March 2010 - Wisconsin Real Estate Magazine by Lauren Bizorik

continuing education

Four ways to complete your mandatory continuing education.

March 2010 $5.00

commercial lien law

WRA seeks changes to increase effectiveness in real estate practice.

MAGAZINE

the many

HATS of selling

short sales

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table of contents

march

features

articles

Many Hats of Selling Short Sales One of the most challenging transactions that REALTORS® face today is a short sale. There are many hats a listing agent must wear.

12 24 26

Out of the Pan and Into the Fire Mortgage fraud schemes arose out of the demand for housing in the last decade - now a dramatic reversal has occurred!

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The Home Stretch The year long legislative session enters its final months, but there is a fair amount of unfinished business at the Capitol.

Wisconsin Sings the “Blues” After 10 years of political success at the top of the ticket, Wisconsin Democrats have owned it all. The GOP looks to change that trend in 2010.

news.wra.org

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2010 |

vol.

26, no. 6

Best of the Legal Hotline Distressed sellers and properties are still abundant and REALTORS® often face tough questions.

Standardized Short Sales Finally what REALTORS® have been asking for: a uniform process, uniform forms and firm deadlines.

Converting the FSBO An inside look at why sellers choose to try the FSBO approach to selling their home.

WRA Seeks Changes to Commercial Lien Law Is the current law ineffective? Read about the WRA’s proposed changes.

It’s Tablet Time! Should your next PC be a tablet? Maybe so, but probably not the one you think.

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 elcome to this month’s edition of Wisconsin Real • Ensuring access to property Milwaukee Business Journal (WI) (09/30/08) Community Estate Magazine. As you know, short sales and tax records kept by local units of United Way of Dane County NAR Releases Free FHA Toolkit state ofaWisconsin is dueofto our receive nearly $39 foreclosures haveThe become daily reality government.

Wisconsin REALTORS® Association (10/30/08) in federal to stabilize United Way of Dane C o u n tThey y aremillion business. also two of the funds top issues I hear neighborhoods and stave off a spate of abandoned homes. According • Postponing or defeating a new onerous recognized the Stark about Familyfrom with the 2008 ® REALTORS as I travel around the state. NAR and the WRA are eager to help you meet the to HUD and Gov. Jim Doyle, the funds are separate Tocqueville Society Award for outstanding service penalty on farmland conversions. current challenges of the troubled economy. We from approximately $9.2 million the government is to the Dane County community and United Way. Inside this issue, you’ll get an inside look at foreclosures and how • Defeating attempts to change the Constitution’s awarding the city of Milwaukee, where the foreclosure The Tocqueville Societyto address Award celebrates and know that you need resources that can help you questions and issues facing consumers. We have also currently 9.9 percent. HUD is awarding the uniform close taxation clause. and you need them at little or no acknowledges people or families, as the Starks, transactions, launchedsuch a foreclosure resourcerate Webis site that includes a variety of funds via its Neighborhood Stabilization Program, who have made a major impact on the quality of life resources to help consumers understand the process and achieve cost.Wisconsin’s NAR has justcommercial released an all-new • Improving broker’sFHA lienToolkit under which almost $4 billion is being allocated to in Dane County through their exceptional service a better outcome. Please visit www.wisconsinforeclosurekit.org online for FREE to help you get clients the financing law. local and state governments for the redevelopment commitment to the community. Billand Malkasian today and share it with consumers in distressed situations.houses. of abandoned and foreclosed they need in a credit-strapped environment. It is WRA President

City Housing Authority Receives Before we touch on this month’s topics, I want to personally thank Sites: Not Just for Personal 100-Unit Grant all of you who attended Designation Week in Appleton. We received Milwaukee Journal Sentinel (09/25/08) Pabst, Georgia Connections Anymore

•

Defeating mortgage “cram downs” in foreclosures.

one of the most comprehensive toolkits NAR has

Don’t forget, ever consumers take advantage of the ® produced,can and still it’s available to all REALTORS home buyers right tax credit the the endlink of April. youalso or your rave reviews and appreciate the efforts ofPaul those whoJournal traveled now byuntil visiting below. IfThey have Minneapolis-St. Business (09/29/08) Grayson, The city of Milwaukee’sthrough housingsnowy authority is due to attend. Please mark your calendar customers have questions, our called tax credit Web You siteNavigate (www. weather Katharine launched a new page “NAR Helps to receive $6.7 million in federal Hope VI money wisconsinhomebuyer.org) provides a wealth of information for next year’s event: February 8-11 at the Kalahari Resort ®and 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 about the credit, qualifications and how to take advantage of it. Convention Center in the Wisconsin Dells. says Flickr, Facebook and other social networking

be constructed in a 2.5-mile area and will include great products and resources, like the FHA Toolkit, it easy to meet people whoIn closing, might the WRA appreciates your support, especially on issues 29 public housing andIf affordable rental units; you could not attend, anothersites greatmake opportunity to work toward for free or at a steep discount. Visit www.Realtor. eventually become clients. While many professionals nine affordable housing units for income-eligible that impact our industry and itsfor success. know foreclosure designations will be at our annual state convention in September at org/NARHelpsYou links toWe these great programs is are using these sites to make business contacts families; and 62 moderately priced, open-market the last result anyone expects when buying a home, but it’s our the Kalahari Resort and Convention Center. If you plan to enhance and companies use them to conduct background and products. condominiums. HUD Secretary Steven C. Preston job to be as proactive as possible to educate consumers about the your knowledge of foreclosures and shorts sales, the Wisconsin checks or recruit new workers, many simply want comments, “Milwaukee’s housing authority has ® process and hopefully steer them away from foreclosure. Again, REALTORS two people additional to offering connect with whocourses have similar interests. demonstrated it has the leadership Association to lead andwill be Home Loans Going Strong, Albeit a urge at convention that apply the CRStoand ABR designations. According Boardman, “The hard sell is we dead. It you to point consumers to our foreclosure resource Web revitalize neighborhoods and transform lives. toward Tighter, intoArea serves Bit as your resource pass on to distressed property Register for one these andwork convention for only $160. doesn’t door-to-door, and it doesn’t site. workIton Cities like Milwaukee change and grow andofneed to courses Wisconsin State Journal (10/17/08) Marv a better socialSeating networks.” On Flickr, Boardman connected revitalize housing to make many than aren’tapriced owners who want to understand the processBalousek, and achieve Thissure is more $100 savings. is limited, so register out.” Milwaukee is oneearly of aand half-dozen housing with a fellow photographer who eventually used her result. feel free to contact our education department with any Despite the ongoing national credit crisis, property authorities nationwide questions. to receive new Hope VI services to purchase a home. professionals say mortgage money remains available grants. throughout southern Wisconsin to home buyers Push Rents Higher, Next, thank you to those whoForeclosures attended this year’s Government ® Housing Study Delay Income Day. Frustrates Almost 500 REALTORS® Squeezing and REALTORLow affiliates wereFamilies in Minnesota Radio years. (MN) (09/21/08) Advocates attendance, making this our largest eventPublic in recent Together,Olson, Dan

with solid credit. Ron Steinhofer, manager of

we demonstrated our strength In as an industry and made a lasting Minnesota’s Twin Cities, a wave of home Sincerely, Two years after promising the Milwaukee metro impression on key lawmakers at the Capitol. foreclosures has pushed more people into the rental

group, states, “There’s plenty of money for home

Milwaukee Journal Sentinel (10/07/08) Williams, Scott

area’s first major housing study in three decades, apartment sector. The result is an intensifying Last, but not least, we are entering theon last months ofand a two-year the Southeastern Wisconsin Regional Planning demand Minneapolis St. Paul’s rental housing session cycle, is due to adjourn thevacancy end ofrate is very low Commission (SEWRPC) islegislative still struggling to get the whichstock, so much so thatatthe ® effort launched. Proponents hopetime the has study willfor all and April. The come REALTORS toondothetheir to in help rents are rise.part This, turn, means lowserve as a catalyst for improving affordable income families face higher monthly pass good pendinghousing laws and defeat badworking pending proposals. Bill rents opportunities throughout the city’s suburbs. But even though their income hovers at unchanging for “Call Action” e-mails the next commissioners have yetWatch to assemble antoadvisory levels.over Since 2005,few theweeks Twin and Cities apartment committee to oversee theplease research a specific takeor asetfew minutes to vacancy contact rate yourhas lawmakers and7 help dipped from percent to closer to timetable for conductingthem the survey. Evenson, 4 The percent. Average monthly include rents over that same make Phil the right decisions. issues still pending the commission’s executive time span are up more than $25, rising to more (indirector, part): said other issues keep getting in the way. The delays have frustrated than $850. The St. Paul-based Wilder Foundation housing advocates the most. Bethany Sanchez, recently reviewed income data for several Twin Cities vice president of the Metropolitan Milwaukee Fair counties. The organization’s research found that the Housing Council, laments, “It’s been a long time number of people in those markets paying too much coming.” The Pewaukee-based commission has for their rental housing will double from around not conducted a comprehensive review of housing 70,000 currently to a whopping 140,000 by 2010. patterns since the 1970s. Some say a partial solution would be for the U.S. government to reverse course on housing policy and

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wisconsin real estate magazine wisconsin real estate magazine

march 2010 october 2009

Marshall & Ilsley Bank’s regional home lending loans out there. It is slightly more difficult to qualify than two or three years ago, but if you have a good credit score, a good job and a down payment, money is available.” Steinhofer adds that banks still are making loans via such programs as Fannie Mae and Freddie Mac. Furthermore, credit standards remain about the same as they were six months ago, meaning that qualified home buyers can get loans if they have the proper income verification. On the downside, banks have been less willing to make loans with higher loan-to-value ratios. In addition, conventional financing without a down payment has indeed disappeared. However, 100 percent financing 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

2010 GRI Scholarship Recipients

John Horning, Chairman-Elect jphorning@shorewest.com

The Wisconsin REALTORS® Foundation would like to congratulate the following 2010 GRI Scholarship recipients: Darwin Scoon Jose Maria Donoso: Stark Company REALTORS®, Sun Prairie Lori Koschnick: Coldwell Banker – The Real Estate Group, Manitowoc

Robert Keefe, Treasurer rkeefe@keeferealestate.com William E. Malkasian, cae, President wem@wra.org

Don Hovde Nathan Gamlin: Your Realty, Porterfield

Editorial Staff:

Arline Beyer Matthew Lamb: Coldwell Banker Commercial NRT, Mequon

William E. Malkasian

Otto Bytof – Coldwell Banker – The Real Estate Group Travis Hein: Coldwell Banker The Real Estate Group, Neenah

Publisher

Robert Uhrina

Otto Bytof – REALTORS® Association of Northeast Wisconsin Nicole Staudinger: Coldwell Banker – The Real Estate Group, Manitowoc

Managing Editor

Al Petri Heidi Kabat: RE/MAX Community Realty, Johnson Creek

Emily Zampardi Publication Editor

Waupaca-Shawano Dennis Glocke: Coldwell Banker – The Real Estate Group, Waupaca

Joe Leschisin Senior Designer

Kettle Moraine Mercedes Loomas: First Weber Group, REALTORS®, West Bend

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.

In addition, the Foundation would like to congratulate the 2010 Arline Beyer AE Institute scholarship recipient: Jared Jamrozy: Ozaukee REALTORS® Association Congratulations and best wishes to everyone!

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.

2010 WRA Annual Convention

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.

September 26-28, 2010 The theme for the WRA’s Annual Convention 2010 is “And the Winner Is...” Mark your calendar’s for this eventful date. The convention will be held at the Kalahari Resort and Convention Center in Wisconsin Dells. Complete details and registration will be in next month’s issue of the Wisconsin Real Estate Magazine.

REALTOR® and Government Day Recap The 2010 REALTOR® and Government Day program was a huge success. More than 450 REALTORS® came to Madison to take part in a full day of activities that included informational speakers, a detailed legislative briefing on critical issues, and a gubernatorial question and answer session between candidates Scott Walker and Mark Neumann.

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

The most important part of REALTOR® and Government Day takes place at the State Capitol. When 450 REALTORS® descend on the Capitol to speak to their Legislators on issues important to the real estate industry, lawmakers listen. Key issues for this session included access to property tax records, commercial broker liens, and taxes on real estate. The WRA and its membership demonstrated an impressive show of strength on February 24th, a day well remembered at the Capitol when key votes are taken.

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

3 wisconsin real estate magazine

For all who joined us this year, thank you. Your participation makes all the difference!

march 2010

Chairman’s Corner

John Flor

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

elcome to spring, Wisconsin REALTORS®. After a long winter, most of us are looking forward to warmer weather and the eventual retreat of the snow piles in our driveways and parking lots. We are also looking forward to a “warmer” housing market, and I am confident we are going to see exactly that. According to year-end sales numbers for 2009, the market finally seems to be moving in the right direction. Overall, the market in Wisconsin was flat from 2008 to 2009, but we saw an increase in sales of more than 25 percent in the fourth quarter compared to the same quarter in 2008. Much of this was due to the $8,000 Home Buyer Tax Credit, and since the program was extended until April 30, we can expect a busy spring selling season as well. That leads me into my first subject. The Wisconsin REALTORS® Association has spent a lot of time and effort creating a Home Buyer Tax Credit advertising campaign that has been running since last summer and will continue to run until the extended and expanded $8,000 and $6,500 Homebuyer Tax Credit ends at the end of April. The campaign, which is one of the most indepth and successful advertising campaigns the WRA has ever undertaken, covers many different media, such as radio, Internet, paid search and social networking sites. Our Web site statistics are better than we could have hoped for and several local associations, like mine, have piggybacked on the campaign’s success with advertising expenditures of their own. This brings me to my second point. I recommend taking full advantage of the tax credit while it lasts. I say that because lobbyists at the state and national level agree that Congress will not extend the credit again for many reasons. After April the housing market will have to sink or swim without the assistance of this program. The good news is that most economic experts agree that we will continue to recover without it.

your customers and clients about the tax credit, how it works, who is eligible and how you can get paid. Another fantastic source is the WRA Web site, which offers a number of great marketing tools, including flyers, ad slicks, postcards, online banner ads and e-mail signature block graphics. Find them by clicking on the Public Awareness Campaign quick link at the bottom of the home page. Time is running out. You have until April 30 to secure an offer to purchase, so I hope you will use these tools to help increase your business this spring. All of this was created for you, so take advantage of it. In the next few months I will have the privilege of representing you in several ways. In April and May, Bill and I will be traveling the state with John Horning, our Chairman-Elect. We want to hear from our younger REALTORS® and those who have less experience in the business. Visiting with a cross section of our members will help John to shape his goals and objectives for next year. I am interested to hear how we can better serve you while exploring the tough question: “How can we get you more involved in the associations that exist to help you and your business?” In May I will return to Washington, D.C., along with many of you from around the state to engage our legislators in discussions about a wide range of topics that are important to organized real estate. If you have never attended, it is a great learning experience and I highly encourage it. I hope your spring selling season will be the best we have seen in years. Keep working hard and show your REALTORS® pride every day.

John R. Flor

There are many resources that have been created just for Wisconsin REALTORS®. One of the best resources is www.WisconsinHomebuyer.org. This consumer Web site is packed with information for

wisconsin real estate magazine

march 2010

news.wra.org

REALTOR NEWSWIRE ®

Top News Stories in and Around the Industry

WHEDA Bringing Back First-Time Home Buyer Loans Associated Press (2/12/2010)

Wisconsin’s affordable housing agency says it will resume lending to first-time home buyers after suspending loans for 17 months. The Wisconsin Housing and Economic Development Authority says it will begin offering a new loan product to buyers on March 1. The agency says it will be the first state housing authority to offer the new product from Fannie Mae. In October 2008, WHEDA suspended its loans for low- and moderate-income home buyers as a result of the freeze in the credit markets. The agency had been making about $500 million in loans every year to about 4,000 or 5,000 homeowners.

Existing Home Sales Stable, Prices Slip in 2009 Milwaukee Journal Sentinel (WI) (02/11/10) Gores, Paul

The Wisconsin REALTORS® Association (WRA) reports that sales of existing homes in the state rose slightly last year, topping 2008 totals. There were 53,751 homes sold by REALTORS® statewide in 2009, up less than 1 percent from 53,279 a year earlier. At the same time, the median price of residences sold by REALTORS® in the state last year declined 7.7 percent to $143,000 from $155,000. As a result of the federal tax credit, researchers say many of the houses sold in ‘09 were more likely to be starter homes. This, in turn, brought down the median sale price. Although many property professionals expect the tax credits to fuel the market in the first four months of this year before expiring, not everyone agrees on whether sales will plunge thereafter. WRA President William Malkasian states, “I don’t see a dramatic drop-off,” noting that the sales trend in each quarter of 2009 was positive. He and others say the best cure for a lackluster housing sector is for businesses to begin hiring again. Malkasian states, “If the unemployment rate starts to come down, and we start to see more jobs in the economy and more confidence, the rest of the year is going to be OK.”

State Program Could Help Save Farmland

forever. The recent economic downturn has eased development pressure in Rock County, creating a window during which committee members can carefully implement a program. Committee member John Lader states, “Municipalities aren’t looking to expand their borders quite as much as they were five years or three years ago. So it gives them more time to define exactly where their growth can and will be and for everybody to work together to do that.” The 21 members of Rock’s committee represent cities, towns, REALTORS®, landowners, developers and environmentalists. Rock is one of the few counties in the state that has town rather than countywide zoning.

Federal Tax Credits Boost Home Buying Fox21Online.com (12/08/09) Halsted, Gil

According to the Wisconsin REALTORS® Association, Kenosha County home sales fell the most among eight counties in Southeast Wisconsin last year. The region was still up 1.5 percent. Kenosha REALTORS® Association President Anthony Nudo believes the county did poorly compared to the region because local sales did better than the region when the housing boom started years ago. The $8,000 credit, claimed on federal income tax forms, is for first-time buyers. There is also a $6,500 credit now being offered for certain homeowners who buy a new principal residence. Marc Frisco, owner of Re/Max Elite, states, “Part of that logic was that sellers would be able to lower their prices a little, knowing they had that credit coming. That was a trigger enough to make their homes attractive in price to get people to buy.” Nudo expects monthly sales to top year-earlier numbers at least through April. After that, it is anybody’s guess. Nudo states, “One thing that will spur real estate sales will be job creation [through government action]. Can we sustain sales growth based on the tax credits, I wonder? What is sustainable, though, is through job creation and job retention.”

Home Sales 27 Percent Higher in 4th Quarter Over Last Year USA Today (02/12/10) Armour, Stephanie

Janesville Gazette (WI) (02/16/10) Nelesen, Marcia

Advocates are calling for the creation of a farmland preservation program in Rock County, Wis. The Rock County Board recently allocated $700,000 for such a conservation program. A county committee has been meeting since late last summer to develop criteria that would entail the purchase of agricultural conservation easements. Such easements are a way for landowners to capture the value of their land without selling any property. In return, the land is kept in agriculture

The National Association of REALTORS® reports that home resales soared 27.2 percent in the fourth quarter from a year earlier to a seasonally adjusted annual rate of 6.03 million. The gain was credited to favorable interest rates and a first-time home buyer tax break, with 67 out of 151 metro areas registering increases. “There’s a growing body of evidence that the housing market has stabilized,” remarks Bernard Baumohl of the Economic Outlook Group. “The question is how quickly can it recover and will we bump along at the bottom for a couple of months?”

Online Marketing: ‘Don’t Use My Name! RISMedia (02/09/10) Parker, Mike

Many real estate agents, especially those in competitive markets, are afraid to reveal their successful online strategies because they fear rivals will adopt the same approaches and steal their business. Others are concerned that they will be perceived as flaunting their success. Much of these concerns stem from the fact that fewer than 10 percent of agents are happy with returns from Internet marketing, according to the National Association of REALTORS®; and agents who have figured out the secret are hesitant to spread the word. However, experts say any agent can follow the basic steps of successful Internet marketing: implementing a marketing platform that allows consumers to request additional information; persuading consumers to express their wants and then providing those wants to them; ensuring their Web sites are easily discovered by home buyers searching online; converting site visitors into registrations; and following up with leads. Agents must understand that successful online marketing involves more than search engine optimization, and they would be wise to hire a company to handle Internet prospecting -- which will cost them only a couple of hundred dollars per month -- so that they can spend their time on other tasks.

6 Weeks to Better Search Engine Results Globe Newswire (12/14/09)

Optimizing a real estate -- or other -- Web site for search engines is a sure-fire way to draw prospects and clients, and savvy practitioners offer several pointers to maximize a site’s potential. One strategy is to come up with better page titles; those appearing in the browser bar should be as specific as possible because this is what the search engines scan. At the very least, an agent should always define his or her geographic location and market niche before his or her name. Another recommendation for search engine optimization is to broadcast links by getting other sites, such as social networks and trustworthy real estate Web sites, to provide the link. Thirdly, it is suggested that certain keywords and top phrases be used liberally and repeatedly -- at least 10 to 13 times per 700 words on a page, according to one expert opinion. A fourth task is to re-word outgoing links by making the hyperlinks specific and including phrases that search engines can index. The fifth technique is to develop a site map that is made specifically for a search engine, which can help Web crawlers find the site’s content and generate more accurate rankings. Finally, it is suggested that companies tweet useful posts about their sites that include keywords and links -- especially now that Twitter posts are indexed in Google.

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

march 2010

One of the most challenging transactions that REALTORS® face today is a short sale. In this article, I will discuss the challenges facing listing agents and how to avoid listing properties that do not have a reasonable chance of closing once a buyer is found. However, before we discuss the many hats a listing agent must wear, let’s first define the short sale: a sale in which the total debt on the property, if sold, is greater than the value of the property in today’s market, and the property owner is unable to bring the additional funds to closing to pay all outstanding debt.

REALTOR® = Diagnostician + Technician + Clinician

Diagnostician

Technician

To diagnose the seller’s pain correctly, REALTORS® need to ask potential sellers very difficult questions. In this role, be mindful of the agency disclosures that must occur prior to asking a party for potentially confidential information. To qualify as a candidate for a successful short sale, a seller must:

When pricing a property, a listing agent should consider the details of the marketplace and put them into a thorough and understandable current market analysis (CMA). He or she must understand how to read the comparable sales, including all distress sales, to price the property correctly. It is essential that the property is priced to sell. The listing agent will need to support any contract price that eventually gets accepted by the seller as an accurate picture of value to the lien holder(s). In addition to a very detailed CMA, there is an abundance of paperwork and detailed reporting that must be completed by the property owner for all lien holders. The REALTOR® must believe that the property owner is willing and able to complete the paperwork necessary to document the hardship and supply to all lien holders the financial application and supporting hardship documentation to assist the lien holder(s) in determining if the property owner has an actual hardship. Most often, the paperwork that the property owner must complete is more detailed than the original loan paperwork. All lien holders must receive the entire documentation from the property owner in the form of a completed short sale package. Keep in mind that all lien holders may not ask for the same information, so the contents of each short sale package are determined by the unique requirements of each lien holder.

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owe more on the property than the property will sell for in the market;

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be unable to bring funds to closing to pay off the outstanding debt; and

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have a valid hardship that can be documented.

REALTORS® often take listings from homeowners who are “upside down” in their equity position and want to sell their property. The REALTOR® takes the listing and the short sale inevitably fails. REALTORS® must explain to the property owner that loss of equity, although unfortunate, is NOT considered a valid hardship by lenders considering short sale approval. A valid hardship is a condition or event(s) that caused the homeowner’s payments to become (or soon become) unaffordable, i.e., employment changes, illness, death of an income earner or divorce. If the hardship is valid and can be documented, then the REALTOR® may consider listing the property.

Hats to Sell Short Sales ... continued on page 8

Hats to Sell Short Sales ... continued from page 7

Clinician The last hat the REALTOR must wear is that of the clinician. As a former psychotherapist, I recognize the inherent challenges when working with individuals who may exhibit a great degree of anxiety, pain and perhaps shame as a result of their current condition. I also recognize the anxiety a REALTOR® feels when having to tell a homeowner the reality of loss in value of a property. Property owners, especially those who have purchased within the last few years, often face the fact that selling their home will cost them any equity they had. They also must face the very real possibility that if payments are unaffordable and there is an actual hardship, the best solution may be to sell the property to avoid foreclosure. That reality is a lot to manage! In the role of the clinician, the REALTOR® must show compassion and understanding and, at the same time, offer objective solutions to the property owner. In other words, be empathic. REALTORS® often share with me that discussing the foreclosure action with the property owner is extremely stressful, emotional and exhausting. In many cases, the REALTOR® is the same agent the property owner used to purchase the property, and it is extremely difficult to remain objective. ®

Objectivity is one of the greatest challenges for listing REALTORS®, but it is a must. It is very difficult to speak frankly with sellers who want their REALTOR® to show sympathy and save them from harm. Unfortunately, there are some people who have no valid hardship, have waited too long to get in touch with a REALTOR® and cannot do what it takes to get out of the bad loan. These folks may just walk away. REALTORS® must never assume the role of giving legal advice. However, make sure that property owners understand that walking away, although an option, is harmful and that they should discuss the legal ramifications of such actions with their legal advisors. The REALTOR® needs to remain objective and assist those homeowners in understanding their options and, if appropriate, list those properties that meet the necessary criteria: the property owner is ready to be helped, has a valid hardship and is able to pull together the paperwork and documentation that is required by the lien holders.

Home Owner Affordable Modification Program The short sale transaction may become easier and more efficiently managed for lien holders who take part in the optional Home Owner Affordable Modification Program (HAMP), which was released by the Obama Administration in November 2009. If transactions become easier, fewer buyers will simply get tired of waiting and move on to other properties. However, short sales will continue to fail if we do not ensure the right parties have entered into the purchase agreement. For more details about the program, visit www.makinghomeaffordable.gov

Wisconsin Foreclosure Assistance Resource Center The Wisconsin Foreclosure Assistance Resource Center provides answers to frequently asked questions about Wisconsin’s foreclosure process and features a variety of credible resources, including expert advice and contact information for trusted advisers throughout the state. The site’s three main sections - a survival kit, prevention kit and public information kit - include video clips with experts from the Wisconsin REALTORS® Association Wisconsin Bankers Association, Consumer Credit Counseling Service of Greater Milwaukee, the Wisconsin Housing and Economic Development Authority and more. In addition, the site explains the foreclosure timeline and provides a glossary of terms to help homeowners ask the right questions and get the answers they need. For more information, visit www.wisconsinforeclosurekit.org

courses

The bottom line is: every successful REALTOR® must wear three hats in today’s marketplace: diagnostician, technician and clinician. Be soft on the people, hard on the problem and be certain to work with the property owner to complete all necessary paperwork.

Short Sales and Foreclosures (CRS 111) Protecting Your Client’s Interest April 23, 2010 - WRA Headquarters - Madison, WI

To learn more about successful short sale transactions as well as REO transactions and the foreclosure process, be sure to look at the newest certification from the National Association of REALTORS®, Short Sale and Foreclosure Specialist Certification (SFR). Additional information about the SFR certification may be found at www.realtorsfr.org.

Working with buyers and sellers of distressed properties can be frustrating and time consuming, but also rewarding. This CRS course provides you with practical approaches to the pre-foreclosure and foreclosure processes that will result in the successful disposition of these properties. Learn the intricacies of the short sale and foreclosure processes.

Lori Cox is the founder of Life Successes, Inc. and has dedicated her energies and passion toward helping real estate professionals succeed in establishing and reaching their business and personal goals. As a top producing REALTOR® for over 15 years, Lori knows what it takes to create business, maintain relationships and thrive in the competitive real estate industry today.

resources

wisconsin real estate magazine

march 2010

Instructor: Frank Serio, CRS Fees: Thru 4/9 After 4/9 ATD *$145 *$155 *$175 *Members of the Wisconsin CRS Chapter receive a $20 discount. For complete course details, visit www. wra.org/CRSinfo news.wra.org

quarterly wisconsin housing report news

HOME SALES RALLY IN THE FOURTH QUARTER TO KEEP WISCONSIN HOUSING MARKET By David E. Clark, Economist, C3 Statistical Solutions Inc.

> WISCONSIN HOUSING STATISTICS QUARTERLY ACTIVITY - Q4 2009*

Region

Median Price Q4-2009 Q4-2008 % Change

Existing Home Sales Q4-2009 Q4-2008

% Change

Southeast South Central West Northeast Central North

$154,900 $157,000 $128,940 $120,000 $117,000 $119,450

4983 2546 1501 2401 885 1193

27.1% 33.5% 29.5% 29.2% 24.3% 19.2%

-3.2% -3.1% -0.8% -5.5% 6.4% -4.1%

interest rates and the federal first-time home buyer’s tax credit. “Mortgage rates remained at historic low levels, just under 5 percent in the fourth quarter, and firsttime home buyers were scrambling to get their homes closed when they thought the federal tax credit was expiring at the end of November 2009,” Malkasian said. “With sales improving each quarter last year, the general trend for the future is favorable,” he said, but cautioned, “While the recession is probably officially over, we really need to start seeing healthy job growth before the economy truly starts to recover.” Unemployment stood at 8.7 percent in December, and Wisconsin seasonallyadjusted employment dropped by nearly 120,000 jobs in 2009.

ome sales in Wisconsin rallied in the fourth quarter after steady improvements throughout the year, bringing final 2009 existing home sales back to their 2008 levels, according to the year-end analysis of home sales conducted by the Wisconsin REALTORS® Association (WRA). At the same time home prices were down by modest margins, as they were in much of the Midwest, but down much less than in other parts of the country. “In the end, Wisconsin home sales in 2009 were unchanged from 2008,” said WRA President William Malkasian, “but it was really a tale of two halves. The first half of the year was down significantly compared to 2008, and the second half of the year grew at a very healthy rate.”

State median home prices fell 7.7 percent to $143,000 in 2009 as compared to 2008. This is in line with the Midwest region, where median single-family home prices fell 5.3 percent over the year, and it is better than the decline of 11.9 percent for the U.S.

According to the REALTORS®’ report, fourth quarter home sales in Wisconsin were 25.6 percent above the same quarter in 2008. Malkasian explained this was due to several factors including favorable wisconsin real estate magazine

$160,000 $162,000 $130,000 $127,000 $110,000 $124,500

march 2010

3919 1907 1159 1858 712 1001

The West region of the U.S., which has been hit hard by heavy foreclosure activity, saw its median prices drop 18.7 percent in 2009 versus 2008. “We do appear to be turning the corner in the state, with healthy inventories and moderating prices,” said John Flor, chairman of the WRA Board of Directors. “The extension of the federal first-time home buyer’s tax credit and the expansion to include tax credits for existing homeowners should help entice buyers off the fence and into the market,” Flor said. Flor noted these tax credits can only be taken on home sales with a contract by the end of April, and closing by the end of June. “We hope this additional tax stimulus will supplement the improving market conditions to make 2010 a better year to buy and sell real estate in Wisconsin.” For More Information Contact: David E. Clark, Economist, C3 Statistical Solutions Inc. Office phone: 414-803-6537

legal

best of the legal hotline

with kevin king

Best of the Legal Hotline: Buyers, Sellers and Distressed Sales Information about the economy and the real estate market surrounds us. Distressed sellers and properties are still abundant. And while many REALTORS® have endeavored to assist these sellers and work with buyers interested in purchasing them, distressed home sales are often complicated. The following questions have been recently submitted to the Wisconsin REALTORS® Association in regards to distressed sales.

MLS Offer of Compensation and Short Sales What can a listing broker do to protect against the lender in a short sale transaction requiring a reduction of commission as a condition of approving a sale of an MLS-listed property? Can the listing broker simply use the phrase, “Call for details?”

Disclosure of Short Sale

Pursuant to the policies and procedures of the National Association of

The broker is listing a home and found out it might be going into a short sale. How should a broker let people know about a potential short sale?

REALTORS®, Multiple Listing Services cannot publish listings that do

On one hand, as the agent of the seller, the broker does not want to compromise the seller’s chances of getting the best price possible for a home by disclosing the seller’s distressed condition too early. On the other hand, Wis. Admin. Code § RL 24.07(2) requires licensees to promptly disclose material adverse facts in writing to all parties to the transaction. Failure to disclose may lead to licensee liability. A transaction that might be a short sale may fall more squarely under § RL 24.07(3), which provides that a licensee is practicing competently when the licensee discloses to the parties in writing the information suggesting the possibility of a material adverse fact, recommends that the parties obtain expert assistance and, if directed by the parties, drafts appropriate contingencies to address this matter.

include general invitations by listing brokers to other participants to

The fact that the transaction may be subject to lender(s) approval and apparently will not be able to close without such approval falls within the category of information that may be stated factually to buyers. If it is disclosed that lender approval will be needed, then the appropriate contingencies can be included in the offer to purchase for the protection of both the seller and buyer.

the gross commission established in the listing contract required by the

wisconsin real estate magazine

march 2010

not include an offer of compensation expressed as a percentage of the gross selling price or as a definite dollar amount. In addition, they cannot discuss terms and conditions of possible cooperative relationships. Through the MLS, listing brokers have the ability to disclose the possibility of a short sale to potential cooperating brokers. A short sale is defined in the MLS rules as a transaction where the sale price is insufficient to pay the total of all liens and costs of sale and the seller does not bring sufficient liquid assets to cure all deficiencies to the closing. MLSs may, as a matter of local discretion, require listing brokers to disclose potential short sales when they know a transaction is a potential short sale. In any instance where a listing broker discloses a potential short sale, the listing broker may, as a matter of local discretion, also be permitted to communicate to other participants how any reduction in lender as a condition of approving the sale will be apportioned between listing and cooperating brokers. All confidential disclosures and confidential information related to short sales must be communicated through dedicated fields or confidential “remarks” available only to participants and subscribers. news.wra.org

Fannie Mae and Freddie Mac Commission Policies

“As Is” Short Sales

Can Fannie Mae and Freddie Mac loan servicers require brokers to reduce the listing commission as a condition of short sale approval?

It seems that each short sale is “as is.” Is there something that the buyer can include in the offer to purchase to address this possibility?

In February 2009, Fannie Mae reconfirmed its short sale commission policy and established a process for REALTORS® to follow if issues arise (Fannie Mae sent Announcement 09-03). Loan servicers were instructed not to negotiate commissions on short sales below the amount negotiated by the listing agent unless the commission exceeds 6 percent. NOTE: Private mortgage insurance companies and second lien holders may still seek to reduce commissions. If a REALTOR® believes a servicer of Fannie Mae loans are unaware of this policy or believes it is not binding, Fannie Mae has established a process for NAR members when short sale commission issues arise. Step 1: Determine whether the loan is owned or guaranteed by Fannie Mae. Only the holder of the loan is allowed to do this, so do so in the presence of your client or after obtaining your client’s written permission. Visit www.fanniemae.com/loanlookup or, if you do not have convenient Internet access, call 1-800-7FANNIE (8 a.m. to 9 p.m. Eastern Time) Step 2: If the servicer is unaware of or disagrees with the policy, provide a copy of Announcement 09-03 to the servicer and negotiate an appropriate commission based on the listing agreement – up to 6 percent. (Announcement is available at: www.efanniemae.com/sf/ guides/ssg/annltrs/pdf/2009/0903.pdf.) Step 3: Contact Fannie Mae at 1-800-7FANNIE or Resource_center@FannieMae.com if the dispute is not resolved directly with the servicer. Be prepared to provide the property address, name of owner and Fannie Mae loan number (if available). On August 20, 2009, Freddie Mac confirmed in writing that its servicers are not allowed to renegotiate short sales commissions (Freddie Mac Single-Family Seller/ Servicer Guide Bulletin 2009-22). According to the policy, as a condition of the servicer’s acceptance of a short sale offer, servicers cannot renegotiate the sales commission below the amount agreed to by the real estate broker and the seller/borrower. However, if the negotiated commission exceeds 6 percent, servicers are required to limit it to 6 percent. This Freddie Mac policy is consistent with Fannie Mae’s policy. Again, private mortgage insurance companies and second lien holders may still seek to reduce commissions. wisconsin real estate magazine

WRA Addendum SSO includes optional provisions that may be used if the offer is “as is.” In such cases, the buyer must be sure to include all necessary inspection and testing contingencies in the offer. The buyer may also decide whether to implement the inspection and testing contingencies right away or wait for lender approval before investing time and money. This is a catch 22 decision for the buyer because the lender will invariably want a speedy closing once lender approval has been given. Addendum SSO (2009) is available in hard copy from the Wisconsin REALTORS® Association and on ZipForm.

Short Sale Secondary Offers The broker received several offers on a property that is subject to a short sale. All offers included Addendum SSO and a lender approval contingency. The broker believed that a seller could accept all offers as primary offers as long as they were contingent on lender approval, and then let the lender decide which one to select. The seller accepted and approved multiple offers in primary position. Now selling agents are calling the broker and asking how the seller could accept multiple offers in primary position. The agents are concerned that there are now four clients in primary position that are being “strung along” by the lender. Under normal circumstances, there would be one primary offer and multiple secondary offers, but in this case what should the broker do? 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 to Article One of the Code of Ethics provides in relevant part, “REALTORS® shall recom¬mend 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. The seller can submit the offers to the lender at the same time for the lender’s consideration. Accepting all of the offers in primary position is possible because they are all contingent upon lender approval from the same lender and the lender is only going to approve one offer. However, this may mislead buyers and their agents and could lead to multiple approved primary offers if communication errors are made by the lenders or agents and more than one buyer comes to believe the lender approved his or her offer. If a group of offers are all accepted as primary subject to lender approval, each individual buyer and agent may also believe that their offer is primary. At minimum, all buyers must clearly understand that there is a “pool” of primary offers and the fact that any particular offer is accepted as primary means nothing. There is no advantage because they are all similarly positioned. It would be prudent to alert all parties, in writing, that there are multiple accepted offers with the same bank approval contingency. Although highly improbable, a bank could approve more than one offer. In that instance the seller would be obligated to sell the property to more than one buyer. Accepting all of the offers as primary may also place the seller at risk for a breach of contract claim. Each of the offers is accepted with the parties agreeing to act in good faith and with due diligence to complete the terms of the contract. Any one of the primary buyers could allege that the seller cannot in good faith attempt to negotiate a short sale to meet the terms of their contract given there are multiple primary offers.

march 2010

legal

Out of the Pan and into the Fire: When Foreclosure Avoidance Turns into Fraud

By tracy rucka

Sadly, REALTORS® are familiar with the mortgage fraud schemes that arose out of the demand for housing in the last decade. Buyers and industry professionals used dishonest means to obtain funds for the purchase of housing that buyers really could not afford. Now, a dramatic reversal has occurred and the focus of fraud has shifted: homeowners attempting to get out of housing they can no longer afford fall prey to scam artists promising relief from foreclosure. Some buyers even cook up fraudulent schemes of their own to escape from the impossible burden of their mortgages. Scams and schemes are being reported at an alarming frequency. Potential victims of fraud are not only your neighbors or clients who are facing foreclosure. The negative impacts of fraud extend into the neighborhoods; property values decrease, owner-occupied housing diminishes and the number of abandoned and vacant properties rises. The following are brief illustrations of some schemes that are being used to defraud homeowners, lien holders, brokers and investors.

SCHEME ONE: “Let us renegotiate your loan.” A consultant contacts a homeowner facing foreclosure and offers to renegotiate the mortgage loan on the home with the lender. The appreciative homeowner pays a large upfront fee to the consultant, sometimes paying out the last few hundred dollars in the homeowner’s savings. The unscrupulous consultant pockets the fee but does little or nothing to renegotiate the loan. Assuming the consultant is acting on the homeowner’s behalf, the homeowner stops communicating with the lender – as the consultant had directed – and is surprised when the foreclosure proceeds. The homeowner now has little, if any, time to try a short sale, has lost the fee paid to the consultant and faces a larger delinquency.

wisconsin real estate magazine

march 2010

Avoid the Scam: Homeowners should avoid consultants who initiate contact. Homeowners should always continue to communicate with the lender, open all mail and correspondence, and respond in a timely manner. In Wisconsin, legitimate mortgage foreclosure consultants are required to enter into a written contract with the homeowner explaining the exact nature of the consultant’s services and the total amount of compensation. The consultant cannot be paid any upfront fees; a consultant can only take money once the services are performed. These are just some of the safeguards put into place when Wis. Stat. § 846.45 was adopted. Legitimate foreclosure consultants can be found by contacting government agencies and nonprofit organizations. More information about foreclosure consultants is available in the June 2009 Legal Update, “Mortgage Foreclosure Scams,” at www.wra.org/LU0906.

SCHEME TWO: “We will negotiate a short sale and buy your house.” A “middleman fraud” scheme victimizes both the homeowner and the lender. The scheme starts when the seller is approached by the scam artist acting as a buyer. The buyer/middleman offers to negotiate a short sale with the lender on behalf of the seller so the scammer can buy the house. The seller enters into a contract with the buyer/middleman (frequently an option) at a low price and the buyer/middleman works with the lender to structure a short sale. Meanwhile the middleman recruits a new buyer to purchase the property at a much higher price, often with simultaneous closings. According to the FBI, two Connecticut real estate agents were indicted for their participation in this type of short sale mortgage fraud scheme. news.wra.org

Although most short sale transactions are legitimate, in these cases the brokers allegedly defrauded the lenders of the proceeds due on the deals. The real estate licensees allegedly knew that the short sale buyers were not the end buyers and that the end buyers had executed offers at legitimate purchase prices with the middleman. These real estate licensees face maximum penalties of imprisonment of 30 years and fines of up to $1 million for each count. For more information, visit http://newhaven.fbi. gov/dojpressrel/2009/nh100809.htm.

Another variation of the equity skimming scam is when homeowners are contacted by someone offering to work on their behalf in a sale, rental and buy back scenario, sometimes offering to be a power of attorney. The scammer uses the power of attorney to transfer title into a trust or to a third party, takes out a new or second mortgage, and then disappears with the proceeds.

Avoid the Scam:

Homeowners must always know what they are signing! Homeowners in trouble can negotiate with the lender for lower mortgage payments for a period of time or ask the lender for forbearance or other loan modifications. Forbearance is an agreement to temporarily let the homeowner pay less than the full amount of the mortgage payment, or pay nothing at all, during the forbearance period. Mortgage companies may consider forbearance when the owner can show that funds from a bonus, tax refund or other source will bring the mortgage current at a specific time in the future.

Be wary when a party that has a vested interest in the home is negotiating with the lender. Having independent legal counsel work with the lender to accomplish the short sale protects the homeowner’s interests. Also, option contracts are risky for a homeowner. An option may be exercised at the will of the middleman. If the middleman cannot find an end buyer or will not make enough money on the scheme, he or she can walk away from the option leaving the homeowner with only the option fee paid, if any, lost time and no buyer. Wisconsin real estate licensees have disclosure obligations to secured lenders. According to Wis. Admin. Code § RL 24.07(4), “a licensee, when engaging in real estate practice, who becomes aware of the fact that a party to the transaction has not disclosed that party’s entire agreement regarding the transaction to that party’s secured lender, shall disclose this fact, in writing and in a timely manner, to the party’s secured lender.” If a licensee knows the buyer or seller has entered into a side deal relating to the property (like a middleman fraud deal), the licensee must disclose this to the lender.

SCHEME THREE: “Sell it to a friend.” The homeowner/borrower finds a person (who is in on the fraud) to act as the buyer to make a low offer on the home. The lender, unaware of the relationship between the buyer and seller, approves a short sale at the artificially low price. The homeowner remains in the property and later buys back the house after securing a loan for a lower amount from a different lender. Avoid the Scam: Lenders have become wise to this scam and often require that all short sale transactions are arm’s length deals. Some lenders are requiring the parties to sign affidavits to that effect and may investigate the relationship between the parties. If caught, the parties could be sued for defrauding the lender. Friends don’t let friends drive drunk or buy out their interest in real estate.

SCHEME FOUR: “We’ll buy your home now; you rent it and buy it back later.” There are several variations of buy and rent back arrangements. One involves equity skimming from a homeowner who has occupied the property, paid the mortgage for years and built up some equity in the home, but who can no longer pay the mortgage. Such homeowners typically did not buy in the recent hot real estate market so they have equity in the home. Because the homeowner is in financial distress and cannot make the mortgage payments, the buyer offers to buy the home and lease the home back to the seller at a low rent. The fraudster says he will sell the property back when the homeowner gets back on his feet. The owner signs a deed to the home and the fraudster takes out mortgages on the property, thereby skimming the equity. Sometimes unsophisticated homeowners believe they are getting a loan from the fraudster, but they are really signing over title to the property. wisconsin real estate magazine

march 2010

Avoid the Scam:

More strategies for assisting distressed homeowners are offered in the January 2007 Legal Update, “Avoiding Foreclosure,” at www.wra.org/ LU0701, and the March 2009 Legal Update, “Working with Distressed Sellers,” at www.wra.org/LU0903.

SCHEME FIVE: “Buy and bail.” The usual victim of this scam is a homeowner who has negative equity in the home because of decreasing home values in the market or because the homeowner borrowed too much; the loan(s) greatly exceed(s) the property’s value. Before foreclosure begins, the homeowner makes an offer on a lower-priced home. When applying for the new loan, the homeowner presents a falsified lease of the current house in order to qualify for the new home loan. The new lender funds the new loan, and the owner moves into the new home and walks away from the original home, allowing it to go into foreclosure. Because of the timing, the buyers are able to avoid having the foreclosure show on their credit report, so they are not prevented from acquiring the new home. Both lenders are defrauded. An unknowing tenant moves into the first home and is quickly served with notice of the foreclosure. Avoid the Scam: Homeowners should refer to the terms and conditions of their mortgage before renting property. It is not nice to fool Mother Nature, and it is a federal crime to falsify loan application documents. Truthful completion of forms, arm’s length transactions and transparency of all aspects of the deal benefit the buyer, seller, lender and REALTOR®. Homeowners who believe they have been a victim of loan modification or foreclosure rescue fraud should file a complaint with the Wisconsin Department of Agriculture, Trade and Consumer Protection and the Wisconsin Department of Financial Institutions at: Department of Agriculture, Trade and Consumer Protection Consumer Protection Hotline: 1-800-422-7128 File your complaint online at www.datcp.state.wi.us/cp/consumerinfo/cp/ complaint-form/CPComplaintForm.jsp. Department of Financial Institutions 608-261-9555 File your complaint online at www.wdfi.org/contact_us/ComplaintDefault. htm. Tracy Rucka is Director of Professional Standards and Practices for the WRA.

NAR’s Short Sales & Foreclosure Resource Certification

Seller Solutions · Buyer Opportunities · Real Estate Recovery Short sales and foreclosures are quickly becoming the new “traditional” real estate transaction. Learning the skills necessary to help buyers and sellers navigate the distressed property market is critical for today’s agents. We understand the complexity of these transactions, which is why the National Association of REALTORS® (NAR) developed the Short Sales and Foreclosure Resource (SFR) certification program to help REALTORS® like you gain confidence towards becoming the short sales and foreclosure resource for your community. NAR has expanded educational options for students working towards the SFR certification by agreeing accept either the CRS 111 course or REBAC’s Short Sales and Foreclosures course to fulfill the core course educational requirement for the certification. Find out how to become SFR certified at www.realtorSFR.org.

NATIONAL ASSOC IATION OF REALTORS ®

The Voi ce for Real Estate®

Standardized Short Sales

legal

By debbi conrad

Throughout 2009, the National Association of REALTORS® urged the U.S. Treasury Department, the Federal Housing Finance Agency, Fannie Mae and Freddie Mac to improve the short sales process. The NAR’s persistence was rewarded on November 30, 2009, when the Obama Administration released guidelines and uniform forms for its Home Affordable Foreclosure Alternatives Program (HAFA). Mortgage loan servicers that are in the Home Affordable Modification Program (HAMP) must follow the HAFA procedures and policies that go into effect on April 5, 2010. HAFA brings what REALTORS® have been asking for when it comes to short sales: a uniform process, uniform forms and perhaps most importantly, firm deadlines.

Financial Incentives HAFA provides financial incentives for participation in short sales: •

$1,500 for seller relocation assistance

•

$1,000 for servicers to cover administrative and processing costs

•

Up to a $1,000 maximum to investors for allowing a total of up to $3,000 in short sale proceeds to be paid to second lien holders

Uniform Short Sale Agreement HAFA allows sellers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds). If a borrower/seller expresses interest in a short sale to his or her loan servicer and is eligible (per the basic HAMP criteria at http:// makinghomeaffordable.gov/), the seller will receive a standardized Short Sale Agreement (SSA) that will give the seller the list price or the net sales proceeds amount that will be acceptable to the servicer and set a maximum limit on closing costs. The seller and the listing agent will know what short sale terms are acceptable to the loan servicer in advance. In order to accept the SSA proposed by the servicer, the seller and the listing broker must sign and return the SSA to the servicer within 14 days along with information about other liens and a copy of the listing agreement. The SSA indicates that the servicer will not reduce the real estate commission agreed upon in the listing agreement (up to 6 percent). Time may be saved because the servicer uses any borrower financial and hardship information already collected under HAMP. The SSA must give the seller an initial period of 120 days to sell the house, although extensions are permitted up to a total of 12 months. Standardized Short Sales ... continued on page 16

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legal

Standardized Short Sales ... continued from page 15

Request for Approval of Short Sale If the seller accepts an offer that meets the SSA requirements, the seller has three business days in which to submit a Request for Approval of Short Sale (RASS) to the servicer, along with a copy of the offer to purchase and all addenda, and the buyer’s documentation of funds or pre-approval/ commitment letter on letterhead from a lender. The deal must be at “arms length.” Sellers cannot sell the property to a relative or anyone else with whom they have a close personal or business relationship. Within 10 business days of receipt of the RASS and all required attachments, the servicer must indicate its approval or disapproval of the proposed sale by signing the appropriate section of the RASS and mailing it to the seller. The servicer must approve a RASS if the net sale proceeds available for payment to the servicer equal or exceed the minimum net determined by the servicer prior to the execution of the SSA and all other sales terms and conditions in the SSA have been met. The servicer may require the closing to take place within a reasonable period after approving the RASS, but not sooner than 45 days from the date of the contract unless the seller agrees otherwise. The servicer must indicate its reasons if the RASS is not approved.

of Wisconsin

Deficiency Forgiveness The servicer must release its first mortgage lien within 10 business days (or earlier if required by state or local law) after receipt of the sales proceeds from a short sale. Investors must waive their rights to seek deficiency judgments and may not require a promissory note for any deficiency. In other words, the seller must be fully released from future liability for the first mortgage debt and, if the subordinate lien holder receives an incentive under HAFA, that debt as well (no cash contribution, promissory note or deficiency judgment is allowed). The amount of debt forgiven, however, might be treated as income for tax purposes if the Mortgage Forgiveness Debt Relief Act of 2007, which is in effect through the end of 2012, does not apply. Visit www.irs.gov/irs/article/0,,id=179073,00.html for more information from the Internal Revenue Service. The HAFA guidelines do not apply to mortgages that are owned or guaranteed by Fannie Mae or Freddie Mac, or to Federal Housing Administration or Veteran loans. Fannie Mae and Freddie Mac, however, are developing programs based on the federal HAFA standards that hopefully will be released soon. HAFA shows great promise to speed up short sales and increase the number of successful closings as long as the servicers and investors understand they are better off with a short sale instead of a foreclosure. For additional information and resources, visit www.realtor.org/realtors/ basics_short_sales?wt.mc_id=rd0041 and www.hmpadmin.com/portal/ programs/foreclosure_alternatives.html, and look for a detailed report in the March 2010 Legal Update. Debbi Conrad is Senior Attorney and Director of Legal Affairs for the WRA.

wisconsin real estate magazine

march 2010

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news.wra.org

Four Ways to Complete Your Mandatory Continuing Education

education

www.wra.org/cecourse LIVE The Wisconsin REALTORS® Association is the top provider of real estate education in Wisconsin. Complete your 2009-2010 Continuing Education requirements by attending one of our live courses. The WRA hosts Continuing Education in all corners of the state. Course dates and locations vary. Visit www. wra.org/cecourse for a complete listing of course options.

THREE DISTANCE LEARNING OPTIONS If attending a live course does not fit your schedule, complete your CE through the WRA’s Continuing Education Distance Learning program. Courses are available in three formats: On Demand, DVD and self-study booklets.

On Demand Continuing Education – On Your Schedule! Distance Learning On Demand gives you the autonomy to take courses on your schedule – at your own pace – anytime – anywhere – from your own computer. Using a Web browser, watch “on-demand” education from the comfort of your own home, office or wherever there is a broadband connection. Best of all, there’s no need to travel or experience sales downtime to meet your CE requirements.

$27/members | $35/non-members

Self Study Booklet With the start of the 2009-2010 biennium, all licensees must complete six Department of Regulation and Licensingapproved courses for a total of 18 hours before December 14, 2010. Licensees must complete four mandatory courses and two electives from the DRL-approved electives list.

These comprehensive, preparatory study guides allow you to study your CE curriculum at your own pace and then take the corresponding exam on the Internet when you are ready. Courses 1, 2, 3, 4 and Elective A and C are available in this handy format. It’s easy to use, and covers the material required to pass the exam.

$27/members | $35/non-members

Mandatory Courses

DVD

(All licensees must take courses 1-4.)

Complete your CE requirements in the comfort of your home with the WRA’s DVD distance learning

Course 1 - Listing Contracts

education option. This program involves watching a DVD and taking the corresponding exam on the Internet. All the 2009-2010 CE courses are available through this program. Simply watch a video, take

Course 2 - Offer to Purchase

an online exam, score and print your certificate.

Course 3 - New Developments

$27/members | $35/non-members

Course 4 - Buyer Agency Agreements

Save Even More with Four-Pack and Six-Pack Discounts (On Demand Only)

Elective Topics (Licensees must take two of the following.)

Save up to 22 percent on CE costs by purchasing “on demand” education as a six-pack or four-pack. Elective A - Risk Reduction

Six-Pack Discount

Elective B - 1031 Exchanges and Exchange Opportunities Elective C - Condominiums

The six-pack option allows you to take the four mandatory classes and two elective courses of your choice. Get the courses and electives for only $126/members and $180/non-members.

Elective D - Landlord/Tenant and Property Management

Four-Pack Discount

Elective E - Financing the Sale

Choose any combination of the mandatory and elective courses for only $92/members and $128/nonmembers. Pricing applies to residential Continuing Education On Demand ONLY. Package pricing is not available in other residential formats or commercial courses.

Elective F - Broker Supervision wisconsin real estate magazine

march 2009

education

2009-2010 Commercial CE

Last Call!

March 10, 17 & 23, 2010 Appleton (co-sponsored with REALTORS® Association of Northeast Wisconsin) Tired of taking continuing education classes that focus on residential issues only? Then the WRA commercial CE courses are exactly what you need. The WRA has created commercial-centric courses specifically for those who practice in the commercial real estate world. Commercial brokers and agents: Complete your required 18 hours of continuing education in three days. Visit: wra.org/CommercialCE

conference

March 10-11, 2010

Ho Chunk Casino & Convention Center - Wisconsin Dells www.wra.org/AppConference

ABR Course March 25-26, 2010

Sales Pre-License Course April 5-8; 12-15, 2010

Wisconsin Dells

WRA Headquarters - Madison

The Accredited Buyer Representative (ABR) designation is the benchmark of excellence in buyer representation. The overall goals of the ABR Designation courses are to educate and prepare buyer’s representatives to provide the kind of service and fidelity to buyers that seller have always enjoyed, and to offer methods for building your buyer representation business. Visit: www.wra.org/ABRcourses

To obtain a real estate license in the state of Wisconsin, you must first complete 72 hours of approved education courses such as our sales pre-licensing course. Second, you must pass a stateadministered exam. The WRA is offering an eight-day accelerated, 72-hour sales program on April 5-8 and 12-15, 2010 in Madison. For more information, visit: www.wra.org/SalesPL

GREEN (2-Day) Course April 7-8, 2010

GREEN Residential Elective April 9, 2010

Brookfield

NAR’s GREEN designation gives you the tools you need to guide clients through buying, selling, or building in the sustainable marketplace. You will learn how to explain to your clients what makes a home, building or property green; list and market green properties; determine the energy efficiency of a property, and more. For more information, visit: www.wra.org/Green

Short Sales & Foreclosures April 23, 2010 WRA Headquarters - Madison Working with buyers and sellers of distressed properties can be frustrating and time consuming, but also rewarding. This CRS course provides you with practical approaches to the pre-foreclosure and foreclosure processes that will result in the successful disposition of these properties. Learn the intricacies of the short sale and foreclosure processes. Co-Sponsored with Wisconsin CRS Chapter, Wisconsin CRS Chapter Members receive a $20 discount. Visit: www.wra.org/CRSinfo

appraisal

wisconsin real estate magazine

march 2009

NAR’s GREEN Designation Residential Elective Course gives you the knowledge and awareness of green building principles applied in residences so that you can guide buyer-clients in purchasing and retrofitting green homes as well as help sellers by listing and marketing green properties. For more information, visit: www.wra.org/Green

QuickStart On Demand The QuickStart program assists agents in learning the business of real estate. Courses focus on contract issues, agency relationships and negotiating strategies. The program is designed to help agents become confident in their practice as well as focused on their personal business plan. Completion of the QuickStart program (four days) and passing the exams fulfills the requirements for GRI Course 1. Visit: www.wra.org/QuickStartondemand

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Course Schedule

Visit wra.org/CourseSchedule for full schedule.

Sales & Marketing Management Date Course Location

*Plus books ** Early registration applies two weeks prior to the start of the course. ***Wisconsin CRS Chapter Members receive a $20 discount.

March 25-26, 2010 April 7-8, 2010 April 9, 2010 April 23, 2010 # Appraiser section members receive a discount.

Early Reg.** $Reg.

ABR Course Wisconsin Dells 260 270 GREEN (2-day) Brookfield 285 295 1-day GREEN Residential Elective Brookfield 130 140 ***Short Sales & Foreclosures: Protecting Madison 145 155 Your Clients Interests (CRS Core 1-day class ) Fulfills core education for NAR new Short Sales and Foreclosure Resource (SFR) certification

Conference and Conventions Date Event Location March 10-11, 2010 Appraisal Conference Wisconsin Dells - Ho-Chunk Casino March 10, 2010 2010-2010 7-Hour National USPAP Update (includes USPAP book) or Current Trends – 7 hours March 11, 2010 Appraising the FHA Way – 7 hours or Technology Resources 3.5 hours Appraising in a Down Market – 3.5 hours

Real Estate Continuing Education

Date

March 10 2010 March 10, 2010 March 11, 2010 March 11, 2010 March 11, 2010 March 15, 2010 March 16, 2010 March 17, 2010 March 16-17, 2010 March 17 2010 March 17, 2010 March 17, 2010 March 18, 2010 March 18, 2010 March 18, 2010 March 22, 2010 March 23, 2010 March 23, 2010 March 24, 2010 March 24 2010 March 24, 2010 March 24, 2010 March 24, 2010 March 25, 2010 March 25, 2010 March 25, 2010 April 8, 2010 Pre-License * Plus books Now available

Course 2009-10 Courses 1 & 2 2009-10 Courses 1 & 2 (Commercial) 2009-10 Courses 3 & 4 2009-10 Courses 1 & 2 2009-10 Elective A & C 2009-10 Course 1 – (DVD) 2009-10 Electives C & E 2009-10 Course 2 (DVD) 2009-10 Courses 1 & 2; 3&4 2009-10 Courses 3 & 4 2009-10 Courses 3 & 4 (Commercial) 2009-10 Courses 3 & 4 2009-10 Courses 3 & 4(DVD) 2009-10 Courses 3 & 4 2009-10 Course 3 (DVD) 2009-10 Course 4 (DVD) 2009-10 Elective B & E (Commercial) 2009-10 Courses 1 & 2 2009-10 Courses 3 & 4 2009-10 Electives A & C 2009-10 Elective A (DVD) 2009-10 Elective D & E 2009-10 Electives A & C(DVD) 2009-10 Elective A & E 2009-10 Electives C & E 2009-10 Elective C (DVD) 2009-10 Courses 3 & 4

QuickStart

290 315 150 175

Location 8:30 – 4:30 Grafton 8:30 – 4:30 Appleton

262-375-4730 800-279-1972 $30/m; $35/nm

8:30 – 4:30 Brookfield 8:30 – 4:30 Appleton 8:30 – 4:30 Friendship 1:00 – 4:30 Racine 8:30 – 4:30 Green Bay 1:00 – 4:30 Racine 8:30 – 4:30 Merrill 8:30 – 4:30 Grafton 8:30 – 4:30 Appleton

800-279-1972 $27/m; $35/nm 920-739-9108 800-236-4625, x113 262-637-4426 920-739-9108 262-637-4426 715-627-4885 262-375-4730 800-279-1972 $30/m; $35/nm

8:30 – 4:30 Madison 8:30 – 4:30 Kenosha 8:30 – 4:30 Appleton 1:00 – 4:30 Racine 1:00 – 4:30 Racine 8:30 – 4:30 Appleton

800-279-1972 $27/m; $35/nm 262-942-0592 920-739-9108 262-637-4426 262-637-4426 800-279-1972 $30/m; $35/nm

8:30 – 4:30 Duluth, MN 8:30 – 4:30 Duluth, MN 8:30 – 4:30 Grafton 1:00 – 4:30 Racine 8:30 – 4:30 Madison 8:30 – 4:30 Kenosha 8:30 – 4:30 Duluth, MN 8:30 – 4:30 Appleton 1:00 – 4:30 Racine 8:30 – 4:30 Sturgeon Bay

218-728-5676 218-728-5676 262-375-4730 262-637-4426 800-279-1972 $27/m; $35/nm 262-942-0592 218-728-5676 920-739-9108 262-637-4426 920-294-6850

Date Course Location

online!

ATD

April 5-8; 12-15, 2010 Sales Pre-License Course 8:00 - 5:00 Madison April 19-22, 2010 Broker Pre-License Course 8:00 - 5:00 Madison July 19-22;26-29, 2010 Sales Pre-License Course 8:00 - 5:00 Madison

Early Reg.** 325* 260* 325*

Regular Reg.

325* 280* 325*

sales training program

www.wra.org/QuickStartOnDemand

wisconsin real estate magazine

march 2010

product showcase Updated

Right Tools, Right Now

Designation Guide

Extended into 2010

A resource to reach your professional goals

The Right Tools, Right Now initiative is back in 2010 to help you and your business find continued success. In the coming year, you’ll find even more great free or at-cost offers, updates to existing NAR products and resources, and valuable tips on how to make the most of Right Tools, Right Now. If you haven’t taken advantage of Right Tools, Right Now yet, visit www.realtor. org/righttools to find out more. New offers are added every month, so be sure to check back regularly.

It’s three months into 2010…where are you in reaching your goals? Do you need help in building your buyer representation business? Have you broadened your knowledge of green principles or short sales and foreclosures? Whether new in the industry or a veteran, we can all use additional training or a refresher to get us on track to reaching our goals. The key is knowing what to improve upon and how to do it.

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Convention & Events Research Tools

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Technology Services

2010

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SRA

AMO

ABR A

SIOR

GAA

CRS

RAA ARM

C-CREC

S SRE

RSPS

MAI

PMN

CCIM

GREE

CLHMS

CRS

ACoM SFR

CRE

ACoM SRES

PMN

CRP

CPM

wisconsin real estate magazine

PMN

SIOR

For more information on the products, publications, services and enhancements available through the “Right Tools, Right Now” initiative, visit www.REALTOR.org/RightTools.

CRE

Wisconsin REALTORS® Association

Among the many useful tools available to REALTORS® at no cost are eProduct versions of the 2007 and 2008 NAR Profile of Home Buyers and Sellers and the 2007 Profile of Buyer’s Home Feature Preferences, as well as valuable information on short sales, foreclosures, business tips and marketing.

CPM

GAA

MAI

“NAR is the most trusted resource for real estate information, and we want to ensure that REALTORS® have easy access to these powerful resources in today’s market,” said NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth. “Every NAR division is contributing to this initiative so that REALTORS® can better service their clients and enhance their business.” More than 300 resources are being offered through “Right Tools, Right Now.” REALTORS® can take advantage of education and online training opportunities, access NAR publications and research, attend conventions and events, and obtain technology services for free or at a discount. Local and state associations and boards also have access to resources and materials through the initiative.

CBR

GRI GREE

designation GRI guide

To help REALTORS® meet their clients’ needs and succeed in today’s economic climate, the National Association of REALTORS® is offering its roster of business-building resources to members for free or at significantly reduced costs through the association’s new “Right Tools, Right Now” initiative.

AMO

CCIM C-CREC CLHMS

CIPS

ALC

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ABR

Online Training

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ABR

Educational Tools & Publications

CRB

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ABR

ALC

SFR

The “Right Tools Right Now” program includes offers and information in the following categories:

If attending class and working toward a designation is the answer, the WRA’s Designation Guide is a perfect time-saving reference tool for you. The Guide summarizes 27 designations. It provides the benefits of the designation, membership dues, application fees, estimated cost of courses, exam requirements, delivery options available, and length to complete the designation.

NAR members can continue to take advantage of hundreds of NAR products, publications, services and enhancements for free or at-cost.

CIPS

GRI RSPS

CRS

ABRM

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ABR

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CCIM

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CRP

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RAA

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ABRM

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C-CREC

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CRS

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RSPS

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ACoM

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SFR

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ALC

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GREEN

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SIOR

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GRI

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SRA

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ARM

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CRB

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MAI

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SRES

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CBR

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CRE

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PMN

The Designation Guide is available for purchase from the WRA for $7.00 (includes shipping and tax) or for download through the myWRA Electronic Resources section of www.wra.org. news.wra.org

Converting the FSBO

Realtor® sales tip

By marcus wally

Today’s market environment across the U.S. is ripe for gaining FSBO listings. A greater number of sellers understand the value of professional representation. This is understandable given that the housing market has been challenged for more than two years and inventory of homes for sale reached its highest point since the early 1980s.

work to build a relationship in order to win over the FSBO listing. When the marketplace is active and everything seems to be selling, FSBO listings abound, and FSBO owners achieve a reasonable sales success rate even without the services of an agent. But their chances are slim in today’s market.

FSBOs are simply too tempting for REALTORS® not to get involved. It does not make sense to ignore this great market segment. Unfortunately, most agents do.

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I recently began a dialog with a neighbor who is trying to sell his property by himself. My first call was an introductory one just to introduce myself. Agents should avoid coming on too strong and trying to get the listing right away. I suggest using the soft approach – expressing interest to learn about the property. Take time to build a relationship and stay in good contact (persistence is key) so that you are always TOP OF MIND!

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Did not want to pay commission fee: 49%

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Sold it to a relative, friend or neighbor: 26%

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Buyers contacted seller directly: 11%

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Agent was unable to sell home: 7%

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Did not want to deal with an agent: 4%

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Seller has real estate license: 3%

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Couldn’t find agent to handle transaction: <1%

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Other: <1%

FSBO owners are easy to find and reach. One of the most difficult steps in the sales process is locating prospects in need of your product or service. With FSBOs, like expireds, you know who your prospects are, and you know how to get in touch with them. Reaching FSBOs is easier than reaching expireds because they want to be found.

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The vast majority of FSBOs fail to sell on their own. Even in a robust market, fewer than 30 percent of FSBOs sell themselves. This means more than 70 percent of the owners, if they want to sell, will eventually enlist the services of a real estate agent.

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Once approached by a REALTOR®, a FSBO owner will usually try for at least a few additional weeks to sell the property before giving the listing to you. At the beginning of the process, sellers usually believes they can do our job, and only time will correct that thinking. FSBO owners may have an agent “in the wings” who they are considering signing with if they have no success on their own. Take a lower-key approach and wisconsin real estate magazine

FSBO owners are viable client targets. Unlike other prospective clients, you do not have to wonder whether they own their home, whether they are serious about selling it and whether or not they have the authority and ability to conduct the deal.

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Knowing why consumers try to sell their properties themselves is a key part in understanding and formulating the correct approach to capture the business. Below are the top reasons why sellers choose to try the FSBO approach, according to the National Association of REALTORS®. •

FSBO owners are qualified, motivated sellers. Clearly, they want to sell; but likely, they do not realize the long odds of the game they are playing.

FSBO sellers often net lower prices than those achieved by agent-represented sellers. Among the 30 percent of FSBO homes that result in a sale, most are priced at or below fair market value. In fact, to FSBO sellers, price is the primary marketing ammunition. There is no reason for a buyer to take the additional risk of working with a FSBO except that they are trying to acquire a home for less money than they would spend in a traditional transaction. The problem is that low price is exactly the opposite of what the homeowner is trying to achieve.

More than nine out of 10 serious FSBOs end up as

march 2010

agent listings within a reasonable period of time – usually four to five weeks. Originally, owners set out to sell their own homes to “save” the agent commission. They view the commission that an agent would earn as too much pay for such an “easy job” and as money that they could put toward an additional down payment or a get-out-of-debt plan. They think, “How hard can it be? We’ll probably meet a few agents along the way, so we can always change our minds.” And most do. After a month of the hassle, time, energy, emotion and stress of trying to sell their own home –running ads, fielding phone calls, holding open houses and dealing with the risks of showing parades of people through their home – 90 percent of homeowners rethink their decision. Fortunately for agents, selling a home is not easy. When a FSBO goes on the market, usually only one of the owners is leading the charge. One half of the couple is fixated on saving the commission and the other relents for a specific period of time. As part of their compromise, they agree to give the FSBO approach a try for 30 to 45 days, after which time they agree to list their home with an agent. More often than not, the consenting partner gets frustrated with the whole process long before the FSBO test period elapses. It is for this reason – the difficult and frustrating nature of a FSBO – that the odds of FSBO conversions are heavily in your favor. Consumers are smart. In more difficult times for housing and the economy, a greater number of people are seeking professional real estate advice. Consumers are also greatly benefiting in the end. I am making headway with the family I am chasing, and just yesterday was told that they will list with me when they are ready. Converting a FSBO is a wonderful way to increase your bottom line and help families accomplish their goals. So go out there and start converting! 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 904-6691081 or by e-mail at marcuswally@comcast.net.

public affairs

WRA Seeks Changes to Commercial Lien Law By tom larson

The Wisconsin REALTORS® Association is working with the Commercial Association of REALTORS® of Wisconsin to make several changes to our state’s Commercial Lien Law to increase its effectiveness and make it more reflective of how things actually work in real estate practice.

Background Wisconsin’s Commercial Lien Law authorizes real estate brokers in a commercial real estate transaction to place a lien on a property to ensure payment of the commission in both purchase/sale and lease transactions. While the requirements for filing a lien in purchase/sale transactions have some similarities to those in lease transactions, they also have some significant differences.

Purchase and Sale Transactions Current Law – In a purchase/sale transaction, a real estate broker is authorized to place a lien on property prior to closing to ensure payment of the commission at closing. In other words, this law provides real estate brokers with an insurance policy to make sure they receive any commission owed at closing. To perfect the lien (make the lien legally enforceable) in a purchase/sale transaction, the broker must file two separate documents with the register of deeds for the county in which the property is located: 1.

an intent of a possible lien, which must be filed 30 days prior to closing; and

the actual lien, which must be filed three days before closing.

If the broker fails to file the necessary paperwork and does not get paid at

wisconsin real estate magazine

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closing, the broker can pursue a breach of contract claim. However, if the breach of contract claim is against the seller, the seller no longer owns the property and the broker will have to find some other means through which to enforce a favorable judgment from a court. The Problem – Wisconsin’s Commercial Lien Law is the only lien law that requires the filing of an “intent of a possible lien” 30 days prior to the time payment of a commission or other compensation is owed. This requirement has made the law ineffective from a practical standpoint because: a.

brokers are required to give notice of intent so early, in some cases before they sign the lease listing or management agreement (Wis. Stat. § 779.32(3)(c)), and in other cases just too far in advance (Wis. Stat. § 779.32(3)(a) & (b));

commercial brokers generally are unaware that their client will not be paying them until right before or at closing; and

filing such a notice of potential lien could jeopardize the transaction or a broker’s relationship with the client.

The Solution – To address this problem, the proposed changes include the following: •

Replace the “Notice of Intent of a Possible Lien” requirement with a “Notice of Interest” requirement. Like the “Notice of Intent of a Possible Lien,” a “Notice of Interest” must be filed with the register of deeds at least 30 days prior to a closing. The “Notice of Interest” will be valid for up to 24 months from the date of filing.

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To make sure the property owner is aware of the broker’s lien rights, require all commercial listing contracts, buyer agency agreements

news.wra.org

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and tenant representation agreements related to commercial real estate to include a disclosure statement to inform the consumer that brokers have the authority to file a lien if the commission is not paid.

before the parties enter into the lease. This requirement can strain a broker’s relationship with a client, suggesting that the broker does not trust the client to honor his/her financial obligations under the lease or management agreement.

Finally, authorize the Broker to file a lien at any time up to 30 days after the date of closing.

The Solution •

Replace the “Notice of Intent of a Possible Lien” requirement” with a “Notice of Interest” requirement. Like the “Notice of Intent of a Possible Lien,” a “Notice of Interest” must be filed with the register of deeds at least 30 days prior to a closing. The “Notice of Interest” will be valid for up to 24 months from the date of filing.

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To make sure the property owner is aware of the broker’s lien rights, require all commercial listing contracts, buyer agency agreements and tenant representation agreements related to commercial real estate to include a disclosure statement to inform the consumer that brokers have the authority to file a lien if the commission is not paid.

Lease and Management Transactions Current Law – In a lease transaction, a real estate broker who is not paid a commission that is owed may place a lien on a property AFTER the lease agreement is signed or the commission or fee is owed. (See Wis. Stat. §§ 779.32(2)(c) and (4)(a)2.) This authority to place a lien on the property after a commission is owed is similar to the authority provided under Wisconsin’s contractor lien law. To perfect the lien in a lease transaction, the broker must file two separate documents with the register of deeds for the county in which the property is located: 1. 2.

a notice of intent to file a lien before the date that the lease or management agreement is entered into; and the actual lien, which must be filed 90 days after the later of the following: a.

the date the broker earns a commission or compensations, or

the date the broker receives notice that he/she has earned a commission or compensation.

The Problem – As is the case with purchase and sale transactions, the “notice of intent” for lease and management transactions must be filed

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Status For the past 12 months, the WRA and CARW have been working with legislators and other interested parties to address the problems with the current lien law. We believe that we have come up with workable solutions, and will work to introduce and pass this legislation into law during the next several months. For more information on the proposed changes to Wisconsin’s Commercial Lien Law, please contact Tom Larson (tlarson@wra.org) at 608-240-8254. Tom Larson is Director of Regulatory and Legislative Affairs for the WRA.

public affairs

The Home Stretch Legislature Enters Final Months of Session with Much to Do By michael theo

The 2009-10 legislative session, which began over a year ago, is set to adjourn at the end of April. With just a few months left before legislators leave town – most of them to run for re-election in November – there is a fair amount of unfinished business to attend to in Madison. Every lawmaker and interest group has a list of what laws should and should not pass before the Legislature adjourns “sine die” (i.e., indefinitely, with no set future date to return). For the housing industry, I guess you could say we are in the “home stretch.” The Wisconsin REALTORS® Association is currently monitoring nearly 200 pieces of real estate-related legislation – a number that will surely grow all the way to adjournment. Here is a sample of just some of the WRA’s priorities for the remainder of this legislative session.

Uniform Taxation Clause The state constitution requires property taxes to be applied uniformly to all property unless a specific exemption is provided. Governor Doyle and some lawmakers are proposing to change the constitution to allow for targeted property tax relief. Specific legislation has been introduced to exempt the first $60,000 of value of a primary residence from the school property tax. Because the legislation does not specify how to replace the $750 million loss in school aids that would result, the bill will shift property taxes to homes valued above $333,405 as well as all other

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property including second homes as well as commercial, manufacturing, multifamily, undeveloped and personal property. The average property tax relief for homes under $333,405 would be 3 percent, while the tax increase to other properties would range from 9 percent to 13 percent. That is not tax relief or reform; that is tax shifting. We oppose.

Commercial Liens Under current law, brokers can place a lien on commercial property prior to closing to ensure payment of a commission at closing. However, to perfect the lien and make it legally enforceable, the broker must file an intent of possible lien 30 days prior to closing and then file the actual lien three days before closing. This is the only lien law to require filing intent and, as such, the law is rarely used and thus ineffective. Legislation to fix this problem will be introduced soon that replaces the notice of intent of a possible lien with a notice of interest that is still filed 30 days in advance but is valid for up to 24 months. To ensure property owners are aware of the broker’s lien rights, all commercial listing contracts, buyer agency agreements and tenant representation agreements will include a disclosure statement to inform consumers of the broker’s authority to news.wra.org

file a lien if the commission is not paid. The bill also allows brokers to file a lien at any time up to 30 days after the date of closing. This legislation is about fairness and transparency. We support.

Appraiser Licensing AB 472 is intended to combat mortgage fraud and predatory lending by requiring credentialed appraisers for all mortgage and real estate transactions. However, as introduced, the bill would change current law to prohibit REALTORS® from providing opinions of value to private parties for purposes other than a real estate transaction or mortgage loan – such as opinions to consumers, banks, attorneys, etc., in divorce or estate proceedings, insurance matters, and other non-transactional situations where the private parties may not need or want a comprehensive appraisal. The Wisconsin REALTORS® Association supported an amendment in the state Assembly to keep current law and also require REALTORS® to disclose to consumers that their opinion of value is not an appraisal. This compromise preserves both the intent of the original legislation as well as the consumer’s right to choose between various value-setting services. We support the bill as amended.

New Farmland Conversion Penalties A new penalty for converting farmland to another use was inserted into the 2009-11 state budget. The WRA strongly opposed this change that went into effect January 1, 2010. The new penalty is assessed whenever land in a “farmland preservation zoning district” is rezoned out of the district. The penalty is the greater of three times the assessed value of the property or an amount specified by the county. If the county chooses to assess a higher penalty, they get to keep the additional revenue, thus giving counties a financial incentive to impose a higher penalty. This new law will decrease the value of farmland and increase the cost of development, thus destroying the critical balance between protecting farmland and residential and commercial development needs. We oppose this new law and support its repeal or delay.

Access to Property Tax Records Wisconsin’s existing open records law states that a municipality must provide property tax and other records to the public upon request and can only charge the actual cost of producing a public record. The law does not specify, however, what a private subcontractor who is maintaining public records for a government entity can charge or in what format the information must be provided. These two major loopholes were issues raised in a recent Wisconsin Supreme Court ruling (WIREdata Inc. v. Village of Sussex, et al). SB 426 and AB 638 have been introduced in the Legislature to address these issues. The legislation states that any subcontractor hired by a municipality to maintain public records is equally bound by the same cost restraints as the municipal government and can only charge the actual cost of producing a public record. Moreover, the legislation requires all public records to be reproduced in the same format as currently maintained by the keeper of such records, if so requested. The ability to obtain public records at a price and format requested is important to REALTORS®, local MLSs and any members of the public who use this data to gather important property information. We support.

wisconsin real estate magazine

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Conclusion These are just a few of the specific real estate-related issues that remain before the Legislature in these final few months of session. This sample does not include numerous administrative rules and issues pending before the state departments of Regulation and Licensing, Natural Resources, Commerce, Revenue, Transportation and Administration, to name a few. Over these final months of session, watch your e-mail for WRA Calls to Action as we ask for your help to educate lawmakers on these and other key issues of importance to REALTORS® and the homeowners, property owners and publics we serve. We will need your help in this important legislative “home stretch.” Michael Theo is Vice President of Legal and Public Affairs for the WRA.

public affairs

Wisconsin Sings the “Blues” By joe murray

As it stands today, Wisconsin is a very “blue” state. Democrats control the governor’s chair, both U.S. Senate seats, five of eight U.S. House seats and both houses of the Wisconsin Legislature. After 10 years of political success at the top of the ticket, Wisconsin Democrats own it all (almost). With the notable exception of Attorney General J.B. Van Hollen in 2006, Democrats have been on a roll in statewide races for a decade. Al Gore, John Kerry and Barack Obama all carried Wisconsin in presidential elections; Herb Kohl and Russ Feingold have cruised to re-election victories; and Jim Doyle defeated two Republicans (and Libertarian Ed Thompson) in two gubernatorial races. This may change a bit after the elections on November 2. It is still too early to make bold predictions on the outcome this year, but given the current political trends nationally and in Wisconsin, Republicans today have the upper hand in two out of three major statewide elections. A closer look at the numbers tells the story.

Governor For the first time since 1982, there is an open race for governor. Jim Doyle decided not to run for re-election to a third term and the open seat has drawn three “major” candidates: Milwaukee Mayor Tom Barrett on the Democratic side, and Milwaukee County Executive Scott Walker and home builder and former Congressman Mark Neumann on the Republican side. Polling in this race indicates a slight preference for the GOP at this point. A January 26 Rasmussen Reports survey of 500 likely voters in Wisconsin found both Walker and Neumann with leads over Barrett. Election 2010: Wisconsin Governor Mark Neumann (R) Tom Barrett (D) Other Not Sure

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42% 38% 7% 13%

Election 2010: Wisconsin Governor Scott Walker (R) Tom Barrett (D) Other Not sure

48% 38% 2% 12%

Given the outcome in three other gubernatorial races around the country since 2008, these numbers are not surprising. Swing state Virginia and blue states New Jersey and Massachusetts all fell to the GOP. If the economy continues to struggle and unemployment remains stubbornly high, Republicans could maintain their current advantage all the way to November.

U.S. Senate Democratic U.S. Senator Russ Feingold is up for re-election this year, and the first non-partisan statewide survey shows Feingold in a far more challenging position than his last election in 2004. A Rasmussen Reports phone survey of 500 likely voters, conducted on January 26, 2010, showed (non-candidate) former Governor Tommy Thompson ahead of Feingold in a hypothetical match-up. Election 2010: Wisconsin Senate Race Tommy Thompson (R) Russ Feingold (D) Other Not sure

47% 43% 6% 4%

Perhaps most concerning to Feingold is his falling job approval. At 55 percent in January 2009, his approval rating today is hovering around 46 percent. Incumbents with job approval numbers below 50 percent are generally considered vulnerable, and Feingold is suffering from voter dissatisfaction with high employment, a struggling economy, a very contentious news.wra.org

debate over health care reform and growing fear over historically large deficits. The fact that President Obama’s job approval rating in Wisconsin has fallen below 50 percent probably does not help Feingold either. The good news for Feingold is that he appears to be safe for now. Madison developer Terrence Wall and businessman David Westlake have officially announced their entry into the Senate race, but it remains to be seen if either candidate will gain traction with voters.

Attorney General Incumbent Republican Attorney General J.B. Van Hollen is running for re-election to a second term. Van Hollen’s Democratic opponent is former Department of Natural Resources Secretary Scott Hassett of Lake Mills. The race for Wisconsin Attorney General is getting far less attention than either the race for governor or U.S. Senate, but that will change over time. In his three years in office, Van Hollen has achieved the standard 50-percent

statewide name identification for someone in this position. Still, for many voters the attorney general remains slightly undefined. The Van Hollen vs. Hassett race should be a classic. Van Hollen is a former district attorney with lots of prosecutorial experience. Hassett is a trial attorney who specialized in civil and criminal litigation before his five-year run as DNR Secretary. A match up between a prosecutor and a trial attorney should offer voters a clear choice in November. There is no credible non-partisan polling available to get an idea of where the contest stands today, but given current political trends in favor of the GOP, Van Hollen has to be considered a strong favorite for re-election in November. Early 2010 fundraising numbers showed a significant advantage for Van Hollen – nearly three to one over Hassett.

is possible for the national and state trends to change, it is getting more difficult to predict anything other than a decent or very good election cycle for Republicans. It is somewhat surprising how fast things have changed for Democrats in Wisconsin. In 2006 and 2008, Democrats captured total control of state government for the first time since 1986, Barack Obama overwhelmed John McCain by 412,293 votes, Jim Doyle became the first Democratic governor re-elected to a second term since Pat Lucy in 1974 and Wisconsin moved from being competitive to a solid “blue” state. Today, GOP is well-positioned for a comeback in November.

Conclusion

The message to both parties should be clear: if voters perceive either party as “out of touch” with their priorities, watch out! You can be replaced as fast as you were installed.

At this time, the mid-term election momentum is all heading in one direction: GOP. While it

Joe Murray is Director of Politcal & Governmental Affairs for the WRA.

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>>Technology Corner

It’s Tablet Time! Should your next PC be a tablet? Maybe so, but probably not the one you think. By Rick Broida

There’s a new gizmo in town. Maybe you’ve heard of it. It’s called the iPad, and it looks like an oversized iPhone. It kind of works like one, too, which begs the question: should you get one?

expensive tablet PCs (though you should still expect to pay anywhere from $1,000-$1,500 for these higher-end models, which have larger screens, faster processors and more features overall than their netbook cousins).

Short answer: no, but you may want to consider something like it. A tablet is actually the perfect kind of PC for a REALTOR® as it operates using a fingertip and/or stylus, meaning you can carry it around as you walk through properties, jotting notes, retrieving photos and even checking e-mail as you go. Picture a typical writing pad cradled in your arm, but with an electronic touchscreen in place of pen and paper.

FIGURE 1 - Apple iPad

For most REALTORS®, the better buy is a convertible tablet – a Windows-powered touchscreen PC that includes a laptop-like keyboard but can transform into an all-screen slate. These kinds of systems made their debut nearly a decade ago, but sky-high prices and other limitations kept them from really catching on.

Tablet PCs have been around for years; the iPad represents Apple’s attempt to make them sexy and desirable. Time will tell if the company has succeeded. In the meantime, there are several alternatives that offer REALTORS® a lot more value – and more are on the way.

The iPad has a tantalizing starting price of $499, but so does the new Lenovo IdeaPad S10-3t, a convertible netbook that runs Windows 7 and sports a 10.1-inch screen (the iPad’s is a slightly smaller 9.7 inches). To be fair, the IdeaPad’s screen shares the iPad’s capacitive nature, so note-taking may present a challenge. (Third-party developers to the rescue: Ten One Design’s $15 Pogo Stylus has a capacitive tip, so note-taking is at least a possibility on both tablets.)

What’s wrong with the iPad? For starters, it relies on a capacitive touchscreen, meaning it recognizes input only from your fingers – just like an iPhone. You can’t write on it using a plastic stylus (think: PalmPilot), so you can’t easily scribble notes. Needless to say, a tablet that is not good for notetaking is not good for REALTORS®. In addition, the iPad runs the same proprietary Apple operating system as the iPhone. And while that allows you to run all the same apps (plenty of which are REALTOR®-friendly), it prevents you from using any Windows-based software you may need. Forget about Outlook, Word, Excel, ZipForm and any other programs you use regularly. Software compatibility is a fairly significant iPad obstacle.

If you’d prefer a more “traditional” tablet, the Asus Eee PC T91 is a convertible netbook with an 8.9inch resistive touchscreen (translation: easy notetaking via the included plastic stylus). It runs Windows XP and sells for under $500. All this is just the tip of the tablet iceberg. For one thing, Microsoft’s latest operating system, Windows 7, includes support for a new breed of “multitouch” displays, meaning upcoming tablets will respond, iPhone-like, to multi-finger touches and gestures (like pinching two fingers to zoom an image). Meanwhile, big-name vendors like Dell, Fujitsu, HP and Toshiba are developing thinner, lighter and less-

Finally, the iPad lacks a keyboard – unless you count the onscreen keyboard, which isn’t exactly ideal for touch-typing. Apple offers a $69 Keyboard Dock accessory that lets you use the tablet more like a traditional PC, but that is one more thing to bring along, and without software like Word and Outlook, what’s the point?

wisconsin real estate magazine

march 2010

If you still like the idea of a thin, inexpensive, screen-only device like the iPad but want a Windows-compatible experience, check out HP’s upcoming Slate. It has nearly identical specs and dimensions, but runs Windows 7. It’s due to ship in the first quarter of 2010, with a price that’s expected to match or beat the iPad’s.

FIGURE 2 - Lenovo IdeaPad

Overwhelmed? That’s understandable – much of this is uncharted territory for anyone accustomed to plain old laptops. Indeed, you may want to wait for some of the dust to settle before pulling the trigger on a tablet PC. On the other hand, if you want a device that’s easy to carry in the crook of your arm and only a few dollars more than a typical netbook, you’ve already got plenty of options. 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.

news.wra.org

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