January 2010 - Wisconsin Real Estate Magazine by Lauren Bizorik

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MAGAZINE

January 2010 $5.00

2010

ECONOMIC

OUTLOOK

s ce e r u h so all of t e w R

it to vie ilable d re age 21 es ava C x to p urc Ta Turn reso

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table of CONTENTS

JanUarY

features

articles

15 23 24

2010 Economic Outlook

Completion of Forms vs. the Practice of Law 13

2010 is shaping up as a year of big challenges for real estate and state government - but where there are challenges, there are also opportunities ...

The Federal “Cap and Trade” Bill Congress is currently working on legislation referred to as The American Clean Energy and Security Act. What are the implications for the real estate industry? Credit Changes

d Questions

Here are some ?

of the most frequent

ly asked question

s on the changes

I thought the tax buyers only. Isn’t credit was for first-time homethis just an extensio tax credit? n of the original

Yes and no. While the original $8,000 homebuyers has tax credit for first-time been extended to April 30, 2010, also expanded Congress has the homebuye r tax credit to homeowners. Homeown include existing ers who have used sold as a principal residence consecutiv the home sold or being years are eligible ely for 5 of the for a $6,500 tax previous 8 credit. limits have been increased to $125,000 In addition, the income $225,000 for married for single individuals couples. and ?

I am an existing homeowner. On I signed a contract October 25, 2009, lived in my current to purchase a new home. I have home for more years and am than 5 consecu within the new tive income limits. to settlement I will go on November 20. Since the was signed by extension President Obama qualify for the on Nov. 6, will new $6,500 tax I credit?

Yes. The existing homeowner credit goes into effect after the date of for purchases enactment (when the bill is signed). reference to the date of contract for the new credit. There is no looks solely to the The provision date of purchase, settlement. which is generally the date of ?

I owned my home for 10 years, but ago year and sold it two years have been renting a home, will I since. If I purchas be eligible for e the $6,500 tax meet all the other credit if I eligibility tests? Yes. Because

you lived years of the previous in the home for more than 5 consecutiv 8, you will qualify keyword here is for the $6,500 credit. e “consecutive.” The

to the Homebu

yer Tax Credit.

Best of the Legal Hotline

Property Data Features Over the Generations

Tax Credit Resources You Can Use REALTORS® will want to check out these resources to help spread the news about the tax credit!

Awesome iPhone Apps for REALTORS® The iPhone’s apps really make the it shine as a tool for REALTORS® - here are the most popular.

Barrett Enters Race for Governor Milwaukee Mayor Tom Barrett has thrown his hat in the ring for the state’s top spot.

I am an eligible existing homeow amount of equity ner. I have a fair in my home. I with a non-neg have found a home otiable price of $825,000. Will to use any of I be able the $6,500 tax credit? No. The

$800,000 cap $800,000. Any amounton the cost of the purchased home is firm at above $800,000 for any portion makes the home of the credit. The $800,000 is an absolute ineligible ceiling.

Existing homeow ner credit: Must more than the the new house old house? cost

No. Thus, for example, individuals who area to a lower move from a high cost area who meet all eligibility requireme cost qualify for the $6,500 nts will credit. ?

Here’s to 2010!

As Wisconsin’s population ages, the Accessibility Features Report could save time. Here’s how.

New Year, New Need for Active Engagement

Homebuyer Tax

26, no. 4

Here are answers to Legal Hotline questions about a REALTOR’S® duty to preserve conﬁdentiality.

Frequently Aske

Vol.

It’s that time again!. Here’s how what you commit to now can dictate what December 2010 will look like.

It’s been two years since we slipped into recession and our feature writer this month says we still have a ways to go to recovery. Here’s his forecast for 2010.

REALTORS must remain vigilant in following best practices when completing forms to retain the authority to ﬁll out forms as a valued service to clients and customers.

2010 |

I am an eligible first-time homebu contract to purchas yer. I entered into a e on November to go to closing 1, 2009. Do I have before Decemb extension date er 1? How does affect me? the

You do not

have to close before December 1. Once was signed, it is the legislation as if the Nov. 30 date had never so long as the existed. Therefore, contract settles before April 30 case), the purchaser (or June 30, worst will be eligible for the credit.

I am a first-tim e homebuyer but was not within prior income limits the contract to purchas at the time I entered into my covered, however e on October 30, 2009. I will be , by the new income limits. new rules have If the been signed into to settlement, law by the time will I be eligible I go for a credit? Yes. The new income

limitations went President signed the bill. The income into effect as soon as the rules will look to limit and other your status as of the date of purchase, eligibility settlement date. which is the

SOURCE: National

Association of REALTORS®,

www.wra.org/nartaxcreditf

Tear off this tax credit ﬂyer to use with buyers! See page 29

News

inside the WRA

with BILL MALKASIAN

Top News Stories in and Around the Industry

Top News Stories in and Around the Industry substantially increase funding for rental assistance, UNITED WAY HONORS THE STARK FAMILY WISCONSIN RECEIVES MILLIONS TO EASE particularly help for working families. FOR SERVICE TO FORECLOSURE CRISIS appy New Year! Based on current indications, I important information for members to Milwaukee Business Journal (WI) (09/30/08) COMMUNITY propose we make a New Year’s resolution that 2010 know about and understand. United Way of Dane County NAR RELEASES FREE FHA TOOLKIT The state of Wisconsin is challenge due to receive nearly $39 will be better than 2009! If anyone wants to

Tracy Rucka compiles our monthly “Best (10/30/08) of Wisconsin REALTORS® Association milliontointalk federal funds to stabilize neighborhoods United Way of Dane C n t I’d y be happy meo onu that, to them. the Legal Hotline” on confidentiality, and Mike and stave off a spate of abandoned homes. According recognized the Stark Family with the 2008 WRA are eager to help you meet the to aHUD andthat Gov.everyone Jim Doyle, the funds areTheo separate Thisforfirst edition of 2010 subject is talking updates NAR us onand thethe political and public policy Tocqueville Society Award outstanding servicefeatures current challenges the In troubled from approximately $9.2 million the government is to the Dane County community and United Way. challenges that face us in the NewofYear. addition,economy. We about this time of year – the economy. Once again, this year’s awarding city ofisMilwaukee, where the foreclosure The Tocqueville Societyarticle Award celebrates and knowabout that the you federal need resources can help you is written by Stephen Malpezzi.theSteve the Academic Tom Larson writes “Cap andthat Trade” rate isCenter currently the I know acknowledges people or families, as James the Starks, bill, which has generated interest from atour Directorsuch of the A. Graaskamp for 9.9 Realpercent. Estate HUD at theis awarding close transactions, and you need them little or no via its Neighborhood Stabilization Program, who have made a major impact on the quality life Wisconsin School ofofBusiness atfunds UW-Madison. membership (judging from the number of all-new e-mailsFHA I’ve Toolkit cost. NAR has just released an under which almost $4 billion is being allocated to in Dane County through their exceptional service received aboutonline it). JoeforMurray has an you article Milwaukee FREE to help geton clients the financing local andtostate governments for the redevelopment commitment to the community. Billand Malkasian We’re fortunate here in Wisconsin have great academic Mayor Tom Barrett’s quest for the governorship. of abandoned and foreclosed houses. they need in a credit-strapped environment. It is WRA President institutions – UW-Madison, Marquette University, UW-Milwaukee

CITY HOUSING AUTHORITY RECEIVES – to name a few. I realize I’m out on a limb onenotes: of the most comprehensive toolkits NAR has Some final WRA and UW-Whitewater SITES: NOT JUST FOR PERSONAL 100-UNIT GRANT here mentioning schools – I don’t mean to exclude any – these ever produced, and it’s available to all REALTORS® Milwaukee Journal Sentinel (09/25/08) Pabst, Georgia CONNECTIONS ANYMORE • We had a solid fi scal year in 2009. Thanks to our are just the schools we work with on a regular basis, and each of

right now by visiting the link below. They also have Minneapolis-St. Paul Business Journal (09/29/08) Grayson, membership, the WRA is in good financial shape. The city of Milwaukee’sthese housing authorityhas is an dueimpressive array of academics who truly institutions Katharine launched a new page called “NAR Helps You Navigate to receive $6.7 million in federal Hope VI money understand real estate. • The WRA Board of Directors meets on January 22 in Madison St. Paul, Minn.-based REALTOR® Teresa Boardman the Current Economy” where you can find dozens of to build 100 new housing units. The 100 units will to discuss issues facing the association. says Flickr, Facebook and other social networking be constructed in a 2.5-mile area and will include And one more mention of the economy: We were fortunate to have great products and resources, like the FHA Toolkit, it easy to Conference meet people who might 29 public housing andNAR affordable rental units; Chief Economist Lawrencesites Yun make at Management fora free or at aof steep discount.Wisconsin Visit www.Realtor. • The WRA is sponsor the annual Economic eventually become clients. While many professionals nine affordable housingonunits for income-eligible December 10. Dr. Yun gave an informative economic update to Forecast Luncheon on January 14 at Monona Terrace in org/NARHelpsYou for links to these great programs are using these sites to make business contacts families; and 62 moderately priced, open-market the group and was very visible in the press statewide on behalf Madison (www.wisbank.com/EconomicForecast). and companies use them to conduct background and products. condominiums. HUD Secretary Steven C. Preston of all of us. checks or recruit new workers, many simply want comments, “Milwaukee’s housing authority has • The WRA will be represented at NAR’s Public Policy Briefi ng in connect with people who have similar interests. demonstrated it has the leadership to media, lead and HOME LOANS GOING STRONG, ALBEIT A Speaking of the the WRAtoExecutive Committee met during Washington, D.C., on January 25 and 26. According to Boardman, “The hard sell is dead. It revitalize neighborhoods and transform lives. a howling snowstorm on December 9 where they authorized a BIT TIGHTER, IN AREA doesn’t work door-to-door, and it doesn’t work on Cities like Milwaukee change and grow and need to • The Local A/E Council will meet January Balousek, 21 in Madison and radio and social media campaign for the extended and expanded Wisconsin State Journal (10/17/08) Marv social networks.” On Flickr, Boardman connected revitalize housing to make sure many aren’t priced there will be RPAC local board training that same day. In tax credit. The campaign began last month and is running through out.” Milwaukee is one of a half-dozen housing with a fellow photographer who eventually used her Despite the ongoingCommittee national credit crisis,that property addition, the WRA Nominating will meet day to March. I’m sure that by now you’ve heard a radio ad, seen a banner authorities nationwide to receive new Hope VI services to purchase a home. professionals mortgage treasurer money remains available nominate candidates forsay 2011-2012 and chairmanad, or heard some mention of the campaign. You can check out the grants. elect. throughout southern Wisconsin to home buyers updated home buyer’s Web siteFORECLOSURES at www.wisconsinhomebuyer.org PUSH RENTS HIGHER,

HOUSING STUDY DELAY and fiFRUSTRATES nd information on resources that you can useINCOME at www.wra. SQUEEZING LOW FAMILIES with solid credit. Ron Steinhofer, manager of Dan only reason I list these activities, which many of you have ADVOCATES org/public_awareness_2009. Minnesota Public Radio (MN) (09/21/08) Olson, The Marshall & Ilsley Bank’s regional home lending

come to expect, is to let you know that the WRA is in solid In Minnesota’s Twin Cities, a wave of home group, “Thgreat, ere’s plenty of money forand home financial shape, and states, you have dedicated leaders By the way, we are able to run this campaign because we had Two years after promising the Milwaukee metro foreclosures has pushed more people into the rental loans out there. It is slightly more diffifor cultyou to qualify a good staff committed to going the extra mile in a good fi nancial year, thanks to all of you who renewed your area’s first major housing study in three decades, apartment sector. The result is an intensifying membership. We Planning had close to ademand 90 percent renewal rate a rental2010. than two or three years ago, but if you have a good the Southeastern Wisconsin Regional on Minneapolis andduring St. Paul’s housing year for the you! Commission (SEWRPC) isrough still struggling to industry. get the Thank stock, so much so that the vacancy rate is very low credit score, a good job and a down payment, money What’s the lesson learned from last year? Your effort launched. Proponents hope the study will and rents are on the rise. This, in turn, means lowavailable.” adds thatwe banks association is isresilient, andSteinhofer when challenged, can still are As I stated last month, we have two core programs coming up early serve as a catalyst for improving affordable housing income working families face higher monthly rents making loans via such programs as Fannie Mae still deliver the products to you that you’ve come to in 2010 – Winter Convention (www.wra.org/WinterConvention), opportunities throughout the city’s suburbs. But even though their income hovers at unchanging ® expect – and and more! We’re Mac. prepared to move out of standards Freddie Furthermore, credit is a great opportunity for REALTORS across state, commissioners have yetwhich to assemble an advisory levels. Since 2005, the the Twin Cities apartment recession into theabout next phase of the realwere estate especially fora those – andrate Designation Week committee to oversee thebut research or set specifiup c north vacancy has dipped from(www. 7 percent to the closer to remain the same as they six months ago, timetable for conductingwra.org/desweek), the survey. Phil Evenson, industry. which is a4 nationally-recognized education percent. Average monthly rents over that same meaning that qualified home buyers can get loans the commission’s executive director, said other issues time span are up more than $25, rising to more program. if they have income verification. On the Thanks for staying with usthe andproper I look forward keep getting in the way. The delays have frustrated than $850. The St. Paul-based Wilder Foundation ® downside, banks have been less willing to make to the next 365 days! over toSanchez, legal and public affairs, don’t income forget REALTOR housing advocates the Switching most. Bethany recently reviewed data for several Twin Cities vice president of the Metropolitan Milwaukee Fair & Government Day (www.wra.org/RGDay) on February 24. This counties. The organization’s research found that the loans with higher loan-to-value ratios. In addition, Sincerely, Housing Council, laments, “It’sevent been isa free long –time number people in those marketsforpaying too much year’s work with your of local board to arrange conventional financing without a down payment has coming.” The Pewaukee-based forattheir rental housing will double from around rides. It’scommission going to be ahas great day the Capitol. indeed disappeared. However, 100 percent financing Milwaukee Journal Sentinel (10/07/08) Williams, Scott

not conducted a comprehensive review of housing 70,000 currently to a whopping 140,000 by 2010. patterns since the 1970s.This month Kevin King writes Some an article completion forms be for the U.S. say aonpartial solutionof would government reverse course take on housing policy and and the practice of law. I ask that brokerstoand managers a

look at this article and share it at a sales meeting this month. It’s

2 2

wisconsin real estate magazine wisconsin real estate magazine

january 2010 oCToBer 2009

Bill

is still available with Veterans Administration and Rural Development home loans.

news.wra.org news.wra.org

REAL ESTATE

Wisconsin Real Estate Magazine™ is published by the WISCONSIN REALTORS® ASSOCIATION. Trademark issued pursuant to Wisconsin state statute; federal trademark is pending.

notes from the wra

John Flor, ABR, CRS, e-PRO, GRI, RRS, Chairman johnflor@sixlakesrealty.com

WRA Launches Second Phase of Tax Credit Campaign

John Horning, Chairman-Elect jphorning@shorewest.com

To promote the $8,000 tax credit extension for first-time home buyers and the recently approved $6,500 credit for current homeowners, the WRA’s Executive Committee approved a $97,000 tax credit media campaign to run from mid-December through March 2010.

Robert Keefe, Treasurer rkeefe@keeferealestate.com

Similar to the campaign the WRA ran for the original $8,000 tax credit, this campaign will feature radio ads and online media with a focus on the home buyer’s microsite (wisconsinhomebuyer.org), Facebook fan page, Twitter, Google Ads text and paid search, a new home buyer blog, and tools REALTORS® can use to promote the tax credit in their own markets.

William E. Malkasian, CAE, President wem@wra.org Editorial Staff:

The radio advertising campaign includes two different 30-second spots, with 15 spots per week on a statewide network of radio stations featuring news programming, running for nine weeks.

William E. Malkasian Publisher

Background on the Tax Credit Signed into law last month, the $8,000 tax credit was extended to first-time home buyers who purchase a home between November 7, 2009 and April 30, 2010. In addition, a $6,500 credit is available for current homeowners who have owned and used the same home as a principal or primary residence for at least five consecutive years of the last eight years and who purchase a new home as a primary residence by April 30, 2010.

Robert Uhrina Managing Editor

Terry O’Connor Publication Editor

Joe Leschisin

Real Estate Magazine Member Survey Results

Senior Designer

Thank you to all who participated in the 2009 Wisconsin Real Estate Magazine survey and provided feedback on the magazine. Your comments, as always, help shape future editorial topics for the next year. The leading issues as voted by Wisconsin Real Estate Magazine readers follow:

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. POSTMASTER: please send address changes to the WISCONSIN REALTORS® ASSOCIATION, 4801 Forest Run Rd., Ste. 201, Madison WI 53704-7337.

TOP REAL ESTATE ISSUES IN WISCONSIN 2. Real estate economy

THE TAX ELEPHANT No one wants to talk about it, but tax increases seem inevitable.

February 2009 $5.00

MAGAZINE

3. Negative news media 4. Ethics / decline of professional standards 5. Under-trained agents 6. Government regulation

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.

7. Property taxes 8. Public view of REALTORS® 9. New business models (limited service / discount brokerage) 10. Understanding legal issues

feb09_cover.indd 1

1/29/2009 1:11:12 PM

Some of the other top real estate issues that survey takers wrote in were unemployment and lack of consumer confidence, the credit crunch making mortgages harder to get, appraisals and the appraisal process, home values falling below mortgaged amounts, and sellers being unrealistic about asking prices.

4801 Forest Run Rd., Suite 201 Madison, WI, 53704-7337 (608) 241-2047 • (800) 279-1972 legal hotline: (608) 242-2296 • (800) 799-4468 general fax: (608) 241-2901 products/education fax: (608) 241-5168 legal hotline fax: (608) 242-2279 president fax: (608) 242-2267 e-mail: editor@wra.org Website: www.wra.org

College Scholarships Available The selection process is now underway for the 2010 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 5, 2010. The application is available online at: www.wra.org/ChildScholarshipAppl or by contacting Sandy at Sandyb@wra.org.

facebook: www.wra.org/facebook linked-in: www.wra.org/linkedin youtube: www.wra.org/youtube

wisconsin real estate magazine

There’s plenty going on at the Capitol with the start of a new year.

1. Foreclosures and short sales

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.

INSIDE THE CAPITOL

january 2010

Chairman’s Corner

John Flor

ABR, CRS, GRI, RRS, and e-PRO

appy New Year Wisconsin REALTORS®! I want to congratulate you for making it through another tough year and choosing to continue your career in real estate. I love this time of the year, because it allows us to focus on the future. It is a great time to put the struggles of the past behind us and look forward to the opportunities that lie ahead. I think we can all agree that the next year will present many opportunities for each and every one of us in new and challenging ways. If you joined us at the Management Conference last month, we heard about how our industry is continuing to change. However, we also heard that in many ways the concepts of community involvement, honesty, integrity and personal referrals are just as important today as they have ever been. When you are sitting down to plan out your goals for the next year, I would like you add one to your list. Please make a commitment to get involved or increase your involvement in your local, state or National Association of REALTORS®. You have made a commitment to stay in real estate and now I would like you to make a commitment to participate in real estate in a way many of you never have. These organizations provide us with the services we need to professionally conduct our businesses and there are many ways to give back. Start with small, attainable goals, like attending meetings in your local area, giving to RPAC, attending a fundraiser or taking part in an educational opportunity. You will find that you learn just as much from your fellow REALTORS® as you do from the formal presentations at these events. If you are already a regular attendee, maybe it is time to step up and participate on a committee or run for the board of directors. For those of you looking for a more serious challenge, I encourage you to explore the possibility of taking on a leadership role in one of the associations. For any of these

wisconsin real estate magazine

january 2010

positions I encourage you to speak to your Association Executive or current leadership team. These are the people who know you and can point out where you can excel within the association and reach your goals. This is the time to decide if you are interested in pursuing this course, as many associations will start their application process soon, so don’t wait. Many of you have served or already currently serve our associations at very high levels. I want to thank you for your leadership and commitment to real estate in Wisconsin. I also want to encourage you to use your knowledge and experience to encourage others to serve. We all know people with the potential to lead, organize or contribute to our organizations in ways that they can’t even imagine. Take the time to personally ask these talented individuals for their help. Personal encouragement from someone you respect is more motivating than any e-mail or article I or anyone else can write. It is often the smallest act of encouragement that will lead to the greatest contributions. Think about how you want to help make real estate in Wisconsin better and then take action. It may take time and effort, but I guarantee you will get much more out of the experience than you give. I want to wish you all a healthy, happy and prosperous New Year. And don’t forget to show your REALTOR® Pride every day.

John R. Flor

news.wra.org

REALTOR NEWSWIRE ®

Top News Stories in and Around the Industry

DOCUSIGN OFFERS REALTOR® DISCOUNT Inman News (11/30/09)

Members of the National Association of REALTORS® (NAR) will have access to special offers and pricing from DocuSign as a result of a “strategic investment” in the electronic signature services provider by NAR’s venture capital fund, Second Century Ventures LLC. The trade group says DocuSign is “the official and exclusive provider of ESIGN services” for its members. Through the end of the year, REALTORS® can obtain an enhanced version of DocuSign for Real Estate Standard Edition for $13.95 per user per month with an annual commitment or $17.95 per user per month without a yearly subscription.

HOME BUYERS STARTING OUT SMALLER DESPITE HELP FROM TAX CREDIT Green Bay Press-Gazette (WI) (11/28/09) Jagannathan, Malavika

In Wisconsin, homes built this year might be smaller and less costly than in years past, but builders say a tax credit for first-time buyers has provided at least that boost to sluggish construction rates. Brown County Home Builders Association President Ron Thiesfeldt states, “A lot of the building going on is with regard to that first-time buyers tax credit. We are starting to see a lot of first-time homebuyers with smaller starter homes.” The $8,000 tax credit was recently extended to the end of April. At the same time, a $6,500 tax credit was created for repeat buyers looking to move. Singlefamily housing starts in Brown County decreased from 617 in 2007 to 337 last year. Through the end of the third quarter, about 312 permits for singlefamily homes had been issued for the current year, reports the Brown County Home Builders Association. Wisconsin Builders Association President Doug Scott remarks, “We’re lucky in Wisconsin that we have not had the extent of overbuilding as some areas of the country like Nevada, Florida and California have had.” The tax credits coupled with still-low mortgage rates should help in the new year, Scott adds, even as the average size of homes and the average construction cost have both decreased in some Brown County communities.

SMART GROWTH ON TRACK

Friends of Wisconsin, states, “Now we’re going into the phase where local land use decisions have to be consistent with those plans.” Hiniker’s group is part of an unlikely coalition that included REALTORS®, builders, planners and legislators who all pushed for the law. Each adopted plan must incorporate nine specific elements, including housing; transportation; agricultural, natural and cultural resources; economic development; intergovernmental cooperation; and land use. In addition, the law requires that the public be involved at all stages of the planning process. State grants were offered to help pay for local planning efforts. According to the state Department of Administration’s records, more than 80 percent of the 1,922 cities, villages and towns reported that they had either adopted a comprehensive plan or were on their way to one as of late August. Counties had the best record, with a whopping 96 percent reporting plans either completed or well under way. About 83 percent of cities and 79 percent of towns had adopted plans or were nearing completion as of Aug. 31. Prior to the law being passed, only 29 percent of all Wisconsin communities had a land use plan.

NEW WISCONSIN JUDICIAL RECUSAL RULE DELAYED Fox21Online.com (12/08/09) Halsted, Gil

Wisconsin’s state Supreme Court this week postponed publication of a new rule clarifying recusal requirements for judges. Justices remain divided over whether judges should rule on cases that involve people who have contributed to their election campaigns. Justice David Prosser, in particular, remains unwilling to approve the rule because it is not clear how it would affect his campaign fund raising when he runs for re-election next spring. Justice Patrick Crooks adds that there should be new hearings on the rule if it is changed. Crooks and fellow Justices Shirley Abrahamson and Anne Walsh Bradley voted against the rule, which was proposed by The Wisconsin REALTORS® Association and Wisconsin Manufacturers and Commerce. It was adopted verbatim by a 4-to-3 margin.

NEW CONSUMER WEB SITE HELPS REALTORS® REACH HOMEOWNERS

Milwaukee Journal Sentinel (WI) (11/25/09) Walker, Laurel

National Association of REALTORS® (12/16/09)

A decade after a state Legislature adopted a law mandating that all Wisconsin communities and counties adopt a comprehensive plan for their communities by Jan. 1, 2010, most have done so. Still, a number of governments are scrambling to adopt their plans in the next 30 days. Some will undoubtedly miss the deadline. Urban sprawl prompted the 1999 Smart Growth law as rural areas were being carved up for commercial and residential development in a haphazard fashion. Steve Hiniker, executive director of the environmental advocacy group 1000

The National Association of REALTORS® announces the launch of a new consumer-focused Web site, www.HouseLogic.com. 2010 NAR President Vicki Cox Golder explains in this podcast (http://www.realtor. org/about_nar/presidents_report/_podcast_archive/ coxgolder_houselogic_20091215p) how REALTORS® can use a special members-only section of the Web site in their business, and a short video is available at www. Realtor.org/HouseLogic explains the benefits of using HouseLogic. NAR will be doing a major marketing push to consumers beginning February 15th.

YUN: ECONOMIST SEES RUSH OF HOMEBUYERS IN EARLY 2010 Wisbusiness.com (12/15/09) Clark, Brian E.

Speaking recently with the Wisconsin REALTORS® Association, National Association of REALTORS® chief economist Lawrence Yun said home prices did not fall much in the state or the Midwest as a whole because the housing bubble was not as severe as in Arizona, California, Florida, or Nevada. Wisconsin saw home prices fall due to concerns about price declines, but the state did not experience the 20 percent to 30 percent drops reported in Florida and the Southwest. The federal tax credit for first-time home buyers helped fuel sales in recent months, and Yun expects the extension of the tax credit through mid-2010 to pump up sales activity during the 2009 fourth quarter. Yun predicts lower inventory and more stable home prices, followed by small price gains and an increase in economic activity as home buyers flood the market in the spring. Currently, buyers are concentrating their purchases in the lower price ranges, with activity slow in the middle price category and virtually stopped in the high end due to the added costs of jumbo loans. According to Yun, “Housing always been the leading indicator for the broader economy. It was the housing market downfall that brought the rest of the economy down. But now that the housing market is beginning to show life signs, the economy appears to be coming out of the recession, too.”

ZIPLOGIX RENEWS RELATIONSHIP WITH THREE REAL ESTATE ASSOCIATIONS ACROSS THE NATION Globe Newswire (12/14/09)

The Wisconsin REALTORS® Association, the Maine Association of REALTORS® and the Texas Association of REALTORS® have each signed long-term renewal agreements with zipLogix, creator of the zipForm contract software program. All three organizations will continue providing zipForm as a member benefit. The technology simplifies the completion of electronic real estate forms, giving REALTORS® and brokers the ability to realize faster, more accurate transactions along with significant time and cost savings from a more streamlined workflow. Cindy Butts, executive officer for the Maine Association of REALTORS®, comments, “Their forms software is one of our most popular membership benefits and as an Association, our focus is to present members with the best tools they need to be successful.” Additionally, zipForm 6 Professional gives realty agents the flexibility to securely access real estate forms and edit transactions from multiple locations by simply logging on to the Internet. Finally, the company’s broker solutions provide special utilities that deliver seamless management of transactions and forms, along with the ability to generate reports at the agent, office and corporate levels.

REALTOR® Newswire is a monthly news service prepared exclusively for the Wisconsin REALTORS® Association by Information, Inc. Reproduction, use, or inclusion of this material in other publications, products, services or Web sites is not allowed without prior written permission from the Wisconsin REALTORS® Association.

wisconsin real estate magazine

january 2010

2010 ECONOMIC It’s now been two years since Wisconsin and the rest of the United States slipped into the recession. The past year saw inflation-adjusted seasonally adjusted GDP decline by almost 2 percent in the difficult first quarter, start climbing back towards zero in the second quarter, but bounce back into positive growth, up about 0.7 percent during the third quarter of 2009. Official unemployment hit a high of about 10.2 percent, and has declined slightly to 10 as of this writing (although the newer “broad” measures of unemployment that include involuntary part-timers and discouraged workers is currently at 17 percent). But unemployment usually lags GDP in the recovery, and a number of observers, not least Federal Reserve Chairman Ben Bernanke and White House advisor Larry Summers, believe the recession is over. But the consensus view at the Graaskamp Center for Real Estate is that it’s too soon to be confident we’re in recovery.

news.wra.org

OUTLOOK

BY STEPHEN MALPEZZI

Overview The housing market led us into the “Great Recession” and it will lead us out. In addition to declines in GDP and rising unemployment, our annus horribilis saw a postwar low in housing starts, serious declines in housing prices in Wisconsin and savage falls in some of the coastal markets, rising mortgage defaults and housing foreclosures, falling transactions volume, and sales inventories of new and existing homes larger than any we’ve seen since the second oil price shock of thirty years ago. But housing prices have started to creep back up, and inventory divided by transaction volume is approaching normal levels. National Association of REALTORS® data on house prices, adjusted for inflation, peaked nationwide in 2005 at about $250,000, saw some of the steepest declines early last year, and as of this writing are bumping along at around $180,000. That bumping is in some sense a good thing, for the last thing we would want to see in the next six months would be house prices shooting back up to their 2005 or 2006 levels. House prices had to come down. For most of the 1970s and 1980s, as well as the early 1990s, housing prices grew on average about half a percentage point per year over background inflation. But from roughly 1996 to 2006, depending on the data series, house prices grew at 5 percent to 7 percent per year faster than background inflation, which is clearly unsustainable.

But we are concerned that just as house prices overshot going up, they could overshoot going down. The big risk in the housing market now comes from foreclosures, about which more below. But first, let’s take a quick look at some of our local markets.

How’s Wisconsin Doing? Wisconsin’s economy and housing markets have not escaped the pain, but as we noted last year so far we’ve done somewhat better than the nation as a whole. The next figure shows you that most of our markets had smaller percentage declines over the past two years than we’ve seen in the national averages. When the U.S. market dove in 2007-2008, Madison took a much smaller hit and now we have our first metropolitan area where median house prices exceed the national. Milwaukee, our biggest metro area, followed a profile very much like the national average with a steep decline but (so far) a better bounce back. (Other data, not shown, indicate that it was Milwaukee County that had the steepest decline and the biggest snap back; Washington, Ozaukee and Waukesha counties saw slower declines and less of a recovery, so far). Some of our smaller metro areas like Eau Claire and Green Bay, while not unaffected, have seen less of a boom and bust cycle than the rest of the country, much less the highly volatile markets in states like California and Florida.

House prices are now roughly in line with fundamentals like incomes, interest rates, and rents. A good starting point is income. As Figure 1 shows, for much of the 80s and early 90s house prices were about 3 to 3½ times median household income. During the bubble the ratio peaked at about five, but now we are back in range with historic norms. Other data, not shown, demonstrate that we’re almost back in line with historic norms of price/rent ratios.

Will We Hit the Target, or Will We Overshoot? We’ve already noted the “green shoots” of stabilizing prices with so far some modest increases; and declining inventory. But mortgage delinquencies, defaults and foreclosures are still high. For example, nationally almost 4 percent of outstanding mortgages are 90 days past due, according to our Economic outlook ... continuEd on pagE 8

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january 2010

Economic Outlook ... continued from page 7

friends at the Mortgage Bankers Association; almost a percent and a half of outstanding mortgages enter foreclosure each quarter. Why are defaults and foreclosures so stubborn this time around? There are two theories about why people default on mortgages. Pure “finance theory” says that when the value of the mortgage exceeds the value of the house, people will default. Empirical research tells us these theories are not mutually exclusive. Both present values, and debt service burdens matter. Some borrowers will default even when house values exceed mortgage values, if their cash flow is sufficiently impaired. But if the house is valuable they will often take extraordinary measures to make payments. Some will default when they go under water, even if they can readily make payments. But many won’t. Default probabilities rise a lot when both conditions are met. And, we’re there. We’ve had 10% unemployment before. We’ve had mortgages underwater before. But we’ve never had 25% of mortgages underwater (50-60% in the worst hit states) with 10%+ unemployment before. That’s why we’ve shifted from a subprime crisis to a crisis in prime mortgages that are underwater with unemployed or underemployed mortgagees. Current government programs, like the Home Affordable Modification Program (HAMP) or the earlier Hope for Homeowners are ineffective. There are many problems with HAMP’s design and execution, but there’s no way an improved HAMP can solve this problem. Why? Because the philosophy behind HAMP is to get employed people out of “stupid mortgages” (bad subprime designs) into a

How is it going? Through spring and summer 2009, we received little response. This fall some momentum has built, as politicians and bureaucrats begin to realize the shifting nature of the foreclosure problem, how strong housing’s spillovers to the rest of the economy can be, and the fact that HAMP is not working. Finally, as of this writing there is some movement; several legislators are talking to us seriously and legislation is being drafted. But the nation’s economy is still behind the curve. Time is of the essence; if we see a winter spike in foreclosures, we fear an overshoot that drives house prices down further, pulling consumption, employment, and commercial real estate along with it.

What’s the Outlook for 2010 and Beyond? The good news is that housing prices in Wisconsin, as elsewhere, have stopped their decline and appear to have stabilized. House prices are back in line with fundamentals, broadly speaking. We have done better than most states, though we’ve certainly had pockets of pain. The bad news is that a significant risk remains of downward overshooting, if foreclosures indeed continue to spike given the toxic pairing of high unemployment and large fractions of mortgages under water. There are policy prescriptions out there, but the politics can be difficult. The worst may be yet to come for commercial real estate, in Wisconsin as well as the rest of the country. Nationally we expect to see continued weakness in

“The good news is that housing prices in Wisconsin, as elsewhere, have stopped their decline and appear to have stabilized. “ “better” mortgage; and many of the UU “unemployed, underwater” defaults are taking place with perfectly fine plain vanilla mortgages in place. Furthermore, unemployed are effectively excluded from HAMP because of the income tests. What can be done? Some housing economists across academia and government are coalescing around plans to provide temporary mortgage support to the unemployed. We’ve offered the Wisconsin Foreclosure and Unemployment Relief Plan (WI-FUR); and colleagues at the Boston Fed have offered a complementary plan. WI-FUR focuses on a voucher; the Boston Fed plans focus on a loan. About 36 percent of the unemployed currently receive unemployment insurance. For about half the mortgagees in the country an unemployment check would be more or less completely eaten up by a mortgage payment. WI-FUR recommends a temporary supplement or housing voucher to unemployment insurance to help cover mortgage payments. There are many variations on the theme, and some decisions are more political than economic. Should WI-FUR vouchers be given only to unemployed mortgagees, or to all unemployed households? (After all, renters are under stress too.) Should we cover only those receiving unemployment insurance, or seek out those who’ve lost their job in the past year but aren’t collecting? How big should the payment be? When should it be “sunset?” The costs vary with design parameters, but can range $10-40 billion/year, depending on breadth of coverage, details of payment, and so on. WI-FUR could be fully funded by taking money from HAMP (currently $75 bn.), or other ineffective programs.

wisconsin real estate magazine

january 2010

the commercial real estate markets, following the downturn in housing and our current weak retail and consumer durables markets. Once again our generally conservative approach to development and real estate lending is paying off with more modest losses in this area than national averages, but we aren’t immune from the pain. We have a lot on our plate for the long run. We still have no long run plan for Fannie and Freddie. Will continued low mortgage rates and firmer prices attract more buyers back into the market, in a sustainable way? Most importantly, will we honestly rethink and rectify the moral hazard and incentive issues that are now rife throughout our system? As of this writing we face some real battles over issues like the Fed’s role in broader financial regulation, and whether we will restrict the menu of mortgage offerings on offer to typical buyers. Whatever the details, we need to find some ways to give all participants in the modern unbundled real estate transaction some skin in the game. I’m still bullish on the American economy and real estate markets in the long run. Maybe a good place to end this outlook is with a reading recommendation. Pick up a copy of Carmen Reinhart and Ken Rogoff’s masterful This Time is Different: Eight Centuries of Financial Folly. Read it. Know it. Live it. We’ll get through this crisis, as we have the others. We’ll have crises in the future, as we have before. But there’s no reason we can’t do a much better job next time around! Stephen Malpezzi is the Academic Director of the James A. Graaskamp Center for Real Estate at the Wisconsin School of Business.

news.wra.org

HERE’S TO 2010!

REALTOR® SALES tip

BY MARCUS WALLY

Embrace technology – Start your engines with good, trusted technology, but do not allow it to run you. Having the latest of everything can dent your wallet, and does not guarantee success. The best use of technology in our business is to help create systems to increase productivity and shorten the time it takes to accomplish tasks. Time is our most valuable asset. I cannot live without my wireless laptop computer, my cell phone, my Flip Video and my car.

Do one more thing each day – This is one of the most dynamic ideas I would ask you to embrace this New Year. Each day when you are ready to pack it up and head home, stop and put your briefcase or purse down and do one more thing. Call a FSBO or an expired listing and offer to help. Write a personal note to a past customer/client or a friend that you recently bumped into at the grocery store. Drive a different route home to spot new business. By the end of the week you will have accomplished five additional tasks. After several weeks and months, you will see the value of doing more than your competitors. It’s all about hard work, and the harder you work, the luckier you will be.

Increase your knowledge base – We all must live by the mantra, “Education is Power.” This is what truly sets us apart. So register yourself for a new course in the specific field that you are specializing in (resolution #2) and gain the knowledge to lead the pack. And whatever you do, tell everyone you come into contact with (your entire sphere of influence) about your newly acquired skills. There is no point in keeping this a secret. Toot your own horn!

Always give Exceptional Customer Service (ECS) – Once customers/clients experience top-notch service, they come to expect it. We must make it our mission to always under-promise and over-deliver. Let actions speak louder than words and allow the underlying foundation of the real estate business to ring out loud and clear – to build your business from referrals. Referrals are the lifeblood of our business and when you treat each and every customer/ client like your one and only, you will never disappoint or damage these folks who can make or break your business.

Work off of a professional calendar – Go out and buy a brand new 2010 calendar or pull up the calendar on your database (I still love my Top Producer) and block out your vacation time. This is one of the most critical elements to any ultra-successful professional. Mark those birthdays, anniversaries, graduations, sporting events, celebrations, etc. Make sure you include the several vacations you and your family have dreamed about. These most important dates are now in permanent ink and may not be changed due to real estate. Remember: I believe there is no such thing as a real estate emergency!

Hire an assistant – In order to be really successful – and I don’t mean just financially – we must take the leap of faith and hire an assistant. Getting by with a little help from a friend is the best way to make sure that your family does not suffer from your absence. Especially when offering ECS, our business is very demanding. Our customers/clients want us now, and I mean NOW, and it is difficult to maintain balance. One way to ensure a sense of balance is to hire someone to complement your strengths and shine on your weaknesses. You will find that this partner is an investment that will pay for itself and then some. And best of all, you will have a life!

Ask for Referrals – Keep the golden rule close to your heart and practice it daily. In addition, keep in mind my second golden rule: everyone has the need to buy or sell estate. We must ask each person that comes into our lives if they have the need to buy or sell real estate. Commit to calling 25 people that you do not know each day and you will have more business than you will be able to handle. Now that’s a resolution!

Marcus A. Wally, MBA is an active Florida REALTOR® in St. Augustine, Florida - “Our Nations Oldest City.” Marcus is the founder and broker of New World Realty, which also manages coaching and facilitation of education classes around the world. Marcus earned his MBA from the University of North Florida in Jacksonville. Marcus can be reached at 904-669-1081 or by e-mail at marcuswally@comcast.net.

Happy New Decade! The new year brings resolutions, and goal setting is paramount this time of year. Commitment time is once again upon us. Do you believe that we can dictate now what our December 2010 will look like? I believe we can. Here are my REALTOR® RESOLUTIONS for our bottom line. We have the power to make it a great year when it comes to production, so follow my lead. 1.

Commit to recommitting – It’s a whole new world out there and we must stay positive. Too many outside distractions can cause us to easily fall into the “pity trap” and constantly wonder when the market is going to return to normal. Well, this is a normal market. In fact, I’ve nicknamed it our “new normal” market. Conditions that we experienced over the last few years were not normal. Like it or not, we are now in a normal market, so suck it up and get in the game.

Become a specialist – Too often REALTORS® try to be everything to everyone. This is not possible. Find contentment in being the very best in one area and ride your success to the top. I never understood how someone could be a solid REALTOR® as well as a mortgage broker, an insurance representative, a builder, etc. Customers/clients want excellent service today and it is impossible to provide top-notch service when you have your fingers in so many different pies. Follow your heart’s desire and work in a field that you are passionate about (waterfront, golf course, historic, commercial, etc.). Become the leader in your market, but stick to one field.

wisconsin real estate magazine

january 2010

LEGAL

best of the legal hotline

with tracy rucka

Duty of Confidentiality Wisconsin Administrative Code § RL 24.12(1) “A licensee acting as a principal or an agent in a real estate or business opportunity transaction shall not disclose any of the terms of one prospective buyer’s offer to purchase, exchange agreement or option contract proposal to any other prospective buyer or to any person with the intent that this information be disclosed to any other prospective buyer.”

The following questions have been recently submitted to the Wisconsin REALTORS® Association in regards to confidentialty.

Distribution of Information Given that the duty of confidentiality extends beyond closing, how can a broker report sales concessions and sold information to the MLS or help appraisers asking for comparable sales? REALTORS® have the duty to preserve confidential information under Wis. Stat. § 452.133(1)(d) and Standard of Practice 1-9 of the REALTOR® Code of Ethics. Due to confidentiality concerns, brokers cannot assist appraisers and others requesting information about concessions in transactions. However, confidentiality is not a concern if the parties authorize the release of sales and concession information. Fortunately the 2010 WB-11 Residential Offer to Purchase now includes the Distribution of Information section at lines 275-280. The Distribution of Information provisions provide written authorization from the parties to the licensees in the transaction to share three categories of information with the MLS, appraisers and other settlement service providers: 1) copies of the accepted offer; 2) financing concessions and sold data; and 3) active listing, pending sales, seller concessions and assistance, and other information needed by appraisers researching comparable information under the increasing number of tougher appraisal standards.

DISTRIBUTION OF INFORMATION Buyer and Seller authorize the agents of Buyer and Seller to: (i) distribute copies of the Offer to Buyer’s lender, appraisers, title insurance companies and any other settlement service providers for the transaction as defined by the Real Estate Settlement Procedures Act (RESPA); (ii) report sales and financing concession data to multiple listing service sold databases; and (iii) provide active listing, pending sale, closed sale and financing concession information and data, and related information regarding seller contributions, incentives or assistance, and third party gifts, to appraisers researching comparable sales, market conditions and listings, upon inquiry.

wisconsin real estate magazine

january 2010

Appraisals The agent has a listing for which the seller had an accepted offer that was subject to appraisal. The appraised value was too low and the buyers decided not to purchase the property. The listing agent has a second potential buyer for the same home. Can the agent share the appraisal with the second buyer? It would be unwise for the listing agent to provide a copy of the appraisal report to the second buyer because it would be considered a confidential transaction document under Wis. Stat. § 452.133(1)(d). Standard of Practice 1-9 prohibits REALTORS® from revealing a client’s confidential information or using it for the REALTORS®’ advantage or the advantage of a third party without client consent after full disclosure. Both the REALTOR® Code of Ethics and Wisconsin license law require brokers to maintain confidential information, even after the completion or the termination of a transaction. Moreover, the appraisal was prepared for a specific client (the first buyer or that buyer’s lender), and appraisals generally cannot simply be reassigned to a second buyer. For information about appraisals and appraisers, see the October 2004 Legal Update, “Appraisers and Appraisal Issues,” online at www.wra.org/LU0410. news.wra.org

Pending Offers

Home Inspection Reports The buyer had an accepted offer and the last hurdle was the inspection contingency. The home inspection was conducted and the home inspector found problems with the window seals and the furnace. The sellers claim they did not know about these problems. The buyer gave a notice of defects and the seller has no right to cure so the offer is null and void. Can the listing broker give the home inspection report to subsequent buyers? The offer to purchase requires that the buyer provide copies of all inspection reports to the seller and listing broker. According to the terms of the standard WB-11 Residential Offer to Purchase, the delivery of a notice of defects plus a copy of the inspection report in a contract where the seller does not have the right to cure causes the offer to become null and void. See lines 433-435 of the 2010 WB-11. Per Wis. Stat. § 709.035, the sellers should amend the Real Estate Condition Report (RECR) when they become aware of information that would change a response before another offer to purchase is accepted. The sellers may amend the report by creating a new RECR or using an amendment to RECR and, in either instance, incorporate by reference a copy of the home inspector’s report. It is recommended that sellers complete the RECR amendment as soon as possible because if a completed RECR is given to the buyer before he or she submits an offer to purchase, there will be no Chapter 709 buyer rescission rights. A real estate licensee who is aware of material adverse facts not otherwise disclosed to the parties or known by the parties must make timely written disclosure. A broker would not provide copies of inspection or contractor reports to meet such an obligation because of confidentiality restrictions in license law and the Code of Ethics.

wisconsin real estate magazine

january 2010

Prior to setting a showing, a cooperating agent called the listing agent to inquire about any existing offers on the property. The property is REO (bank-owned) and the buyer wants this information before seeing the property. The listing agent said he could not reveal that information because the REO seller does not want pending offer information disclosed. Is this allowed? The Wisconsin Administrative Code and the Code of Ethics regulate the sharing of information about pending offers on a property. Wis. Admin. Code § RL 24.12(1) states, in relevant part, “A licensee may, but is not required to, disclose information known by the licensee regarding the existence of other offers on the property, the fact that a seller has accepted another offer, that the offer is subject to contingencies and that the offer is subject to a clause requiring removal of certain contingencies upon the occurrence of an event such as receipt, acceptance or conditional acceptance of another offer.” Therefore, if the seller has required the broker to keep any information about pending offers on the property confidential, the agent need not make this disclosure. Standard of Practice 1-15 provides, “REALTORS®, in response to inquiries from buyers or cooperating brokers shall, with the sellers’ approval, divulge the existence of offers on the property. Where disclosure is authorized, REALTORS® shall also disclose, if asked, whether offers were obtained by the listing licensee, another licensee in the listing firm, or by a cooperating broker. (Adopted 1/03, Amended 1/09)” Therefore, with the seller’s approval and prior to the acceptance of an offer to purchase, the agent shall disclose information about other offers. If, however, the seller directs the agent not to disclose, as is the case here, the broker may document this fact and follow the instructions of the seller. Legal Hotline ... continued on page 12

best of the legal hotline

continued from page 11

Accepted Offers The seller listed a property for a short sale. A primary offer has been accepted subject to lender approval. Is this an accepted offer, and does the broker have to disclose the accepted offer to cooperating brokers? Should another offer be submitted as primary or secondary? An offer to purchase is accepted when the buyer and seller have signed the offer and it has been delivered to create binding acceptance. The offer is subject to lender approval, which reflects an unresolved contingency of the accepted offer between the buyer and the seller. Standard of Practice 3-6 provides, “REALTORS® shall disclose the existence of accepted offers, including offers with unresolved contingencies, to any broker seeking cooperation.” (Italics added.) Any subsequent offers should be accepted in secondary position to avoid multiple primary offers because it is very risky and ill-advised for a seller to accept more than one offer to purchase as a primary offer. Standard of Practice 1-7 provides in relevant part, “REALTORS® shall recommend that sellers obtain the advice of legal counsel prior to acceptance of a subsequent offer except where the acceptance is contingent on the termination of the pre-existing purchase contract ...” Clearly the safest practice from the seller’s standpoint is to make subsequent offers secondary offers – with each one also subject to the approval of the seller’s lender for a short sale. For further discussion of short sales, see the January 2008 Legal Update, “Short Sales – A Risky Business,” online at www.wra.org/LU0801.

wisconsin real estate magazine

january 2010

Confidentiality Agreements The broker has a new commercial listing. The prospective buyers are asking for financial statements. The broker would like the buyers to sign a confidentiality agreement before releasing the financials. Does the Wisconsin REALTORS® Association have some appropriate wording for a confidentiality agreement? There is no standard confidentiality agreement or language for use by real estate licensees. Drafting such an agreement would be the unauthorized practice of law. The seller may be referred to private legal counsel to draft a confidentiality agreement that meets the needs of the seller in his transaction, given his specific situation. Tracy Rucka is a Staff Attorney for the WRA.

news.wra.org

LEGAL

PROPERTY DATA FEATURES OVER THE GENERATIONS BY DEBBI CONRAD

People come with a wide range of individual needs and these needs may change over time, as with “normal aging.” Over one million Wisconsin residents are over the age of 60 as of July 1, 2008. The 60-and-older population in this country has gone from 6 percent in 1900 to 16 percent in 2000, and is projected to be 25 percent in 2030 and 26 percent in 2050. The number of people age 65 and older has increased from 4 percent in 1900 to 12 percent in 2000, and is expected to reach 19 percent in 2030 and 20 percent in 2050. That is 86.7 million people! As people get older or sustain injuries they may find themselves in situations where they must temporarily or permanently use a walker or a wheelchair, which gives rise to some specific dimensional requirements in the homes they want to buy. One Eau Claire REALTOR® recently had to measure the doorways in 58 homes to find three that her buyer-clients who use wheelchairs could go to see. This could have been avoided if the MLS included barrier-free features. Barrier-free features will also be important in the Home for Vets program where veterans from Korea, Vietnam and other conflicts will need homes that accommodate special needs resulting from war injuries. The Accessibility Features Report (AFR) is an optional property condition report designed by a certified architect to provide specific information about barrier-free property features needed by a homebuyer with accessibility needs. The AFR is intended to be used by real estate agents who are listing or previewing a property to determine if the property may be appropriate for a person with disabilities. Using the AFR will help define and prioritize specific property features, rather than leave the real estate agents to determine what is or is not an “accessible” or “barrier-free” property. It also may be used to identify and prioritize the architectural features a buyer needs in a residential property. The AFR may best be used in conjunction with MLSs. A broker who has listed a property that has potential for a person with disabilities may indicate that an AFR is available. The cooperating broker can get a copy of the AFR and see a thumbnail sketch of some of the property’s dimensions and features: the width of interior doorways, the height of thresholds, the kind of door handles, the method of window operation, etc. Using the AFR is not, however, an exact science. Any person considering a property based upon an AFR should most definitely inspect and evaluate the property. Generations ... continued on page 14

wisconsin real estate magazine

january 2010

Generations ... continued from page 13

When the listing agent showed a ranch-style home to a buyer who was not very interested in the property, it occurred to the agent that this home might, with a little remodeling, be suitable for a buyer who uses a wheelchair. The listing agent would like to advertise a house as wheelchair accessible because it is built at ground level. The agent was told that the remainder of the house, especially the bathroom, would also have to be wheelchair accessible. Is this correct? The term “accessible” may have many connotations, and what may be accessible for certain persons with special needs may not be so for others. It is unfortunate if the listing broker advertises a property as being accessible and the selling agent and buyer go there only to discover that it simply will never work because the garage ceiling is too low for a specially customized van and because the buyer will never be able to open and close all of the double-hung windows. The parties and the agents could avoid getting their hopes up and wasting time if they had more detailed information on the listed property’s features and the features for which the buyer is looking. The answer, of course, is to use an AFR when listing this property that can be remodeled and retrofitted for persons with special needs. Instead of labeling a property as “accessible,” a term that has no precise, commonly understood meaning, the AFR simply gives information about potentially accessible or adaptable components in a home, such as whether grab bars are in the bathroom or could be easily installed. Encourage your MLS to use the AFR and list barrier-free property features – it’s the wave of the future! The AFR form may be found in ZipForm and on the Wisconsin REALTORS® Association Customers with Disabilities Resource page at www.wra.org/resources/resource_pages/disabilities_resources.htm. Debbi Conrad is Director of Legal Affairs for the WRA.

New Department of Regulation and Licensing Forms

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Optional-Use Date: November 1, 2009; Mandatory-Use Date: March 1, 2010 WB-11 Residential Offer to Purchase WB-40 Amendment to Offer to Purchase WB-41 Notice Relating to Offer to Purchase WB-42 Amendment to Listing Contract WB-44 Counter-Offer WB-46 Multiple Counter-Proposal WB-47 Amendment to Buyer Agency Contract Your source for new forms information is the WRA Forms Update page at www.wra.org/ formsupdate. Order new forms at www.wra.org/forms.

wisconsin real estate magazine

january 2010

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COMPLETION OF FORMS VERSUS THE PRACTICE OF LAW

LEGAL

BY KEVIN KING

As Wisconsin brokers and salespersons are learning about the new WB-11 Residential Offer to Purchase (knowing the other new offers are soon to follow), the issue of forms seems to be fresh in our minds. Among the very important roles provided by licensees is the negotiation and documentation of the parties’ agreement in a real estate transaction. In fact, pursuant to Wis. Adm. Code § RL 24.08, it is the obligation of licensees to “put in writing all listing contracts … and any other commitments regarding transactions, expressing the exact agreement of the parties unless the writing is completed by the parties or their attorneys or the writing is outside the scope of the licensee’s authority under ch. RL 16.” With limited exception, § RL 16.04(1) states that licensees shall “use approved forms when acting as an agent or a party in a real estate or business opportunity transaction.”

practicE of law ... continuEd on pagE 16

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Practice of Law ... continued from page 15

Over the years, this authority to complete forms approved by the Department of Regulation and Licensing has withstood challenges. The most recognized attempt to remove this valuable service came in the early 1960s when the State Bar of Wisconsin (Bar), acting through the attorney general, went directly to the Supreme Court to challenge the rules permitting brokers (not salespersons at the time) to complete the blanks on forms prepared and approved by the Real Estate Board (State ex rel. Reynolds v. Dinger (1961)). It was the position of the Bar that such conduct constituted the practice of law – functions that should only be performed by licensed attorneys. The Court agreed with the Bar that the rules permitted brokers to engage in the practice of law, but the Court also noted that this service was a necessary and regular part of the brokers’ business. In a 4-3 decision, the Court upheld the rules but made it very clear that this practice is under the control of the Court as well as the DRL and, if abused, the Court has the power to take it away. Why are we having this discussion in 2010? Because the practice may well be under attack again. Since 2004, the Bar has been petitioning the Supreme Court regarding the unauthorized practice of law, attempting to document to the Court the impact of unqualified individuals practicing law. The Wisconsin REALTORS® Association has been monitoring the petitions and actively participating in the process to preserve the authority currently enjoyed by our members to complete approved forms as a valued service to consumers. Yet another hearing asking the Court to define by rule what constitutes the “practice of law” and to create a new administrative system to enforce the new rules will take place on March 8, 2010. The Bar is taking this petition very seriously. The Bar’s Board of Governors voted unanimously at its December 2009 meeting to approve a resolution calling on the Court to adopt the petition. The Bar’s Unlicensed Practice of Law Policy Committee has joined former Supreme Court Justice Wilcox in a “call to action” to all Bar members to contact the Court in support of the petition. The WRA will be present to protect your interests. It is important that we all remember the admonition of the Court in Dinger – as long as the consumer is the primary beneficiary of this long standing practice, the Court will not interfere. However, it will not hesitate to put an end to the authority enjoyed by real estate licensees to engage in the limited practice of law if the Court concludes the practice is abused and the consumer is no longer served. What are some best practices to make certain we retain the ability to complete forms as a service to our customers and clients? • Know the rules for use of approved forms – found primarily in ch. RL 16. •

Do not charge extra compensation for completing forms (§ RL 16.05(4)).

•

Do not complete approved forms in any transaction where you are not acting as a licensee or principal (§ RL 16.05(3)).

•

While you may give a general explanation of the provisions in an approved form to the parties (§ RL 16.05(2)), do not give any advice or opinions as to the legal effects of a specific contract or conveyance, or as to the legal rights or obligations of the parties (§ RL 16.05(1)). The best practice always is to refer the parties to their respective legal counsel.

•

Never hold yourself out in advertising or otherwise as being able to complete “all” forms necessary for a real estate transaction or imply that your services make an attorney unnecessary.

•

Never discourage any party from utilizing the services of an attorney (§ RL 24.06(2)).

•

Remember always that completing approved forms IS the practice of law, and if you do so incompetently, you may be subject to liability to the parties (and to discipline by the DRL).

Assume that the State Bar and the Supreme Court are looking for evidence of incompetent practice and abuse of your authority to complete approved forms. Do not let them find any in the real estate profession! Know the law, and utilize the services of Legal Hotline whenever you have a question. Kevin King is General Counsel for the WRA.

wisconsin real estate magazine

january 2010

news.wra.org

2010 Winter Convention January 25-27, 2010 Lake of the Torches Resort Casino & Convention Center

LOCATION Lake of the Torches Resort Casino & Convention Center 510 Old Abe Road, Lac du Flambeau, WI 54538 (Located on Hwy. 47) Room Rate: $80* Register: 888-599-9200 or 715-588-9200 Fax: 715-588-9215 *includes a two for one breakfast buffet coupon and a $1.00 drink coupon for Dancing Waters Lounge vention WRA Winter Con re 2009 Northern Exposu PeachTree Design 608-739-4408 July 2009 Full Color Version

Wednesday, January 27 Monday, January 25

Tuesday, January 26

7:30

Registration

7:30 – 5:00

Registration

7:30 – 5:00

Registration

8:00 – 1:15

Exhibits

8:30 - 4:30

Short Sales and Foreclosures: Protecting Your Clients’ Interests: LeRoy Houser and Frank Serio

8:00 – 5:00

Exhibits Open

8:30 – 12:00 Course 3 - New Developments: Cori Lamont

8:30 – 12:00 CE Elective A – Risk Reduction: Dave Sayas 1:00 – 4:30

CE Elective E - Financing the Sale: Mike Tobin

2:00 – 5:00

S nowshoeing Event, Snowmobile Outing, Cross Country Skiing, Ice Fishing (Make Your Own Reservations)

4:30 – 6:30

Exhibits Open

5:00 – 7:00

Welcome Party DJ + Karaoke

5:00 – 8:00

Chili Cook-Off - Enter your favorite recipe and you may win a prize! Sponsored by the Northwoods Association of REALTORS®

www.wra.org/winterconvention

8:30 – 12:00 Course 1 - Listing Contracts: Mike Tobin 10:00 – 11:45 Opening Session - Power Selling in Any Market: Ralph Roberts Two lucky winners will receive a $150 WRA credit. Must be present to win. 11:45 – 1:00 Broker Lunch (ticketed event) 1:00 – 4:30

Course 2 - Offer to Purchase: Dave Sayas

1:15 - 2:45

Workshops The Personal Micro-Brand Called “You”: 999 Bad Ideas and One Nail: Ralph Roberts

Everyday Magic: LeRoy Houser

Regulatory Update: Tom Larson

Field Guide to Social Networking: Rob Uhrina

3:00 – 4:15

Workshops Walking Like a Giant…Selling Real Estate Like a Madman: Ralph Roberts

The Systems, Techniques and Strategies to Build a First Time Home Buyer Business: LeRoy Houser

9:00 – 10:15 Workshops Leverage Your Listings: Get More in Return for Your Online Marketing: Amy Chorew

Be Safe: Dave Sayas

Lights, Camera, Action: Creating Amazing Listing Videos for YouTube, Facebook or Your Own REALTOR® Web Site: Rob Uhrina

10:30 – 11:45 Workshops

Exceptional E-mail: Learn Seven Ways to Maximize Outlook! Amy Chorew

Business Sale Basics: Dave Sayas

Tax Changes Affecting Real Estate: Mike Tobin

11:45 – 1:00

CRS Lunch (ticketed event)

1:00 – 4:30

Course 4 - Buyer Agency Agreements: Cori Lamont

1:15 – 2:45

Workshops

Facebook: 10 Privacy Tips You Should (Absolutely) Know: Rob Uhrina

Your Book of Business: Using the Internet to Create Quality Leads and Contacts: Amy Chorew

Panel Discussion: Questions You Could Never Ask Your Mother

Financing the Sale: Mike Tobin

4:15 – 7:00

Reception and DJ

Land Contracts and Lease with Option: Dave Sayas

Las Vegas CE SOLD!

PAYLINE SOLD!

March 1-3, 2010 Out of State CE - Las Vegas March 1-3, 2010 Tuscany All Suites Hotel & Casino | Las Vegas, Nevada

Great Food. Great Shows. Great Education.

Fulfill your 2009-2010 real estate continuing education requirements in style. Escape the winter weather and join the WRA in sunny Las Vegas, Nevada. Whether you enjoy the spectacular dining or try your luck at the many casinos, this is one educational opportunity you won’t want to miss. Choose from as many as six CE courses or electives and still have plenty of time to catch a show on the strip. You may even be able to write it off as a business expense (check with your tax accountant)!

2010

appraisal

conference

March 10-11, 2010

Ho Chunk Casino & Convention Center Wisconsin Dells ABR Course January 13-14, 2010 Brookfield - WICPA The Accredited Buyer Representative (ABR) designation is the benchmark of excellence in buyer representation. It identifies those real estate agents who have demonstrated a serious commitment to the practice of buyer agency, and will prepare you to represent buyer-clients with the quality of service and degree of fidelity to buyers that sellers have customarily enjoyed. Approved for 2009-2010 Continuing Education Course 4. For more information, visit: wra.org/ABRcourses

Short Sales & Foreclosures: Protecting Your Clients’ Interests (CRS Core Course) January 25, 2010 Lac du Flambeau - Winter Convention Working with buyers and sellers of distressed properties can be frustrating and time consuming, but rewarding. Learn the intricacies of the short sale and foreclosure processes and the roles of the parties involved, and provides strategies for working with financial institutions and other owners of REO properties. Counts as core course toward SFR certification. Visit: wra.org/winterconvention

Daily Schedule Course 1: Monday, March 1 Course 3: Tuesday, March 2 Elective A: Wednesday, March 3 7:30 am – 8:00 am 8:00 am – 11:00 am 11:00 am – 11:30 am Course 2: Monday, March 1 Course 4: Tuesday, March 2 Elective C: Wednesday, March 3 12:30 pm – 1:00 pm 1:00 pm – 4:00 pm 4:00 pm – 4:30 pm

Registration Class Exam

New Broker Training February 17-19, 2010 WRA Headquarters - Madison

Registration Class Exam

w w w. w r a . o r g / l a s v e g a s

This course provides guidance for brokers who are opening up their own brokerage office or are becoming a manager for their company. The three-day course covers the fundamentals of being a broker and the responsibilities that come with that supervisory role. Registration includes the latest version of the Broker Desk Reference – a $75 value. Visit: www.wra.org/newbroker

Course Schedule Sales & Marketing Management *Plus books ** Early registration applies two weeks prior to the start of the course. ***Includes Winter Convention Registration.

Visit wra.org/CourseSchedule for full schedule. Date

Course

Location

January 13-14, 2010 January 25, 2010

ABR 2 Day Core Course *Short Sales & Foreclosures: Protecting Your Clients Interests (CRS Core 1-day class )

Brookﬁeld Lac du Flambeau

260 ***195

270 205

290 225

February 8-11, 2010 February 8-11, 2010 February 8, 2010 February 8, 2010 February 8-9, 2010 February 10-11, 2010 February 8-9, 2010 February 10, 2010 February 9-10, 2010 February 11, 2010 February 17-19, 2010 March 25-26, 2010

Designation Week GRI Course 2 and GRI Course 3 GRI Course 1 Equivalency Exam Marketing with Microsoft Ofﬁce (CRS Elective) CRS 201 CRS 202 ABR Core Course *Short Sales Foreclosures (ABR Elective) Green 2-day course Green 1-day Residential Elective New Broker Training ABR Course

Appleton Appleton Appleton Appleton Appleton Appleton Appleton Appleton Appleton Appleton Madison Wisconsin Dells

315 260

325 270

345 290

# Appraiser section members receive a discount.

Early Reg.** $Reg.

ATD

*Qualiﬁes as core course for Short Sales & Foreclosure Resource (SFR) Cerﬁtication Conference and Conventions

Real Estate Continuing Education

Date

Event

Location

January 25-27, 2010 February 8-11, 2010 March 1-3, 2010 March 10-11, 2010

Winter Convention Designation Week Out of State CE (Courses 1-4, Electives A & C) Appraisal Conference

Lac du Flambeau Appleton Las Vegas, NV Wisconsin Dells - Ho-Chunk Casino

Date

Course

Location

January 13, 2010 January 25, 2010 January 26, 2010 January 27, 2010 February 3, 2010 February 3, 2010 February 3, 2010 February 3, 2010 February 7, 2010 February 10, 2010 February 17, 2010 February 17, 2010 March 1, 2 & 3, 2010

2009-10 CE 2 8:30 – 12:00 2009-10 Elective A & E 8:30 – 4:30 2009-10 CE 1 & 2 8:30 – 4:30 2009-10 CE 3 & 4 8:30 – 4:30 2009-10 CE 1 & 2(Comm.) 8:30 – 4:30 2009-10 CE 1 & 2 8:30 – 4:30 2009-10 Electives A & C 8:30 – 4:30 2009-10 CE 1 & 2 8:30 – 4:30 2009-10 Electives A & E 8:30 – 4:30 2009-10 CE 3 &4 (Comm.) 8:30 – 4:30 2009-10 Elect. B & E (Comm.) 8:30 – 4:30 2009-10 CE 3 & 4 8:30 – 4:30 2009-10 Courses 1,2,3,4 & Electives A & C

Sheboygan 920-457-7908 Lac du Flambeau 800-279-1972 Lac du Flambeau - register for Winter Convention Lac du Flambeau – register for Winter Convention Brookfield $30/m; $35/nm Beaver Dam 920-885-3312 Manitowoc 920-553-6227 Madison 800-279-1972 $27/m; $35/nm Appleton 800-279-1972 Brookfield 800-279-1972 Brookfield 800-279-1972 Beaver Dam 920-885-3312 Las Vegas 800-279-1972

Pre-License

Date

* Plus books

January 4-7; 11-14, 2010 Sales Pre-License Course 8:00 - 5:00 Madison February 1-4, 2010 Broker Pre-License Course 8:00 - 5:00 Milwuakee April 5-8; 12-15. 2010 Sales Pre-License Course 8:00 - 5:00 Madison

Now available online!

Course

Location

Early Reg.** 325* 260* 325*

Regular Reg.

325* 260* 325*

QuickStart sales training program

www.wra.org/QuickStartOnDemand

wisconsin real estate magazine

january 2010

February 8-11, 2010 Radisson Paper Valley Hotel

n o i t a K n E g i E s De W S|A R C | I R G

Appleton, WI

wra.org/DesWeek

EEN R G | R B

ions... t a n g i s e ManynDe Location! O

What is Designation Week?

According to the National Association of REALTORS®, designations can almost double your income in real estate. Whether you have a designation, want to earn more or are working towards your first one, Designation Week offers you an opportunity to take multiple courses in one week and make significant progress towards earning nationally-recognized designations – all in one location. This year’s Designation Week will be held at the Radisson Paper Valley Hotel in Appleton on February 8-11, 2010. Get yourself on track to success by putting your education dollars to work at Designation Week.

This Year’s Designation Courses: GRI Course 2 February 8-11, 2010

Instructors: LeRoy Houser, CRS, Kevin King, Dan Kruse, Rob Uhrina, Doug Hoffman and Mark Porter, CRS

GRI Course 3 February 8-11, 2010

Instructors: Tom Lundstedt and Ed Hatch, CRS

CRS 201: Listing Strategies Included in GRI Course 2 February 8-9, 2010 Instructor: LeRoy Houser, CRS

CRS 202: Effective Buyer Sales Strategies Included in GRI Course 3 February 10-11, 2010 Instructor: Ed Hatch, CRS

Marketing with Microsoft Office (CRS Elective) February 8, 2010

ABR Two-Day Required Course February 8-9, 2010

Instructor: Barb McGill, ABR, CRB, CRS, GRI, and SRES

Foreclosures and Short Sales: What Buyer’s Representatives Need to Know (ABR & RSPS Elective) February 10, 2010 Instructor: David Sayas

*Qualifies as core course for Short Sales & Foreclosure Resource Certification (SFR)

New GREEN Designation Course (Also ABR Elective) February 9-10, 2010 Instructor: Sam Martin

GREEN Residential Elective Course February 11, 2010 Instructor: Sam Martin

BONUS!

Register for Designation Week and you can complete six hours of your 2009-2010 continuing education on Sunday, February 7, 2010! No charge for Designation Week Attendees.

Instructor: Pat Zaby, CRS

YOU MAY QUALIFY FOR A SCHOLARSHIP! GRI Scholarships are available to WRA members. Contact your local board/association, the Wisconsin CRS Chapter, the WRA or visit www.wra.org/GRIscholarship for application information. This year’s deadline is January 15, 2010.

product SHOWCASE New!

ZipForm Expires March 1

Free Tax Credit Tools for REALTORS® An updated microsite and downloadable resources

ZipForm is an electronic forms product available to REALTOR® and Legal Section members as a benefit of membership with the Wisconsin REALTORS® Association. It is available for download free of charge at www.wra.org/zipform. There are two software programs available – an online version and a desktop version. Both are included in your membership. During registration of the program, the software is stamped with an expiration date of March 1. Within 30 days of the expiration a message will display indicating that the program license is expiring. To renew ZipForm, you must be a member of the WRA and follow a series of steps. The edition of the software determines the renewal steps you will follow: ZipForm 5 users – To renew your program an upgrade to ZipForm 6 is required. • If you are a ZipForm®Online user please select the “Free Upgrade to ZipForm 6” button located in the program. • If you use ZipForm®Desktop, you will upgrade via a button (REALTOR® member or Section Member) on the WRA’s Web site at www.wra.org/zipform • Once selected, – REALTOR® members will be directed to a log in page at ZipForm® where you will be prompted to enter your NRDS number and last name. The NRDS number is printed on your NAR REALTOR® Magazine mailing label and on your NAR Membership identification card. A look up option will be provided should you need further assistance in locating this number.

Members of the Wisconsin REALTORS® Association will benefit from a new public awareness campaign launched by the WRA. The radio and Web-based campaign was launched in mid-December and will continue through March 2010. The REALTOR® campaign is similar to the campaign initiated for the original $8,000 home buyer tax credit, and is intended to raise public awareness of the new extended and expanded tax credit program. The WRA has assembled a number of resources for REALTORS® to use with clients and customers who have questions about the credit. REALTORS® are also encouraged to use these materials to get the word out to consumers about the extended and expanded credit. WisconsinHomeBuyer.org The WRA’s tax credit miscrosite (www.wisconsinhomebuyer.org) has been updated to reflect the extended and expanded tax credit program. On the updated site you will find tax credit basics with the information you and your clients and customers need to determine who is eligible for the tax credits, along with other home buyer and REALTOR® resources. The microsite has a new feature, a blog by “Joe the HomeBlogger,” who talks about the tax credit and gives tips to home buyers. The blog can be found at http://joethehomeblogger.com.

– Section members will be directed to log into the WRA’s Web site and then will be sent to ZipForm for upgrading. • After logging in, members will select to upgrade their current ZipForm® account or create a new ZipForm® 6 account. • Next they will be asked to create a username and password.

Downloadable Resources

• They will verify their company information, enter any missing information and proceed to check out.

In addition to the Web site, there are a number of resources available at www.wra.org/expandedtaxcredit_resources.

• When finished, they will receive an e-mail confirmation informing them how to access ZipForm® 6 Professional (formerly ZipFormOnline) and zipForm® 6 Standard (formerly ZipFormDesktop).

A helpful flyer, “Homebuyer Tax Credit Changes - Frequently Asked Questions,” is available for you to download and print. Note: You can also tear off the back page of this magazine for a copy of the flyer.

ZipForm 6 users – This is a summary of the renewal process for both zipForm® 6 Standard and Professional.

Other resources at www.wra.org/expandedtaxcredit_resources are banner ads for your Web site, e-mail signature blocks, and ad slicks for your local newspaper or business newsletter.

• When you open or log into the software, you will see a message that your account is expired or expiring. • If you click on Renew Now in the application, you will be logged into your customer dashboard in order to complete your renewal. • In the customer dashboard, – REALTOR® members will click the Renew Now button and will be taken to a shopping cart to renew. – Section members will click the Authenticate Now button, log in to the WRA’s Web site and be returned to the customer dashboard. Clicking on the Renew Now button will take you into the shopping cart to complete your renewal. >> To learn more about zipForm 6 please visit http://www.ziplogix.com/products. ®

wisconsin real estate magazine

january 2010

>> To see the WRA’s updated home buyer microsite, visit www.wisconsinhomebuyer.org. >> You can find more details on the campaign at www.wra.org/public_awareness_2009. >> Visit the Facebook fan page at www.wisconsinhomebuyer.org/ facebook, share videos on YouTube at www.wra.org/youtube or follow tweets on Twitter at www.wisconsinhomebuyer.org/twitter. >> Downloadable tax credit resources are available at www.wra.org/expandedtaxcredit_resources.

FREE to attend! (Limited to first 500 registrants)

REALTOR速 & GOVERNMENT

Day 2010

February 24, 2010 | 10:00 am - 3:30 pm | Monona Terrace | Madison

To Register please visit: www.wra.org/rgday

TAXES ON REAL ESTATE FORECLOSURES COMMERCIAL BROKER LIENS APPRAISAL REFORMS

public AFFAIRS

NEW YEAR, NEW NEED FOR ACTIVE ENGAGEMENT BY MICHAEL THEO

Each new year brings new hope and excitement. But for REALTORS®, 2010 also brings a new reality that this will be an extraordinary year of big challenges and opportunities – a year in which REALTORS® must actively engage in both politics and public policy to help set the stage for Wisconsin’s future. Our state faces major challenges in the year ahead. We have an extremely tough real estate market and (in large part because of that market) a very difficult state budget. How state lawmakers respond to these issues will greatly impact our industry.

Big Challenges for Real Estate Wisconsin’s real estate market is recovering but has not yet recovered. Sales volume has declined 47.4 percent from its peak in 2006. Among the biggest challenges facing Wisconsin’s real estate market today are unemployment and foreclosures. Unemployment in October was 10.2 percent nationally – that translates to 8 million jobs lost since December 2007. Wisconsin is fairing better with an unemployment rate of 8.4 percent – a loss of 155,000 jobs total, and 92,000 in 2009 alone. Foreclosures are up 21 percent between 2007 and 2008 and are still climbing. On the positive side, home values in our state have only fallen slightly – a modest 3.6 percent from their peak in the second quarter of 2007. Wisconsin is faring better than the housing recession poster child states of Arizona (down 34.8 percent), Florida (down 35.5 percent), California (down 41 percent) and Nevada (down 46.6 percent). A slumping real estate market is not only bad for our industry, but for the entire state as well. Real estate constitutes 11 percent of the gross state product, with new construction adding another 3.4 percent. Real estate

wisconsin real estate magazine

generates $8.32 billion in local property tax revenues, which constitutes 95 percent of all local government revenues. And the ripple effect is significant. Every $100 spent on housing generates another $44 in spending in other sectors of the economy. The bottom line: Wisconsin’s economy will not recover until the state’s real estate industry recovers!

Big Challenges for State Government You’ll probably remember the state budget debate from last summer as lawmakers struggled mightily to close a whopping $6.6 billion deficit. The good news is they passed a budget in July that did not raise taxes directly on real estate. Options such as tinkering with the mortgage interest deduction, increasing the real estate transfer tax, or applying the sales tax to real estate commissions or commercial leases had all

been discussed in the past. They did, however, raise over $3 billion in other taxes, (including a dramatic increase in the capital gains tax) and increased boding debt significantly. They also cut spending, some of which decreased aid to local government and thus increased pressure on local property tax increases. Worst of all, current projections indicate that the pain of recent tax increases and spending cuts only “balanced” the budget temporarily. According to the experts, the next biennial budget will start out at least $2 billion in the hole again!

Big Opportunities in 2010 The challenges facing the real estate market and state government are enormous, but so too are the opportunities presented in an important election year – a year that will end with voters choosing a new governor and a new state Legislature. This will be the first Active Engagement ... continued on page 27

january 2010

FEDERAL “CAP AND TRADE” BILL: WHAT DOES IT MEAN FOR REALTORS®?

public AFFAIRS

BY TOM LARSON

To address issues related to energy efficiency and climate change, Congress is currently working on legislation referred to as The American Clean Energy and Security Act (H.R. 2454), which was introduced by Reps. Waxman (D-CA) and Markey (DMA). The legislation is more commonly known as the “Cap and Trade” bill because of one of the bill’s more controversial provisions that places a cap on the usage of certain energy sources and allows trading of energy credits. The bill was approved by the House of Representatives on June 26, 2009, and is currently being debated in the Senate. The Senate Energy Committee has already developed an alternative to the proposal passed by the House, which establishes less stringent energy reduction goals and maintains more state and local control. It is not clear if and when the Senate will take up the bill, but, if it does, the bill will likely look much different than the version passed by the House. This means that a House-Senate conference will be necessary to resolve the differences. While the bill will have the greatest direct impact upon utilities and manufacturing companies, the “Cap and Trade” bill could also have a significant impact on the real estate industry and property owners. The National Association of REALTORS® has been working closely with members of Congress to amend the bill to minimize the negative impacts on our industry. They have been successful in removing several real estate-related provisions from the bill, such as federal energy audit requirements for homeowners and various point-of-sale triggers, but other controversal provisions remain in the legislation. Some of the highlights in the House version of the bill include: •

•

Authorizes state governments to pass a law to label homes according to their energy efficiency, but specifically prohibits labeling during a sales transaction;

•

Prohibits the Environmental Protection Agency from regulating carbon emissions for residential and commercial buildings under the Clean Air Act;

•

Exempts existing homes, multi-family homes and commercial buildings from any federal guidelines such as the existing federal Energy Star labeling program;

Provides property owners with matching grants

wisconsin real estate magazine

january 2010

and diagnostic tools to make energy-saving property improvements; and •

Creates green building financial incentives for HUD housing, including loans, block grants and underwriting for energy improvements.

The House version of the bill also includes some provisions that could be detrimental to the real estate industry. For example, the bill creates a national building code standard that would make buildings more energy efficient, but would also add significant costs to those buildings. States would have one year to bring their building codes into compliance with the new national standards before the federal government would enforce the codes for them. In addition to the new building code requirements, the original version of the House bill included a mandatory federal energy audit and labeling requirement at the time of sale. In other words, the bill would have required every home and building to be inspected for its energy efficiency and labeled accordingly prior to closing. The National Association of REALTORS® successfully lobbied to have this provision removed from the bill that passed the House and will continue to try to keep it out of any future versions of the bill. Due to the financial impact on the pocket books of American families, public support for the “Cap and Trade” bill appears to be lacking. According to government estimates, the average U.S. family would pay an additional $80 to $173 per year if the “Cap and Trade” bill was adopted. Based upon an AP-Stanford University poll, more than half of the respondents said they would not support a cap and trade program to reduce global warming gases if it increased their monthly energy bills by $10, or $120 annually. If monthly electric bills rose by $25 because of cap and trade, 75 percent of those surveyed said they would oppose it. Given the lack of public support, it appears unlikely that Congress will pass the Cap and Trade legislation in 2010, especially since this is an election year. However, the Wisconsin REALTORS® Association staff, in conjunction with the NAR, will continue to monitor the progress of the legislation and provide periodic updates as necessary. For additional information, please contact Tom Larson (tlarson@wra.org) at 608-240-8254. Tom Larson is Director of Regulatory and Legislative Affairs for the WRA. news.wra.org

>>Technology Corner 7 Awesome iPhone Apps for REALTORS® BY RICK BROIDA

Let’s face it: the iPhone deserves the hype it is getting. Few other cell phones on the planet offer such an elegant interface, useful Web browser and diverse assortment of third-party applications. Those applications – “apps” for short – really make the iPhone shine as a tool for REALTORS®. Here is a list of apps that will make you better organized, more productive and, quite possibly, smarter than the average REALTOR®. (Note: everything listed here is available via iTunes or your iPhone’s App Store app.)

Kindle

Property Evaluator

Why buy a Kindle when you’ve already got an iPhone? I like Amazon’s popular e-book reader, but I don’t relish the idea of transporting yet another device everywhere I go, particularly one that does not fit in a pocket. Thankfully, I can read Kindle e-books right on my iPhone thanks to Amazon’s own Kindle app.

Designed with real estate agents and lenders in mind, Property Evaluator provides loan calculations, performance projections, what-if scenarios, amortization tables and other handy analysis tools. It is quite the bargain at just $2.99.

The app itself is free; you pay only for the books you buy from Amazon’s Kindle Store (http://tinyurl. com/nuwpcq), which is accessible on your PC or your iPhone’s Safari browser. Delivery is instantaneous. Once you click Buy, the book is immediately downloaded to the app. This is great not only for leisure reading when you have a little down-time, but also for bringing along industryoriented titles like 1,200 Great Sales Tips for Real Estate Professionals and Broker to Broker: Management Lessons From America’s Most Successful Real Estate Companies.

Google Earth Already a desktop staple, the iPhone version of Google Earth puts the same incredible satellite and aerial imagery in the palm of your hand. You can “fly” to any location in the world (including your current location), browse geo-located photos (and Wikipedia articles) and leverage Google Local Search to find nearby businesses and places. Best of all, Google Earth is free.

Loan Lite

GPS Apps

For a mere 99 cents, this handy app calculates monthly rates for 5-, 10-, 15- or 30-year home loans. Like any good mortgage calculator, Loan Lite also lets you make adjustments for down payments, insurance, homeowner association fees and taxes.

If you don’t already own a GPS, here is some good news: apps like CoPilot Live, MobileNavigator and TomTom can turn your iPhone into a sophisticated, full-featured navigation system. However, the apps can be pricey (most are in the $40-80 range), and you will need to buy a windshield or dashboard mount for your iPhone. Plus, if you spend a lot of time making or taking calls on the road, you might not like the constant interruptions to your navigation.

TourNarrator Imagine hiring an assistant to follow you around during property tours, taking notes about clients’ observations, snapping photos of standout house features and so on. Later, the assistant compiles all that information into a slick, easy-to-share PDF – effectively giving the client a multimedia-rich summary of likes and dislikes for a given property. Not a bad proposition. That’s the idea behind TourNarrator, an app that captures photos, voice notes and text for individual properties, and then presents them in a neatly organized PDF report. That report lives on developer A La Mode’s servers, where it gets a dedicated Web address you can share with others, post on Facebook, tweet on Twitter, etc. All that is available from an app that costs just $1.99.

Home Finders What about finding actual homes for sale? Apps like Home Finder, Puluwai Real Estate Search and Trulia Real Estate Search help you do exactly that, this time using your iPhone’s GPS as a basis for searches. They present listings within a designated radius of your location. The apps are free, so you can try them all to see which one suits you best.

wisconsin real estate magazine

FIGURE 2 - Property Evaluator iPhone Application

FIGURE 1 - LoanLite iPhone Application

january 2010

Tech guru Rick Broida writes for CNET and PC Magazine. He is the author of over a dozen books, including How to Do Everything with Your Palm Powered Handheld, 6th Edition.

public AFFAIRS

TOM BARRETT ENTERS RACE FOR GOVERNOR BY JOE MURRAY

“Long considered the leading contender on the Democratic side, Barrett entered the race after months of speculation about whether or not he would run.” On November 15, 2009, Milwaukee Mayor Tom Barrett announced his campaign for Governor of Wisconsin on the Democratic ticket.

•

Long considered the leading contender on the Democratic side, Barrett entered the race after months of speculation about whether or not he would run. Democrats believe Barrett is their best chance to hold on to the governor’s office in what could be a difficult year for their party both nationally and in Wisconsin. Born and raised in Milwaukee, Mayor Barrett’s political experience will likely make him a formidable candidate in 2010. He was elected to the Wisconsin State Assembly in 1984, the State Senate in 1988 and Congress in 1992. Prior to his election as Mayor of Milwaukee in 2004 (re-elected in 2008), he ran for governor in the 2002 Democratic primary, losing a close race to then Attorney General Jim Doyle.

•

Barrett supporters point to several factors they believe will lead to a victory in November: •

Money: When Barrett announced his run for governor in November, his campaign already had $850,000 in the bank. That factor alone gives Democrats some confidence that Barrett will be able to raise money as successfully as GOP front runner Scott Walker, who had $1.1 million in his account in July 2009. Barrett has a proven track record when it comes to raising money to finance his campaigns – a key component of any successful statewide effort.

wisconsin real estate magazine

•

City of Milwaukee: One of Scott Walker’s strengths running for statewide office is the fact he was elected and re-elected three times as a Republican Milwaukee County Executive in the largest Democratic County in Wisconsin. As Barrett enters the race, Democrats argue the Walker “Milwaukee advantage” will disappear given Barrett’s deep Milwaukee roots and success running for several political offices. Barrett generally receives more than 60 percent of the vote in his elections. Hero: Barrett was the subject of national news in August (the “Hero Mayor”) when he was badly beaten while trying to stop a domestic dispute outside the State Fair. The Mayor was hospitalized with head injuries, broken teeth and a severely fractured hand that will never be the same. Barett already has a well-deserved “good-guy” image, and his “come to the rescue” intervention will make it more difficult for the opposition to criticize him. Even those who disagree with the Mayor and his policies like him. Obama: Barrett will have the full support of President Obama and his White House team, and this will mean more money, more organization and more staff coming into Wisconsin for an all-out effort to elect Barrett governor and keep Wisconsin in the Democratic column. This is important to the future Obama re-election effort in 2012 and, in the short term, attempts to gain an edge in the redistricting battle

january 2010

that the Legislature is responsible for every 10 years. Critics of Barrett cite two major weaknesses that burden the likely Democratic nominee. First, he showed reluctance to jump into the race. Doyle announced his retirement in August and Barrett waited until November 15 to officially announce his candidacy. Some consider this delay to be a sign that Barrett is a “reluctant candidate,” a candidate that had to be talked into the race by others. These insiders view Barrett as a candidate who lacks the belly fire for a tough and expensive campaign in a year that may be difficult for Democrats across the board. They remember the “vanilla campaign” he ran in the 2002 gubernatorial primary. The other potential weakness is Barrett’s record as a true Progressive. Is this the right profile for a Democratic candidate running in 2010? If President Obama and the Democratic Congress continue to lose support with Independent voters – a significantly large block of votes in Wisconsin – will a candidate who endorsed Obama and maintains a long record of supporting many of the same policies be the right fit as a candidate for governor? Isn’t this the exact candidate comparison Scott Walker (or Mark Neumann) is looking for: “Tom the Taxer” Barrett vs. “Tax Freeze” Scott? The Democrats got the man they wanted. Will it work for them in November? Joe Murray is Director of Politcal & Governmental Affairs for the WRA.

news.wra.org

Active Engagement ... continued from page 23

Active Engagement and You

wide-open (no incumbent) governor’s race since the early 1980s. These elections present us with a phenomenal opportunity – as individuals and as an organization – to impact our markets and our state. The outcome of the November 2010 elections will directly impact you, your family, your business, your community and your state.

If You Are Not at the Table, You Are on the Menu Nothing in politics just happens. Agendas and issues are determined by those who participate in, and win, elections. The candidates who win in November 2010 will be the ones deciding which programs to cut or fund, which regulations to impose or remove and which taxes to raise or reduce. And, as the old political adage states, if you’re not at the table (helping to make these decisions) you’re likely on the menu!

So what can you do to help? The answer is two things you probably have precious little of right now - time and money. Invest time in getting to know your state senator and state representative. Communicate with them on a regular basis, not just when you want something. Provide them with good counsel on matters regarding transactional, regulatory and tax issues so they can better understand the real impact of proposals before them. Help to make better laws by helping them become better lawmakers. Make sure you respond to each and every Wisconsin REALTORS® Association Call to Action. With just a few clicks of your computer mouse, you can help guide lawmakers toward making the right decisions on key issues. Finally, invest in the REALTORS® Political Action Committee (RPAC). Your financial support for RPAC is pooled with other contributions from REALTORS® across the state and distributed to candidates – both Democrats and Republicans – who support our issues. Our industry faces big challenges in 2010, but we are presented with even bigger opportunities. Now more than ever, we must rededicate ourselves to the notion of active engagement in politics and public policy. If we do, 2010 can truly be a happy new year! Michael Theo is Vice President of Legal and Public Affairs for the WRA.

Referrals Cheryl L. Eskridge A HEART for REAL ESTATE!

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Jo Baldridge, CRS, GRI, CHMS

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Serving Clients on Both Sides of the Mississippi

SPECIAL report

SHOULD REAL ESTATE AGENTS GET COMMISSION ADVANCES? BY JOSEPH GIOVANNELLI

The following is a paid advertisement and is not necessarily representative of the opinions of the Wisconsin REALTORS® Association.

Like most businesses, the typical real estate brokerage has a line of credit with a local bank to smooth out the cash flow peaks and troughs. This enables the brokerage to operate smoothly and uniformly throughout the year. The brokerage can meet its recurring administrative payroll, pay branch office expenses and maintain consistent advertising to recruit new agents. When the brokerage income during the seasonal slow periods fails to meet the expenses, the line of credit kicks in and the brokerage checks are honored. That way, all obligations to vendors and brokerage employees are met. As business increases and income from settlements hits the brokerage bank account, the line of credit is automatically paid down. That’s how it works. If this arrangement is so vital and necessary for the brokerage business to be successful, why is it not necessary for the success of the independent contractor agents (who are indeed running independent businesses within the brokerage)? Many agents have teams that include employees who need to be paid regularly. Many are “100-percent” agents with office space or desk fees that must be paid monthly. Most have listings that need to be advertised and promoted. All have the standard agent expenses: •

Personal promotion

•

Productivity tools

•

License fees

•

Association dues

•

E & O insurance

•

Automobile

•

Cell phone

•

Continuing education

•

Self employment tax

Just like the brokerage needs a reliable income stream to pay its expenses, the agents operating their businesses within the brokerage also need a reliable income stream to pay their expenses. The problem is, the professional agent who sells 24 houses a year does not sell two houses a month. If that were the case, the agent would

wisconsin real estate magazine

likely not need a business line of credit. But just like the brokerage, the agent’s income during the seasonal (or other) slow periods can fail to meet expenses. In those cases, the agent’s only recourse was to ask the brokerage for an advance on pending commissions. If the brokerage gave the agent an advance and the sale kicked out, the brokerage had the unpleasant experience of collecting the amount owed from the agent. This created an adversarial relationship between the brokerage and agent. If the brokerage was unable to make the advance, the agent would simply have to wait for settlement to meet financial obligations. This often resulted in the agent having a poor credit rating and being unable to qualify for credit cards or other loans. In some cases, it caused the agent to leave the real estate business entirely, which was certainly not good for the brokerage. Obviously, this situation contributed greatly to the turn-over of agents with its concomitant expenses to the brokerage for recruiting and training new agents. But the brokerages in general had little appreciation for the plight of the agents and never addressed the issue. Things changed in 1992 when a working broker in the Washington, D.C., area, who was a Million Dollar Club Life Member and Top Producer Life Member, had often experienced cash flow problems despite being one of the top income earners in the area. He concluded that if he had a need for a commercial commission advance service, other top agents and working brokers had a similar need. After having had a successful twenty year sales career, John Stedman teamed with Joe Giovannelli, another 20-year broker, to launch Commission Express, the first commercial commission advance company in the country. They spent the next five years developing the protocols and procedures to enable agents to quickly and easily sell their pending commissions (accounts receivable) at a discount. Unlike loans that required a good credit rating and took several days to be approved, their’s was a business to business “sale of an asset” transaction under

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the Uniform Commercial Code, which has been adopted by all 50 states. Having fully developed the process, they franchised Commission Express in 1996 to provide fast and reliable commission advance services on a local and personal basis. This enables agents across the country to easily solve their cash flow problems. Since then, Commission Express has provided over 80,000 commission advances totaling more than $400 million through franchised offices in 32 states. Unlike credit based lenders, Commission Express is a factoring company purchasing accounts receivable primarily on the strength of the asset (commission) being purchased. The agent makes an application online or with forms that are faxed and directs either the real estate company or settlement agent to pay the commission to Commission Express when the transaction settles, typically in 30 to 90 days. The agent is charged a discount of 8 percent to 14 percent. There is a holdback or reserve of 10 percent that is charged should the receivable not be redeemed within the 30 day grace period after the projected settlement date. Otherwise, the holdback is paid to the agent when the receivable is redeemed. The advance of 76 percent to 82 percent is paid to the agent, usually within 2 days, and often the same day that application is made. In most cases, the agent receives a total of 86 percent to 92 percent of the original commission. It’s quick, easy and available even to agents with credit problems due to the irregular income associated with commissioned sales positions. And with the current condition of our banking system, more and more businesses are turning to factoring companies to finance their operations. Joseph Giovannelli is a licensed real estate broker. He was first licensed in 1971 and over the next 38 years owned his own companies and managed offices for several of the largest companies in the Washington, DC area. He is co-founder and currently serves as Vice President of Commission Express National, Inc. news.wra.org

Homebuyer Tax Credit Changes Frequently Asked Questions

Here are some of the most frequently asked questions on the changes to the Homebuyer Tax Credit.

I thought the tax credit was for first-time homebuyers only. Isn’t this just an extension of the original tax credit? Yes and no. While the original $8,000 tax credit for first-time homebuyers has been extended to April 30, 2010, Congress has also expanded the homebuyer tax credit to include existing homeowners. Homeowners who have used the home sold or being sold as a principal residence consecutively for 5 of the previous 8 years are eligible for a $6,500 tax credit. In addition, the income limits have been increased to $125,000 for single individuals and $225,000 for married couples.

No. The $800,000 cap on the cost of the purchased home is firm at $800,000. Any amount above $800,000 makes the home ineligible for any portion of the credit. The $800,000 is an absolute ceiling. ?

Existing homeowner credit: Must the new house cost more than the old house?

I am an existing homeowner. On October 25, 2009, I signed a contract to purchase a new home. I have lived in my current home for more than 5 consecutive years and am within the new income limits. I will go to settlement on November 20. Since the extension was signed by President Obama on Nov. 6, will I qualify for the new $6,500 tax credit? Yes. The existing homeowner credit goes into effect for purchases after the date of enactment (when the bill is signed). There is no reference to the date of contract for the new credit. The provision looks solely to the date of purchase, which is generally the date of settlement.

I am an eligible first-time homebuyer. I entered into a contract to purchase on November 1, 2009. Do I have to go to closing before December 1? How does the extension date affect me? You do not have to close before December 1. Once the legislation was signed, it is as if the Nov. 30 date had never existed. Therefore, so long as the contract settles before April 30 (or June 30, worst case), the purchaser will be eligible for the credit.

No. Thus, for example, individuals who move from a high cost area to a lower cost area who meet all eligibility requirements will qualify for the $6,500 credit. ?

I am an eligible existing homeowner. I have a fair amount of equity in my home. I have found a home with a non-negotiable price of $825,000. Will I be able to use any of the $6,500 tax credit?

I am a first-time homebuyer but was not within the prior income limits at the time I entered into my contract to purchase on October 30, 2009. I will be covered, however, by the new income limits. If the new rules have been signed into law by the time I go to settlement, will I be eligible for a credit?

Yes. The new income limitations went into effect as soon as the President signed the bill. The income limit and other eligibility rules will look to your status as of the date of purchase, which SOURCE: National Association of REALTORS®, www.wra.org/nartaxcreditfaq is the settlement date.

I owned my home for 10 years, but sold it two years ago year and have been renting since. If I purchase a home, will I be eligible for the $6,500 tax credit if I meet all the other eligibility tests? Yes. Because you lived in the home for more than 5 consecutive years of the previous 8, you will qualify for the $6,500 credit. The keyword here is “consecutive.”

HURRY!

Both the $8,000 first-time buyer and $6,500 existing homeowner credit end at midnight on April 30, 2010.

WHEDA is positioned for a big comeback in early 2010. Our new, statewide loan program called the WHEda速 advantage will offer many benefits for your first-time home buyers, and has been developed to keep pace with the changing housing industry. income and purchase price limits apply and home buyer education is required. For the latest information about the WHEda advantage, go to wheda.com/Realtors.aspx or follow us on Facebook. Just click on the icon found on our website.

Wisconsin Housing and Economic dEvElopmEnt autHority 201 West Washington Ave n Madison, WI 53703 800.334.6873 n www.wheda.com