December 2012 - Wisconsin Real Estate Magazine by Lauren Bizorik

Real Estate WISCONSIN

A PUBLICATION OF THE WISCONSIN REALTORS® ASSOCIATION

MAGAZINE

December 2012 Vol. 29 No. 3

Short Sale Questions Listing agent answers.

Mortgage Law

Expiration date is nearing.

Title Insurance Rates Clarity from the WRA and OCI.

License Renewal It’s that time!

FOCUS

SAILING THE SHORT SALE SEAS

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CONTENTS December 2012 | Vol. 29, No. 3

16 14 18

8 13 4 License renewal 13 Taxman 16 Legal hotline 18 Be careful! 25

President’s message Moving forward to help the housing market help to economy.

Everything you need to know about end-of-biennium details.

Want to remove a federal tax lien? Here’s how.

Safety and success go hand in hand.

26 Scratching your head? 29 Election overview

The WRA clears up confusion about changes to title insurance rates.

A summary of the 2012 election both state and nationwide.

2012 Magazine Survey Recap

Cover Story

The WRA conducted its annual Wisconsin Real Estate Magazine survey in November 2012. And thank you to those who participated! The survey results help the WRA marketing team develop appropriate and relevant magazine topics for the following year.

Are you prepared for a short sale voyage? A look at new Fannie and Freddie short sale guidelines, delegation agreements and much more to help you be prepared for smooth sailing with a distressed sale. Page 8.

What did the 2012 survey reveal? Flip to the back to page 30 to find out!

WIREALESTATEMAG • DECEMBER 2012

Short sale Q&A about lenders, seller repairs and more.

A MESSAGE FROM THE PRESIDENT by Mike Theo

Help Housing Help the Economy

WIREALESTATEMAG • DECEMBER 2012

he one issue — and perhaps the only one — that wasn’t discussed much in the recently-concluded elections was housing. Which is odd given the housing sector has historically led the way into and out of national economic recessions. Now that the elections are over, it’s time for Washington — that is both parties, both houses of congress and the president — to focus on how to help the housing market help the rest of the economy. Over 3.5 million homes have gone into foreclosure since the last presidential election four years ago. Some prognosticators estimate another 3 million are likely to follow in the next four years. Almost 11 million homes, or more than a fifth of all homeowners, are underwater with mortgages greater than homes are worth. Yet we’re seeing signs of a housing recovery. Market fundamentals like historically low interest rates, affordable prices and ample inventory across most price points are all telling signs of an improving real estate sector. But while our markets are improving, there are potential problems on the horizon ... problems that can either be averted or aggravated by our newlyelected congress and/or president. As REALTORS® gathered in Orlando the day after the election for NAR’s annual convention, their mood was a mixture of relief that the seemingly endless campaigning had ended, and trepidation over the immediate issues regarding the so-called “fiscal cliff.” The term “fiscal cliff” refers to a series of automatic tax increases and spending cuts that will take effect January 1, 2013, which everyone agrees is bad but few agree on how to fix. For housing, falling off the fiscal cliff could mean the end of the mortgage forgiveness debt relief law. If this happens, homeowners who have avoided foreclosures through loan modifications or short sales would have to pay income taxes on the amounts forgiven. The Congressional Budget Office says the

average debt forgiveness in a short sale is $65,000, and a two-year extension of this program will save distressed families some $2 billion. Some estimate that failure to extend this program could reduce homes sales by as much as 20 percent. Another aspect of the fiscal cliff is called sequestration. This is a budgetary tool that has been around for 40 years but has never been used. It is the most powerful of budgetary tools because it cuts off funding to federal government agencies automatically without Congress having to vote on anything. Such cuts could negatively impact all HUD programs, including potential cuts to FHA; the future of Fannie and Freddie; energy, agriculture and environmental cuts could impact real estate; and base closings and other military cutbacks could hurt many communities and thus their real estate markets. Beyond the immediate threats of this fiscal cliff, Congress and the president will face major tax reform issues in the new session, many of which will have direct and dramatic impacts on our industry. Chief among these issues is the future of the mortgage interest deduction (MID). While most observers don’t think Congress will deal with MID before the end of the year, they could agree on the principle of MID reform now and leave the details for later in 2013. Eliminating this deduction would raise nearly $100 billion a year in new revenues. Total elimination of the deduction seems unlikely, but there is serious talk of limiting or capping the deduction and/or eliminating it altogether for second homes. Other smaller deductions could also face elimination or limitation, such as deductions for mortgage insurance premiums, energy-conserving home improvements and tax credits for builders constructing energy-efficient new homes. Our industry also faces financial regulations that could disrupt mortgage lending practices. Under the new and far-reaching DoddFrank Wall Street Reform Law, Congress

will consider new Qualified Mortgage (QM) rules where borrowers would have the right to sue banks for giving them loans they can’t pay back. Under another proposed rule called the Qualified Residential Mortgage (QRM), lenders would be required to keep additional capital in house on certain loans so they have “skin in the game” and could also require 20 percent down payments — all to prevent making bad loans. Finally, rules known as Basel III, could mandate how much capital a bank must keep on hand to back their mortgage-related portfolio. All of these regulatory uncertainties — what NAR calls the “perfect storm of regulation” — will exacerbate the already problematic hesitancy of banks to make housing loans. Finally, our industry faces enormous uncertainty regarding GSE reforms, as Congress wrestles with how to change Fannie and Freddie. These two government mortgage behemoths currently provide more than 90 percent of all new mortgages. Some fiscal conservatives advocate for full privatization, while others (including NAR) say some government role is needed to ensure affordable fixed rate mortgages remain widely available. This election was about jobs and the economy. While candidates can disagree on how to end the recession and create a growing economy, the winners must now find agreement — across partisan lines — on how to make their campaign promises a reality. As REALTORS®, it is our duty to help our elected officials, of all parties and at all levels, understand how best to help housing help the economy.

REAL ESTATE INSIDE THE WRA

Real Estate WISCONSIN

MAGAZINE

WRA Holiday Hours The WRA holiday hours are as follows:

WRA Executive Committee: Renny Diedrich, Chairman Steve Lane, Chairman-Elect Dan Kruse, Treasurer Paul Schieldt, Vice President Peter Sveum, Vice President K.C. Maurer, Vice President Erik Sjowall, Vice President Contact Information: 4801 Forest Run Rd., Suite 201 Madison, WI, 53704-7337 608-241-2047 • 800-279-1972 e-mail: editor@wra.org website: www.wra.org POSTMASTER: please send address changes to the WISCONSIN REALTORS® ASSOCIATION, 4801 Forest Run Rd., Ste. 201, Madison WI 53704-7337. Wisconsin Real Estate Magazine™ is published by the WISCONSIN REALTORS® ASSOCIATION. Trademark issued pursuant to Wisconsin state statute; federal trademark is pending. Wisconsin Real Estate Magazine, USPS 597-850, ISSN 1548-0526, is published monthly by the WISCONSIN REALTORS® ASSOCIATION, 4801 Forest Run Road, Ste. 201, Madison, WI 53704. Periodical postage paid in Madison, WI and additional mailing offices. An annual subscription rate of $5 is included in membership dues and a copy is mailed to every paid REALTOR® and affiliate member of the association. Nonmember subscription rate: $60. Permission to reprint or quote any material from this issue is hereby granted, provided the Wisconsin Real Estate Magazine is given proper credit in all articles or commentaries, and the WISCONSIN REALTORS® ASSOCIATION is provided with a copy of any reprint. Advertising of third party products and services herein does not imply endorsement by the WRA unless specifically stated. Furthermore, the WRA does not endorse, approve, or otherwise warrant the accuracy or legality of any information or content contained in advertisements. Any questions regarding advertising policies should be directed toward the editor.

Monday, December 24: Closed Christmas Day: Closed Monday, December 31: Closed Tuesday, January 1: Closed The WRA wishes all of our members a very safe and happy holiday season!

WRA General Membership Meeting WRA members are invited to attend the WRA’s General Membership meeting. Date/time:

Friday, January 25, 2013 at 8:00 a.m.

Location:

Holiday Inn at the American Center, 5109 West Terrace Drive, Madison, WI

Agenda: I. Call to Order – Renny Diedrich, Chairman of the Board II. Association Issues III. Adjournment For more information, call Sandy Bolgrihn at 608-241-2047 or 800-279-1972.

College Scholarships Available The selection process is now under way for the 2013 Wisconsin Realtors® Foundation REALTOR® Children’s Scholarship program. This program awards college scholarships to children of WRA members. The foundation is offering 10 scholarships in the amount of $750 each. The deadline for submitting an application is March 8, 2013. The application is available online at www.wra.org/ChildScholarshipAppl or by contacting Sandy at Sandyb@wra.org.

Nominating Committee Seeks Candidates Are you interested in serving in a leadership role for your state association? The WRA Nominating Committee is seeking candidates for the positions of 2013-2014 Chairman-elect and Treasurer. Applications are available on the WRA website or by contacting Sandy Bolgrihn at sandyb@wra.org. The deadline for submitting an application is December 31, 2012. In addition, the Nominating Committee is seeking applications for the positions of 2013-2014 Executive Committee Vice President, NAR Director (one opening), and WRA Board of Director Regional Representative. The number of openings for regional representative is determined by the membership as of February 28, 2013. The application deadline for all positions is March 15, 2013. Region Preliminary Number of Openings One 0 Two 0 Three 1 Four 1 Five 1 Six 1 Seven 0

WIREALESTATEMAG • DECEMBER 2012

Editorial Staff: Publisher: Michael Theo Editor: Lauren Bizorik Senior Designer: Joe Leschisin Advertising: Robert Uhrina

CHAIRMAN'S CORNER by Renny Diedrich

Strong Today, Strong Tomorrow

WIREALESTATEMAG • DECEMBER 2012

ello fellow REALTORS®! The election is finally over and we can now move forward working with our newly elected state leaders. Tom Larson, Joe Murray and Cori Lamont, otherwise known as our WRA legislative and lobbying superstars, are already rolling up their sleeves and working on issues important to you and Wisconsin property owners. We have been very successful in past years in passing laws that have protected and promoted property rights while also defeating proposals contrary to our mission. It is because of the dedication and passion of this legislative powerhouse team, backed by your support and participation, that will continue this success moving forward. In November, the WRA leadership team joined nearly 100 fellow REALTORS® in Orlando for the NAR convention. There, we heard NAR Chief Economist Lawrence Yun state that home sales volume and prices are poised to keep improving over the next two years. He also predicted that homes will continue to appreciate as well. All good news indeed. Our own WRA immediate past chairman Rob Keefe was also honored in Orlando, receiving recognition for being the Wisconsin REALTOR® of the Year. He proudly represented us on stage along with other elite members of this group from around the nation. All in all, if you have not yet attended a national convention, you will want to put this in your budget for next year. It is an amazing opportunity to network and to learn from REALTORS® from across the nation. Also at the conference, the leadership team was honored to attend the installation of Madison broker Darren Kittleson as the national CRB president for 2013. What a thrill to have one of Wisconsin’s finest leading that national council. Congratulations Darren! The council is certainly in great hands!

“Nearly half the WRA membership is female yet we have fewer women representing us on WRA committees and in leadership roles. “ As you may know, one of my 2013 objectives is to engage and empower more female REALTORS® in the WRA. Nearly half the WRA membership is female yet we have fewer women representing us on WRA committees and in leadership roles. I will be reaching out to brokers and local association executives for recommendations and suggestions for qualified female REALTORS® who may be willing and able to serve as future WRA leaders. If you are interested in serving or learning more about the leadership opportunities, please feel free to contact me. The WRA is excited about the strategic planning that we are embarking on this year. After the first of the year, we will be meeting with members from around the state. WRA Treasurer Dan Kruse is chairing this important committee. We encourage input from you as we make strategic decisions for the future of our organization. You will be hearing more about this in the near future. Please plan on participating and sharing your vision of the future of real estate in Wisconsin. Earlier this month, REALTORS® from around the state had the opportunity to attend our WRA Management Conference in Pewaukee. Included in the lineup of superb speakers was Dr. Morris Davis, an economist with the Graaskamp Center for

Real Estate at UW-Madison. His message focused on the importance of not only understanding what we can expect the real estate market to look like next year, but what the market trends are for the next 10 years. Stop and think about what your business or markets will look like over the next 10 years! Another amazing speaker was Jose Perez from PCMS Consulting who focused on reinventing the way we do business. It’s a common theme but one that holds particular importance in today’s fast-paced business world. He highlighted 10 real-world ideas that clearly impact our business. Who couldn’t use an idea or two or 10? If you have never attended this conference, I would strongly encourage you to do so next year. You won’t be disappointed!

Tech tip And lastly, for my “Tech Tip of the Month!” With CamScanner and CamScanner Pro, you take a picture with your smartphone of a document, save it as a PDF file, and then e-mail or fax it right from your phone. You can scan multiple pages as well as edit, crop, adjust color or upload to your cloud storage. This app has a free version! No more running to the office or waiting until you get home to use your personal scanner. This app is available for iPhone, iPad and Android. If you don’t have this app for your mobile device, I would highly encourage you to add it. I love it! I hope you all take the time to enjoy the holidays and to remember that we are all truly blessed. If you can, please take this opportunity to help someone who may not be as fortunate. Merry Christmas!

Renny Diedrich, WRA Chairman

WISCONSIN MONTHLY HOUSING REPORT by David Clark

Home Sales Up Sharply in October as Prices Increase WISCONSIN HOUSING STATISTICS MONTHLY ACTIVITY — OCTOBER 2012 Statewide OCT-2012 OCT-2011 % Change YTD-2012 YTD-2011 % Change New Listings 8,006 7,668 4.4% 100,080 102,175 -2.1% Closed Sales 5,569 4,305 29.4% 53,091 44,045 20.5% Median Sales Prices $134,500 $129,900 3.5% $134,315 $133,000 1.0% Median Price Existing Home Sales Region OCT-2012 OCT-2011 % Change OCT-2012 OCT-2011 % Change Southeast $145,000 $138,500 4.7% 1,984 1,504 31.9% South Central $154,000 $152,000 1.3% 1,013 769 31.7% West $135,000 $123,750 9.1% 563 460 22.4% Northeast $121,450 $116,950 3.8% 1,012 792 27.8% Central $113,000 $107,000 5.6% 385 295 30.5% North $120,000 $117,900 1.8% 608 477 27.5%

isconsin saw its home View Online sales increase sharply in October compared View all of the housing statistics at to the same month last year. www.wra.org/housingstatistics. Existing home sales rose 29.4 percent over that period, which represents the highest monthly growth rate since August 2011. Median prices also increased 3.5 percent to $134,500 over the period, and this represents the strongest increase in median prices since early 2010. Through the first nine months of the year, home sales are up a solid 20.5 percent and prices are up 1 percent. To view the complete October 2012 press release, go to www.wra.org/HSROct2012. David Clark, Ph.D., is a professor of economics at Marquette University and serves as a consultant to the WRA in the analysis of existing home sales data. For more information, contact Clark at C3 Statistical Solutions, 414-803-6537.

CLOSED SALES IN OCTOBER

2012 2011 2010

5,569 4,305 3,785

CLOSED SALES PAST 3 MONTHS

OCT SEPT AUG

5,569 5,113 6,560

MEDIAN PRICE 2012 VS. 2011 2012

$140,000

2011 $130,000

$120,000 $110,000 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

WIREALESTATEMAG • DECEMBER 2012

$150,000

WIREALESTATEMAG • DECEMBER 2012

FEATURE

SAILING THE

Short Sales

SEAS BRING PERSISTENCE AND PATIENCE ABOARD by Debbi Conrad

Many times, short sale sellers may be the most noble of transaction parties. They have vigilantly continued to pay monthly mortgage payments, at least until recently, despite diminished property values wrought by the diabolical workings of a real estate market far beyond their control. They are underwater through no fault of their own and have fallen victim to a job loss, death or disability of a breadwinner, or another of life’s tragedies. All of the money they initially poured into the down payment and prior mortgage payments is at risk of being lost, and they are sinking into despair. Others may be less saintly. They have made somewhat foolish or greedy decisions that left them overextended, but at the end of the day, in the same place as the goodstanding homeowner: underwater with the home worth less than the mortgage balance, unable or unwilling to keep up with mortgage payments and looking for an exit strategy. They may have tried a loan modification, a forbearance, a refinancing or a principal reduction without success and are now

at the end of the rope. The alternatives have narrowed and all that appears to be left is a deed in lieu of foreclosure, a short sale or surrender to the unrelenting foreclosure headed their direction. They want answers: what is the best course for them to follow? And they expect you to supply those magic cures for them. Potential short sale sellers clearly need information, and they need advice. Real estate brokers can provide information and point out the standard alternatives but can’t fall into the trap of providing personal legal or financial advice to downtrodden sellers. You can tell them what some of the possible options might be, but they must choose for themselves. This may be an exceptionally difficult task, especially if the sellers are depressed, exhausted, without hope and angry at all perceived representatives of that diabolic real estate world. When it comes to having someone tell them what they should do, they have to talk a housing counselor, their attorney or their tax advisor. Brokers cannot give legal advice and should always recommend that short sale sellers retain an attorney to help them navigate the sale.

Help is a phone call away: 888-995-HOPE (4673) Let an HUD-approved housing counselor help the seller understand his options and work with his mortgage company.

Embarking upon the short sale voyage When distressed owners decide on a short sale, your duty is to help set their expectations. The time has come to explain the perils that might lie ahead. Prep the clients so that they know there will be torrential downpours of frenetic demands for data and documents requiring instantaneous responses, followed by apparent calm seas of seemingly endless waiting. That calm may be deceiving — another storm may be brewing just over the horizon and might suddenly unleash on the owner, as when the asset manager who said the lender approved an offer suddenly demands more money.

WIREALESTATEMAG • DECEMBER 2012

SOS: Sellers in distress

FEATURE

Explain that you will “man the crow’s nest” and help navigate the seller on the voyage by monitoring the mortgage servicer/lender’s progress, making sure the seller has promptly provided all needed information, and communicating with the mortgage servicer, seller and all others involved. Depending on the complexity of the deal and the number of junior lienholders, your relentless persistence may not be enough. It doesn’t hurt to watch for dolphins and swallows — those harbingers of good luck — that may be needed for the seller to reach the destination: lender approval of a short sale with no deficiency obligation.

Short sale developments Over the past several years, there has been an endless procession of changes and touted improvements to the short sale process. The latest round includes several new measures from the Federal Housing Finance Authority with regard to mortgages owned by or guaranteed by Fannie Mae and Freddie Mac. Short sale decision in 30-60 days

Fannie Mae or Freddie Mac

WIREALESTATEMAG • DECEMBER 2012

Homeowners can determine if they have a Fannie Mae or Freddie Mac loan by going to: • www.FannieMae.com/loanlookup or calling 800-7Fannie (8 am to 8 pm ET) • www.FreddieMac.com/corporate or 800-Freddie (8 am to 8 pm ET)

New short sale timelines require servicers to make a decision within 30 days of receiving either an offer on a property under the companies’ traditional short sale programs or a completed Borrower Response Package (BRP) requesting short sale consideration. If more than 30 days are needed, servicers must provide weekly status updates and make their decision no later than 60 days from the date the offer or BRP was received. See www.fhfa.gov/webfiles/23887/ Short_Sales_release_041712.pdf and www.freddiemac.com/sell/guide/ bulletins/pdf/bll1209.pdf for more information.

New short sale guidelines The new Fannie Mae and Freddie Mac documentation reduction measures include the following: • Borrowers 90 days or more delinquent with a credit score under 620 will no longer be required to document their hardship. • The right to pursue deficiency judgments will be waived in exchange for a financial contribution from a borrower with sufficient income or assets to make cash contributions or sign promissory notes. • Second lienholders will be offered up to $6,000 to prevent from stalling the short sale process. • Servicers can approve short sales for borrowers who are not in default but face certain hardships including death, divorce, disability or employment transfer of over 50 miles. • Military personnel with Permanent Change of Station (PCS) orders who are required to relocate will automatically

be eligible for short sales, even if they are current in their mortgage payments, and will not be required to contribute funds to pay any remaining deficiency. See www.fhfa.gov/webfiles/24211/ ShortSalesPRFactFinal.pdf for more information. Short sales for underwater borrowers who never missed a mortgage payment may not be the benefit they first seem to be. These non-delinquent parties who use a short sale will likely take just as big a hit to their credit score as if they had been seriously delinquent and the bank foreclosed, calling into question the desirability of such a measure. Credit agencies generally code short sales and foreclosure in the same way, but the FHFA is looking for solutions. If short sales were coded as “paid as agreed,” there would be no concerns for short sale sellers. Unfortunately, it may be some time before a fix is forthcoming from FICO.

Short sale delegation agreements Standard delegation agreements have been reached with nine mortgage insurers to allow mortgage servicers to approve short sales and deeds-in-lieu without a separate review and approval by the mortgage insurer. The nine mortgage insurers that have agreed to expedite short sales are CMG Mortgage Insurance Co., Essent Guaranty Inc.,

“Best if Used By” Date Looming for the Mortgage Forgiveness Debt Relief Act

Mortgage Guaranty Insurance Corp., PMI Mortgage Insurance Co., Radian Guaranty Inc., Republic Mortgage Insurance Co., Triad Guaranty Insurance Corp., and United Guaranty Corp. For more information, see www. fanniemae.com/portal/about-us/media/ corporate-news/2012/5877.html.

(more on page 12) WIREALESTATEMAG • DECEMBER 2012

Genworth Mortgage Insurance Corp.,

The Mortgage Forgiveness Debt Relief Act of 2007 generally allows taxpayers to exclude income from the 2007-2012 discharge of acquisition debt, such as purchase, building and improvement costs, incurred on their principal residence but not on second homes or investment properties. The act helps homeowners facing foreclosures or who sell in a short sale by excluding up to $2 million of forgiven debt ($1 million if married, filing separately), provided the discharge is due to the decline in the home’s value or the taxpayer’s financial condition. If the lender agrees to forgive the debt, then the lender will send a 1099-C Cancellation of Debt Form. Lenders are required to send a 1099-C form when they cancel any debt of $600 or more. For more information from the IRS, visit www.irs.gov/Individuals/The-Mortgage-Forgiveness-Debt-Relief-Act-and-DebtCancellation. The owner then will report the forgiven debt on their tax return, specifically on Form 982. The Mortgage Forgiveness Debt Relief Act is set to expire at the end of 2012. Some have argued that the expiration of this act could reduce sellers’ motivation in seeking a short sale. Without an extension to the act, a seller most likely will be unable to benefit from tax relief in a transaction that does not close in 2012 and is pushed into 2013. The National Association of REALTORS® argues that if the act is not extended, it will continue to place pressure and uncertainty on sellers already experiencing financial trouble and adding to their financial burden. While NAR has been and will continue to push the importance of this issue, it also reached out to each state’s REALTOR® community in a Call to Action on November 15, 2012. Look for more to follow. For more information from NAR on the importance of extending the act and congressional action needed, visit www.ksefocus.com/billdatabase/ clientfiles/172/6/1681.pdf. If there is no congressional action to extend the act, the practice pointers on the next page will assist brokers working with short sale sellers. Wis. Admin. Code REEB 24.03(c) provides that “Licensees shall be knowledgeable regarding laws, public policies and current market conditions on real estate matters and assist, guide and advise the buying or selling public based upon these factors”;

FEATURE

What about the deficiency? Typically in a short sale, the lender agrees to accept less than what is owed in order to release the mortgage lien against the property. In and of itself, this does not forgive the remaining balance due on the mortgage note. If the lender intends on trying to collect the “deficiency” from the seller, the lender typically requires the seller to sign a promissory note at the time of the closing for the unsecured portion still owed. If, instead, the lender chooses to forgive the shortfall, the lender may issue a Form 1099 to the borrower/seller. The seller then has to pay income tax on the forgiven amount. The Mortgage Forgiveness Debt Relief Act allows taxpayers to exclude from income the amount of the debt forgiven when the forgiven debt relates to the primary residence and the discharge of debt was due to a decline in the home’s value or the taxpayer’s financial condition. For example, if the seller owes $150,000 on his home and it sells for $100,000 in a short sale, the IRS could tax him on the remaining $50,000. That would mean approximately $12,500 in taxes if the owner was in the 25 percent tax bracket. Initially approved in 2007, the Mortgage Forgiveness Debt Relief Act is set to expire on December 31, 2012 if there is no Congressional action to preserve it. Brokers must keep abreast of any developments in this regard because owners may be much less willing to try for a short sale if the remaining mortgage balance not covered by short sale proceeds is taxable income. For more information about the Act, see www.irs.gov/Individuals/The-Mortgage-ForgivenessDebt-Relief-Act-and-Debt-Cancellation.

Arriving at port If the voyage was successful and the seller disembarks at port having sold the home without the trauma of a foreclosure, you will have earned your commission — always a good thing — but the intangible benefits are also important. Short sales are a rewarding endeavor that saves the seller and the seller’s lender from foreclosure, prevents another potential vacant REO property that falls into disrepair and brings down the neighborhood, and makes a small, yet positive contribution to the recovery of the market. Bon Voyage.

WIREALESTATEMAG • DECEMBER 2012

Debbi Conrad is Senior Attorney and Director of Legal Affairs for the WRA.

WRA Short Sale Tools • • • •

Listing Questionnaire Regarding Title Issues (WRAQST) Short Sale Checklist Addendum to the Short Sale Listing (WRA-SSL) Addendum to the Short Sale Offer (WRA-SSO)

Mortgage Forgiveness Debt Relief Act Cont’d meaning brokers working in short sale transactions should alert the seller and buyer regarding the act and its possible expiration. Providing the information found at www.irs.gov/Individuals/TheMortgage-Forgiveness-Debt-Relief-Act-and-Debt-Cancellation may be prudent. Although many sellers facing foreclosure and short sales cannot afford an attorney or accountant, this does not change the fact that licensees cannot provide legal or tax advice. Licensees can, however, provide information and suggest alternatives. • For pending short sale offers, brokers may emphasize to the parties the importance of meeting all closing dates scheduled prior to December 31, 2012. • If parties wish to extend a short sale closing until after December 31, 2012 or the lender is not providing short sale approval in time to close by December 31, the broker may recommend that the parties consult with their tax advisor about the implications if the closing occurs after December 31. • For new short sale offers, brokers should be sure that parties understand that if the offers do not have a scheduled closing before December 31, there is a risk that any amounts forgiven will be taxable to the seller. The impact of the act expiring could become a material adverse fact should a short seller decide to not go through with the sale because of the tax consequences. If the agent, as a competent licensee, knows that a seller’s decision to not sell based on the expiration of the act is information that indicates that the seller is not able to or does not intend to meet his obligations under the contract, this constitutes an adverse fact. If a party to the transaction were to so indicate, or if a competent licensee would generally recognize that these circumstances are of such importance that it would affect a reasonable party’s decision to enter into a contract or would affect the party’s decision about the terms of the contract, the information is both adverse and material. If both adverse and material, then Wis. Admin. Code REEB 24.07(2) requires the licensee to timely disclose the circumstances in writing to all parties to the transaction, even if the client would direct the licensee not to disclose. If the licensee knows or is aware of information suggesting the possibility of a material adverse fact, Wis. Admin. Code REEB 24.07(3) states that the licensee will be practicing competently if the licensee makes timely written disclosure of the information suggesting the material adverse fact to all parties to the transaction, recommends the parties obtain expert assistance to inspect or investigate for the possible material adverse fact, and, if directed by the parties, draft appropriate inspection or investigation contingencies. The duty to disclose has priority over any duty owed to the client. See the October 2009 Legal Update, “Diligent Disclosure,” at www.wra.org/LU0910 for further discussion of licensee disclosure obligations.

Real Estate License Renewal: the Process Real estate license renewal applications must be filed with the Department of Safety and Professional Services (DSPS) no later than December 14, 2012, for all licensees who wish to practice real estate on December 15, 2012 and moving forward. Licensees who do not meet the December 14, 2012 deadline will be unlicensed as of December 15, 2012 and CANNOT PRACTICE REAL ESTATE per Wis. Stat. § 452.12(5)(b) until they complete the renewal process. by Debbi Conrad

Not receiving a renewal notice postcard from the DSPS is not a valid excuse! As it says in the statutes, it is not a valid defense in a disciplinary proceeding brought against you if you continue to practice real estate without a current license. Wis. Stat. § 440.08 also says that not receiving the renewal postcard does not excuse you from paying a late fee should you realize after December 14 that it is time to renew your license! Don’t let this be you — get that license renewed right away!

Online renewal Licensees may renew their real estate licenses over the Internet at https://online. drl.wi.gov/UserLogin.aspx. Licensees will need their credential number and a credit card to pay the $82 renewal fee that applies to real estate salespersons, real estate brokers, timeshare salespersons and real estate business entities such as corporations, partnerships and LLCs. The PIN number can be looked up using the credential number and other licensee information. The DSPS site advises to allow two business days for the processing of online renewals. Waiting until the last day may also be unwise because

there can be computer issues or other reasons for an outage of the online service. If a renewal application and payment is received on time and the Continuing Education (CE) has been completed, the credential holder is eligible to practice while the license is being processed. The DSPS considers a license renewed as soon as the department website shows that the renewal requirements have been completed. E-mails are sent to confirm completion of renewal. Renewal status may be checked in the Licensee Lookup feature at https://online. drl.wi.gov/LicenseLookup/LicenseLookup. aspx. This website is updated daily.

WIREALESTATEMAG • DECEMBER 2012

But I didn’t receive a renewal postcard!

LEGAL

WIREALESTATEMAG • DECEMBER 2012

Continuing Education requirement: Late for a very important date Six courses, 18 hours Licensees who do not renew their licenses by

The DSPS requires all real estate licensees to complete 18 hours of CE per biennium and pass the respective course examination for each course (70% correct is passing). As part of the renewal process, individual licensees must list the date, course title, course sponsor and the number of hours for each course completed to satisfy the CE requirements. This biennium’s renewing licensees must complete each of the following four mandatory courses: • Course 1 - Listing Contracts • Course 2 - Offer to Purchase • Course 3 - New Developments • Course 4 - Business Ethics (may fulfill NAR Code of Ethics requirement depending upon provider) plus two of the following electives: • Elective A - Short Sales and Foreclosures • Elective B - Environmental Matters • Elective C - Other Approved Forms • Elective D- Financing An individual licensee may attend live classes, watch classes on DVD, work through the selfstudy courses and/or use Distance Learning On Demand on the computer. See www.wra. org/ce for the WRA CE course schedules or to order distance learning materials. Individuals who complete CE with the WRA can log in to the WRA website, go to myWRA, select myEducation, then myHistory, and click on Real Estate CE 11/12 Biennium to see all of their completed WRA CE courses. This is a handy way to track the CE course information required on the renewal application. Licensees need not submit any course certificates with their renewals, but these may later be requested by the DSPS. Wis. Stat. § 452.14(3)(a) tells us that making a false statement to the DSPS in connection with any license application is grounds for revocation, suspension or denial of the license. Persons granted an original broker’s or salesperson license between December 15, 2010 and December 14, 2012 need not complete CE during the 2011-2012 licensing period according to Wis. Admin. Code § REEB 25.065.

December 14 may file a late renewal application. Applications received by the DSPS after December 14 must include the $82 renewal fee and the $25 late fee as directed by Wis. Stat. § 440.08(3). The same is true if your real estate license is currently inactive and has been inactive for less than five years and you apply to reactivate your license shortly after December 14, 2012: complete the 2011-2012 CE requirements and pay the $82 license fee and the $25 late fee to reinstate your license. See Wis. Admin. Code § REEB 12.04. The REEB may grant an extension of time for completing CE and a renewing license if it receives a written request from the licensee and a physician’s statement that verifies that a licensee’s health prevented completion of CE. An extension may also be granted, as explained in Wis. Admin. Code § REEB 12.065(9), to a licensee on active military duty outside Wisconsin, or for other compelling reasons beyond the control of the licensee.

Business entity renewals Be sure to not forget to renew the broker business entity license for any business entity involved in your practice. If you are the “business representative” for the business entity, that means that you, as the director, manager, member, officer, owner or partner of the business entity, must make sure that your broker’s license is renewed and that the license for the business entity also is renewed if that company will continue to act as a broker entity during the upcoming biennium.

Broker supervision oversight Wis. Admin. Code § REEB 17.07 requires each broker-employer/brokerage company to confirm that each agent in the company has renewed his or her real estate license by December 14, 2012 and is properly licensed. If an individual’s renewal application has not been timely filed with the DSPS, a broker/company may not permit the individual to engage in real estate practice after December 14 until the license is renewed. If there are any agents who do not renew their licenses or who are no longer with the company, the broker should make sure that a Form #766

“Notice of Termination of Employment of Broker or Salesperson” is submitted to the DSPS within 10 days. This also is an opportune time for business entity brokers to make sure that their written delegations of the entity’s broker supervision duties to supervising brokers are current and up-to-date.

Renewal roadblocks: delinquent tax and support obligations As part of the renewal process, the DSPS uses a licensee’s Social Security number or a company’s FEIN to check for any delinquent state tax or family support payments (does not include property taxes) and to see if a licensee has failed to comply with a warrant or subpoena related to paternity or support proceedings. If left unresolved, these issues are grounds for the denial or restriction of a license as laid out in Wis. Stat. § 440.12-.13. The Department of Revenue is willing to enter into reasonable payment arrangements with taxpayers who demonstrate an inability to repay delinquent taxes in full. Contact the nearest Department office, the Madison Central Collection Unit at 608-266-7879, or the Occupational License Specialist at 608-267-0833, to discuss the available options. See the DOR credential renewal information at www.revenue.wi.gov/faqs/ise/ occupa.html#occ2, and the Department of Children and Families information regarding denying, restricting, suspending, or not renewing a license at http://dcf. wisconsin.gov/bcs/enforce/enforce_license.htm

• All licensees should be aware that the name and address information submitted to the DSPS is available to the public so consider substituting a business address in place of a home address. • Individuals and sole proprietors have the opportunity to opt-out of the disclosure of your address on lists of 10 or more credential holders furnished by the DSPS to third parties. • As part of the renewal application, each applicant must certify that the applicant is a U.S. citizen or a legal alien qualified to receive a credential. Visit the NEW Department of Safety and Professional Services website at http://dsps.wi.gov/Home and click on License Renewal, then on Professional Renewal Requirements, to review additional credential renewal pointers. Debbi Conrad is Senior Attorney and Director of Legal

WIREALESTATEMAG • DECEMBER 2012

Privacy concerns

LEGAL by Cori Lamont

“Cause I’m the Taxman” (the Federal Taxman) Understanding the process of removing federal tax liens

WIREALESTATEMAG • DECEMBER 2012

s the Beatles song goes, “If you drive a car / I’ll tax the street / If you try to sit / I’ll tax your seat. If you get too cold / I’ll tax the heat / If you take a walk / I’ll tax your feet. Taxman.” While George Harrison was not speaking specifically about federal tax liens, he was singing about paying taxes. However, what Mr. Harrison did not discuss are the consequences of failing to pay the “taxman.” This article explores federal tax liens and the process of removing them.

assets and may affect the individual’s ability to obtain credit. In addition, the lien attaches to all business property and rights to business property, which would include account receivables. Lastly, if the individual files bankruptcy, the lien and debt may continue as well as the Notice of Federal Tax Lien. Agents cannot provide legal or tax advice, and they should encourage the parties to consult with an attorney when trying to sell or purchase a property with a federal tax lien.

What is a federal tax lien?

What can the owner of the property do?

Liens are not an uncommon occurrence in distressed sales. Liens may range from mortgages, state taxes, local taxes, judgments, construction liens and more. However, this article focuses on one specific lien: the federal tax lien. A property owner, for purpose of this discussion, includes a business or individual(s) referred to as individual within this article; and generally, a federal tax lien occurs when a property owner fails to pay a tax debt. When a federal government lien exists on a property, it is against all of the property owner’s property — from real estate to personal property such as vehicles and financial assets. Section 6325 of the Internal Revenue Code (IRC) addresses the release of federal tax liens. According to the IRS, a federal tax lien exists after the IRS: • Assesses the individual’s liability. • Sends the individual a bill explaining how much is owed, which is in a Notice and Demand for Payment. • The individual neglects or refuses to pay the debt in time. Once the IRS has determined a lien is warranted against the property, the IRS files a Notice of Federal Tax Lien, a public document alerting creditors that the government has a lien on the property. Two pieces are important to note about the Notice of Federal Tax Lien: 1) this notice only shows the balance as of the date of the notice and does not show the payoff balance or the charge for filing and releasing the lien; and 2) there is a right to appeal the notice. A federal tax lien may greatly affect an individual because the lien attaches to all of the individual’s

Clearly, the easiest way to remove the lien is to pay the debt in full. Once paid, the IRS will release its lien within 30 days. In addition, the IRS may be willing to allow the individual to pay on a payment plan, which is discussed at www.irs.gov/Payments/Make-a-Payment. However, the IRS does provide other options when said option is in the best interest of the government and individual: • Discharge of property: This allows the property to be sold free and clear of the lien. This means that the federal government has cleared the individual of the lien for the debt and the Notice of Federal Tax Lien previously filed. The specific paperwork in this situation is the Form 14135 Application for Certificate of Discharge of Property from Federal Tax Lien. This Certificate of Discharge removes the government’s lien from the property named in the certificate. More information regarding this form is found in the IRS publication 783 at www.irs.gov/pub/ irs-pdf/p783.pdf. This discharge may be granted in the following six situations. • 1) If the value of the individual’s remaining property encumbered by the federal tax lien is equal to at least twice the amount of the federal tax lien liability secured by the lien and any

lower interest rate and thus a lower monthly payment to the creditor would then allow the individual to pay more per month to the government. (IRC section 6325(d)(2)) This application must be completed by the individual at least 45 days before the transaction date for which the certificate of subordination is needed. More on this is found in IRS publication 784 at www.irs.gov/pub/irs-pdf/p784.pdf. • Withdrawal: This process removes the public notice to assure that the IRS is not competing with other creditors for the property. The Application for the Withdrawal of the Public Notice is on Form 12277 found at www.irs.gov/pub/ irs-pdf/f12277.pdf. If the individual’s application is granted, the IRS will file Form 10916(c), Withdrawal of Filed Notice of Federal Tax Lien, with the recording office where the original notice was filed. In addition, a copy will be provided to the individual for their records as well. (IRC section 623(j)). Remember, the withdrawal tells other creditors that the government is deserting its lien priority, not releasing the lien or waiving the individual’s responsibilities relating to the debt.

What happens if the individual does not pay the federal tax lien? If the individual does not repay the debt, the government may take the property to pay the debt, or levy the property — a process that includes the IRS seizing and selling all real and personal property the individual has an interest in. Generally, the IRS does not levy unless 1) a Notice and Demand for Payment was sent, 2) the individual neglected or refused to pay, and 3) a Final Notice of Intent to Levy and Notice of Your Right to a Hearing at least 30 days before the levy. However, it should be noted that there are several exceptions as to when the IRS does not have to provide the 30-day notice. There are a number of other considerations regarding the government’s ability to levy; such seizure is not permitted if the individual entered into some sort of payment plan or if the IRS agrees that the individual is unable to pay due to economic hardship. For more information on the government’s ability to levy, visit www.irs.gov/Businesses/SmallBusinesses-&-Self-Employed/Levy as well as pages 5-7 of IRS Publication 594 regarding the collection process at www.irs.gov/pub/irs-pdf/p594.pdf. The specific information relating to the IRS was derived from “Understanding a Federal Tax Lien” found at www.irs.gov/Businesses/Small-Businesses-&Self-Employed/Understanding-a-Federal-Tax-Lien. Cori Lamont is Director of Regulatory Affairs for the WRA.

WIREALESTATEMAG • DECEMBER 2012

encumbrance entered into before the IRS filed its public notice of lien. (IRC section 6325(b)(1)). • 2) When the tax liability is partially satisfied with an amount paid that is not less than the value of the federal government’s interest in the property being discharged. (IRC section 6325(b)(2)(A)). • 3) When the government’s interest in the property has no value. The debts senior to the federal tax lien are greater than the fair market value of the property or greater than the sale value of the property. A copy of the offer to purchase would be included in the application. (IRC section 6325(b)(2)(B)). • 4) The IRS reaches an agreement with the individual allowing the property to be sold. This section requires the sale proceeds be held in a fund subject to the claims of the federal government in the same manner and priority that the claims had prior to the property being discharged. A copy of the offer to purchase would be included in the application. (IRC section 6325(b)(3)). • 5) A third party that owns the property commits to making a deposit or an acceptable bond equal to the government’s interest in the property. (IRC section 6325(b)(4)) • 6) Discharge is subject to an Estate Tax lien (IRC section 6325(c)), which is covered under Form 4422 at www.irs.gov/ pub/irs-pdf/f4422.pdf. • Subordination: The process of subordination does not remove the lien, but allows other creditors to move ahead of the IRS, which may help the process of obtaining a loan or mortgage. Essentially, a subordinate, or junior creditor, is moving their position ahead of the federal government. This subordination may be granted under two scenarios: • 1) If the individual pays an amount equal to the lien or interest to which the certificate subordinates the lien of the government (IRC section 6325(d)(1)) • 2) If the IRS determines that the granting of the certificate will increase the amount the government will receive. For example, an individual refinancing for a

BEST OF LEGAL HOTLINE

Best of the Legal Hotline:

Short Sales — The Listing Agent’s Point of View WIREALESTATEMAG • DECEMBER 2012

Listing presentation

The broker is planning a listing presentation, and the seller thinks they may have to proceed with a short sale. How can the broker better prepare to work with the seller? Knowing the seller may have a short sale, the broker can take steps in advance of the listing. First, the broker may contact the title company and obtain a search-and-hold or title report for the property. The information provided will help the broker and seller itemize current

liens on the property, thereby developing an accurate idea of what the seller will need to do financially to provide clear title. Having an accurate picture of the seller’s financial position is beneficial before entering into the listing so the listing broker may ask the seller to have financial information readily available. The listing broker can include additional documents in the listing folder: a WRA Short Sale Checklist, a WRA Listing Questionnaire Regarding Title Issues, a copy of the Addendum SSL to the Listing Contract- \Short Sales, and a sample net sheet. The broker and seller

can use these documents to identify potential issues with the transaction in advance of marketing the property for sale. The broker can also complete a current CMA to assist in determining a viable list price for the property. If the property does not sell quickly, it is valuable for the broker to go back and ask the seller similar questions to assure that the seller’s financial position remains similar throughout the listing period. The WRA-SSC Short Sale -Checklist was created for the broker and property owner to work together to gather information and assess the seller’s

by Tracy Rucka

Lender involvement The broker has a property that has been listed for almost a year. The seller was current on payments at first, but not in recent months, and has now received a foreclosure notice. The seller wants to move forward with a short sale.

Seller repairs An offer was presented to the seller on the listing broker’s short sale listing. The offer used the WRA Addendum SSO and included an agreement in Additional Provisions that the seller would make specific repairs prior to closing. Is the seller bound by the offer terms regardless of the short sale status? And would the seller or lender be required to perform the repairs in the offer if they sign and are accepted? If the optional “as-is” provision in the Addendum SSO is marked, the “as-is” clause states, in part, that the seller

More info online

March 2010 Legal Update, “Uniform Short Sales,” at www.wra.org/LU1003 March 2009 Legal Update, “Working with Distressed Sales,” at www.wra.org/LU0903 July 2009 Legal Update, “Solving the Mysteries of Short Sales,” at www.wra. org/LU0907 January 2008 Legal Update, “Short Sales – A Risky Business,” at www.wra. org/LU0801 “Short Sale Survival: Part One” in Wisconsin Real Estate Magazine, January 2012 www.wra.org/WREM/Jan12/ ShortSaleSurvival/ “Short Sale Survival: Part Two” in Wisconsin Real Estate Magazine, February 2012 www.wra.org/WREM/Feb12/ ShortSaleSurvival/

WIREALESTATEMAG • DECEMBER 2012

situation to decide if a short sale is a good solution. The checklist includes background information, potential alternatives to short sale, and a roadmap and requirements to move ahead when a short sale is the right decision. The Addendum SSL–Short Sale Listing is educational in nature and allows the broker to obtain consent to work with the seller’s lender. This addendum includes cautions about the potential consequences of a short sale and recommends the seller consult with attorneys and tax advisors with specific questions.

Must the broker get bank preapproval for the short sale? Whether a seller will qualify for a short sale is a case-by-case determination to be made by the seller’s lender. Given the change in the seller’s financial position, the broker and seller may review Addendums SSL and SSO to educate the seller about the short sale process. The listing may be amended to incorporate the Addendum SSL, and the Addendum SSO may be used with any offer to purchase. The seller may approach the lender to determine under what terms and conditions the lender would approve a short sale. However, lenders do not in general agree up front to approve a short sale. Whether the lender will offer any information would be dependent on the lender. The Home Affordable Modification Program (HAMP) is a program to assist homeowners to avoid foreclosure by modifying loans. The Home Affordable Foreclosure Alternatives Program (HAFA) sets forth a uniform process, uniform forms, and perhaps most importantly, firm deadlines for short sales. If the seller qualifies for HAFA, the seller can obtain pre-approved short sale terms before listing the property. If a borrower/seller expresses interest in a short sale to his or her loan servicer and is eligible, per the basic HAMP criteria at www.makinghomeaffordable.gov, the seller will receive a standardized Short Sale Agreement (SSA) that will give the list price or the net sales proceeds amount acceptable to the servicer and set a maximum limit on closing costs. To find out if the seller qualifies, the seller may contact the Homeowner’s Hotline at 1-888-995-HOPE or visit www.realtor.org/government_affairs/ short_sales_hafa. Fannie Mae, Freddie Mac, and some other lenders have similar programs and may be willing to set some sale parameters in advance — the seller will need to ask the lender.

BEST OF LEGAL HOTLINE

will not make any repairs or cure any defects in the property. Consequently, if accepted, there would be contrary terms in the Addendum SSO and the Additional Provisions. The seller should counter the offer to assure there is not an inconstancy relating to repairs of the property included in the Additional Provisions. In a short sale, the seller — not the lender — is the one transferring title to the property and agreeing to the terms of the contract including repairs. Given the seller’s financial difficulty, there is no assurance that the lender will approve the short sale including enough remaining funds for the seller to complete the repairs. Since the lender is not a party to the contract, the lender would not be required to make the requested repairs.

Sheriff’s sale The broker’s short sale listing is in foreclosure. There is an accepted offer subject to lender approval, but the sheriff’s sale was last week and the lender has the successful bid. What does the listing broker do after the sheriff’s sale?

Providing Service To

WIREALESTATEMAG • DECEMBER 2012

Metro Milwaukee Area, 262.798.4274 Metro Madison Area, 608.824.8041 Janesville Area, 608.359.9544 Green Bay Area, 920.621.8198

16871 W. Greenfield Ave., New Berlin, WI 53151 1600 Aspen Commons #240, Middleton, WI 53562

Mortgages without obstacles.

© 2012 PrimeLending, A PlainsCapital Company. Trade/service marks are the property of PlainsCapital Corporation, PlainsCapital Bank, or their respective affiliates and/or subsidiaries. Some products may not be available in all states. This is not a commitment to lend. Restrictions apply. All rights reserved. PrimeLending, A PlainsCapital Company (NMLS no: 13649) is a wholly-owned subsidiary of a state-chartered bank and is an exempt lender in WI.

Technically, the seller still owns the property. Title of the property does not transfer to the successful bidder until court confirmation of the sheriff’s sale. Before confirmation, the listing broker will continue to provide brokerage services, and if possible, although not probable, the broker can assist the seller to convey the property per the pending offer. Without successful negotiation of the short sale or obtaining funds to pay off lien holders, the seller may not be successful. Although ownership of the property is conveyed by sheriff’s deed, the seller’s obligations to the buyer and the listing broker must still be resolved. It will be necessary to address each contract, the original listing, offer, and possible second listing on its own merits. The first listing: The listing broker — not listing agent — must determine what action to take regarding the listing. Although the seller did not sell the property, ownership changed; therefore, per the listing, the broker could technically pursue the seller for commission when there is an effective change of ownership or control of the property during the listing. Considering that the seller no longer owns the property, functionally the broker no longer has the property to market, effectively terminating the listing. If the broker does not wish to pursue commission or damages for breach, the broker and sellers may use a CAMR to release all rights and interest in the listing. If the broker wishes to pursue legal rights, a notice or other correspondence from legal counsel may be appropriate. The original offer: After the confirmation of the sheriff’s sale, the broker may give written notice to the parties that title to the property has been conveyed by sheriff’s deed. One definition of material adverse fact is “information that indicates that a party to a transaction is not able to or does not intend to meet his or her obligations under a contract or agreement made concerning the transaction.” If the parties agree to release all rights and interest in the offer and to disburse earnest money, they may sign a CAMR. However, if either party wishes to bring legal action against the other, they may be referred to private legal counsel for legal advice. If no CAMR is agreed on, the broker holds the earnest money until proper disbursement authorization is given. The second listing: The lender may elect to list, with a new listing contract, with the same broker or may engage a new broker to market the property for sale. Generally, the lender will have the new listing broker target any formerly interested buyers to purchase the property. If the lender does not list the property, a broker may enter into a buyer agency agreement to represent the previous buyer to acquire the property from the FSBO lender. Tracy Rucka is Director of Professional Standards and Practices for the WRA.

MEMBERSHIP RESOURCES

Exclusive Member Benefits We wish you success in your career and hope you take advantage of the many benefits we offer.

Unlock the Potential of Web Marketing — No Locksmith Needed!

ou can start your RealEstateHomePages.com (REHP) website for just $19.95 per month for the first year when you mention the WRA promotion! The promotion is good through December 31. Just mention “WRA Half Off.” Why use REHP? clicks and keystrokes. You’ll see how your website will look live — no guesswork required! Search engine-friendly REHP sites are optimizable with Google and the major search engines. Changes in content, site titles and linking ability make REHP websites friendly for Google and for your customers.

Custom design options Leave it to the experts to make your site look great — REHP offers options for custom designs, including Flash. Unlimited pages and photos You don’t have to condense everything to the homepage! Upload as many photos as you need. With REHP, you are not constricted to a space limit.

Wisconsin-based company Involved in the Internet since 1995 and headquartered in Hudson, REHP is close to home with hundreds of REALTOR® clients in Wisconsin and Minnesota. Visit www. realestatehomepages. com/portfolio.asp to see examples and to learn what REHP can do for you.

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Health, Dental & Life Insurance

Website Development

Save big on office supplies with Office Supplies 2U, a Wisconsin-based company with a seasoned, experienced staff focused on customer service. OS2U’s mission is to be the single-source premier supplier of business products by providing the utmost in quality, commitment and care. For more information, contact Bob Brooks at 608-441-8900, ext. 26, or by e-mail at bobb@os2u.com. Visit OS2U online at www.os2u.com.

Save on health insurance premiums with REGIT Inc. without compromising your coverage. REGIT Inc.’s health program provides access to insurance plans that can be customized to meet the needs of the individual. Call today for a free, no-obligation quote at 800-537-9786 or visit www.regitinc.com.

Interested in creating your own website? WRA members can design and maintain their own websites through Real Estate Home Pages. Software templates and easy-to-use tools for adding images and formatting text provide a professional look, usually only attained by a graphic artist or Web designer. Visit www. realestatehomepages.com for more information. You’ll be amazed at how easy and inexpensive having a website can be!

Long-Distance Program Save big money on your long-distance rates with AMI Communications Inc. The plan features low rates with no monthly plan fee, no time-of-day restrictions and no term or volume commitments. AMI also offers a variety of products, including teleconferencing and toll-free service. Call 800-254-3202 or visit www.ami.net and mention that you are a WRA member to begin enjoying the high-quality service and savings that AMI provides.

Business Furniture Established in 1940, Emmons Business Interiors has marketed and distributed quality office furnishings across Wisconsin for decades. Through several statewide locations, EBI provides a complete line of quality new and used furniture, as well as refurbished office furniture products. Also available are interior design services, installation, and project management and moving management. Let the experienced team at EBI design efficient, productive and ergonomic work environments for your office or home. For more information, contact Tod Dean at 800-324-1691 ext. 424, or by e-mail at todd@ebiweb.com. Visit online at www.ebiweb.com.

Shipping Discounts WRA members currently enrolled in the UPS Savings Program must re-enroll to take advantage of this new exclusive offer. Just take a few minutes to fill out the short application form available at www.savewithups.com/enroll. To enroll, use promo code NCR308. If you have any questions, call UPS at 1-800-325-7000. If you have questions about one of the WRA Member Benefits, please contact Debbie Thacker at dthacker@ wra.org or by calling 1-800-279-1972.

WIREALESTATEMAG • DECEMBER 2012

Easy editing No specialized training or technical knowledge? No problem. If you can write an e-mail or use Microsoft Word, you can easily craft your REHP website. With REHP’s webbased editor, you can easily type paragraphs, and insert photos, links, tables and more, all with a few simple mouse

EDUCATION

Top-Notch Classroom Education Whether your goal is to become a real estate sales licensee, enhance your career with a prestigious designation, or renew your license with continuing education, this section offers you the key courses you will need.

GRI Course 2 February 12-13; March 12-13, 2013 Appleton, Eau Claire, Madison, Milwaukee The GRI is the most widely recognized of the national real estate designations. 90 hours of classroom instruction are required in contract law, professional standards, marketing, finance, technology and business ethics. This designation is earned by completing three courses, GRI 1, 2 and 3, and passing the exam for each course. Each is a four-day course. The courses do not need to be taken in order. Once you start the GRI designation coursework, you have five years to complete all three courses. GRI courses can be fulfilled by passing the GRI course equivalency exam or by completing the QuickStart program. GRI scholarships are available online at www.wra.org/GRIscholarship. To register, visit www.wra.org/GRI.

2013-14 CE Out-of-State March 5-8, 2013 — San Juan, Puerto Rico Grab your suitcase and fulfill your 2013-2014 CE requirements in style! Escape the winter weather and join the WRA in sunny Puerto Rico. Whether you enjoy the spectacular ocean views, historical buildings or fantastic beaches, this is one educational opportunity you won’t want to miss. Classes are held at The Sheraton Old San Juan Hotel & Casino. • Course 1 – Wisconsin Listings • Course 2 – Wisconsin Offers • Course 3 – Wisconsin New Developments • Course 4 – Contingencies in Wisconsin Approved Offer Forms

WIREALESTATEMAG • DECEMBER 2012

To register, visit www.wra.org/CEOut-of-State.

Real Estate Sales Pre-license February 25-March 1; March 4-6, 2013 WRA Headquarters — Madison To obtain a real estate license in the state of Wisconsin, you must first complete 72 hours of approved education courses, such as the WRA Sales Pre-license Course. Next, you must pass a state-administered exam. The WRA will offer an eight-day accelerated 72-hour sales program on February 25-March 1; March 4-6, 2013 in Madison. For more information, visit www.wra.org/salespl

Broker Pre-license Course March 18-21; April 15-18, 2013 The eight-day Broker Pre-license Course covers contracts, approved forms, trust accounts, escrow and closing statements, business management and marketing, finance and office management, personnel, business ethics and much more. Completing pre-license education or passing the real estate sales exam are prerequisites. For more information and to register, visit www.wra.org/Broker_Career.

2-Day ABR Course April 10-11, 2013 — Madison Do you like working directly with buyer clients? If so, this course is for you! You’ll discover how to represent buyer clients with the same level of service that sellers enjoy. You’ll also learn about methods of building your buyer representation business. Complete two of the three days required for the ABR designation. Submitted for 2013-2014 CE credits. To register, visit www.wra.org/ABR_overview.

BPOR Certification

April 18, 2013 — Appleton Earn your Broker Price Opinion Resource (BPOR) certification with the course BPOs: The Agent’s Role in the Valuation Process. This course will provide you with the know-how to produce professional and accurate BPOs. You’ll learn about the many uses of BPOs, how to evaluate and minimize risk in the valuation process, plus much more. The BPO course counts as one REBAC elective to be applied toward the ABR designation. To learn more and to register, visit www.wra.org/BPOR_overview.

EDUCATION

WRA Course Schedule Visit www.wra.org/CourseSchedule for full schedule and details. Conference and Conventions Date March 5-8, 2013 March 18-19, 2013

Event/Course Out-of-State CE 2013-14 Appraisal Conference

Location San Juan, Puerto Rico Wisconsin Dells

Real Estate Continuing Education Date December 12, 2012 December 13, 2012 February 27, 2013 March 5, 2013 March 6, 2013 March 7, 2013 March 8, 2013

Course 2011-12 Elective C – DVD 2011-12 Course 4 – DVD 2013-2014 Course 1 2013-2014 Course 1 2013-2014 Course 2 2013-2014 Course 3 2013-2014 Course 4

Location Manitowoc Manitowoc Sheboygan Puerto Rico Puerto Rico Puerto Rico Puerto Rico

Price Call 920-973-7748 Call 920-973-7748 Call 920-457-7908 Call 608-241-2047 Call 608-241-2047 Call 608-241-2047 Call 608-241-2047

Pre-License Date Feb 25-Mar 1; Mar. 4-6, 2013 Mar 18-Apr 5, 2013 *Plus books

Course Sales Pre-license Course Broker Pre-License Course

Location Madison Madison

Member $325*

Non-Member $325* $345*

ATD $335 $345/m; $365 nm

Designation Courses Date Course Location February 12-13, 2013 GRI Course 2/CRS 201 Appleton/Eau Claire/Madison/Milwaukee March 12-13, 2013 GRI Course 2/CRS 201 Appleton/Eau Claire/Madison/Milwaukee April 10-11, 2013 2-Day ABR Course Madison April 18, 2013 BPOR: The Agent’s Role in the Valuation Process Appleton

APPRAISAL CONFERENCE

Mark the date

March 18-19, 2013 I Wisconsin Dells

WIREALESTATEMAG • DECEMBER 2012

2013

Excellence.

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Get on the road to earning the prestigious Graduate, REALTOR® Institute designation.

Out-of-

SAN JUAN, PUERTO RICO

March 5-8, 2013

2013-2014 Real Estate Continuing Education

Grab your suitcase! This isn’t your typical CE! Fulfill your 2013-2014 CE requirements in style — join the WRA in sunny San Juan, Puerto Rico! Classes are held at The Sheraton Old San Juan Hotel & Casino, located in the heart of Old San Juan, surrounded by museums, galleries, restaurants and the Bacardi Rum Distillery. Choose from as many as four CE courses: Course 1 – Wisconsin Listings Course 2 – Wisconsin Offers Course 3 – Wisconsin New Developments Course 4 – Contingencies in Wisconsin Approved Offer Forms Courses have been submitted for Wisconsin and Minnesota Real Estate CE.

Daily agenda NEW live classroom webcast February 12–13; March 12–13, 2013 Appleton I Eau Claire I Madison I Milwaukee

www.wra.org/GRI

Registration 8:00 a.m. – 8:30 a.m. Daily Tuesday, March 5 8:30 a.m. – 12:00 p.m. CE 1 5:30 p.m. – 7:00 p.m. Welcome Party Wednesday, March 6 8:30 a.m. – 12:00 p.m. CE 2 Thursday, March 7 8:30 a.m. – 12:00 p.m. CE 3 Friday, March 8 8:30 a.m. – 12:00 p.m. CE 4

www.wra.org/CEOut-of-State

REALTOR SALES TIPS by Marcus A. Wally

Safety and Success

One is no more important than the other! When training new hires, I am reminded of all the pieces that help us become successful REALTORS®. With the hiring of a recruit recently, I conducted training and again was reminded of the critical importance of REALTOR® safety.

1. Require prospects to show identification. At my office, we request that prospects initially visit our office in person. During the visit, we make a copy of the prospect’s driver’s license. Part of my office policy is to gather basic documentation on everyone who wants to see a property. Convenience can be a factor oftentimes, and if prospects are unable to visit the office first, meet at another public place, such as a coffee shop. There, take a photo of the license with your phone and e-mail it to your office. People expect an application process; if they object, that’s a red flag.

2. Be aware and cautious when showing a listing. Never turn your back on a client. Before I lean over to open the lock box, I ask prospects to walk around the property to view the landscaping. This keeps prospects away from the agent at a time of vulnerability. Once inside, allow them to walk into each room while you stay by the door. I hang out in the hallway or in the open living area. When showing the house, always walk behind the prospects. Direct; don’t lead. For example, say, “the kitchen is on your left,” and gesture for them to go ahead of you.

Another super idea is to silence your phone and have an imaginary conversation to give the impression that someone knows where you are and what you’re doing. My staff knows a code that signals an emergency. When an agent calls our office and says “cancel all my appointments with Mr. Snow,” our secretary automatically knows to phone the police. Make sure your office has a similar emergency code.

fast escape. Identify escape routes that lead directly out of the property as well as outdoor escapes, such as fence gates or garage doors. • Turn on lights and open curtains for both safety and marketing purposes. • When prospects arrive, jot down car descriptions and license plates as well as physical descriptions.

3. Trust your instincts. Mother always told us to follow our instincts and listen to our gut. The top crime against women in real estate is assault. After the fact, most victims state that they did not feel right about a person or a situation but plugged ahead as they needed the sale or rental. We just can’t ignore that inner voice. For safety, you may feel comfortable carrying mace or pepper spray. I recommend talking on your cell phone as a bigger deterrent: if someone hiding in a property hears you talking on your phone, they are likely to remain hidden rather than attack.

Hosting an open house? While an open house is a great sales tool, it also exposes you to unfamiliar people. Stay safe by practicing these tips: • Call the local police and ask for a squad car to drive by during your open house hours. • Check your phone charge and signal prior to the open house. Have emergency numbers programmed on speed dial. • Determine escape routes. Make sure all deadbolts are unlocked to facilitate a

• Notify a friend or relative that you will call every hour on the hour. And if you don’t call, they are to notify the police immediately. • Inform a neighbor that you will be showing the house and ask if he or she can be observant for the unusual. This safety tip is my favorite as it provides the opportunity to meet someone new. While making it to the closing table is our ultimate goal, never let it be overshadowed by risking your safety. Stay safe! Marcus A. Wally, MBA, is an active REALTOR® in St. Augustine, Florida. Marcus is the founder and broker of New World Realty, which also manages the coaching and facilitation of education classes around the world. Marcus earned his MBA from the University of North Florida in Jacksonville. He can be reached at 904669-1081 or at marcus@newworldrealty. com. Learn more about him at www.

WIREALESTATEMAG • DECEMBER 2012

orking with strangers puts us in harm’s way each time we show a property. Meeting an unknown person at a property is like playing Russian Roulette. Here are my tips for a safe sale, both for sales and rentals.

newworldrealty.com.

LEGISLATIVE by Tom Larson

Wisconsin Title Insurance Rates: Questions and Answers from OCI

WIREALESTATEMAG • DECEMBER 2012

everal months ago, many REALTORS® in Wisconsin received written notification from various title insurers indicating that new title insurance rates would be going into effect beginning October 1, 2012. In some cases, these new rates were higher than the rates commonly charged in some marketplaces. In addition to new rates, some REALTORS® learned that other title insurance practices would be changed, such as the ability to “downward deviate” — or “negotiate” — from these filed rates. Some REALTORS® received information indicating that these changes were caused by new regulations, interpretations or enforcement practices by Wisconsin’s Office of the Commissioner of Insurance (OCI). Other REALTORS® were informed that OCI did not make any changes to the law or its enforcement practices. To clear up the confusion, the WRA submitted several questions to OCI and asked for written clarification regarding its role in the new title insurance rates, as well as any changes to the practice of downward deviation from the rates filed with OCI. OCI recently provided the WRA with the following responses to our questions: WRA: Did the Office of Commissioner of Insurance (OCI) eliminate “downward deviations”? OCI: No. The title insurers requested OCI eliminate downward deviations, but we rejected their request. We believed then, and believe now, that downward deviations are good for consumers. We did remind the industry of their obligation under current law to document any downward deviations. OCI continues to allow downward deviations based on the streamlined process adopted in 1993.

Did OCI ask title insurers to raise their rates? No. Wisconsin is a use-and-file state for title insurance rates. This means that insurers are required to submit a rate filing to OCI within 30 days of beginning to use new rates. Did OCI order title insurers to file new rates? No. Under Wisconsin law, insurers are required to submit a rate filing within 30 days of beginning to use new rates. Wisconsin issued a bulletin on title insurance on April 30, 2012. Did that bulletin change the rules for title insurers? No. The bulletin only detailed requirements that title insurers were supposed to be meeting since the industry requested a change to allow a streamlined downward deviation process in 1993. The administrative rule allows title insurers to use downward deviations without filing them with OCI if the insurer or its agents retain certain information for a five-year period. The bulletin requires that title insurers document a reason for deviations. What are acceptable downward deviations? There is no change to existing law. Title insurers are allowed to lower rates for any activities that will lower the risk on cases or will result in lower expenses. The examples of allowable discounts are innumerable. The only requirement is that the discounts reflect a more favorable risk profile or lower administrative costs. Can title insurers lower rates for one specific policy on a case-by-case basis? Yes. It is expected that similarly situated consumers, such as consumers

purchasing the same house, in the same neighborhood, from the same title agent, and the same title insurer, would pay similar rates unless additional factors would result in lower costs for the insurer. Why can’t rates be adjusted on a case-by-case basis, regardless of risk? Wisconsin statutes prohibit it unless there are reduced expenses. Specifically, Wisconsin Statute 628.34 (a) states “No insurer may unfairly discriminate among policyholders by charging different premiums or by offering different terms of coverage except on the basis of classifications related to the nature and the degree of the risk covered or the expenses involved, subject to ss. 632.365, 632.746 and 632.748. Rates are not unfairly discriminatory if they are averaged broadly among persons insured under a group, blanket or franchise policy, and terms are not unfairly discriminatory merely because they are more favorable than in a similar individual policy.” What are some examples of improper downward deviation / unfair discrimination? As previously discussed, similarly situated individuals purchasing coverage from the same insurer, from the same agent, on the same property, with the same expenses should expect to receive similar rates. For more information on Wisconsin’s title insurance rates, we encourage you to visit OCI’s website at oci.wi.gov. Tom Larson is Vice President of Legal and Public Affairs for the WRA.

What’s Your Dream Job? When was the last time your boss asked you that? At Coldwell Banker it’s always our first question. We believe our success comes from helping you realize your idea of

Every Dream Deserves a Chance DreamBlueBlog.com • ColdwellBankerOnline.com

WIREALESTATEMAG • OCTOBER 2012

success. It’s whatever you decide.

WIREALESTATEMAG • DECEMBER 2012

LEGISLATIVE

LEGISLATIVE by Joe Murray

Democrats Carry Statewide Races while Republicans Sweep Legislative Seats

Presidential President Obama’s 7-point win was half of his 14-point margin four years ago, but it was the seventh consecutive presidential win for Democrats in Wisconsin. Other notable facts from the 2012 presidential contest in the Badger State include: • Obama’s 52.8 percent is the third-largest margin by a Democratic presidential nominee in Wisconsin since 1940. Sequentially, the other margins include 62 percent for Johnson in 1964, 56 percent for Obama in 2008, and 52.8 percent for Obama in 2012. • Professional pollsters say a candidate’s “job approval” number is the best indicator of their final election performance. Obama’s job approval in Wisconsin stood at 51 percent on October 28, nine days before the election. Once again, the Marquette Law School poll called the race in Wisconsin accurately. • The total vote increased by 105,781, which is 4 percent, in 2012 over 2008: 2008 vote,

“After three consecutive ‘wave’ elections in 2006, 2008 and 2010, Wisconsin voters returned a split decision on November 6: the top-of-the-ticket solidly ‘blue’; the down ballot results solidly ‘red.’” 2,965,653; 2012 vote, 3,071,434. The total vote declined in some states, but not in Wisconsin.

U.S. Senate Tammy Baldwin’s victory in the Senate race makes history in two ways. First, she defeated a four-term, well-known former governor, and Baldwin also became the first woman elected to the U.S. Senate from Wisconsin. Other facts of note with the Senate race include these: • No ex-Wisconsin governor has ever been elected to U.S. Senate. Five have tried and lost, including Democrat Tony Earl in 1990 and Republican Tommy Thompson in 2012. • When there is a presidential and Senate race on the same ballot, the results are the same in 15 of 17 election cycles going back to 1914. The winner of the presidential race virtually always wins the U.S. Senate as well.

• There were 62,023 fewer total votes in the Wisconsin Senate race than the total vote in the presidential race. Election experts believe this could have taken place as a result of the elimination of straight-party voting in Wisconsin.

Legislature Republicans will come back with strong majorities in both the state Senate and Assembly in 2013. Prior to November 6, Democrats maintained control of the state Senate for five months but failed to hold their majority in the fall elections. • Republicans picked up two new state Senate seats to regain control of the upper house 18-15. Democrats defeated three GOP senators in the 2011-12 recall elections, but Republicans were able to get back two of those seats in November. • Wisconsin was one of three states to shift from Democrat to Republican control in the state Senate. The other two states were Alaska and Arkansas. • Since 1993, the Wisconsin state Senate has switched control nine times, including three times over the last two years. • Republicans will control the state Assembly 60-39 in 2013. In November, the GOP picked up one additional seat to add to their already large majority. • There will be 25 new members in the state Assembly and three new members in the state Senate. In fact, first and second term legislators will make up more than half the state Assembly next year. Joe Murray is Director of Political and Governmental Affairs for the WRA.

WIREALESTATEMAG • DECEMBER 2012

n November 6, Wisconsin Democrats swept both top-of-the-ticket races, winning Wisconsin for Barack Obama and electing Tammy Baldwin to the U.S. Senate. On the same night, Wisconsin Republicans won back control of the state Senate, increased an already big margin in the state Assembly and held the seats of Sean Duffy and Reid Ribble, the two House freshmen. After three consecutive “wave” elections in 2006, 2008 and 2010, Wisconsin voters returned a split decision on November 6: the top-of-the-ticket solidly “blue”; the down ballot results solidly “red.” Let’s take a closer look at the details.

MAGAZINE SURVEY RECAP

Wisconsin Real Estate Magazine Survey A review of 2012 and planning for a successful 2013 Thanks to all who participated in the 2012 Wisconsin Real Estate Magazine survey last month! Your opinions are important, and your input in the survey will help to shape future magazine issues and topics.

n 2013, Wisconsin Real Estate Magazine will provide information based on your 2012 survey responses. Next year, you’ll see magazine articles that highlight commercial real estate, vacant land, vacation properties, ethics and inspections — just to name a few of the popular responses from survey participants. If you have magazine-related ideas or feedback, don’t hesitate to send an e-mail to editor@wra.org. 2012 survey highlights are below.

Who are Wisconsin Real Estate Magazine readers? • 73% are sales agents, 20% are brokers. • 9% work as a one-person operation. • Half enjoy cooking, one-third like shopping. • 52% scan and browse for topics in every magazine issue. • A quarter of readers want to read more ethics topics, and 4% want less coverage on technology.

Top 10 industry issues by rank

WIREALESTATEMAG • DECEMBER 2012

1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Foreclosures and short sales Job and employment situation Government regulation Negative news media Public perception of REALTORS® Undertrained agents Legal issues Property-related taxes/fees Housing affordability Health care for agents

“Is there anything we can do to make the magazine better?” • “No, you’ve made changes recently which I like.” • “More seller and buyer feedback.” • “A little bit more on appraisal work would help.” • “Show more pictures of female REALTORS®.” • “No … I LOVE Cori Lamont’s articles! She is smart, witty and makes overwhelming and sometimes boring — although important — legal issues interesting!”

“Which guest writer(s) would you like to see contribute an article to the magazine?” • “Scott Walker, Paul Ryan, farmers.” • “Terry Watson.” • “Stephen Colbert.” • “More articles from top producers about what works for them.” • “Harney.”

“What additional topics would you like to see in the magazine?” • “Trends in floor plans; trends in square footage.” • “Construction industry.” • “I would like to see more on ethics/professional standards.” • “Real-life scenarios: financing, inspection, arbitration, consumer behavior.” • “Vacant land.”

“In your opinion, what are the top issues facing the real estate industry?” • “Difference between each lender and their credit requirements.” • “I have seen some slippage of ethics during the tough years and now even as things pick back up.” • “Depending on the day, it could be just about anything.” • “City inspectors, code violations, vacant/abandoned properties.” • “Appraisal and loan problems in the ‘eleventh hour.’”

WHAT MAKES A CENTURY 21 AGENT? GUTSPAH. IT’S LIKE CHUTZPAH. BUT WITH EVEN MORE GUTS, MOXIE AND METTLE. LIKE THE KIND OF METTLE THAT’S STRONGER THAN STEEL. WITH NERVES TO MATCH. THAT’S GUTSPAH. AND GUTSPAH DELIVERS EVERY TIME. ®

CENTURY 21 AGENTS. SMARTER. BOLDER. FASTER.

C21.COM U.S. SOCCER IS A TRADEMARK OF THE UNITED STATES SOCCER FEDERATION, INC. ALL RIGHTS RESERVED. ©2012 Century 21 Real Estate LLC. All rights reserved. CENTURY 21® is a registered trademark owned by Century 21 Real Estate LLC. An equal opportunity company. Equal housing opportunity. Each office is independently owned and operated.

What was our advantage? realtors like you. ÂŽ

Wisconsinâ&#x20AC;&#x2122;s housing market is getting stronger thanks to your continued commitment to home ownership across the state, but much more needs to be done in the coming year. Together we can build strong communities and create new economic opportunities through home ownership. To learn more, go to www.wheda.com/Realtors. Wisconsin Housing and Economic dEvElopmEnt autHority 201 West Washington Ave n Madison, WI 53703 800.334.6873 n www.wheda.com