in the nation remained steady in February.

Among the jurisdictions with year-over-year unit sales declines in February were Somerset (-40.0%), Charles (-23.9%), Baltimore City (-18.4%), Washington (-17.6%), St. Mary’s (-15.8%), Calvert (-10.2%), Cecil (-7.0%), Montgomery (-3.8%), Harford (-3.2%), and Prince George’s (-1.8%). There does not appear to be a common trait among each of these jurisdictions, though several are closely aligned with the federal government and its workforce, including Montgomery, St. Mary’s, Charles and Prince George’s counties. Growth in sales appears to have been due in part by increasingly attractive pricing. In January, average Maryland sales price was virtually unchanged, down 0.1 percent, while median price was down only slight more, 0.6 percent, suggesting that prices are moving into line with demand. Of

The good news is that Maryland businesses are hiring. According to the

Maryland’s 24 jurisdictions, 11 registered a year-over-year decline in average

most recent data available, Maryland’s economy added 3,100 jobs in

sales price in January, and 12 recorded a decline in median sales price.

December, 25,200 jobs on a year-over-year basis. This translates into 1.0 percent job growth for the year, still short of the 1.4 percent tally at the

The greatest decline in January average sales price was in Somerset

national level but far better than in earlier periods.

County, with a drop from $177,357 a year ago to $134,870 this January. However, this reflects only a handful of sales; January is a traditionally

Predictably, the improving labor market is helping to lift home sales in

slow month for real estate sales transactions.

Maryland. Unit sales were up 2.5 percent statewide in February on a year-

over-year basis, with fourteen jurisdictions experiencing sales increases.

The largest increases in average sales price were in Dorchester (97.3%) and

These included Garrett (77.8%), Carroll (41.5%), Baltimore (33.2%),

Caroline (86.3%) counties. In Dorchester County, average price rose from

Howard (22.6%), Allegany (20.8%), Worcester (15.2%), Frederick (7.1%),

$116,208 in January 2011 to $229,250 in January 2012. In Caroline

Anne Arundel (6.6%), and Caroline (6.3%) counties. A number of these

County, average price increased from $95,653 to $178,219 one year later.

jurisdictions are Baltimore area suburbs, communities that have been

This is not necessarily a reflection of rising home prices (at the individual

among the state’s better economic performers recently. The Eastern Shore

unit level), but is more likely a reflection of the changing mix of purchases,

also participated in this sales rally, including Talbot (64.7%), Queen Anne’s

as buyers feel more comfortable with their economic circumstances and

(50.0%), Kent (44.4%), Dorchester (33.3%), and Wicomico (11.1%) counties.

near record low mortgage rates allow them to pursue homes upmarket.

M A R Y L A N D R E A L T O R ® April/May 2012

Price dynamics were similar in February, with 16 jurisdictions reporting

There were a handful of jurisdictions that experienced substantially lower

year-over-year declines in average sales prices and 12 reporting year-over-

prices in February. In Dorchester County, for instance, average sales price

year declines in median prices. Statewide, average price was down 1.9

declined (?) 41.3 percent, and median price dropped 30.7 percent. In

percent in February. However, though median sales prices were down in

Baltimore County, average price fell 16.2 percent while median price

12 jurisdictions, median price statewide actually increased 2.0 percent

slipped 10.3 percent. In Talbot County, average price was off 12.7 percent

from February 2011. Certain jurisdictions produced significant year-over-

while median price dipped 12.9 percent. In Howard County, average price

year increases in both average and median sales price in February,

declined 10.4 percent while median price was down 12.5 percent.

including Baltimore City, where average price increased 28.5 percent and median price rose 112.3 percent (from $53,000 to $111,551). This is

Active inventory of unsold homes also continues to fall for the state as a

probably largely a reflection of the dip in the proportion of sales

whole. Ultimately, that will translate into more stable prices and growing

characterized as distressed sales. In Somerset County, average price was

urgency among prospective buyers faced with the potential of rising

up 68.1 percent while median sales price rose 62.0 percent. In Wicomico

prices. In February 2011, months of inventory stood at 11.2 months. One

County, average price increased 17.1 percent, while median sales price

year later, inventory had dipped to 8.3 months. Many jurisdictions are

was up 8.3 percent.

still associated with over two years of inventory, however, including Somerset (40 months), Garrett (32.3 months), and Kent (26 months)

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3/6/12 2:46 PM

M A R Y L A N D R E A L T O R ® April/May 2012

Residential Sales

Continued from page 23

counties. Granted, these figures are probably inflated by weak February

including high and potentially rising oil prices and circumstances

2012 sales, but they indicate that housing market equilibrium continues

surrounding Iran, North Korea and other global hotspots. Correspondingly,

to elude much of Maryland.

the ongoing recovery remains shockingly fragile, which helps explain the Federal Reserve’s ongoing unwillingness to raise short-term interest rates.

Looking Ahead

The recent run-up in gas prices serves as a reminder that it doesn’t take

Among other things, continued economic progress will help improve

much to fundamentally alter the economy’s trajectory.

confidence among prospective homebuyers. Confidence is already building in much of the state, including in Central Maryland. Pending

That said, economic momentum picked up during the latter stages of

sales in Maryland were up on a year-over-year basis in both January and

2011. Financial market performance was more than solid in January and

February. In Anne Arundel County, pending units totaled 475 in February

February, indicating a growing degree of comfort with U.S. economic

2011; one year later, the corresponding figure was 604. In Baltimore

circumstances and prospects. Job creation, auto sales and spending

County, pending units have risen from 526 to 706 over the same period.

generally have continued to hold up. Business in America is gradually

In Prince George’s County, pending sales are up from 950 to 1,188.

normalizing and Maryland’s economy has also gathered momentum in recent months.

The outlook for the broader economy has become more positive in recent months. An object in motion tends to stay in motion, and the U.S.

Anirban Basu, Sage Policy Group, Inc.

economy is presently on the move. Granted, many headwinds remain,

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M A R Y L A N D R E A L T O R ® April/May 2012

January 2012 vs. 2011 Units Average Price County 2012 Allegany 16

2011 Change

2012

2011 Change

31 -48.4% $99,375 $90,618

9.7%

February 2012 vs. 2011 Units Average Price County 2012 Allegany 29

2011 Change 24

2012

2011 Change

20.8% $73,597 $82,754 -11.1%

Anne Arundel 299 306 -2.3% 346,579 375,482 -7.7%

Anne Arundel 339 318

Baltimore City 286 388 -26.3% 138,074 110,513 24.9%

Baltimore City 332 407 -18.4% 143,386 111,551 28.5%

Baltimore County 396 355 11.5% 214,711 239,788 10.5%

Baltimore County 425 319 33.2% 215,899 257,762 -16.2%

Calvert 44 50 -12.0% 291,897 291,401

0.2%

Caroline 16 17 -5.9% 178,219 95,653 86.3% Carroll 78 61 27.9% 242,091 274,710 -11.9% Cecil 40 46 -13.0% 227,240 206,680

6.6% 317,321 345,392 -8.1%

Calvert 44 49 -10.2% 259,744 283,008 -8.2% Caroline 17 16

6.3% 142,321 152,777 -6.8%

Carroll 75 53 41.5% 259,917 262,380 -0.9%

9.9%

Cecil 40 43 -7.0% 190,347 197,009 -3.4%

Charles 92 93 -1.1% 228,665 233,231 -2.0%

Charles 89 117 -23.9% 227,356 213,133 6.7%

Dorchester 20 21 -4.8% 229,250 116,208 97.3%

Dorchester 24 18 33.3% 112,892 192,482 -41.3%

Frederick 120 138 -13.0% 227,646 249,743 -8.8%

Frederick 166 155

7.1% 230,000 230,855 -0.4%

Garrett 27 18 50.0% 333,937 398,779 -16.3%

Garrett 16

Harford 121 150 -19.3% 249,454 250,001 -0.2%

Harford 120 124 -3.2% 225,936 248,351 -9.0%

Howard 154 143

Howard 163 133 22.6% 368,968 411,965 -10.4%

Kent 9 9

7.7% 384,627 381,088

0.9%

0.0% 205,994 182,067 13.1%

Montgomery 530 557 -4.8% 415,887 436,443 -4.7% Prince George’s 526 542 -3.0% 179,834 185,057 -2.8% Queen Anne’s 32 23 39.1% 370,750 275,104 34.8% Somerset 10

7 42.9% 134,870 177,357 -24.0%

St. Mary’s 48 68 -29.4% 273,193 258,500

Kent 13

9 77.8% 278,250 309,667 -10.1%

9 44.4% 220,415 401,101 -45.0%

Montgomery 505 525 -3.8% 391,552 390,022 0.4% Prince George’s 540 550 -1.8% 168,409 181,496

-7.2%

Queen Anne’s 30 20 50.0% 333,441 261,576 27.5% Somerset 6 10 -40.0% 182,250 108,390 68.1%

5.7%

St. Mary’s 53 63 -15.9% 252,548 231,088 9.3%

Talbot 29 17 70.6% 498,889 385,034 29.6%

Talbot 28 17 64.7% 453,948 520,159 -12.7%

Washington 72 73 -1.4% 162,198 139,695 16.1%

Washington 70 85 -17.6% 143,609 143,583 0.0%

Wicomico 44 42

4.8% 144,806 128,685 12.5%

Wicomico 40 36 11.1% 153,453 131,032 17.1%

Worcester 65 74 -12.2% 266,572 288,360 -7.6%

Worcester 91 79 15.2% 272,821 301,359 -9.5%

Total 3,074 3,229

-4.8% $266,041 $266,216 -0.1%

Figures reflect resales and new properties. Residential resales are reported by MRIS ® and local boards MLS systems.

Total 3,255 3,179

2.4% $249,648 $254,588 -1.9%

Figures reflect resales and new properties. Residential resales are reported by MRIS ® and local boards MLS systems.

M A R Y L A N D R E A L T O R ® April/May 2012

Snippets

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M A R Y L A N D R E A L T O R ® April/May 2012

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M A R Y L A N D R E A L T O R ® April/May 2012

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Commercial Connection David J. Fritz, CCIM, SIOR

Financing Still Driving Commercial Sales for Private and

Institutional Investors

The investment sales market continues to be split with the volume of

The graph shows that in terms of volume, institutional sales have

sales being dramatically higher for those appealing to institutional buyers

recovered in a dramatic way that private market sales have not matched.

when compared with smaller assets that appeal primarily to private

After falling to 35 percent of their 2006-2007 level in 2009, institutional

market buyers.

sales were back up to 85 percent of the pre-crash volume in 2011. In contrast, private market sales are on track to remain still well off pre-

As a way to highlight this contrast, we compared the number of

crash levels in 2011 at about 49 percent of that 2006-2007 level.

commercial real estate transactions in the greater Baltimore market area both over $10 million (which we are somewhat arbitrarily defining as

Financing (or lack of it) is a primary driver of the volume of investment

“institutional” in size) and under $10 million (those being smaller assets

sales. Private market buyers are more dependent on financing than their

more typically appealing to private investors).

institutional brethren. In 2011, there remained fewer sources of financing for private market buyers when compared to 2006-2007 and today’s

Baltimore Market Region

sources are lending much more cautiously and are willing to permit less leverage than before. Things are improving incrementally. There are more sources of financing this year than last year, but most private market investors are still depending on banks and, to a lesser extent, insurance companies to finance their acquisitions. This is in contrast to pre-2008 when a major source of financing a private market transaction was Wall Street-originated securitized CMBS financing which was attractive thanks to low rates, long amortizations often including long periods of interest-only debt service, with no personal recourse required.

M A R Y L A N D R E A L T O R ® April/May 2012

In the private market arena, there has been a flight to quality: yield

troubled banks and CMBS loans in the greater Baltimore-Washington area

expectations and capitalization rates fell to pre-crash 2006-2007 levels for

compared with other major markets, thanks to the insulating effect of the

most attractive smaller assets such as well-located, high quality, retail

Federal Government as a demand driver. Those troubled loans that do

strip centers or assets leased on a long-term net-lease basis to companies

exist are moving through lender’s workout process at a glacial pace, while

with excellent credit.

ever-more bad loans come to maturity. Maturity defaults are indeed the biggest sore spot with most of these loans being “extended and pretended”

The solid single digit returns tolerated by institutional investors investing

as long as there is adequate cash flow to carry the loan.

in well-leased, high quality assets are not enough for private market buyers who are looking to create value and generate entrepreneurial

When distressed assets are disposed of through loan or real estate sales,

returns. The best way to generate these kinds of returns is by leasing up

there are few true bargains as lenders find every reason to drag their feet

vacant space. The sluggish economy is yielding a still-anemic leasing

on taking these write-downs. CMBS special servicers are the most

market. As such, buildings with significant vacancy that once generated

notorious culprit of this strategy. They have little incentive to dispose of

a bidding war among investors are languishing on the market.

troubled assets in a timely manner and every incentive to continue managing a bad asset and collecting their asset management fee. Bad

Many of these private entrepreneurial investors had hoped for a wave of

CMBS assets language in special servicing in months or even years, many

opportunistic investment opportunities in the wake of the 2006-2007

times despite the fact that values continue to erode.

crash. However, it has turned out that there have been relatively few Unlike private market buyers, institutional investors have become frenzied buyers of real estate in 2011, increasing their allocation to real

WAITING For Your Commission?

estate to “chase” higher yields than they can achieve through historically low bond yields. Due to its status as a global gateway, Washington, DC, remains one of the hottest investment markets in the country for institutional investors. Baltimore’s status as one of the busiest deep water ports in the nation makes it an attractive market in particular for institutional buyers of warehouses. Institutional buyers, who made acquisitions in 2011, typically underwrote little to no asset appreciation in the near term. They intended to be longterm holders and focused on assets they perceived as risk free. Trophy Washington, DC, CBD office buildings were big beneficiaries of the market

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as well as trophy quality retail centers in the most affluent areas. Apartments remain the hottest property type, with buyers recognizing that everyone needs a place to live, and that the declining residential real estate market is actually creating more renters. Attractively priced governmentbacked mortgage financing is also fueling appetite for this product. Unfortunately, in the past few months, the economic crisis in Europe has tarnished the recovery in the investment sales market. We are seeing pullback from all categories of buyers who are taking a “wait and see” attitude toward these developments.

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David J. Fritz, CCIM, SIOR, is a Principal with NAI KLNB in Columbia, MD

M A R Y L A N D R E A L T O R ® April/May 2012

From the Hotline Charles A. Kasky, Esquire

When in Doubt...

Disclose

As a listing agent, I struggle with how my duty to disclose property conditions relates to a seller’s obligations under the law. For example: the seller of a property filled out the Disclosure Statement on the Maryland Residential Property Disclosure/Disclaimer form. A contract was accepted, contingent on the buyer’s home inspection. After receiving the home inspection report, the buyer submitted a list of 70 items for “Corrective Action” by the seller. The seller agreed to make some, but not all repairs. In response, the buyer rescinded the contract. The seller now has knowledge of several conditions of which he was unaware before he received the report, as am I. Does this alter legal responsibilities for either of us?

A. The short answer is: almost certainly, yes. Your situation crystallizes a common question we hear on the MAR Legal Hotline. You are right to distinguish a seller’s legal obligations from yours as a real estate licensee, because they are substantively different. The seller of residential property is required to provide to a buyer a completed Disclosure or Disclaimer Statement. If the seller completes the Disclosure Statement, it must be accurate, with no items left blank. If the seller completes the Disclaimer Statement, the seller is making no representations as to the condition of the property. Whether the seller discloses or disclaims, the seller is required to disclose latent defects of which the seller has actual knowledge. A latent defect is a condition that could cause harm to an occupant of the property and that could not be discovered by careful visual inspection of the property. If the seller chooses disclosure, and a subsequent home inspection exposes new conditions that would result in changes to the answers the seller provided on the Disclosure Statement, the seller must complete a new form and make that available to subsequent prospective buyers. Similarly, if the seller learns of latent defects of which he was previously unaware, the seller must disclose them, whether he disclosed or disclaimed.

FREE Legal Hotline 34

Maryland real estate licensees, however, have entirely different obligations concerning disclosure of property conditions. Under the Real Estate Brokers Act, a licensee must disclose to all parties material facts the licensee knows or should know. The Real Estate Commission has said that this obligation requires a licensee to make a reasonable effort to ascertain all material facts concerning every property for which the licensee accepts agency. A material fact is anything that may affect the value of the property or a party’s decision to buy or sell the property (i.e., the terms or conditions on which the party would buy or sell). Under this standard, a licensee who comes into possession of material facts must disclose those facts to all parties. You and the seller received the inspection report. The law requires you to evaluate the conditions cited in the report in light of the definition of material facts I have provided above, and disclose to prospective purchasers the conditions that meet the definition. I know this is not a popular position to take, but it is clearly the law. For purposes of risk management, we recommend this disclosure be in writing and that you obtain an acknowledgment of receipt from the buyer. One final point. Before disclosing any material fact, first ask yourself: “What’s the fact?” In this case, it’s not simply that a condition exists, because you have no first-hand knowledge of it. Every home inspection report is an expression of the inspector’s opinion regarding the property. Therefore, your disclosure should begin with a statement like “In the opinion of a previous home inspector, the following material facts concerning the property exist.” Applying this analysis to any situation can insulate you from allegations that you failed to comply with your legal obligation to avoid error, exaggeration, misrepresentation or concealment of material facts.

Charles A. Kasky, Esquire, Vice President of Legal Affairs Maryland Association of REALTORS®

1-800-888-1272 • Monday and Wednesday • 10am – Noon and 2 pm – 4 pm www.mdrealtor.org • Complete an Online Form available in the Legal Hotline tab

M A R Y L A N D R E A L T O R ® April/May 2012

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Silver Spring 301-879-2600 Towson 410-828-4700 Waldorf 301-870-7653 VIRGINIA OFFICES Alexandria 703-836-1464 Fairfax/Oakton 703-691-7653 Hamilton 540-338-4171 Kingstowne /Ft.Belvoir 703-550-7653 Lake Ridge 703-497-7788

Leesburg 703-777-1250 Manassas/Gainesville 703-396-6000 Reston 703-716-2900 Vienna 703-281-8500 Winchester 540-722-9300 Woodbridge 703-897-4663 WASHINGTON D.C. OFFICES Capitol Hill 202-393-1111 Uptown 202-243-4200

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