Kentucky ®
SPRING 2016
A publication of the Kentucky Association of REALTORS®
Two vital steps to generating online leads Social media posts that get you in trouble Drones in real estate kar.com
CONTENTS Volume 9, Number 1, SPRING 2016
A publication of the Kentucky Association of REALTORS® President C. Lamont Breland, Greater Louisville Association
IN THIS ISSUE
10 Two vital steps to generating
President-elect Mike Becker, Northern KY Association
online leads
Treasurer Steve Cline, REALTOR® Association of SKY
13 Social media posts that
Treasurer-elect Rip Phillips, Greater Louisville Association KAR members should always send address changes to their local board/association first. Subscription rates: $10 per year (included in dues) for members, $25 per year for nonmembers. All articles represent the opinions of the authors and do not necessarily represent the opinions of Kentucky REALTOR® or KAR and should not be construed as a recommendation for any course of action regarding financial, legal or accounting matters by KAR or Kentucky REALTOR® and its authors. Reproduction prohibited without permission. Copyright© 2016. Kentucky Association of REALTORS®, Inc. All rights reserved. Address letters and inquiries to: Kentucky REALTOR® 2801 Palumbo Drive, Suite 202 Lexington, KY 40509 TF 800.264.2185 T 859.263.7377 F 859.263.7565 www.kar.com email: hcooper@kar.com
get you in trouble
7 Drones in real estate 1 20 The 5 real estate trends
that are shaping 2016
REGULAR FEATURES
4 KAR News 5 6 8 14 19 22 24 25 30
President’s Message Tools You Can Use Legal Update Legislative Update Education Local Association News By the Numbers Housing Stats A Day in the Life of...
ON THE COVER Cover photo submitted by Earleene Woods, with Keller Williams Experience Realty in Murray. The shot was taken on Blood River, a well-protected inlet on Kentucky Lake in far western Kentucky. The bird pictured is found throughout North America from the Aleutian Islands in Alaska down to Florida and Mexico and is typically spotted on the coast or on large inland lakes and rivers. Go to the KAR Facebook Page (facebook.com/kentuckyrealtors) — please like the page if you haven’t already — locate the cover photo and comment with the name of the bird for a chance to win a free online course with Jason Vaughn, courtesy of the Kentucky Real Estate Education Foundation (KREEF). If you would like to submit a photo for the magazine cover contest (Fall 2016 issue), send photographs to kar@kar.com. Photos must be high resolution and be Kentucky specific — landmark, destination, etc. SPRING 2016 | Kentucky Realtor® | 3
KAR NEWS KAR names new Chief Executive Officer KAR has named Steve Stevens as its Chief Executive Officer, effective May 17, 2016. Stevens had most recently been president and CEO of Greater Spokane Incorporated (GSI), the 1,200-member chamber of commerce and economic development agency for eastern Washington. In his role, Stevens’ focus was on recruitment and expansion of business and industry, government relations, workforce Steve Stevens development and member services. During his tenure, strong legislative advocacy by the organization helped secure over $1.7 billion in new funding for the region. “I am thrilled to be coming home to Kentucky to apply my expertise and years of experience to help support such an important segment of Kentucky’s businesses. Working as a dedicated business advocate for most of my life, it’s been my ‘calling’ and I am energized to be part of this team. Nearly 10,000 members count on KAR’s strong advocacy to advance issues and provide important member services that help them grow and maintain strong businesses in Kentucky.”
HomeOwnershipMatters.Realtor: NAR’s New Consumer Advocacy Website HomeOwnershipMatters.Realtor, the flagship website of NAR’s Consumer Advocacy Outreach Program, offers brokers, agents and state and local associations, a comprehensive way to educate and engage consumers on homeownership-related public policy issues at the state, local and national levels. Consumers can get the latest information on public policies affecting home ownership, private property rights, community building and the free enterprise system as well as participate in national calls for action.
Brokers and agents are free to link to or use the content from HomeOwnershipMatters.Realtor on their personal or company websites and on social media to stay in touch with past and prospective clients. This includes free access to post information to or use HomeOwnershipMatters.Realtor video clips in newsletters or use videos and content from the Broker Consumer Content Library, which will be available early 2016.
KAR Elections www.kar.com > Members > Elections Deadline: Thursday, September 1 KAR is seeking nominations for several leadership positions for 2017. The information regarding the openings, terms, voting information and the form can be found on the nomination form. If you need additional information or would like to discuss, please contact Julie Johnson, Legal Affairs Director, at 800.264.2185 or at jjohnson@kar.com. Open Positions: President-Elect (1 position, 1 year term); Treasurer-Elect (1 position, 1 year term); At-Large Director (3 positions, 3 year term); Region Director for 2, 4 & 6 (3 positions, 2 year term); At-Large Delegate (3 positions, 3 year term); NAR Director (1 position, 3 year term)
Award Nominating Forms www.kar.com > Members > Awards KAR invites nominations of members (and associations through the CSA) for the 2016 awards. These awards have been created to recognize members, through their commitment to the industry, who consistently demonstrate the practices that define the very meaning of the term “REALTOR®.” To learn more about each award, download a form from the website. • REALTOR® of the Year Award: Deadline: Monday, June 1, 2016 • Distinguished Service Award: Deadline: Friday, June 3, 2016 • Good Neighbor Award: Deadline: Monday, June 1, 2016 • Nat Sanders Education Award: Deadline: Saturday, August 15, 2016 • REALTOR® Community Service Award: Deadline: Saturday, August 15, 2016
OUR AFFINITY PARTNERS Contact GEICO for a free quote on auto insurance to see how much you could be saving. Mention your KAR affiliation, you could qualify for an exclusive member savings opportunity on auto, homeowners, renters, motorcycle insurance and more! Through this special auto insurance program, you will save up to $500 with special rates on your auto policy even if you already have Nationwide as your carrier. In addition to auto insurance, Nationwide can also provide you with other products such as home/renters, boat and RV insurance as well as identity theft protection.
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KAR members can save up to 30 percent on UPS shipping. Members currently enrolled in the UPS Savings Program must re-enroll to take advantage of this new exclusive offer. KAR members can now save over 40% on tickets to Kings Island, a 364-acre amusement park located 24 miles northeast of Cincinnati in Mason, Ohio that has won Amusement Today’s Golden Ticket Award for having the “Best Kids’ Area” in the world for fourteen consecutive years (2001–2014). The park features over 80 rides, including 14 roller coasters and a 33-acre water park.
Provided to you and your family & friends to help lower your prescription drug costs. Your FREE Prescription Drug Card can save you up to 75 percent (discounts average roughly 30 percent) at more than 54,000 national and regional pharmacies. KAR members can now join the UKFCU and enjoy all the benefits offered like free online banking and bill pay, great rates on mortgages and other savings and loans and over 30,000 free ATMs nationwide. With many different ‑financial products and services, from checking and savings accounts to auto loans and money market accounts, UKFCU can meet your needs and serve you for life. And, you receive $50 just for joining.
PRESIDENT'S MESSAGE
Position your business to succeed
I
t looks like this year is going to be a busy one! Sales and values are up, however, inventory and interest rates continue to be low, which may not be a good sign. I think most would agree there are some indicators on the horizon that the market and economy may be ready for a correction in the not so distant future. I’ve said it before, but this may well be the “good ole days,” and now is the time to take some precautions so that your business will sustain any possible downturn in the market. Here are some thoughts:
1. Make a Plan: When was the last time you set aside time to create or update your plan for success as a REALTOR®? There have never been more opportunities to succeed in real estate as there are today. Unfortunately, they are reserved for those who are organized, have a good plan and execute that plan each and every day. Beware of the many ways to spend money to attain “success,” however. This is a relationship business first and there is no substitute for careful planning, goal setting, execution and hard work. 2. Time Block: Block out time each week to work ON your business, not just IN it. Be intentional about sending out hand written notes, updating your database, learning new technology or just asking for referrals from those you do business with (loan officers, inspectors, attorneys, etc.). 3. Go Pro: Be more professional! Not just to your clients, but to your fellow REALTORS®. A small percentage of agents do a majority of the business, so get to know those agents and build quality relationships with them. The best way you can do that, however, is being known as a true professional. So give feedback, return calls and if you see they’ve made a mistake, let them know! They will appreciate it and may return the favor someday. I would encourage you to read the National Association of REALTORS® Code of Ethics at least once a year and always remember that it is summed up in The Golden Rule: Do unto others as you would have them do unto you.” 4. Learn More: There is a saying, “if you want to earn more, learn more.” That is so true. Be a lifetime learner, whether it’s through classes at your association, reading good business books, listening to books on tape or watching training videos
LAMONT BRELAND 2016 KAR President
on YouTube. Whatever you do, make it a point to always be learning! 5. Build Reserves: Be sure to set aside funds from each closing for taxes (20%), marketing (10%), and reserves (15%). It’s never too late to start good habits! None of this is new, but successful REALTORS®, the ones that have done well in this business and will continue to do so, understand how critical it is to be disciplined. History shows the real estate market is rarely on an even plane, its either on the way up or on the way down. Unfortunately, it’s usually a process and we don’t see it until its well on its way. While you’re getting better at your business, the Kentucky Association of REALTORS® is doing the same. As I write this article, the Kentucky General Assembly has just finished the 2016 session and KAR was at the table working tirelessly, tracking some 40 bills (daily) that affect the real estate industry. We will also be headed to Washington D.C in a few weeks to do the same at the national level. KAR exists to serve it’s over 9,600 members. As a state association, most of our members don’t come in contact with us nearly as often as they do their local association. Sometimes it seems that we’re like salt in a good recipe, you don’t know we’re there until we’re gone! I assure you that we are here and working every day to add value to your business! What can we be doing better? I would love to hear from you, so please send me an email at LB@ brelandgroup.com and let me know. Have a great spring and summer and thanks for helping KAR and your business — Keep Moving Forward!
SPRING 2016 | Kentucky Realtor® | 5
TOOLS YOU CAN USE Apps for real estate Real estate technology moves fast so it’s important to keep up with the latest mobile apps (for both iOS and Android). Check out these options:
Ink Cards and Postagram: send your clients, or potential clients, a follow-up thank you card. This app will send a personalized postcard, from you, to whoever you want for just a couple bucks. Or in the case of Postagram, for less than a dollar. Snapseed: acts as a powerful photo editor, packed full of editing options including a feature called “Selective Adjust,” which allows you to edit certain areas of a photo without altering the entire picture. Word Swag: with a large selection of fonts and style, it allows you to put text onto pictures which can be a great tool for branding yourself as an agent or promoting that unique new listing. Waze: a turn-by-turn navigation app that updates road conditions in real time with help from its users. Whether it’s speed traps, accidents or a stalled car on the side of the road, Waze keeps you updated on driving conditions to get you to your listing appointments on time.
REclarity - Real Estate Video Message Maker Compelling visuals are becoming more important in real estate and with REclarity, you can easily create photo-based video messages that combine voice and pictures to communicate your message to clients. As a real estate professional, using REclarity to create and share personalized ZAP video messages will help you dramatically clarify your intended message and improve your efficiency, minimizing time spent typing tedious emails and messages. It’s a feature-filled app that creates high-quality video and audio for even the most time challenged and tech shy professional due to a simple to use interface. The app is only available for iOS but there is a free version or an upgraded version that can be purchased for a small one-time fee. The free version gives you up to 3 images and up to 30 seconds of recording time while the paid version increases to 12 images and a full 2 minutes of recording time. Sharing your message is a snap as it saves to your device and allows distribution through text, email, Facebook, YouTube, WhatsApp or other social media programs and can be uploaded to many of the real estate portals.
Take the KAR Survey of the Month Each month, KAR is asking members to respond to a question about the real estate industry. The feedback received is used to gather insight on a topic trending in the industry. The information will be used to develop articles, create education and is shared in newsletters, social media and the magazine. To see the latest question, visit kar.com > Education.
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Home design trends through the years How has the typical American home evolved over the last fifty years? Robert Dietz, the chief economist at the National Association of Home Builders recently spoke with Real Estate Today Radio about home design trends that have come and gone, and those that will be here to stay. While buyers from fifty years ago and now prefer single-family homes in the suburbs, buyers in 2016 expect new homes to be adaptable, open, and efficient. So how has the typical American home evolved over the last half century? Chief economist Robert Dietz, from the National Association of Home Builders, gives the low down predicting future design preferences will include efficient design and energy efficient features. He also believes that location will play a larger part in where buyers choose to build, and a rise in townhomes and locations near urban villages with walkability features. New-home design characteristics in 1966: • The average home size was much smaller than today. • The one-story homes were popular with builders and buyers. • The kitchen, dining room, and living rooms were all separate. • Laundry rooms were located in the basement. • The efficiency of home features was not a big consideration. New-home design characteristics in 2016: • The average size of the home keeps growing, mainly because builders are catering to a higher-income, older demographic. • 60 percent of new homes have at least two stories. The need for multiple levels is due to millennials wanting more space for their growing families, and also because of the increase in multi-generational households. • Open-floor design is the new norm across all generations of buyers. • New home construction emphasizes energy efficiency and efficient design. • Laundry rooms are typically located on the home’s main level.
NAR Home Survey NAR recently released the results from its second installment of its HOME Survey, where a sample of US households are asked a series of questions about market conditions and the economy. Here are some of the findings (to see the full report, visit realtor.org and search for the HOME survey): • The survey findings call attention to the glaring need for more supply of single-family homes as 85% of homeowners and 75% of renters said they would buy a single-family home. • Supply and demand imbalances and unhealthy levels of price growth have made buying an affordable home a difficult task for far too many first-time buyers and middle-class families. Tight inventory and affordability conditions will likely worsen without significant headways made in single-family housing starts in relation to job creation. • A high number of homeowners are expressing that it’s a good time to buy, a sentiment that is no doubt being fueled by the $4.4 trillion in housing equity accumulation in the past three years. • Fewer renters (62%) compared to the December 2015 survey (68%) believe that now is a good time to buy a home. Accelerating home prices and the perceived difficulty in obtaining a mortgage appears to be tugging at the confidence of renters.
Least desired home features for buyers In a recent survey of more than 4,300 house hunters of all ages, the National Association of Home Builders identified the top 12 items buyers say they don’t want in a new home: • • • • • • • • • • • •
Elevator (63 percent say they don’t want one) Pet washing station (54 percent) Wine cellar (53 percent) Golf course (53 percent) Daycare center in the community (52 percent) High density — smaller lots and attached or multifamily buildings (46 percent) Cork flooring on the main level (45 percent) Dual toilets in master bathroom (44 percent) Two-story family room (43 percent) Wet bar (42 percent) Two-story entry foyer (40 percent) Laminate countertop (40 percent)
2. Improperly placed anchor bolts: missing or improperly placed foundation anchor bolts. 3. Braced wall errors: missing blocking for braced wall panels. 4. Weakened joists and beams: beams that aren’t sized for the load or that lack proper bearing (can be more of an issue with remodelers). 5. Deck ledgers and braces: inadequate deck connections that can be dangerous and cause the entire structure to fall. 6. Stair rise and run errors: inadequate horizontal space planned for stairways that results in stairs that are too steep. 7. Stair handrails and guardrails: wrong heights as measured from the tread. 8. Missing or inadequate fire blocking. 9. Air-barrier gaps: missing air barriers, particularly behind HVAC chases and attic knee walls. 10. Exposed kraft-faced insulation: the paper cannot be exposed and must be covered with drywall or other type of sheathing, even in attics and crawlspaces.
When should a home be listed? 5 things a home owner should do when moving into a home Before a home owner gets settled in, there are 5 things to do immediately to the home, according to Bankrate. 1. Change the locks. Who knows how many people have keys to the home. But it’s recommended you don’t just re-key the locks. Go ahead and replace the hardware, too. You get a nice update and peace of mind. 2. Change all the filters including aeration filters in kitchen and bathroom faucets, the air filter in the heating and air conditioning unit as well as the vent filter above the stove. And, check the dryer vent to make sure it’s not clogged. 3. Give the entire home a thorough cleaning while it’s empty. You can see every blemish that may need attention. Once the home is furnished, it’s harder to get to some places and you may forget to tackle some of the defects. It’s good to go ahead and wash windows, vacuum floors, steam clean carpets and, if necessary, buff and seal wood floors. 4. Install or update home technology before moving in. You not only have easy access to every spot in your home which can help with planning and installation but you get to enjoy the systems and upgrades right from the start. 5. See if the previous homeowner has a list of contacts and service people they’ve used for repairs. Previous providers have a background on the property and may be better to help if something comes up.
Top 10 building code violations With about 45 percent of residential field inspections revealing a code violation, according to the Common Code Violations survey by the International Code Council and the National Association of Home Builders, it’s important to know what to watch out for and what issues spring up the most often for builders. 1. Missing documentation: not having all the required documents (e.g. structural plans and energy code docs) on-site. Required documentation varies by jurisdiction.
When it comes to listings, NAR analyzed data for 2015 and found that spring months work best and an obvious lack of weekends. The biggest months for new listings are April, May and June, followed by March and July. These months alone accounted for roughly half of all new listings in the analysis. While not devoid of new listings, the weekends are obviously not popular days to list. Among weekdays, Fridays and Thursdays are the most common days for new listings to go up, with Mondays and Wednesdays trailing a bit and Tuesdays not too far behind. Tuesdays and weekends are the only days of the week absent in the top 25 days for listings. While home closings exhibit a strong tendency to get done at the end of the month, listings are much steadier throughout the course of the month with a slight tendency to be posted earlier rather than later. To see a list of the top 25 dates to list a home, check out the KAR Facebook page at facebook.com/kentuckyrealtors and don’t forget to like the page.
Follow KAR on Facebook and Twitter KAR has posted its Twitter feed and Facebook page link on the home page of its website (kar.com) so members and consumers can follow all the things going on with the association. Keep up with all things KAR on a real time basis – legislative updates, industry news, business tips and much more! Or you can visit the pages directly: facebook. com/kentuckyrealtors or twitter.com/kyrealtors.
SPRING 2016 | Kentucky Realtor® | 7
LEGAL UPDATE
Closing costs, RESPA and Kentucky’s license law BY JASON VAUGHN
A
question recently arose concerning whether a licensee may advertise that they will pay a consumer’s closing costs. Whether or not a licensee may pay a consumer’s closing cost depends on an evaluation of the proposition under both the Real Estate Settlement Procedures Act (“RESPA”) and Kentucky License Law. The key thing to remember is that a licensee may not accept or make any referrals in connection with the payment of the consumer’s closing costs.
RESPA Section 8(a) of RESPA states that “No person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person.”¹ There are three elements to an illegal kickback under RESPA, (1) a “thing of value,” (2) an “agreement or understanding,” and (3) a “referral.” ² At first glance, the proposal of advertising paying credit to defray closing costs in exchange for business would appear to violate RESPA. The defraying of closing costs is a thing of value, there is an understanding or agreement that the licensee will pay the closing costs in exchange for business, and there is a 8 | kar.com
referral in that the person is influenced to use the licensee. The potential violation in this situation would be the referral of business to utilize the services of the licensee that is offering the payment of closing costs. The parties to the alleged RESPA violation would be the licensee and the consumer, and the “kickback” would be the payment of closing costs. However, RESPA was designed to protect consumers from high closing costs, not to prevent them from obtaining lower costs. An exception to RESPA is that a borrower cannot be considered a party to a kickback in his own loan transaction.³ In other words, if the person receiving the only benefit to the agreement or understanding is the borrower, then it is not an illegal kickback, and there is no RESPA violation.⁴ A caveat to this exception is that it does not relieve the licensee from its prohibition against referrals with any preferred lenders or title companies. The payment of closing costs must be given without strings attached, or the licensee may be liable for using the defrayed costs to steer the customer. Furthermore, while defraying the closing costs is legal under RESPA, if done properly, these defrayed costs cannot be used to justify any increase in other settlement costs, and the licensee must not obtain an advantage from defraying the closing costs.⁵ Finally, it is likely that any defrayed costs would be covered by a rebate of a portion of the licensee’s commission. While RESPA is now administered by the Consumer Financial Protection Bureau, until 2011 it was administered by the Department of Housing and Urban Development, who had addressed rebates by licensees to borrowers.⁶ It stated that while such a rebate is legal under RESPA, it must be listed as a credit on page 1 of the HUD-1 in Lines 204-209, and the name of the party giving credit must
be identified.⁷ However, no part of the amount rebated or paid may be tied to a referral of business.⁸ Due to the benefit to consumers, offering to defray closing costs is likely permitted under RESPA, so long as no part of the offer is tied to a referral or steering business to a specific provider of real estate settlement services.
Kentucky License Law Unlike some other states, Kentucky does not appear to outright ban the payment of cash prizes or rebates, with the exception of prizes given away in a lottery.⁹ In 1991 the Kentucky Real Estate Commission (the “KREC”) promulgated regulations that banned brokers from offering rebates or inducements to potential buyers and sellers. However, in 2005, the U.S. Justice Department filed an antitrust action against the KREC, stating that the regulations banning rebates and inducements in Kentucky was an unreasonable restraint on trade and a per se violation of Section One of the Sherman Act.10 The Justice Department further stated that rebates and inducements in the sale of real estate benefited both buyers and sellers by allowing competition amongst brokers and lowering the cost of home sales, as well as contributing to a more competitive and more-efficiently operating marketplace.11 The case ended with an agreement between the Justice Department and the KREC that the KREC could no longer enforce the regulations prohibiting licensed real estate brokers from offering non-misleading rebates or inducements.¹² Following the resolution of that case, the KREC mailed notification to real estate licensees in Kentucky notifying that, under the terms of the settlement with the United States, the KREC would no longer
The key thing to remember is that a licensee may not accept or make any referrals in connection with the payment of the consumer’s closing costs. ban the use or advertisement of rebates, inducements, or discounts. KREC’s General Counsel explained that, “any type or amount of inducement and rebate is acceptable, so long as it is disclosed in writing.”13 Presumably, this disclosure in writing is to ensure the rebate or inducement is not misleading to the consumer. Black’s Law Dictionary defines inducement as “the act or process of enticing or persuading a person to take a certain course of action.”14 As offering or advertising to pay closing costs would likely entice consumers to utilize a licensee’s brokerage, such an offer or advertisement would likely be considered to be an inducement. As stated above, the U.S. Department of Justice has made it clear that such inducements are beneficial to the real estate market and are not to be prohibited by the KREC. Therefore, so long as the broker discloses the offer to pay closing costs in writing, it should be permitted under Kentucky law. Kentucky law does, however, forbid “paying valuable consideration to any person for the name of potential sellers or buyers, except as otherwise provided in KRS 324.020(4).”15 Any licensee who is contemplating payment of a consumer’s closing costs must take steps to ensure that they do not receive any type of referral in connection with the transaction, so as not to be liable for
paying a referral fee to an unlicensed person for the name of potential buyer or seller. While it may be desirable for licensees to offer to defray closing costs as a way to entice customers to do business with their brokerage, any licensee considering such an offer must ensure that there are no other referrals connected to the defrayed closing costs and that no advantage is gained by any real estate settlement service. Furthermore, a licensee considering defraying closing costs must make sure the details of the offer are disclosed to the consumer. So long as the licensee takes these precautions, an offer to defray closing costs should be permitted. n 1 12 USCS § 2607(a). 2 Howard Lax, RESPA Compliant 3 (Oct. Res. Corp. 2007). 3 Id. at 4. 4 Id. 5 Id. at 5. 6 HUD New RESPA Rule FAQ’s 47, available at https:// portal.hud.gov/hudportal/documents/ huddoc?id=resparulefaqs422010.pdf. 7 Id. 8 Id. 9 KRS § 324.160(l). 10 Competitive Impact Statement at 7, U.S. v. KREC, No. 3:05-cv-00188-S (W.D. Ky. July 26, 2005). 11 Id. at 4–5. 12 Amended Final Judgment, U.S. v. KREC, No. 3:05-cv00188-S (W.D. Ky. July 15, 2005). 13 Lee B. Harris, Inducement and Rebate Ban is Lifted, Ky. Real Est. News, Fall 2005, at 4. 14 Black’s Law Dictionary 379 (4th pkt. ed. 2011). 15 KRS § 324.160(s).
Jason Vaughn is a lawyer with Vaughn & Smith, PLLC in Louisville and serves as legal counsel to KAR. The attorneys at Vaughn & Smith, PLLC constantly monitor the real estate industry as a whole, as well as any and all changes in the law that may affect it. They have intimate knowledge of commercial and residential real estate transactions and can utilize this base knowledge when representing their client's interests. This discussion should not be viewed as legal advice. Please consult your attorney.
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www.kyhousing.org SPRING 2016 | Kentucky Realtor® | 9
TWO VITAL STEPS TO GENERATING
online leads BY NOBU HATA
NAR’S DIRECTOR OF DIGITAL ENGAGEMENT
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G
ive clients transparent information and memorable real estate experiences that they’ll want to share with family and friends. The leads will follow.
We’ve made real estate look easy — there’s a whole cable TV channel devoted to the subject. In fact, we’ve made it look a little too easy. Expertise and skill have been eschewed for trust, which is why family and friends win out. “My mother’s uncle’s girlfriend would never steer me wrong!” Let’s start telling the world the truth: Real estate is hard, and true real estate experts are a valuable resource. Let’s rethink marketing, master the art of mobilizing our raving fans, and start earning and attracting leads and business rather than feeling entitled to them. So, if the world doesn’t understand how hard real estate is, you can help change that. Take a page out of HGTV’s playbook and post information on your website such as outlining the process of a real estate transaction. Let’s educate the public on the complex steps it takes to buy a home. The best real estate transaction is a smooth one, but
clients should understand that it’s smooth only because the agent is keeping all the frogs in the wheelbarrow, making sure the process is a seamless one. Tell them how to work through the mortgage process. Advise misinformed home buyers to stop racking up credit card debt, to pay their taxes, and to postpone the purchase of that expensive new car, furniture, appliance, or pet before closing — even advise them against quitting their job before the walkthrough. Educate buyers on how to compromise on their wish list. And, most important, let’s prepare sellers for the emotion involved in the transaction. Make sure your agents are preparing sellers to receive negative feedback about the home they’ve loved for years, and let them know it’s usually a negotiation tactic. Be the human persona of your online presence, and vice versa. Start with your lingo. No one says “last and best offer” or “absorption rates are beating Case-Shiller numbers” outside of the real estate world. Remember, people want to buy and sell a home; it’s an ideal they aspire to. Have your happy clients explain why they wanted to use you, rather than feeling as if they had to. It’s an important distinction when earning leads in real estate’s Internet age.
Mini-moments make up the real estate journey Half of all buyers and sellers last year spent six to 12 months researching real estate before reaching out to a professional. During that time, tell people what is important at those key moments, also called the “zero moment of truth” by Google, just before each pivotal step in a real estate transaction. These are the moments when an online search has met a person’s want or need - when a seller makes the call to choose an agent, when a buyer inquires about a home over the phone or online, when a person asks a friend for their real estate agent’s contact information after hearing a rave review. These mini-moments make up the digital real estate journey. While most of these questions below aren’t asked from the onset, they are surely being asked of your agents during the transaction, so figure out a way to answer them now, at the “zero moment of truth,” and secure more clients going forward. • “Can I afford to buy a home?” • “What’s the market like?”
• “Do I need a real estate lawyer?”
• “If I sell my house, what’re the options for me if I move up or downsize?”
• “What’s the difference between homeowner’s and
• “How long does it take to buy a home?” • “How does X neighborhood compare to Y?”
• “After I buy, what improvements will maximize my investment?”
• “What does an inspector/title/mortgage dude do?”
• “What’s TRID?”
title insurance?”
SPRING 2016 | Kentucky Realtor® | 11
Having your happy, empowered clients speak on your behalf is arguably the most important marketing an agent and brokerage can enact today. So, in addition to providing quality, relevant, educational information on your site, you should also prominently display customer reviews. Most consumers are going online to plan their next vacation, shopping online for new jeans, and checking out that new breakfast joint online before making reservations. So it stands to reason they’re going to Google the heck out of the single biggest financial transaction of their lives. To seal the deal with your next buyer or seller, leverage the positive social capital you earned with your last loving buyer and seller. Make sure your messaging is consistent across online portals as you share your web content along with your reviews and recommendations from happy clients. Spread the love across the web: your website, Yelp, LinkedIn, YouTube, and portals like realtor.com’s enhanced profiles. Ask your current and past clients where they go to read reviews and then grow your presence there; make sure those review sites link back to your website to seal the relationship.
Broker tip When evaluating your business plan, tackle these tough questions to find out how you and your agents stack up against the competition and to help determine how well your brokerage is serving its clients: • Are your tools and marketing efforts useful and user-friendly? • How do you compare to the competition? • What niches, specialties, and expertise does your company have that aren’t reflected in your marketing? • What are you doing that your competition isn’t and how can you better leverage that? • Is your online presence targeting local buyers and sellers? • Is your web traffic from Google searches indicative of your brand’s target audience? • Do you have a discernable area of service that rises above the competition?
Most brokers and agents have already nailed the art of informing buyers and sellers offline, but conveying it online is the key to capturing new leads. Consider these questions: Is your online marketing different from the other stuff floating around the web? Is it trustworthy? And does it exemplify your company’s expertise? n
NAR’s “Get REALTOR®” campaign is consumer focused With the new consumer-facing advertising campaign, NAR is taking a different approach than in recent past by addressing consumer issues head-on. The campaign slogan, ‘Get Realtor®,’ targets home buyers and sellers through social, digital, print, and radio creative that brings to light what consumers think they might know about the transaction and how a REALTOR® can help them buy or sell more effectively. The focus of the campaign targets hyper-connected and emerging generations of consumers. “When it comes to real estate and the Internet, today’s consumers don’t always know what they don’t know,” said NAR President 12 | kar.com
Nobu Hata has worked in the real estate industry since 1996 and serves as the director of digital engagement for the National Association of REALTORS®. Hata sees his job as listening to the trade group’s 1 million members; providing NAR’s leadership with insight and context on issues that agents, brokerages and local associations face; and disseminating information to members in person and through the digital domain. He was recently named to Inman’s list of the top 100 most influential real estate leaders and as a Swanepoel Power 200 top 20 social influencer in real estate. Hata was a featured speaker at the 2016 Broker Summit in Louisville, KY.
Tom Salomone. “The Get Realtor® campaign demonstrates how REALTORS® can help buyers, sellers and investors succeed. We want today’s consumers to understand that having a Realtor® at their side is their competitive advantage in the real estate transaction.” NAR’s consumer advertising campaign began 17 years ago, and now in 2016 it has transitioned to a whole new look and feel to help modernize consumer perceptions of REALTORS®, particularly among Millennials, who are currently the largest home buying segment. By bringing in the new era, these more realistic ads offer honesty, acknowledging the anxieties along with the excitement of the process while increasing the relevance and value of REALTORS® in the evolving digital landscape.
Social media posts that get you in trouble BY MELISSA M. KELLOGG
The Code of Ethics addresses how you should behave online. Here are a few provisions to keep in mind.
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t’s often misunderstood how the Code of Ethics extends to how you conduct yourself online. What you wouldn’t say or do in front of someone, you also shouldn’t do on social media and other online platforms. In general, any guideline for offline behavior applies to online as well.
But real estate professionals often let their guard down online, making the mistake of treating their communications on social media as casual conversation and forgetting that there are guidelines to uphold in that space as well, says Carolyn D’Agosta, GRI, broker-owner of Carolyn D’Agosta and Associates in San Diego and 2016 chair of NAR’s Professional Standards Committee. A major misconception is that comments made in Facebook groups and other online forums are private. That’s often not the case, says Ginger Wilcox, chief industry officer for online mortgage servicer Sindeo who has trained REALTORS® on the Code.
It’s up to the group administrator to set the privacy settings of the group, so you should never assume comments you make in groups aren’t viewable by the public. When practitioners discuss commissions or working with difficult agents in Facebook groups, they’re potentially running afoul of the Code and risking exposing their behavior publicly. Even if the group is private, a fellow member could take a screen shot of the conversation and file an ethics complaint against you, Wilcox warns. So what kinds of comments or posts should you be wary of making online? Here are some common hazards that get professionals into trouble (read about the specific Articles mentioned below at NAR’s Code of Ethics page – realtor.org/code):
1. Venting about another agent. This is a common subject to come up in relation to the Code, says Katherine Lawton, NAR’s manager of Professional Standards and Administration. It’s not smart to air your frustrations about a colleague online because it could violate Article 15, which prohibits REALTORS® from making false or misleading statements about other real estate professionals. You can also get into trouble in blog comments by suggesting another agent’s client take a negative action against that agent, D’Agosta warns. For example, responding to a frustrated seller by saying “Fire your listing agent and I’ll help you” can easily become an ethics violation.
2. Sharing another agent’s listing. Retweeting or sharing another
agent’s listing on your own social media timeline could constitute an improper advertisement of their listing. This commonly happens when agents visit an open house and, after leaving, post about it on their feeds. You cannot engage in any practice that is inconsistent with exclusive-representation agreements that practitioners have with their clients, states Article 16. Lawton recommends getting the listing agent’s permission — a verbal agreement is fine — before sharing anything about their listing online.
3. Watch what you share on personal accounts. Many agents have Facebook business profiles that note their role as a real estate professional and the company they work for. That generally satisfies the requirement of Article 12, Standard of Practice 12-5, that REALTORS® must clearly identify themselves and their company when advertising online. But your personal Facebook profile may not include such details, and if you post listings or other advertorial material on that page, you could be violating the Code. Bruce Aydt, ABR, CRB, senior vice president and general counsel for Berkshire Hathaway HomeServices Alliance Real Estate in St. Louis, says it’s not always clear when a post constitutes advertising. His rule of thumb is that if you’re in doubt, include a link in the post to a webpage that displays your company’s logo prominently. That’s especially important on Twitter because you often can’t fit the name of your company in each tweet. See SOCIAL MEDIA on page 29 SPRING 2016 | Kentucky Realtor® | 13
LEGISLATIVE UPDATE future, and believe that requiring homebuilders to hire certified radon mitigation contractors to run one stack in a new home would only serve to unnecessarily increase the cost to the consumer. The bill passed the House and Senate with overwhelming bipartisan support and awaits Governor Bevin’s signature. Also, KAR supported HB 41 sponsored by Representative Joni Jenkins addressing the landlord/tenant relationship impacted by victims of domestic violence. The bill allows landlords to bar an abuser from their property and formally evict the abuser based on the issuance of an order, enables landlords to recoup any losses they might incur from the one responsible for the loss – the perpetrator of the violence; and grants landlords immunity from liability if they act in good faith in the application of this law. KAR worked with the apartment industry and victims’ advocacy groups to craft language that supported victims of domestic violence while protecting the landlords’ investments. The House passed the bill with strong bipartisan support, but did not receive a hearing in the Senate.
Over 200 REALTOR® members gathered in the Capitol prior to the Hill Visits with legislators.
State Update: 2016 Legislative Session On January, the General Assembly convened for the 60-day Legislative Session. This session was met with heightened anticipation of the newly elected Governor Bevin administration and his legislative agenda. Within the first 7 weeks of taking office, Governor Bevin started the deliberative process building his team of Cabinet Secretaries and key officials and developing his first biennial budget of nearly $21 billion. Legislators filed a total of 937 bills, which is the largest amount since 2008. KAR monitored around 60 pieces of real-estate and small business legislation to make sure policymakers in Frankfort promoted accessible and affordable homeownership in Kentucky. As we all know, a thriving real estate market is the foundation to a growing and vibrant economy. KAR strongly supported SB 68 sponsored by Senator Ralph Alvarado addressing the liability of the rental property owner when a tenant is a dog owner. The bill limits the landlord’s legal liability if the renter’s dog bites someone. SB 68 passed the Senate but unfortunately the did not receive a hearing in the House of Representatives. KAR remains strongly committed to this issue and will engage with likeminded organizations over the interim to grow support in the Legislature. KAR supported HB 272 sponsored by Representative Tommy Thompson which exempts residential and commercial building contractors installing vent pipes from radon mitigation certification requirements. KAR supports homebuilders’ proactive approach of installing vent pipes in the event of potential radon issue in the 14 | kar.com
In addition to these issues, we monitored numerous bill address a wide variety of issues including veterans, landlord/ tenant relationship, auctioneers, radon mitigation, mortgage lending, title insurance, first time home buyer tax credits, homestead exemption, drones, roofing contracts, etc. Final Legislative Update including a complete list of the bills can be found on our website, under Advocacy > Legislative Updates.
Tax reform being addressed next session Though the Legislature did not address tax reform this session, Governor Bevin has mentioned on numerous occasions that he plans to discuss and study the issue over the interim, meet with stakeholders across the state and present a plan for the 2017 Legislative Session. KAR will remain engaged on the issue to increase homeownership, protect the mortgage interest and property tax deductions, and opposing sales tax on services that includes real estate transactions.
Federal Update: House passes VA loan bill Recently, the House of Representatives passed legislation which included a provision to eliminate the cap on VA loan limits. The bill, H.R. 3016, “Veterans Employment, Education, and Healthcare Improvement Act” included an amendment added in Committee that would allow veterans to purchase a home in high cost areas, by eliminating the maximum loan amount on VA loans. As stated in the accompanying report, “The Committee is confident VA’s current strict underwriting standards and low foreclosure rates will ensure that veterans still have the required good credit and income to qualify for the loan, and that this change will not result in a significant increased amount of foreclosures.”
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The number to text the word REALTOR to in order to sign up for the REALTOR® Party Mobile Alerts. This texting platform offers REALTORS® a way to stay connected directly from their cell phone or tablet. Get information on finding your polling locations, election and primary voting day reminders and participate in calls for action. Only 13% of KAR members receive the mobile alerts (goal is 20%) so we need another 894 members to take this step.
G-Fees removed as a financing mechanism from transportation bill After aggressive advocacy outreach by NAR through letters, meetings and an all-member Call for Action which generated the highest response rate in NAR history, Congress removed the use of guarantee fees (G-fees) as a financing mechanism from the Fixing America’s Surface Transportation Act (FAST Act). While originally included in the Senate version of the bill, the final Conference Report removed the G-fee pay-for provision which would have extended elevated G-fees on mortgages backed by Fannie Mae and Freddie Mac. Had this provision been included the fees would have been passed on to homeowners. To further protect homeowners, NAR sent a letter to the full Senate in March urging members to cosponsor S. 752, which would establish a scorekeeping rule to ensure that increases in guarantee fees (G-fees) of Fannie Mae and Freddie Mac will not be used to offset spending that increases the deficit. The bipartisan legislation recognizes that diverting revenue from these risk-based fees both places an additional burden on the backs of homeowners and is bad public policy. The purpose of the G-fee is to prospectively guard against credit losses at Fannie Mae and Freddie Mac. G-fees should only be used to protect taxpayers from mortgage. Each time G-fees are extended, increased and diverted for unrelated spending, homeowners are charged more for their mortgages and taxpayers are exposed to additional risk for the long-term.
Military foreclosure protection bill passes In March, the U.S. House of Representatives passed S. 2393, the “Foreclosure Relief and Extension for Servicemembers Act of 2015,” which extends the one-year protection from foreclosure in the Servicemembers Civil Relief Act (SCRA) through 2017. The Senate passed S. 2393 in 2015 and the legislation is expected to be signed by the President. The Servicemembers Civil Relief Act (SCRA) is intended to help those men and women who have answered their nation’s call by providing certain financial protections, including foreclosure protection, to members of the military that have incurred debt prior to their active service. NAR recently signed onto a coalition letter to Speaker Ryan and Minority Leader Pelosi strongly supporting House passage of S. 2393. Earlier this month, NAR was joined by eight other financial services trade associations in encouraging Congress to pass an extension of the one-year foreclosure protection as soon as possible.
House passes “Housing Opportunity Through Modernization Act” The U.S. House of Representatives passed the bill by a vote of 427-0 to advance legislation that will expand opportunities for homeownership. H.R. 3700, the “Housing Opportunity Through Modernization Act,” includes a number of initiatives that have strong support from NAR, who hailed the vote as important progress for home buyers and sellers. NAR testified last year in support of H.R. 3700 before the U.S. House Financial Services Subcommittee on Housing and Insurance. In particular, NAR championed the inclusion of reforms to current Federal Housing Administration restrictions on condominium financing. Condominiums are among the most affordable homeownership options for first-time homebuyers, as well as lower income borrowers, but barriers to safe, affordable mortgage credit for condos still exist. H.R. 3700 takes a number of steps to address those concerns. These include efforts to make FHA’s recertification process “substantially less burdensome,” improving a process that is often costly and which condo developments must repeat every 24 months. H.R. 3700 also lowers FHA’s current owner-occupancy requirement from 50 percent to 35 percent and requires FHA to replace existing policy on transfer fees with the less-restrictive model already in place at the Federal Housing Finance Agency. Finally, H.R. 3700 includes further support for rural housing loans and multifamily housing initiatives.
Flood insurance rates set to increase in 2016 On April 1, 2016, National Flood Insurance Program (NFIP) premium rates are set to rise an average of 9%. This increase is less than the 2015 average and is consistent with the annual 5-10% increases prior to the 2012 Biggert-Waters Act, which made significant reforms to the NFIP. Under 2014 Flood Insurance Affordability amendments, individual property owners could see a rate increase up to 18% for newer properties and 25% for older ones. With these April 1 changes, FEMA is implementing the next round of required technical changes and extensions to newly mapped and business properties. In addition: • The 2-year grace period for NFIP policy holders who let their coverage lapse is coming to an end. Beginning April 1, those policyholders will have 90 days to reinstate their policy in order to maintain “continuous coverage” and continued eligibility for grandfathered or subsidized flood insurance rates. • FEMA will begin requiring insurance companies to reunderwrite NFIP policies in order to determine if the underlying properties are being rated based on the most current flood map. This is a critical first step toward correcting inaccurate flood insurance rates and clearly communicating the full risk to all policy holders. SPRING 2016 | Kentucky Realtor® | 15
ELECTION DATES CFPB looks to expand ‘rural’ designated areas The Consumer Financial Protection Bureau announced a new application process that could add more “rural” areas under its federal consumer financial law for mortgage lending. The application process started on March 31. The agency is accepting applications for areas outside rural counties or census blocks to be considered as rural. If eligible, these areas may be suitable for certain exemptions and provisions from certain mortgage lenders. This step will allow the Bureau to consider whether there are smaller institutions that merit a designation as ‘rural’ lenders but do not qualify under current guidelines, according to Richard Cordray, CFPB’s director. To request a rural designation, applicants are required to identify the area and provide information to help CFPB evaluate the application under the Helping Expand Lending Practices in Rural Communities (HELP) Act. The application process is open until Dec. 4, 2017.
Jess and Carolyn Kinman Award The Kinman award is named in honor of Jess, a former KAR past president and REALTOR of the Year who passed away in 2007, and his wife Carolyn, who worked for many years at the Legislative Research Commission and the General Assembly. The award is presented to an Ken Warden (r), NAR Director and KAR’s 2004 outstanding Kentuckian President, presents State Representative whose involvement in the Dennis Keene with the Kinman Award. legislative and political arenas have left an indelible mark on all those who have known or worked with him or her. In 2016, the award was given to State Representative Dennis Keene for his longstanding support and leadership on real estate and small business issues.
REALTOR® Political Action Committee (RPAC): Due to the thousands of REALTORS® investing in RPAC last year, we achieved the Triple Crown Award for the first time in KAR history. However, we are not resting on last year’s successes. This year, we are shooting for the prestigious President’s Cup Award and we need your help. By investing in RPAC, you are able to support REALTOR®-friendly legislators who believe in the real estate industry, protect private property rights, preserve the American dream of home ownership, fight for tax reforms and reduce burdensome regulations on your
89.76% 16 | kar.com
Primary Election Date: May 17, 2016 Polls are open 6:00am – 6:00pm n For voting information, sample ballots and to find out where you vote visit elect.ky.gov. n n
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Get involved, get out the vote and make sure the REALTOR® voice is heard on Election Day.
business. RPAC is the real estate industry’s insurance to promote and protect the real estate profession and industry.
RPAC Report: As of May 1 2016 Current: NAR Funds: $52,443 (at 118.2%) Major Investors: 21 President’s Circle: 10 Participation Rate: 47.5%
2016 Goals (based on 9,549 members) Triple Crown: NAR Funds: $44,379 Major Investors: 78 President’s Circle: 8 Participation Rate: 37% President’s Cup: NAR Funds: $44,379 Major Investors: 96 President’s Circle: 10 Participation Rate: 37%
2015 RPAC Awards: • Most Contributions Raised (Overall) - Greater Louisville Association of REALTORS - $87,875.77 • Highest Membership Participation Henderson Audubon Krystal Kirkman (r), president of the Hopkinsville, Christian & Todd County AssociaBoard of REALTORS tion, accepts two RPAC awards from Ann 100% Participation Elizabeth Delahanty, 2015 RPAC Chair. • Pacesetter Award (First to Achieve Goal - February 2015) - Hopkinsville Christian & Todd County Association of REALTORS® • Largest Percentage Over Goal - Small Board Division Hopkinsville Christian & Todd County Association of REALTORS® - 320.65% • Largest Percentage Over Goal - Medium Board Division Greater Owensboro REALTOR(R) Association - 369.38% • Largest Percentage Over Goal - Large Board Division Lexington Bluegrass Association of REALTORS(R) - 172.94%
In Kentucky, the percent of REALTORS® currently registered to vote. If you know that you, or someone you know, are NOT registered, and would like to register to vote, it has never been easier. Just go to realtoractioncenter.com/vote and register. It’s that simple.
DRONES in real estate
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hances are good that you have recently read an article, heard a news story or overheard a conversation about the use of unmanned aircraft systems (UAS), or drones, in real estate and other businesses. But it seems that there are still more questions than answers about this emerging technology, especially when it comes to real estate. To help real estate professionals better understand the conversation surrounding drones, below is some basic information on the use of drones in real estate. WHAT IS A DRONE? A drone, or UAS, is an unmanned aircraft and all of the associated support equipment, control station, data links, telemetry, communications and navigation equipment, etc., necessary to operate it. Drones may be controlled either autonomously by onboard computers and communication links or by a pilot via a ground control system. The machines being used for real estate purposes are mostly micro drones, which weigh 4.4 pounds or less, have a short battery life of about 20 minutes, and typically have four rotors.
WHICH GOVERNMENT AGENCY HAS OVERSIGHT OVER DRONES? The Federal Aviation Administration (FAA) has jurisdiction over the operation of drones in the National Air Space.
WHAT IS HAPPENING WITH REGULATIONS RELATED TO THE USE OF DRONES? Currently, the commercial use of drones is prohibited, except for those operators who successfully obtain a Section 333 waiver from the FAA. Currently, there are over 3,000 operators in the U.S. who have obtained a Section 333 waiver. At this time, having and complying with the waiver is the only path to the lawful commercial use of a drone. However, change is on the horizon. It is anticipated that the FAA will issue its final rule in the summer of 2016, which will govern the commercial use of small drones. The final rule will provide guidance on the safe and lawful operation of drones, as well
as the required training, certification and registration of drone operators. Most recently in March, the Senate Committee on Small Business and Entrepreneurship held the hearing, “Up in the Air: Examining the Commercial Applications of Unmanned Aircraft for Small Businesses.” During the hearing, witnesses from the Air Line Pilots Association, the Association of Unmanned Vehicle Systems International, and the Mercatus Center at George Mason University discussed the potential that unmanned aerial systems (UAS) hold for the U.S. economy and small businesses, the need for the U.S. to remain competitive with other nations in UAS innovation, and the importance of protecting privacy and safety of people in the National Air Space and on the ground. NAR sent a letter to the Committee members for the hearing, emphasizing the potential that UAS technology holds for the real estate industry, while reiterating our commitment to working with the FAA and other agencies to create a culture of safe and responsible UAS users.
WHY AND HOW ARE DRONES BEING USED IN REAL ESTATE? For real estate professionals, drones have several applications that could dramatically enhance different aspects of the business. The use of drone technology will serve to elevate and enhance a real estate professional’s ability to market property listings. Large properties, listings with large acreage, and waterfront properties are just some of the types of properties that are ideally suited for this
new technology. In addition, the use of drones is a faster and more cost-efficient method of obtaining aerial images than traditional methods, such as a manned aircraft. Drones will also likely have a significant impact on real estate-related services, such as roof inspections, appraisals, mapping, property management and insurance inspections.
DOES NAR SUPPORT THE USE OF DRONES IN REAL ESTATE? NAR has been active in various regulatory and legislative efforts related to drones, including testifying before the House Judiciary Committee, commenting on the FAA’s proposed rulemaking on drones and as a participant in the NTIA privacy working group. NAR has also submitted several letters of support to Congress and the Administration on the use of drones in real estate, and senior FAA officials have spoken at several REALTORS® Conference and Expo events.
WHERE CAN I FIND MORE INFORMATION ABOUT DRONES IN REAL ESTATE? A wealth of information is available at www.realtor.org/drones, including a series of FAQs and videos, which answer common questions regarding the legal and regulatory landscape of drones and a real estate professional’s ability to use this emerging technology. NAR has created this dedicated webpage, which provides legal and regulatory updates on this issue, as well as other relevant drone news and information, in response to real estate professionals’ growing interest in drones. n SPRING 2016 | Kentucky Realtor® | 17
Changes to the Seller’s Disclosure of Property Conditions Form
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he Commission is in the final stages of amending the Seller’s Disclosure of Property Conditions Form. The anticipated approval date for the use of the new form is around the middle of May 2016. Several changes have been proposed.
A definition for a “single family residential real estate dwelling” has been added to state that it includes a duplex, triplex, fourplex, condominium, townhouse, or other residential unit conveyed on a unit-by-unit basis, and a manufactured home permanently attached to land. For single family residences containing multiple units, e.g., duplex, fourplex, etc., the licensee may provide one form for the structure and disclose any details that are specific to each unit, or provide one form for each unit, at their discretion. The amended form has three new questions for sellers: • To disclose whether the property is in a “special flood hazard zone” as that term is used by FEMA (Federal Emergency Management Agency). KAR-3.5x2.25-SpringIssue.pdf
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• For the name and contact information for Homeowner Associations. • Whether there is an existing environmental hazard from unremediated methamphetamine contamination on the property. The question regarding the condition of the “roof” has now been changed to “roof covering.” Lastly, formatting changes were made to include a “Not Applicable” (N/A) answer and to make the form clearer. There are three exceptions to using the Seller Disclosure of Property Condition Form as the form is not required for: • Residential purchases of new construction homes if a written warranty is provided. • Sales of real estate at auction. • A court supervised foreclosure. As a reminder, the seller must complete and sign the Seller Disclosure of Property Condition form at the time he or she signs the listing agreement. The listing agent is required to deliver the form to any prospective buyer or buyer’s authorized representative upon request and a copy of the form shall be delivered by the listing agent to any prospective 4/5/2016
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purchaser or his representative within seventy-two (72) hours of the listing agent’s receipt of a written and signed offer to purchase. If a licensee is involved in a transaction where the property offered for sale does not have a listing agreement, the licensee shall provide a blank form to the property’s owner and request that the owner sign the form and deliver it to a buyer or potential buyer not later than one hundred twenty (120) hours after the creation of an executory contract. The listing broker or the broker of any licensee who presents an offer on a property not subject to a listing agreement are mandated to keep the original seller disclosure form in the transaction file. n
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Conventional Loans VA Loans HUD/FHA Loans Jumbo Loans VA Jumbo Loans
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Although the regulation is being amended, the Seller Disclosure statute “KRS 324.360” was unchanged.
All mortgage services provided by our partner, SWBC, a well-established mortgage banking firm SWBC was selected to process and close home loans for our members due to their excellent reputation, their financial strength and stability, and their wide array of loan products. NMLS #9741
18 | kar.com
www.ukfcu.org 859.264.4200
Welcome to better banking
EDUCATION Get started in real estate with an online course www.kreef.org > Pre-licensing
In order to meet the needs of today’s student, KREEF is offering the entire 96-hour pre-licensing program entirely online. All the materials and resources needed to get started in real estate are included in the $599 price. In addition, the license law portion of the course was written by the highly respected and often requested attorney and real estate instructor Virginia Lawson and provides a comprehensive look into the Kentucky statutes and regulations applicable to all licensees.
Online education: ready when you are
www.kreef.org > Courses > Online Education
KREEF offers a wide selection of online education – CE (both law and elective), Core (yes, even Core), ethics and some video based. Courses are available to you 24/7 – all you need is a computer and internet access. It’s that simple. These courses can be taken at your pace. Finish the entire course in one sitting or you can enter and exit as your schedule allows.
GRI - start on your designation journey today! www.kreef.org > GRI
The program has been redesigned to meet the needs of today’s real estate professional including one day courses and a full year’s worth of CE per course. With GRI, you can build your business through courses that offer specific training in key areas of real estate. And, you will expand your network of real estate professionals that can assist in generating leads and referrals from across the state. Get started now on the most popular national designation in real estate. Bonus: these courses also count for broker credit, PLE credit and the completed GRI program counts for ABR elective credit.
KREEF Scholarships Available www.kreef.org > Scholarships
As part of its mission, the KREEF Trustees award scholarships on an annual basis to enhance real estate professionalism and knowledge by providing quality educational services and programs for the real estate industry and the public. KREEF makes scholarships available to members who want to obtain the GRI designation as well as provide scholarships to Kentucky residents (members and non-members) who wish to pursue a career in real estate or attend a post-secondary institution.
Nat Sanders Education Award www.kreef.org > Nat Sanders Award
and service in, real estate education at either the local, state or national level. The award is voted on by the KREEF Trustees and awarded during the annual convention in September. Nominate yourself or someone else deserving of having this recognition.
Post-License Education (PLE) Overview The Post-License Education (PLE) law went into effect on January 1 which requires all new sales associate real estate licensees to take 48 hours of approved PLE courses within two years of activating a license. The PLE requirement only affects new sales associate licensees who receive their license after January 1, 2016 and new broker licensees are not obligated to meet PLE requirements. The requirement consists of 32 mandatory hours, which consist of specified course topics, along with 16 elective hours in additional approved course topics. Under the PLE law, licensees who do not timely complete the required courses will have their license automatically canceled and will not be able to reinstate the license until all PLE requirements have been met. You can find detailed information on the required course topics, and other information, on KREC’s website (www.krec.ky.gov). The GRI program (courses 100-600) cover the 48 hours of PLE as well as counting for CE and broker license hours.
FAQ for PLE Does the 2-year clock start running when a sales associate applicant passes the exam? No, the 2-year clock starts running on the day a sales associate is issued an active license. If a sales associate applicant places his/her license directly in escrow at the time of application, when will his/her 2-year clock start running? The 2-year clock starts running on the day the sales associate activates his/her license. What if an active sales associate places his/her license in escrow a few months after being actively licensed. Does the 2-year clock start over when they go into escrow? No, once the 2-year clock begins, it does not stop or start over just because the sales associate is no longer active. When will a newly licensed active sales associate be required to complete continuing education? A licensee issued a sales associate license after January 1, 2016 will not be required to attend a continuing education course during the first two (2) calendar years from the date of issuance of an initial sales associate license. For example, a sales associate issued a license on March 1, 2016 will not be required to complete continuing education until December 31, 2018. What will happen if a licensee fails to complete the required forty-eight (48) classroom or online hours of commission-approved post-license education? The licensee’s license shall be automatically canceled and it shall not be reactivated until the licensee has completed all of his or her postlicense education requirements, complied with all Commission orders, and other applicable licensing requirements.
This award is presented to an individual who has made the most significant contributions to, and exemplified leadership SPRING 2016 | Kentucky Realtor® | 19
The 5 real estate trends that are shaping 2016 BY JONATHAN SMOKE
CHIEF ECONOMIST AT REALTOR.COM
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et ready to break out the Cristal: We had a great 2015 — the best year for housing since 2007. And our forecast here at realtor.com® projected an even better year in 2016. How so? Well, with economic growth chugging along, employment will continue to increase, meaning that people will have more money coming in and they’ll be able to buy their first home or upgrade to a new one.
Here’s a closer look at the trends that will have the greatest impact on the housing market for the remainder of 2016.
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WE’LL RETURN TO NORMAL (ANYONE REMEMBER NORMAL?)
The year ahead will see healthy growth in home sales and prices, but at a slower pace than in 2015. This slowdown is not an indication of a problem — it’s just a return to normalcy. We’ve lived through 15 years of truly abnormal trends, and after working off the devastating effects of the housing bust, we’re finally seeing signs of more normal conditions. Distress sales will no longer be playing an outsized role, new construction is returning to more traditional levels, and prices rise at more normal rates consistent with a more balanced market. 20 | kar.com
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GENERATIONAL SHUFFLE WILL MAKE 2016 THE BEST YEAR TO SELL IN THE NEAR FUTURE
Millennials emerged as a dominant force in 2015, representing almost 2 million sales, which is more than one-third of the total. This pattern will continue in 2016 as their large numbers combined with improving personal financial conditions will enable enough buyers between ages 25 and 34 to move the market — again. The majority of those buyers will be first-timers, but that will require other generations to also play larger roles. Two other generations will also affect the market in 2016: financially recovering Gen Xers and older boomers thinking about or entering retirement. Since most of these people are already homeowners, they’ll play a double role, boosting the market as both sellers and buyers. Gen Xers are in their prime earning years and thus able to relocate to better neighborhoods for their families. Older boomers are approaching (or already in) retirement and seeking to downsize and lock in a lower cost of living. Together, these two generations will provide much of the suburban inventory that millennials desire to start their own families. Assuming that most of these households will both sell and buy, it is important to recognize that 2016 is shaping up to be the best year in recent memory to sell. Supply remains
very tight, so inventory is moving faster. Given the forecast that price appreciation will slow in 2016 to a more normal rate of growth, delaying will not produce substantially higher values, and will also see higher mortgage rates on any new purchase.
3
BUILDERS WILL FOCUS ON MORE AFFORDABLE PRICE POINTS
One aspect of housing that has not recovered yet has been single-family construction. Facing higher land costs, limited labor, and worries about depth of demand in the entry-level market, builders have shifted to producing more higher-priced housing units for a reliable pool of customers. That focus caused new-home prices to rise much faster than existing-home prices. Builders were able to be profitable and grow by following this move-up and luxury strategy, but their growth potential was limited by avoiding the entry level. That should begin to change in 2016. We are already seeing a decline in new-home prices for new contracts signed this fall. In addition, credit access is improving enough to make the firsttime buyer segment more attractive to builders. We’re looking for the strong growth in new-home sales and singlefamily construction as builders offer more affordable product in the year ahead. Consumers of all types should consider new homes, but availability will be highly dependent on location.
4
MORTGAGE RATES WILL EVENTUALLY RISE AND AFFECT HIGH-COST MARKETS THE MOST
We told you mortgage rates would go up in 2015, and they did — but they also went back down. We expect similar volatility in 2016, but the move by the Federal Reserve to guide interest rates higher should result in an eventual consistent upward trend in mortgage rates. The year started off with the opposite as global economic weakness caused financial market distress leading to stronger demand for US bonds and mortgage backed securities. As a result, mortgage rates fell to nearly three-year lows. These lower rates are likely to be shortlived as rates should move up as more positive US data lead to further Federal Reserve actions to raise short-term rates. We expect thirty-year fixed rates to end 2016 about 60 basis points higher than they are today. That level of increase is manageable, as consumers will have multiple tactics to mitigate some of that increase. However, higher rates will drive monthly payments higher, and, along with that, debt-to-income ratios will also go higher.
The lower rates to start the year could add urgency to spring buying season that we already expect will be the strongest in a decade. But as rates move higher, markets with the highest prices will see that higher rates will result in fewer sales. Across the U.S., the effect will be minimal as the move to higher rates will spur more existing homeowners to sell and buy before rates go even higher.
5
ALREADY UNAFFORDABLE RENTS WILL GO UP MORE THAN HOME PRICES
The housing crisis that politicians are ignoring is that the cost of rental housing has become crushing in most of the country. More than 85% of U.S. markets have rents that exceed 30% of the income of renting households. Furthermore, rents are accelerating at a more rapid pace
than home prices, which are moderating. We’ve been seeing asking rents on vacant units increase at a double-digit pace in the second half of this year. Because of this, it is more affordable to buy in more than three-quarters of the U.S. However, for the majority of renting households, buying is not a near-term option due to poor household credit scores, limited savings, and lack of documentable stable income of the kind necessary to qualify for a mortgage today. This trend does not bode well for the health of the housing market in the future. It will only improve if we see more construction of affordable rental housing as well as more of a pathway for renters to become homeowners. n
Jonathan Smoke is the chief economist for realtor.com and is a 20-year real estate veteran. Before joining realtor.com, he worked for Hanley Wood Market Intelligence and spent 16 years as a consultant and corporate executive including as founder of a research firm for homebuilding, development and investment clients, senior vice president for corporate strategy and innovation for Beazer Homes USA, principal of Lend Lease Corporation, and as a national leader in real estate operations for Deloitte & Touche. In 2006, he founded BlueSmoke, LLC of Atlanta, a housing market research company that provided consulting services to builders, developers, lenders, and real estate investment companies and operated HousingIntelligence.com and RatingInsights.com. SPRING 2016 | Kentucky Realtor® | 21
LOCAL ASSOCIATION NEWS Local boards/associations are encouraged to submit information for this section. Pictures must be at least 300dpi. Send all association news to hcooper@kar.com.
REALTOR® Association of SKY Members of RASKY came together to stop homelessness and hunger in the community by hosting the 5th annual “REALTORS® Hope for Homeless” Event. The event brings awareness to and helps poverty stricken and homeless children and families by collecting food, toiletries and money. Volunteers live and sleep in tents during the 4-day event collecting the items and donations regardless of the weather conditions. Donations are split between area schools Family Resource Centers and HOTEL, Inc where students are then able to take these items home in a “backpack” program during the school year and are distributed directly to the homes of these children during the summer. The event has grown each year since its inception and the 2016 goal is 150,000 servings of food.
Henderson Audubon Board
Hopkinsville Christian & Todd County Association The Association’s community service project is helping to complete the Hopkinsville Dog Park. To do this, HC&T County received a $2,500 PlaceMaking grant from NAR to help continue the work on the project. By partnering with the City of Hopkinsville and others in the community, additional funds have been raised to keep the progress going for the park. One event that is making an impact is the Mutt Strut, consisting of a mile walk on the Pennyrile Rail Trail, on-site pet vendors, food, photos and more festivities being held.
RPR Webinars for KAR Members KAR is offering 4 free webinars with RPR so you can enhance your business with this member benefit. Find out what it can do for you and how will it help your bottom line. Realtors Property Resource® (RPR®) is designed exclusively for that purpose: to help REALTORS® achieve professional success by providing them with an unparalleled platform of
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Henderson Audubon Board of REALTORS® hosted its first “Run for the Roses” on May 7, which featured a 1, 3 and 5 mile run and, for kids, a “pony dash.” All proceeds from the race will benefit Healing Reins Therapeutic Riding, a licensed SpiritHorse Center, that assists individuals with special needs in reaching their full potential through interaction with horses. The logo for the event was designed by Andrea Conrad, a member of the Henderson High School Advanced Visual Communications class in a competition decided by the Board of Directors.
Greater Louisville Association GLAR recently launched their new community service initiative, the REALTORS® Care Week of Service. During the designated week, there are numerous volunteer opportunities listed on the new website (www.WeekofService.com) for GLAR members to volunteer and give back to the community where they live and work. GLAR also hosted its Annual Charity Bowling Event in March. With a sold out event with 250 bowlers, the event raised over $4,400 for the Community Clubhouse, St. Ignatius Helping Hand Center and the Kentucky and Southern Indiana Stroke Association.
dynamic data and persuasive reports that help attract, retain and lead clients to the closing table. To find out more, visit www.kar.com/rpr. August 9: RPR App for Smartphones September 13: Secrets from the Pros: Tips for Growing Leads and Increasing RIO with RPR November 15: Meeting Buyers’ Demands with RPR’s Search Tools
Appalachian Rebuild Project Greater Owensboro GORA’s first “Home Ownership Matters” fair, held at Legion Park, was open, and free, to the local community. It celebrated the many benefits of living in Owensboro and highlighted the advantages to owning your own home. The day included entertainment, a petting zoo, bounce houses, games, face painting, food, beverages and a trail of booths with giveaways. Net proceeds from sponsors and exhibitors were given to the Cliff Hagan Boys and Girls Club.
Kentucky attracts new facilities, wins Governor’s Cup Site Selection magazine, a national magazine, awarded Kentucky with the Governor’s Cup for attracting corporate facility investment projects versus the previous year, specifically for total projects per capita. For this award, qualifying projects had to meet one or more of these criteria: a minimum capital investment of $1 million, 20 or more new jobs created and 20,000 or more square feet of new space. This is the second year in a row that Kentucky has been given this award. In addition, Kentucky was ranked fifth in total number of projects. Site Selection also gave Louisville a Top 10 ranking in economic development and job creation, placing seventh in the magazine’s list of top tier metro areas that have populations of more than 1 million people. Louisville credits several business investments and company expansions in the city, where it had 62 business development projects that added 5,400 new jobs in 2015.
www.kar.com > Meetings
As part of KAR’s commitment to community service, the Association is participating in an Appalachian Immersion Trip to eastern Kentucky. The trip is in cooperation with Hand in Hand Ministries, an organization, based in Louisville, whose mission is to help empower individuals and families living in poverty. We are coordinating a group of up to 35 member volunteers who want to participate in the trip to eastern Kentucky to help make a difference right here in our home state. Teams of Hand in Hand Immersion Trip volunteers travel to eastern Kentucky repairing homes for those most in need. Repairs range from building wheelchair ramps for the disabled to replacing floors, roofs and plumbing in family homes. You do not have to have construction skills to participate in the trip.
Lexington Bluegrass Association A group of LBAR members turned out for the 10th Annual Shamrock Shuffle 3K in downtown Lexington just before St. Patrick’s Day. The event gives back 100% of the proceeds to the Lexington chapter of Habitat for Humanity. In addition to the dozens of members who participated, there were many others who contributed to the cause.
LeadershipKAR: Apply for the 2017 class Would you like to join the ranks of some of the most successful REALTORS® from around the state? You can by becoming part of the LeadershipKAR program, offered by KAR since 2002. Recognizing that leadership development is an essential element in the process of improving our Association, KAR attempts to identify emerging REALTOR® leaders in the state, encourage them with motivational activities and assist in sharpening their leadership skills in the hope they will exert a strong positive influence on the future of the profession. Details can be found at www.kar.com/lkar.
Lauren Pfannerstill, Scotty Floro, John Waizenhofer, Bob Gates, Dana GentryJackson, Blaire Christner, Ty Brown, Alicia Huff, Carl M. Tackett, Sandy Allnutt, Donna Redd Elder, Bob Sophiea, Terra Long, Amber Martin, Lynne Sneed, Kim Buckner, Stefani Thornberry Grimes, Darrell Reynolds, Devon Ramage, Eli Mashni, Mansour Martha, Melia Hord, Billie Mussman, Violet RobinsonMcKinney, Jennifer Williams Neil, Brian Erwin and John Franklin.
IN MEMORIAM Carl Adams (December 25, 1957 - January 5, 2016) In November 2015, the Paducah Board of REALTORS® presented the Joe C. Marshall Distinguished Service Award to Carl Adams in recognition of his personal commitment to the real estate profession and community. In January 2016, Carl passed away after a long battle with cancer. His contributions to the Paducah Board of REALTORS® and KAR will be greatly missed. Carl joined the Paducah Board in 1998 and served in many roles including board president in 2008. He was a 2005 graduate of LeadershipKAR and served as a delegate, director and on numerous committees at the state level.
SPRING 2016 | Kentucky Realtor® | 23
BY THE NUMBERS
The percentage of renters that say eventually owning a home is one of their highest personal priorities according to the 2015 Housing Pulse Survey. That is up 11 points from 2013.
The percent of all homes sold in 2015 were sold with the assistance of a real estate professional, according to NAR’s Home Buyers and Sellers Profile report. Eight percent of home sellers chose to list themselves – a record low of for-sale-by-owner transactions, according to NAR’s survey, which dates back to 1981.
According to Michael Thorne, co-host of Mobile Agent TV, the percent of homeowners who say they will list with an agent offering a video. He also says you will get 403 percent more inquires with a video on a property than without.
The amount of time it takes for a person to draw conclusions about you based on your headshot, which plays one of the most vital roles in the overall scheme of marketing for a real estate agent.
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61% Age 40
89% 400 feet or 5miles
73%
50million
Nearly 51 percent of renters have celebrated their 40th birthday, according to a Harvard study analysis of Census Bureau data. That amounts to 22.4 million households. A decade ago when the housing bubble peaked in 2005, 47 percent of renters - or 16.4 million households - were older than 40. Their share was 43 percent in 1995.
Drone operators’ most common violations of existing rules prohibiting flights above 400 feet or within five miles of an airport. In December 2015, the FAA starting charging to register drones - $5 per registration - the same price to register a large commercial jet. Registration is good for three years and $5 allows an owner to register multiple drones.
The number of unique users realtor.com®, attracted in January 2016, which was 34 percent larger than its previous record for January of 37 million, set in 2015, making it the fastest growing online real estate destination in 2015.
40 milliseconds
Top10
NAR reported that the top 10 dates sellers listed their homes in 2015 all fell in April, May or June.
HOUSING STATS
Kentucky real estate market breaks records, looking positive for 2016 The housing market in Kentucky has gotten off to a solid start after a record setting year in 2015. Reported statistics for the first quarter of the year show an increase of 12 percent in total homes sold and a 3.1 percent bump in the median home price. Total home sales in 2015 reached the highest ever recorded in the state at 48,488, a 4.2 percent increase over the 46,553 homes sold in 2014. The previous record for home sales came in 2006 when 47,312 homes were sold. The Kentucky Association of REALTORS® (KAR) reported that over the past 4.5 years, home sales increased monthly, year-over-year, in all but 6 months. Also, in 2015, for the first time ever, there were consecutive months (June and July) where over 5,000 homes were sold statewide. Home prices in the state edged up to a median of $120,460 for 2015, the highest annual median price recorded in the state. This is 9.3 percent increase over the 2014 median home price of $110,167. Even with the increase in price, the Kentucky median fell well short (just over 53 percent) of the national median home price of $224,100 that was reported in December 2015. Total volume of all homes sold in Kentucky reached a record breaking $7.97 billion, surpassing the $7.36 billion sold in 2014 and the $7.41 in 2006, which was the previous record.
“We saw a more active market as the year progressed,” stated Lamont Breland, 2016 president of KAR. “Even with lower than average inventory across most of the state, a variety of factors including the improving economy, pent-up demand and low interest rates helped spur home sales.” Across the country, several influences are playing into the current real estate environment – rising rents, job creation and the stock market will guide how the year progresses. According to Lawrence Yun, chief economist for the National Association of REALTORS®, although healthy labor market conditions may persuade more households to buy, it’s possible overall demand could be somewhat curtailed in coming months due to the financial markets sizeable losses since the start of the year. But, Yun continued by saying the silver lining from the market turmoil in recent weeks is the fact that mortgage rates have slightly declined and buyers looking to close on a home before the late spring/summer buying season begins may be rewarded with a mortgage rate at or below 4 percent. “Home sales should continue to be strong throughout 2016,” said Breland. “Days on market, a good indicator of housing demand, hit its lowest level in seven years. This is an indication that buyers are out shopping and taking advantage of our state’s extremely affordable housing market. With interest rates remaining low, you can get more house for your money so it makes sense to consider buying in many circumstances.” To view housing statistics for the state, visit housingstats.kar.com.
MARCH 2016 VS MARCH 2015
Board/Association
# Sold 2016
# Sold 2015
Sold %
Median Price 2015
Median Price 2016 Median Price %
Region One Greater Owensboro Association 113 106 -6% 105000 108950 4% Henderson-Audubon Board 38 39 3% 140888 119900 -15% Hopkinsville-Christian Board 44 41 -7% 117375 129900 11% 25 38 52% 99000 109750 11% Kentucky-Barkley Lakes Board Madisonville-Hopkins Board 37 46 24% 106000 104000 -2% Mayfield-Graves Board 25 31 24% 65400 82500 26% 28 28 0% 105000 137750 31% Murray Calloway County Board Paducah Board 60 61 2% 135000 116000 -14% Region Two Central Kentucky Association 44 55 25% 88500 115100 Heart of Kentucky Association 174 166 -5% 129500 117450 Old Kentucky Home Board 37 54 46% 113500 126750 REALTOR® Association of SKY 168 187 11% 134950 128500 South Central Kentucky Association 27 28 4% 94500 122500
30% -9% 12% -5% 30%
Region Three Greater Louisville Association 1140 1346 18% 150000 150000
0%
Region Four Lexington Bluegrass Association 884 950 7% 145000 150000
3%
Region Five Northern Kentucky Association 501 550 10% 140500 179900
28%
Region Six Ashland Area Board 93 71 -24% 80000 77500 -3% Eastern Kentucky Association 38 35 -8% 116000 82000 -29% Madison County Board 90 97 8% 134050 136500 2% Pennyrile Board 31 22 -29% 72500 135250 87% Somerset-Lake Cumberland Board 63 81 29% 85860 107000 25% Totals 3660 4032 10% 113500 119900 6% SPRING 2016 | Kentucky Realtor® | 25
COMMUNITY PROFILE
BOURBON: KENTUCKY’S TRUE NATIVE SPIRIT BY HUNT COOPER
KAR DIRECTOR OF EDUCATION AND COMMUNICATIONS
B
ourbon. It’s as much a part of Kentucky as horses and basketball. And its popularity not only across the state, but also the country and the rest of the world, is expanding rapidly. In fact, domestic whiskey sales have soared by 40% in the past five years, according to Euromonitor — accelerated numbers in a sector where good growth typically means 2% or 3% a year, and a surge for a spirit whose sales declined almost without a break for three decades. The growth can be attributed to perception — from TV shows glamorizing the drink to celebrities and chefs throughout the world boosting bourbon’s image. Even Mila Kunis is promoting bourbon, recently signing on as a Jim Beam spokesperson.
Kentucky is, after all, where 95 percent of the world’s bourbon is made. And just how did bourbon derive its name? According to a conversation posted on Smithsonian. com by writer Laura Kiniry, historian Michael Veach, associate curator of special collections at Louisville’s Filson Historical Society, a former archivist for United Distilleries and Louisville’s unofficial bourbon ambassador, argues the following on where the name ‘bourbon’ actually comes from. Visit any local distillery and you’ll likely hear that the moniker derives
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from Bourbon County - once part of a larger expanse known as Old Bourbon - in upstate Kentucky. However, says Veach, the timeline just doesn’t match up. Though the Filson Historical Society is home to bourbon labels printed as early as the 1850s, he says, the story that the name ‘bourbon’ comes from Bourbon County doesn’t even start appearing in print until the 1870s. Instead, Veach believes the name evolved in New Orleans after two men known as the Tarascon brothers arrived to Louisville from south of Cognac, France, and began shipping local whiskey down the Ohio
River to Louisiana’s bustling port city. They knew that if Kentuckians put their whiskey into charred barrels they could sell it to New Orleans’ residents, who would like it because it tastes more like cognac or ‘French brandy’ says Veach. In the 19th century, New Orleans entertainment district was Bourbon Street, as it is today. People starting asking for ‘that whiskey they sell on Bourbon Street,’ which eventually became ‘that bourbon whiskey.’ Still, Veach concedes that we may never know who actually invented bourbon, or even who the first Kentucky distiller was.
BOURBON FACTS n Bourbon is America’s only native spirit, as declared by Congress in 1964. It must be made with a minimum of 51 percent corn, aged in charred new oak barrels, stored at no more than 125 proof and bottled no less than 80 proof. Regardless of the name, or which side of the argument you fall, the resurgence of bourbon, “America’s Official Native Spirit,” has had quite the impact on the state in recent years. The number of distilleries across Kentucky continues to grow and existing distilleries are in the middle of a $1.3 billion building surge that, over the next five years, will include new tourism centers and expanded production facilities. In total figures, the “bourbon boom” pours $3 billion into Kentucky’s economy annually, generating 15,400 jobs with an annual payroll of $707 million. Spirits production and consumption amounts to more than $166 million in state and local tax coffers every year. In fact, over the past decade the tax-assessed value of all barrels aging in Kentucky nearly doubled since 2006 ($1 billion versus approximately $2 billion most recently). And, total bourbon inventory topped 5.6 million barrels in 2014, the highest it’s been since 1975. That means there are one million more barrels of bourbon aging in Kentucky than there are people (4.4 million) living in the Commonwealth. Globally, U.S. distilled spirits exports topped $1.5 billion in 2013. Kentucky bourbon and Tennessee whiskey made up more than $1 billion of that amount, making it the largest export category among all U.S. distilled spirits. To capitalize on the explosive popularity of bourbon, in 1999, the Kentucky Bourbon Trail (KBT) was launched and 13 years later, in 2012, it expanded to include the more specific Kentucky Bourbon Trail Craft Tour. These tours give visitors a behind the scenes look at the art and science of the craft and provide education about the rich history and proud tradition of not only the signature spirit, but also a view of the picturesque scenery of the Bluegrass backroads. In total, there are nine distilleries on the tour located throughout the central Kentucky region (an additional 10 distilleries participate in the Craft Tour). These attractions have more than doubled attendance in the past five years, according to the Kentucky Distillers’ Association (KDA), exceeding 900,000
n All bourbon is whiskey is but not all whiskey is bourbon. Because corn is a sweet grain, the more corn, the sweeter the whiskey. And to be called bourbon, it must be at least 51 percent corn (most distillers use 65 to 75 percent corn). n Kentucky is the birthplace of bourbon, crafting 95 percent of the world’s supply. Only the Bluegrass State has the perfect natural mix of climate, conditions and pure limestone water necessary for producing the country’s greatest bourbon. But Kentucky doesn’t have an exclusive claim – bourbon can be made in other places, however it must be made in the United States to be called bourbon. n Bourbon, by law, must be aged in a brand-new, charred white oak barrels to be called straight bourbon whiskey. Each barrel can only be used once for bourbon and then they are shipped all over: to Mexico for aging tequila, Scotland for aging Scotch or elsewhere to store all kinds of things, including coffee, tobacco, beer (Kentucky Bourbon Barrel Ale) and maple syrup. n The corn and other grain is known as distiller’s grain or more accurately as “slop.” When the distillers are done with it, it is shipped off to farms to be used as feed for cows and livestock. n Nothing can be added to bourbon in the distilling process except water. That means that all the flavor comes from the charred oak barrels. n By law, bourbon must be aged in barrels for at least two years. As bourbon is “sleeping “ in the barrel, it loses some to evaporation every year and that’s called the “angel’s share.” n Most bartenders do a multiple pour when bourbon is ordered neat or on the rocks because there’s something known as “suspended solids” in bourbon. By doing multiple pours, the bourbon is shaken and the flavor is rounded out.
visitors in 2015, an all-time record. The Bourbon Trail increased its annual attendance 22 percent last year alone. And bourbon tourists clearly don’t play around. On average, each bourbon tourist spends $1,000 on their trip, according to an economic impact study conducted by the University of Louisville. The study also found that more than 85 percent of the tourists are from outside Kentucky, bringing people to the Bluegrass from all over the country and the world. In fact, bourbon tourism on the Trail has attracted 2.5 million visitors from all 50 states and 25 countries over the last five years, according to stats found on the KBT website. “The growth and impact of the Kentucky Bourbon Trail is advancing
Kentucky tourism beyond our wildest dreams. The entire commonwealth is seeing tremendous benefits from the increased investment and revenue,” said Eric Gregory, president of KDA, the founders of the Trail. “We get calls every week from local leaders who want a Kentucky Bourbon Trail distillery in their area. They know it means jobs and tax dollars and positive publicity.” If you plan on visiting a distillery, consider signing up for the Kentucky Bourbon Trail Passport, where folks can earn a complimentary t-shirt (the design changes every year) for completing the entire Trail. Or take an official tour from one of the several guides available to get the inside scoop, and storied history, from the true experts. n SPRING 2016 | Kentucky Realtor® | 27
REALTOR® Ombudsman Programs are a great success BY DIANE K. DISBROW, GRI, CRS, CRB, ABR, SFR, RSPS, SFR, SRES, SRS, E-PRO®
R
EALTOR® Associations across the country have been busy lately developing and adopting Ombudsman programs to meet the National Association of REALTORS® requirement to offer ombudsman services to their members and consumers either directly or through an agreement with other associations of REALTORS® by January 1, 2016. SO WHAT IS AN OMBUDSMAN PROGRAM? The Ombudsman Program in its simplest definition is informal telephone mediation. In some cases, it can address and solve minor complaints from the public. The ombudsman can also solve inter-REALTOR® conflicts before they become serious problems. Some complaints do not allege specific articles of the NAR Code of Ethics and many times they are transactional, technical and procedural questions that can be addressed by communication. Like a mediator, an ombudsman helps parties find solutions that everyone can be happy with.
HOW DOES IT WORK? In most cases, the designated contact person at the local association; often the Professional Standards Administrator, listens to the callers’ complaint or concerns and then explains the ombudsman service if the complaint meets the association’s criteria for an ombudsman to handle. The staff person also explains that if the ombudsman service is not successful in resolving the problem, the complainant may still 28 | kar.com
file a formal, written ethics complaint with the Association. If the complainant accepts the ombudsman service, the staff person then relays the concerns to the ombudsman who contacts the complainant, listens to their concerns, clarifies that they understand the situation and ascertains what their desired outcome is. The ombudsman’s role is to communicate the concerns of one party to the other and seek a resolution so that a positive relationship between the parties can be restored. Let’s face it, most people don’t like conflict so it’s easier for a consumer or REALTOR® to contact the local association of REALTORS® to vent or voice their concerns than bring the problem up directly with the REALTOR® they are upset with. It’s so much easier with a neutral person who can be the go-between.
WHO ARE THESE OMBUDSMAN? Typically, Associations of REALTOR® appoint members to be ombudsman who have a certain number of years of real estate experience and are familiar with the REALTORS® Code of Ethics, the professional standards process and have knowledge of their state real estate regulations and are active in the real estate business and understand
the current real estate practices. The ombudsman must be fair and credible, avoid making a judgement of who is right or wrong and can also not give legal advice to any party. Real estate practitioners make wonderful ombudsman because by the nature of our business we are used to negotiating win-win real estate transactions and sometimes the same skill set is used in dispute resolution. Careful listening, summarizing the situation, determining what is most important to resolve the situation or make everyone satisfied and working toward that goal.
WHY NOW, YOU ASK? The main reason is because it’s been so successful for associations that have had a program in place. It seems that many members of the public are reluctant to file a written ethics complaint for several reasons; the process is too cumbersome and the paperwork is too hard to understand. They really just want someone to listen and help solve their problem and not have to fill out paperwork. Many times the problem is not a violation of our Code of Ethics and unfortunately, if the consumer took the time to file the complaint, they would become frustrated when the grievance committee reviewed
SOCIAL MEDIA continued from page 13
The Kentucky Association of REALTORS® developed and implemented an Ombudsman program in January 2016. KAR was delighted to have Ms. Disbrow present Mediation and Ombudsman training in April for those appointed by their local associations to volunteer for these important positions. For more information on KAR’s program, go to kar.com and click on Legal or contact Julie Johnson, Director of Professional Standards and Governance at jjohnson@kar.com.
the complaint and dismissed it as not relating to a violation of one of the Articles of our Code. Even REALTORS® are often reluctant to file ethics complaints for similar reasons and also because they would rather not “rock the boat” and cause conflict with other members that they cooperate with on transactions. Many ethics complaints might be averted with enhanced communications and initial problem-solving capacity at the local Association level. It’s interesting to note that in reality, many association staff people have been providing services similar to that of an ombudsman for years since they are the first point of contact when a REALTOR® or consumer wants to file a complaint. In many instances, staff is successful in alleviating the concerns. However, that isn’t always the case. Consumers and our members really just want their story to be heard and having a team or committee of qualified REALTOR® members serving as ombudsman available to assist in
resolving disputes has met with great success. It shows that we really care about trying to help resolve the problem and also overcomes the perception that one REALTOR® may be trying to cover up for another and reopens communications between the parties. As the chairperson of the Expedited Ethics Enforcement Workgroup, our goal was to find creative ways to accelerate the ethics enforcement process and the mandatory ombudsman program was just one of the changes that were recommended by the professional standards committee and approved by the Board of Directors this past year. The term “ombudsman” isn’t new in other industries, but I am extremely pleased that this fairly new dispute resolution service in REALTOR® associations has been described by some local association executives as very positive public relations for the REALTOR® organization. In closing, I feel that just like mediation of monetary disputes between REALTORS® has been a huge success over the years and mediation is the “preferred dispute resolution” process of the National Association of REALTORS®, we’ll see the same thing happen as associations adopt and implement their own ombudsman programs. It’s a very positive step in providing an opportunity for the public and our members to resolve disputes without anyone having to file a formal complaint and insuring that our customers and clients continue to have great relationships with REALTORS® who truly want to make sure they have a great real estate experience. n
Diane Disbrow served as the 2015 chair of the NAR Professional Standards Committee and has been working in the real estate business for 33 years. She earned her broker’s license within the first five years of being licensed and has a deep commitment to furthering their knowledge in the field of real estate. She’s been active in the REALTOR® organization at the local and state levels for more than a decade and has presented numerous educational programs for NAR and various state and local associations throughout the country.
4. Commiserating on commissions. A common topic that comes up in real estate–related Facebook groups is commissions. If someone is complaining about a commission they received and asking for feedback, it can be tempting to spill your own experience. But aside from it being in poor taste, you could be revealing confidential financial details about your client if you speak in too much detail about a commission, Wilcox says. Article 1, SOP 1-9, requires REALTORS® to preserve the privacy of confidential information about their clients even after the end of their business relationship. You would need their permission first before revealing such details publicly in order to avoid an ethics violation. If you have questions about whether your online behavior is compliant with the Code, Lawton advises calling your state or local association’s legal hotline. Their input is important since enforcement of the Code is done at the local level. “They are a great resource for all of these issues,” Lawton adds. You should also read through the Code and familiarize yourself with its provisions, especially Article 12 as it relates to marketing and advertising, D’Agosta says. “It’s your responsibility to know what the Code says as well as to know what your state’s real estate commission guidelines are.” Wilcox says the bottom line is that when it comes to social media, “assume everything is public.” n By Melissa M. Kellogg, reprinted from REALTOR® Magazine Online (http:// realtormag.realtor.org), March 2016, with permission of the National Association of REALTORS®. Copyright 2016. All rights reserved. SPRING 2016 | Kentucky Realtor® | 29
A DAY IN THE LIFE OF...
A 30 Under 30 Recipient and YPN Member
Rusty Underwood, Lexington to mobilize a better and more cohesive REALTOR® community. They have really been the ones to help give us the tools and outlets to be more involved through YRB.
How many years have you been in real estate? This is my 4th year in real estate. What motivated you to get into real estate? I grew up working in and around construction and have always appreciated the process and character of homes. As I was finishing up college, a friend and mentor helped encourage me to explore the opportunities available as a REALTOR®. That was certainly a big part of my motivation. How have you grown in the business over the past four years to get where you are today? Luckily, I have been blessed with a great family, a great brokerage and great clients, all of whom have been huge proponents of my businesses growth. I believe my business to be based on relationships and have really tried to focus on that in the interest of meaningful growth, both personally and professionally. You received the Good Neighbor Award from LBAR last year. Were you surprised by that? I was certainly surprised by that. I was kind of aware something was going on when I arrived at LBAR’s Installation Luncheon and my wife was there as a surprise. I still remain surprised over it and am so honored to have received such an award. I now, more than anything, feel motivated to serve my community and try to contribute to some positive change. The YPN chapter at LBAR, the Young REALTORS® of the Bluegrass (YRB), was recently awarded “medium chapter of the year” by NAR and you are extremely active with them. What benefits have you received from being involved with that group? The Young REALTORS® of the Bluegrass is a great organization that I am so grateful to be a member. This group is constantly growing the relationships between young REALTORS® that are members of my board and giving back to the community. I am so lucky to be a member of LBAR and their organizational power really does help
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You applied and were selected as a recipient of the 30 Under 30 award with the National Association of REALTORS®. What does that recognition mean to you and is it the highlight of your career so far? This was certainly the highlight of my career so far. I am hopeful that I can be given the opportunity to participate on a geographically broader scale for the REALTOR® community. I think it is extremely important to constantly adapt and change in our business. Having the opportunity to connect and communicate with other REALTORS® across the country, to have the opportunity to listen and be heard in our ever changing market, would be exceptionally valuable for my personal growth and potentially for our state as well. What’s the next goal you hope to achieve? I hope to continue my community involvement to find some new and creative ways to help the REALTOR® community and the REALTOR® Community Housing Foundation (the nonprofit, charitable organization established through LBAR) coordinate with other charitable organizations in Kentucky to broaden the scope of how we can help those who might need it. What is the one thing that has helped you succeed the most since entering the real estate business? I really do love my job and believe having passion and appreciation for what you do is the most valuable tool for success and how you measure it. Outside of business, what is your favorite past time? Running. What is the best advice you have ever received? Work every day to be better than you were yesterday. n
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