Kentucky ®
SPRING 2018
A publication of Kentucky REALTORS®
Staying ahead of the changing connected consumer Data security heats up 5 things real estate agents can learn from superfans Commercial drone regulations
kyrealtors.com
LEADERSHIP TEAM
Steve Cline
Rip Phillips
Lester Sanders
KENTUCKY REALTORS® President REALTOR® Association of SKY
KENTUCKY REALTORS® President-elect Greater Louisville Association
KENTUCKY REALTORS® Treasurer Greater Louisville Association
Michael Becker KENTUCKY REALTORS® Immediate Past President Northern Kentucky Association
Charles Hinckley KENTUCKY REALTORS® Treasurer-elect Heart of Kentucky Association
Tony Clark
Steve Stevens
KENTUCKY REALTORS® Past President Chair Greater Owensboro REALTOR® Association
Kentucky REALTORS® CEO
DELEGATE BODY
REMAINING BOARD OF DIRECTORS
Not members of the Board
Earleene Woods Region 1 Director Murray Calloway County Board
Don Cecil
Region 2 Director Heart of Kentucky Association
Bobby Hunton
Director at Large REALTOR® Association of SKY
Allison Bartholomew Rick Baumgardner Thomas Black Al Blevins William Bramble Lamont Breland Jim Broadwater Ty Brown Lisa Bush Bonnie Byerly Linda Gibson Cecil Angela Clark James Collier Sue Ann Collins Cathy Corbett
Elizabeth Monarch Region 3 Director Greater Louisville Association
Mike Inman
Director at Large Lexington-Bluegrass Association
Jayne Cox Linzie Craig Greg Crase John Davis Fred Dent Laura Disney David Earls Helen Fardo Pam Featherstone Stacey Fergerson Cindy Flynn Doug Gibson Larry Gillette Brenda Gooslin Leslie Gray
Barbara Curtis
Region 4 Director Lexington-Bluegrass Association
Brenda Loyal
At-Large-Director Greater Owensboro REALTOR® Association
Robin Roseberry Region 5 Director Northern Kentucky Association
Art Reed
Director at Large Northern Kentucky Association
John Groft Karen Gross Joe Guy Hagan Susan Hansford Susan Hatton Rick Hogue Mary Ann Hollon Alicia Huff Ronald Hughes Todd Hyatt Cheryl Johnson Norman Jones Martin Jones Charles Lambdin Cheryl Lary
Marcie Estepp
Region 6 Director Eastern Kentucky Association
Mike Spicer
At-Large-Director Northern Kentucky Association
Melanie Lindsey Robert Massey John May Trey McCallie Ann McDonald Jeanie McKinley Cathy Miller Christie Moore Linda Moore Christine Morgan Becky Murphy Charlie Murphy Joy Murphy Douglas Myers Randy Newsome
AnnElizabeth Delahanty Barbara Flannery Gambrel At-Large-Director Greater Louisville Association
Libbi Taylor
At-Large-Director Lexington-Bluegrass Association
Kelley Nisbet Rosemary Nobles Paul Ogden Dave Parks Lisa Presley Donnie Roberts Kae Schennberg Edward Seay Trish Segrest Jim Sewell Jim Simpson Jeff Smith John Smither Kathryn Sotelo David Stagner
At-Large-Director Lexington-Bluegrass Association
Donna Gordon-Willoughby At-Large-Director Greater Louisville Association
Karen Story Justin Suiter Carl Tackett Greg Taylor Glenn Thomas Angela Turner Jay VeLotta Ralph Waldrop Ken Warden Cheryl Watson Nelson Weaver John Weikel Robert Wyatt
CONTENTS Volume 11, Number 1, SPRING 2018
A publication of Kentucky REALTORS® President Steve Cline REALTOR® Association of SKY President-elect Rip Phillips Greater Louisville Association Treasurer Lester Sanders Greater Louisville Association Treasurer-elect Charles Hinckley Heart of Kentucky Association CEO Steve Stevens, CCE sstevens@kyrealtors.com
IN THIS ISSUE
8 Sellers liability for video, audio recording a house showing 10 Staying ahead of the changing
connected consumer
2 Fair Housing: Promises of a Century 1 20 Five things real estate agents can
Kentucky REALTORS® members should always send address changes to their local board/association first. Subscription rates: $10 per year (included in dues) for members, $25 per year for non-members.
learn from superfans
All articles represent the opinions of the authors and do not necessarily represent the opinions of Kentucky REALTORS® and should not be construed as a recommendation for any course of action regarding financial, legal or accounting matters by Kentucky REALTORS® and its authors.
REGULAR FEATURES 4 REALTOR® News
Reproduction prohibited without permission. Copyright© 2018. Kentucky REALTORS®, Inc. All rights reserved.
Address letters and inquiries to: Kentucky REALTORS® 2708 Old Rosebud Road, Suite 200 Lexington, KY 40509 TF 800.264.2185 T 859.263.7377 F 859.263.7565 www.kyrealtors.com email: hcooper@kyrealtors.com
5 6 14 18 22 24 25 28 30
President’s Message Tools You Can Use Legislative Update Education Local Association News By the Numbers Housing Stats CEO Message A Day in the Life of...
ON THE COVER Also called the Little Niagara, this landmark spans the river at the border of McCreary and Whitley counties, and is the central feature of the state park where it is located. It is believed it formed as the result of erosion from its original starting place at an escarpment far downstream and is the only site in the Western Hemisphere where a moonbow is regularly visible. Go to the KYR Facebook page (facebook.com/kentuckyrealtors) – please like the page if you haven’t already – locate the cover photo and comment with the name of the landmark for a chance to win a free online course with Jason Vaughn, courtesy of the Kentucky REALTOR® Institute (KRI). If you would like to submit a photo for the magazine cover (Fall 2018 issue), send photographs to kyrealtors@kyrealtors.com. Photos must be high resolution and be Kentucky specific – landmark, destination, etc. SPRING 2018 | Kentucky REALTORS® | 3
REALTOR® NEWS Give back through leadership at the state level
Are you interested in serving the real estate industry at the state level? Kentucky REALTORS® is seeking nominations for several leadership positions for 2018. The information regarding the openings, terms and voting information can be found on the website at kyrealtors.com/elections. The deadline for nominations is September 14 and elections will take place at the 2018 Annual Convention & Expo. If you need additional information, please contact Julie Johnson, Director of Professional Standards and Governance, at 800.264.2185 or at jjohnson@kyrealtors.com. Open Positions: President-Elect (1 position, 1-year term) Treasurer-Elect (1 position, 1-year term) At-Large Director (3 positions, 3-year term) Region Director for 2, 4 & 6 (3 positions, 2-year term) At-Large Delegate (3 positions, 3-year term) NAR Director (1 position, 3-year term)
support organizations by filling the backpacks with various items and supplies. Members can take the bags directly to the organization or drop off at Kentucky REALTORS® headquarters in Lexington. Supplies needed will depend on where the bags are being donated and should be coordinated with the appropriate organization. Special thanks to Century Mortgage for helping fund this project.
Award forms available for KYR top honors Kentucky REALTORS® invites nominations of members (and local associations through the CSA) for the 2018 awards. These awards recognize members, through their commitment to the industry, who consistently demonstrate the practices that define the very meaning of the term REALTOR®. To learn more about each award, download a form from the website at kyrealtors.com/awards. REALTOR® of the Year Award Deadline: Friday, June 1 Good Neighbor Award Deadline: Friday, June 1 Distinguished Service Award Deadline: Friday, June 1 Nat Sanders Education Award Deadline: Wednesday, August 15 REALTOR® Community Service Award Deadline: Wednesday, August 15
Kentucky REALTORS® announces
community service projects for 2018
Kentucky REALTORS® is once again partnering with the Boys & Girls Clubs of America (BGCA) by hosting a Day of Service on August 9 to help local chapters prepare for their back to school activities. A list of local chapters, as well as information about the service day, can be found on the Kentucky REALTORS® website at kyrealtors.com/cs. In addition, KYR is joining the Salvation Army for a REALTOR® Ring Day on December 7. What started with two state REALTOR® Associations in 2010 has since grown into a nationwide effort coordinated between 30+ states across the US, making it one of the largest volunteer efforts in Salvation Army history. The event gives REALTORS® an opportunity to support a cause that is dear to them: housing. Kettle donations also fund additional Salvation Army programs such as food, rehabilitation and youth activities. And, best of all, the dollars raised at each kettle stay in the local community. To learn more about the REALTOR® Ring Day, visit kyrealtors.com/ cs. At the Legislative Meeting in February, KYR distributed 2,000 sling backpacks to local REALTOR® Associations across the state to help
Affinity Partners As a benefit of membership with Kentucky REALTORS®, members are eligible to receive discounts and added value on business-related products and services from a number of leading industry partners. To learn more about each of companies listed, visit kyrealtors.com/discounts (log-in required).
LeadershipKYR Class of 2018 This year’s class includes 17 members who will join the ranks of some of the most successful REALTORS® from around the state. The program leads participants through several retreats and provides skill
Ty Brown
Lisa Bush
Dolly Rivero 4 | kyrealtors.com
Angi Cline
Edward Seay
Matt Coomer
Mary Anne Simmons
development in leadership along with team-building exercises, goal setting, personal profile analysis, network building and improving communication skills. Members from this year’s class include:
Liz Davenport
Michelle Stansbury
Tara Dixon
Eunice Stone
Kristy Gooch
Jen Swendiman
John Kopperud
Mike Thomas
Tim Mattingly
Jeanna Wright
PRESIDENT'S MESSAGE
We will “Aim Higher” to improve our industry and community
A
new year means new goals and we have set many in recent months. I am delighted to have the opportunity to serve as your State President and work to get them accomplished. Since day one, there has been no time wasted, as we hit the ground running to represent you and accomplish important work for both our industry and communities. Our 2018-2020 Strategic Plan outlines many ways we want to “Advocate” on behalf of REALTORS®; “Educate” by providing high caliber training; “Elevate” by raising the bar of business professionalism and ethics; “Engage” by collaborating with others to advance the business interest of REALTORS® and “Promote” by being a positive force in our communities.
2018 community service projects for the Salvation Army, Boys & Girls Clubs and more…
Each year, Kentucky REALTORS® (KYR) go above and beyond for their communities, as they address many of the big socio-economic challenges that surround them. This year, KYR will focus statewide on several ways to help others. First, in a partnership with the Salvation Army, Kentucky REALTORS® will participate in a “Ring Day” across the Commonwealth on Friday, December 7. This STEVE CLINE is a nationwide effort between 30+ states making it one of the largest volunteer efforts for the Salvation Army. KYR will also continue its partnership with the Boys & Girls Clubs by giving members the chance to volunteer with a “Day of Service” on Thursday, August 9. This day will give members the chance to help a local BGCA Presidential appointed workgroups addressing chapter prepare for the back to school season. And finally, to help the key areas less fortunate citizens in our communities, KYR is filling cinch sacks with In addition to the work from our Strategic Plan, we are attempting to personal care items in a project KYR is calling “REALTORS® Got Your tackle several “nuts and bolts” initiatives to improve our industry and Back(Pack).” Local associations have received quantities of these bags for organization. I’ve received input and feedback from members, local members to use as they collect items for donation to local organizations. associations and the Kentucky Real Estate Commission on current needs Please contact KYR if you would like more information on how to we have. As a result, I have appointed four special task forces to go to participate in these events. work on them: • A Commercial Real Estate Program Task Force has been created to explore ways to attract, support and retain commercial real estate members in our organization. The group will consider new educational offerings, networking activities and issue advocacy for this group’s unique issues - all as components of a targeted program. It will be chaired by Jim Broadwater, a member of the Lexington-Bluegrass Association. • A special Appraisal Task Force has been created to connect another natural allied group to KYR. This task force will also consider educational opportunities and other activities that might better support those who conduct business as appraisers, as well as do business as REALTORS®. It will be chaired by Larry Disney, former Executive Director of the KREAB. • A special Statewide Forms Task Force is being chaired by Janie Wilson, Association Executive of the Northern Kentucky Association, and will work to develop a standard purchase and listing contract to be used on a voluntary basis by local associations and licensees to create better uniformity across the state and reduce liability. • The Kentucky Real Estate Commission is developing a new website and has asked KYR to provide guidance in making it userfriendly and ensure it contains the information most needed by real estate professionals. A special Website Task Force is being co-chaired by Randy Newsome, a broker in Morehead, and Stacey Fergerson, a member of the REALTOR® Association of Southern Kentucky, to develop input.
Broker Summit and Summer Meeting in Owensboro cannot be missed!
Our annual Broker Summit and Summer Meetings are always hits, but this year you have great reasons to make attending them a top priority. Last year our Broker Summit had a record attendance and received amazing reviews from attendees. Mortgage trends, cybersecurity, legal issues and social media risk management are just some of the topics that will be offered on April 25th in Louisville. In addition to our many networking opportunities and business meetings of our committees, a highlight of our time together will be a keynote from National Association of REALTORS® (NAR) 2018 President Elizabeth Mendenhall. You will be able to hear how she and her team at NAR are representing you as they tackle our ever-changing industry. CRS will also be holding a one-day class – Top of Mind Techniques to Boost Your Brand – that will count for GRI elective, post-licensing (PLE) and continuing education (CE) credit and, if you don’t want a full day designation course, another CE course will also be held during our annual summer event. You will be able to get required hours of education completed early in the year, while enjoying many other benefits that come from attending our meeting on June 12-15 in Owensboro! I hope you will help us Aim Higher by being involved in some of our many exciting activities and initiatives. If you’ve never attended a statewide meeting before – THIS is your year! I encourage you to connect to our website www.kyrealtors.com and go to our Events page to stay informed and register for upcoming activities. I promise that you will be glad you did! Thank you again for my opportunity to serve you and for all that you are doing to improve our industry.
STEVE CLINE
2018 PRESIDENT, KENTUCKY REALTORS®
TOOLS YOU CAN USE Kentucky population changes Estimates released by the Census Bureau show the resident population of Kentucky was 4,454,189 as of July 2017, an increase of 0.4% from the previous year and an increase of more than 2.6% from the 2010 Decennial Census. Kentucky remains the 26th largest state by population, trailing Louisiana (25th) and coming in just ahead of Oregon (27th). All of Kentucky’s population growth since 2010 has been in the population segment age 65 and older, which has grown by 23% since the last Census. The number of individuals younger than 65 has declined during this time. Persons age 65 and older now constitute 16% of the state’s total population, up from 13.3% in 2010 and 12.5% in 2000. There were 1,010,539 Kentuckians under the age of 18 in 2017, the smallest number since 2005. Persons younger than 18 now constitute 22.7% of the state’s total population, compared to 23.6% in 2010 and 24.6% in 2000.
Your words can carry a listing A new study finds that properties that contain certain words in their listing comments tend to sell for higher prices. CoreLogic researchers analyzed more than 1 million single-family transactions that closed in the first half of 2017. Every property analyzed had public remarks and comments from which researchers extracted word pairs. Prices can vary geographically on how much weight certain words may have. The following words were found to have a positive impact on the closing price, according to CoreLogic researchers: Pane windows New construction Remodeled kitchen Single-level Outdoor living Exterior paint Fully fenced RV parking In the kitchen: granite, range, oven Updated kitchen Quiet street Interior paint Light, bright Hardwood floors Award-winning
Gas fireplace Natural light Fruit trees New paint Stainless appliances Gas range Front yard Walking distance (note: the appropriateness of this term is up for debate) Fireplace Fully fenced Large backyard Easy access Vaulted ceilings Perfect for entertaining
“Anyone selling a home that has any of the features listed … should make sure to ask their listing agent to include these words and phrases in the public comments,” CoreLogic notes at its Insights blog.
Follow Kentucky REALTORS® on Facebook and Twitter KYR has posted its Twitter feed and Facebook page link on the home page of its website (kyrealtors.com) so members and consumers can follow all the things going on with the association. Keep up with all things KYR on a real-time basis – legislative updates, industry news, business tips and much more! Or you can visit the pages directly: facebook.com/ kyrealtors or twitter.com/kyrealtors. 6 | kyrealtors.com
Make your property descriptions speak to buyers Inman news has provided a few tips on how to craft property descriptions that resonate better with homebuyers. Using emotional appeal and highlighting benefits has more power than explaining home features. Here are some examples of words and phrases you can interchange with current ones commonly used in property descriptions: Replace “unit” with condo or townhome. No one says “I want to purchase a unit.” The word unit doesn’t give a warm-and-fuzzy feeling. Instead of “lot” say homesite. Homesite suggests the realization of a dream. “The perfect homesite for your dream home” expresses fulfillment of a desire better than “The perfect lot for your new house.” Warm up the phrase “new development” with new neighborhood or community. Would you rather live in a development or a community? Neighborhoods should never have “restrictive covenants.” Instead, refer to the community agreement or protective covenants. Replace “guard gate” with security or welcome center. The word guard is associated with danger whereas security and welcome are related to safety. The commonly used word “upgrades” is cold and matter-offact. Try swapping it for updated or custom features. Avoid using “can’t” in a description. “You can’t miss this!” Replace can’t with “won’t.” “You won’t want to miss this!” Can’t is forbidding to the reader, whereas won’t places the action with the reader. Another similar phrase to avoid is “have to.” Swap the phrase “want to” in, and once again you’ve gone from controlling their action to allowing the buyer to control their actions. Try to avoid acronyms and confusing terms whenever possible. Although many buyers understand what HOA, POA and regime stand for, there are many who don’t. Confusing words and acronyms can be a turnoff for some potential customers.
FSBOs hit lowest share in history Sellers’ use of a real estate agent remained at an all-time high this year at 89 percent, according to the most recent NAR Profile of Home Buyers and Sellers survey. Meanwhile, for the third consecutive year, for-sale-by-owner sales continued to be at the lowest share in the history of NAR’s survey at 8 percent. Sellers reported mostly being satisfied with the performance of their agents, too. Eighty-eight percent of sellers surveyed indicated they were satisfied with the selling process, and 85 percent said they are likely to use their agent again or recommend him or her to others. Buyers say they need agents too, even though a rising share are turning to the Internet for real estate information. Eightyseven percent of buyers said they ended up purchasing their home through a real estate agent. They said help finding the right property to buy and assistance in negotiating the terms of the sale were the two main things they most wanted from their agent. A majority of first-time buyers indicated that the top benefits received from their agent were help understanding the buying process (83 percent), pointing out unnoticed property features or faults (60 percent), and negotiating better sales terms (51 percent).
What NOT to post on social media if you are a real estate agent It’s a proven fact, yet one overlooked by many real estate agents. Listings, as a singular source of social media content, are a mediocre business builder. Among REALTORS® who cited listings as their primary source of Facebook postings, less than half reported measurable outcomes, according to a study conducted by Realtors Property Resource® (RPR®). “Sharing individual listings on an as-needed basis is not a sustainable strategy when it comes to building awareness, says Reggie Nicolay, vice president of marketing for RPR. “Listings do not inform or engage consumers beyond those immediately interested in purchasing a home.” So what can REALTORS® do to consistently inform, engage, and grow their sphere of influence above and beyond posting listings? Nicolay recommends mixing it up for maximum impact. “A balanced mix of content yields the greatest reward in terms of capturing interest and earning commitment,” says Nicolay. “Market activity reports, neighborhood data, buying-and-selling tips, home improvement ideas, and even community events offer agents a chance to communicate both market knowledge and valuable information to potential buyers and sellers, building a lasting relationship over time.”
Outdated and most requested home features Home builder Taylor Morrison found the most common outdated features according to homebuyers in a recent consumer survey. They are: • Linoleum floors (40 percent) • Popcorn ceilings (29 percent) • Wood paneling (28 percent) • Ceramic tile countertops (28 percent) • Shag carpeting (19 percent) • Avocado green appliances (8 percent) The features home buyers say they most desire are: • Better energy efficiency (62 percent) • Personalized floor plans (58 percent) • Easier maintenance (56 percent). The interior features home shoppers called most essential are: • • • •
Wood flooring (65 percent) USB and Ethernet ports (44 percent) Whirlpool tub (36 percent) Sun room (34 percent).
Features that help sell a home faster Realtor.com looked at the most common home features and analyzed applicable listings to find which homes sold in the fewest number of days. For the study, researchers used days on market as an indication of demand for a home feature. The following were the top features uncovered in the survey: Smart-home features Open kitchens Finished basements Front porches Patios Dining rooms Walk-in closets Energy Star appliances Granite countertops Two-car garages Eat-in kitchens Fireplaces Hardwood floors Security systems Laundry rooms
Nicolay cites RPR’s Market Activity Report as an ideal option for agents who want to create enduring and results-oriented relationships. The report puts audiences in the driver’s seat by equipping them with the when, where and why of real estate in their locality. Specifically, the report presents a snapshot of changes in a local real estate market, and includes active, pending, sold, expired, distressed, new for lease, recently leased properties, as well as recent price changes and upcoming open houses for a period of up to six months. “Every homeowner or would-be seller wants to know what is going on in their local market,” says Nicolay. “Agents who provide that data by way of Facebook are simultaneously empowering audiences and positioning themselves as market experts. It’s a winwin. And now, it’s easier than ever to share the report to Facebook from within RPR.” The real estate data platform has added a simple, things you can do with this report option on the reports page of its website. Within a few short steps, agents can create a report and share it on Facebook, including optional comments and the ability to specify audiences who will see the report. Learn more at www.narrpr.com.
Homes are getting smarter Consumers say they want more smart-home technology, and they are looking to agents for assistance according to a Coldwell Banker survey. Forty-two percent of survey respondents say they would look to their real estate agent to provide suggestions about how staging their home with smart-home products could impact the sale of their home. The smart-home products home buyers say they prefer to be already installed in a home are: • • • • • •
Smart thermostat: 77% Smart fire detector: 75% Smart carbon monoxide detector: 70% Smart camera: 66% Smart lock: 63% Smart lighting system: 63%
Builders reveal the 10 biggest concerns for 2018 According to the National Association of Home Builders and Wells Fargo Housing Market Index, these are the top 10 most significant problems facing builders in 2018. • • • • • • • • • •
Cost/availability of labor: 84% Building material prices: 84% Cost/availability of developed lots: 62% Impact/hook up/inspection or other fees: 60% Local/state environment regulations and policies: 45% Inaccurate appraisals: 42% Federal environment regulations and policies: 42% Difficulty obtaining zoning/permit approval: 42% Gridlock/uncertainty in Washington making buyers cautious: 42% Development standards (parking, setbacks, etc.): 38%
The top concern, cost/availability of labor, started growing as a problem after 2011. In 2011, just 13 percent of builders rated labor as a significant problem, but by 2012, the percentage jumped to 30 percent and has continued to increase each year since. SPRING 2018 | Kentucky REALTORS® | 7
Sellers liability for video, audio recording a house showing BY JASON VAUGHN
S
ecurity systems and cameras have become very common in America today. The use of these recording systems raises new questions about the legality of their use during REALTOR® showings to a potential buyer.
In Kentucky, people are free to video others as long as it is not of sexual conduct without consent, when those who are being filmed believe that the sexual conduct would not be observed. This would not be an issue during a showing, so there would be no violation of the law. The only issue with videoing during a showing is whether the potential buyers and REALTOR® have an expectation of privacy within the home being shown. People have an expectation of privacy in places like bathrooms, locker rooms, and their own homes. People do not have any expectation of privacy in a public area, like on the lawn of a house, the sidewalk, or at a public business. 8 | kyrealtors.com
A video put out by the National Association of REALTORS® (NAR) addresses this somewhat, by stating that there is not a large expectation of privacy during an open house.1 However, NAR’s Senior Counsel does not address whether there is an expectation of privacy during a private showing. It can be argued that a potential buyer has a higher expectation of privacy during a private showing with a REALTOR® than during an open house. However, it is still likely acceptable for a seller who has cameras within their home to record, in areas other than bathrooms, during a showing.
Audio recording can result in criminal charges While many security systems only record video, some can record audio as well. This can cause a real problem based on Kentucky’s eavesdropping laws. Kentucky’s statutes define eavesdropping as “means to overhear, record, amplify or transmit any part of a wire or oral communication of others without the consent of at least one
(1) party thereto by means of any electronic, mechanical or other device.” This means Kentucky is one of many states that require at least one party being recorded to know they are being recorded. It is a crime to eavesdrop in Kentucky. This is found in KRS 526.020, which states that eavesdropping is when someone “intentionally uses any device to eavesdrop, whether or not he is present at the time.” This crime is a Class D Felony, which means the penalty is one to five years in prison. Therefore, if no one in the conversation knows they are being recorded, it is a violation of Kentucky law. In short, this means that it is illegal for a seller to record audio during a home showing without the potential buyers or REALTOR® knowing they are being recorded, unless the seller is participating in the conversation. The other possible eavesdropping violations that may arise are if the sellers put audio recording devices for the purpose of eavesdropping 2 and then divulge any information obtained through eavesdropping.3 Sellers should not hide any type of digital audio recorder or other audio recording devices within their homes to be able to hear the conversations of potential buyers.4 While it may be enticing to get information about what potential buyers like and dislike, the placing of devices to hear this type of information is illegal. In Kentucky, this is a Class D Felony. Likewise, information divulged from eavesdropping is a crime. This is a Class A Misdemeanor with a penalty of 90 days to 12 months. An example of such would be if a seller audio recorded a showing and then divulged information to the listing agent about what was overhead between the REALTOR® and the potential buyers.
Sellers recording audio can also be liable to the potential buyer personally Beyond the criminal statutes that might result in a violation is the civil liability that could be faced. Invasion of Privacy has been adopted within Kentucky. One version of Invasion of Privacy is called Intrusion Upon Seclusion. It is defined as “one who intentionally intrudes, physically or otherwise, upon the solitude or seclusion of another or his private affairs or concerns, is subject to liability to the other for invasion of his privacy, if the intrusion would be highly offensive to a reasonable person.”6 5
This means that someone who personally intrudes on the solitude or private affairs of another can be held liable if it would be “highly offensive” to a reasonable person. This is possible with a showing. Potential buyers can discuss personal, private affairs, like personal finances, potential offers (including the highest they’d willing to go for the house), and other things. If such was recorded, the seller could be liable to the potential buyers for an invasion of their privacy, should the potential buyer sue.
What should REALTORS® do? It is recommended that if a listing agent finds that a client’s home has any sort of surveillance, whether video or audio, they should inform all potential buyers and buyer’s agents prior to a showing.7 The listing agent should be very specific in their explanation to the agent and/or potential buyer when audio recordings will be taken. By informing the buyer’s agent or the potential buyer, it eliminates any possible later claims of eavesdropping that may arise. This is because the agent and potential buyers will know of the recording, so anything said during the showing was consented to. This information can be communicated orally, but better yet, in writing via email. By informing via an email, there will be proof for later if a potential buyer attempts to claim they were eavesdropped on without their consent. As for a buyer’s agent, they can inquire about whether a home they will be showing a client has any video or audio recording with the seller or their agent. If they are informed there is recording that will happen, they should relay it to their clients. Again, this will eliminate a seller’s criminal liability. It will also allow the potential buyers to be aware of any recording, so they are mindful of what they are saying during the showing. Potential buyers will be more thoughtful in what they say, so they do not say anything they are not comfortable having the seller know. In conclusion, video recording is acceptable in most areas of the seller’s home. Audio recording, however, can get the seller into legal trouble. If they’re going to record audio, whether individually or with video, they should inform the buyer’s agent prior to any showings.
1. www.youtube.com/watch?v=ym6yc2CFGWw 2. KRS 526.030 3. KRS 526.060 4. https://www.realtor.com/news/trends/buyers-under-surveillance/ 5. McCall v. Courier-Journal & Louisville Times Co., 623 S.W.2d 882, 887 (Ky. 1981). 6. Restatement (Second) of Torts § 652B 7. http://realtormag.realtor.org/daily-news/2016/07/26/your-seller-s-babycam-lawsuit-waiting-happen
Jason Vaughn is a lawyer with Vaughn & Smith, PLLC in Louisville and serves as legal counsel to KYR. The attorneys at Vaughn & Smith, PLLC constantly monitor the real estate industry as a whole, as well as any and all changes in the law that may affect it. They have intimate knowledge of commercial and residential real estate transactions and can utilize this base knowledge when representing their client's interests. This discussion should not be viewed as legal advice. Please consult your attorney. SPRING 2018 | Kentucky REALTORS® | 9
STAYING AHEAD OF THE CHANGING CONNECTED CONSUMER BY CRAIG GRANT
10 | kyrealtors.com
T
oday’s consumer is vastly different than the customer of the past. And with the popularity explosion of the Internet, social media, mobile, video, the portal sites, apps, smart home devices and more, they continue to change more and more with each passing day. In this article, we will explore many ways they have changed and what you can do to adapt to keep up with them! MORE EDUCATED, MORE PREPARED, SOMETIMES OVERWHELMED CONSUMER
In the old days, the REALTOR® was the gatekeeper and the only reliable source for all the information, which made the consumer completely reliant on the REALTOR® through the entire process. But today’s consumer has access to any type of information or data they want 24/7/365, which makes them less dependent, but at the same time, they expect more from their real estate professional. And a key is they now view the real estate practitioner as more of a consultant who is there to help guide them through the trove of information they find, rather than the gatekeeper of the past.
about the listing i.e. it is no longer on the market but hadn’t been removed from the site they found it on. Additionally, you can try to offer them more reliable sources, like creating them a profile in your MLS, your own website (which will run off an accurate IDX feed) or sites such as REALTOR.com or HomeSnap that are more accurate than the syndicated sites.
LESS PATIENT CONSUMER
OVER PREPARED, EVEN COCKY CONSUMER How many times have you been challenged by a customer for your lack of information or about a listing they found online that you didn’t know about? And often you don’t know about it because they found it on an unreliable source (i.e. it is a known fact that many syndicated sites have issues with outdated, incorrect and duplicated listings). To combat this, it is recommended at the beginning of the relationship, you educate them of the process and the fact there are many unreliable sources out there and then have consistent and ongoing communication with your clients. If you are ever challenged by a customer, own up to it by saying you’re not sure why you don’t know about the listing. Then look it up in the MLS, which will often validate why you didn’t know
In the old days you could get away with responding to a message several hours or even a day later. But with today’s consumer, every minute matters and the longer you take to get back to them, the odds increase that they’ve moved on and contacted another agent. So, the bottom line is you need to have the right tools on your end to be able to service the customer as fast as possible no matter what environment you are working in. This means having a great smartphone and/or mobile computer and using the best apps and software including a Customer Relationship Management (CRM) system that will notify you immediately of any lead/contact and, more importantly, help you follow up with them seamlessly without missing a beat.
LESS LOYAL CONSUMER This is the one that hurts to talk about the most, but the fact is today’s consumer is being less and less loyal to brand and that is true in all industries. Real estate has always been a relationship based, loyalty, repeat and referral business, but study after study shows that is just not happening as much anymore. In fact, only 12% of property owners re-hired the same REALTOR® to sell the property that helped them buy it. And a recent Inman study showed that 70% of buyers couldn’t remember their REALTORS®’ name within 1-year of the transaction. So how could they rehire or refer more business to you if they don’t even remember your name? And, there is no question that technology has hurt the relationship building process. But the point is you
shouldn’t be disheartened by these studies and feel that relationship building is a waste of time. The best way to combat this trend is to take it head on and make more of an effort than ever in this area and strive to have a true connection with your clients. That way you are not just a transaction, but a trusted friend.
THE UNHAPPY/HARD TO PLEASE CONSUMER Every year, NAR updates its Buyer and Seller Profile study. It shows that the top two complaints consumers have about REALTORS® are communication and follow through. Even with all the amazing advancements that have been made in these areas, with tools that help us communicate and organize/run our business more efficiently than ever before, it is still the same top two complaints from ages ago. So, what can you do to overcome this? Similar to the advice provided above, it boils down to properly setting expectations and then educating and communicating with your customers all throughout the process. But you also want to make sure you are meeting their needs in these areas, so a few questions you want to work into your discussion very early in the process are: • What is your preferred method of communication (ex. email, phone, sms/text, etc.)? • What is your expectation of frequency of communication (ex. daily, weekly, when needed, etc)? And, if you are dealing with more than one person in the transaction, you should make sure you address them separately as they might have totally different communication needs and expectations. So hopefully this helps you in dealing with today’s consumer, but if you need additional tips, resources, how to videos and more, you can check out RETI.us, a Kentucky REALTOR® Institute partner.
Craig Grant of The Real Estate Technology Institute and EasyRealtySites.com is a national speaker on all aspects of technology, marketing and risk management as well as a top consultant for REALTORS® looking to run their business more productively and cost efficiently using technology. He will be teaching two days of classes at the upcoming KYR Summer Retreat in Owensboro on June 12 & 13. For more information, he can be reached at 352-400- 4857 or by email at Craig@RETI.us or register for class at www.kyrealtors.com.
R ET R E AT 2018
SPRING 2018 | Kentucky REALTORS® | 11
FAIR HOUSING: Promises of a Century
F
or REALTORS®, the Fair Housing Act is one of our nation’s most significant laws guiding the real estate industry today. Usually we recognize it with Fair Housing Month, celebrated in April each year. 2018 is different, however, as we commemorate the 50th anniversary of this major milestone in our nation’s efforts to bring greater equal opportunities in the rights to private property and housing. As we commemorate this act, it is important to recognize that the way our country views property rights, and who has those rights, has been a struggle dating back at least since Europeans first came to North America. When he signed the Fair Housing Act into law on April 11, 1968, President Lyndon B. Johnson noted that the bill would help fulfill “the promises of a century.” He referred to another law enacted just over one hundred years earlier, the Civil Rights Act of 1866, which declared “That all persons born in the United States […] are hereby declared to be citizens of the United States; and such citizens, of every race and color, without regard to any previous condition of slavery or involuntary servitude […] shall have the same right, in every State and Territory in the United States, to make and enforce contracts, to sue, be parties, and give evidence, to inherit, purchase, lease, sell, hold, and convey real and personal property….” Despite the language and spirit of the law, the intervening century provided countless examples of laws and events that contradicted this early declaration of equality, including the right to buy, sell and own homes and other real property. The Civil Rights Act of 1866 itself specifically excluded Native Americans and immigrants from its definition of “all persons.” California, Oregon, Minnesota and other states enacted laws restricting or prohibiting immigrants from China and other Asian countries from owning land. Cities and towns across the country often used covenants as part of property deeds to restrict who could purchase and live in a particular place, effectively creating neighborhoods from which African Americans and other groups were banned. A parade of court decisions and legislation sought to overturn many of these restrictions. In the early 1800’s, individual states began enacting laws granting women the right to own property. In 1948, the U.S. Supreme Court decided in the landmark case Shelley v. Kraemer that racially restrictive covenants on real estate could not be legally enforced. Less than a decade later, New York City became the first locality in the United States to ban discrimination in
12 | kyrealtors.com
privately owned housing. In 1962 discrimination in federally funded housing was banned. But it was the Fair Housing Act of 1968 that became the nation’s definitive law granting everyone equal access to housing, no matter their ethnicity, nationality, religion, handicap, or familial status. As President Johnson plainly explained: “It proclaims that fair housing for all—all human beings who live in this country—is now a part of the American way of life.”
For more information on the 50th Anniversary of Fair Housing, resources and to get involved, visit www.FairHousing.realtor
DATA SECURITY HEATS UP: Are you ready?
C BY MELANIE WYNE
oncerns over data security are heating up across the country. Make sure you’re doing what you can to keep from landing on the wrong side of a data breach charge.
Recently, a Massachusetts real estate brokerage and property management company was hit with a $15,000 civil penalty by the state. The reason? The laptop of one of its employees, containing unencrypted data on hundreds of the company’s customers, was stolen from the employee’s car. Although there was no indication that data was used for any unauthorized purpose, state law requires businesses to encrypt personal information when it’s on a laptop or mobile device. As a result of the breach, the state required the company to train its employees on its data security and privacy policy; ensure that no personal information would again be stored unnecessarily on laptops or mobile devices; and encrypt any personal data that must be kept on a laptop or other mobile device. Data security and privacy protection laws vary by state, but with concerns over data breaches heating up across the country, the number of penalties like this one is likely to rise. Whether you’re a brokerage owner or a salesperson, have you done enough to keep from landing on the wrong side of a data breach charge? Based on a National Association of REALTORS® survey, the answer is probably
not. The report showed that 52 percent of brokers didn’t have a data security and privacy policy in place, and 58 percent of sales associates had no idea whether or not their broker had a policy. Almost 85 percent of respondents didn’t know what their state required them to do in the event of a data breach. Data security and privacy issues could well move to the front burner on Capitol Hill this year. Several bills are being considered that would create a national standard for data protection and breach notification. There’s no need to wait for lawmakers to pass new measures. Using the NAR Data Security and Privacy Toolkit (http://bit.ly/nardatasecurity), you can create your own security and privacy system. The kit will help you draft a program that follows best practices while meeting the needs of your business.
Know the laws. The toolkit contains a list of laws by state that require notification of security breaches involving personal information. More than half the states also have laws on how to properly dispose of data in order to protect an individual’s privacy. Those are listed as well. Post your policies. Your privacy policy should be posted on your Web site. Among other things, the toolkit includes a model privacy policy that you can use as a template. But you shouldn’t rely exclusively on that; you›ll want to bring in an attorney or other expert to help you tailor your policy in accordance with your state laws and specific business situation.
Take inventory and purge. Take time to conduct an inventory of what you›re collecting and why you’re collecting it. Then pare down your data needs to a minimum, and aim to keep what you›ve collected for the shortest span of time necessary. If you obtain a client’s bank account number in the course of a transaction, delete the number from your records once the transaction is closed and you no longer have an essential business reason to hang onto it. The fewer pieces of sensitive data you possess, the better. Visit the FTC web site. Check your policies against a set of best practices from the Federal Trade Commission (http://www.ftc.gov/infosecurity). These include the need to create clear, written security policies and lock up what you collect (both digitally, using firewalls and passcodes, and physically, within filing cabinets). By following the FTC’s recommendations, you’ll have your system covered. Melanie Wyne is a senior policy representative for the National Association of REALTORS®. She can be reached at mwyne@ realtors.org. Melanie will be a featured speaker at the upcoming Broker Summit in Louisville on April 25. To register, visit bit.ly/2018BSE. SPRING 2018 | Kentucky REALTORS® | 13
LEGISLATIVE UPDATE RPAC reaches new heights in 2017 Kentucky REALTORS® Political Action Committee (RPAC) had a banner year in 2017. For the first time in the history of the organization, KYR, along with seven local REALTOR® Associations, won the NAR President’s Cup. This award recognizes excellence in nine categories of work that advance the REALTOR® Party. Kentucky is just one of sixteen states to be honored with that achievement in 2017. Another three local Associations took home the Triple Crown Award in Kentucky. Award presentations will take place during NAR’s REALTORS® Legislative Meetings & Trade Expo in Washington, DC from May 14-19 so make plans to join the celebration.
Local Association Presidents Cup Winners Central Kentucky Association Henderson Audubon Board Hopkinsville Christian County Board Murray Calloway County Board Greater Owensboro REALTOR® Association Paducah Board REALTOR® Association of SKY
Local Association Triple Crown Winners Eastern Kentucky Association Heart of Kentucky Association Somerset-Lake Cumberland Board
Thank you RPAC Investors! The strength of RPAC lies the power of Kentucky REALTORS® membership. KYR is proud to have members in every corner of the Commonwealth that see the value of investing in RPAC to protect homeownership and real property rights. RPAC recognizes special investors that went above and beyond to support the REALTOR® Party in 2017.
2017 RPAC MAJOR INVESTORS RPAC’s Major Investors are an elite and passionate group of REALTORS® whose investments shape the political future of the real estate industry.
Golden R ($5,000 and above)
Al Blevins
Tony Clark
David Earls
Mike Inman
Ann McDonald
Guy Montgomery
Charlie Murphy
Betty Schutte
John Weikel
14 | kyrealtors.com
Crystal R ($2,500 and above) Timothy Montgomery
Sterling R ($1,000 and above) Ben Allen Nancy Allison Dennis Anderson Greg Back Rick Barker Mike Becker James Bramblett Lamont Breland Ty Brown Greggery Buchanan Lisa Bush Bonnie Byerly Daniel Carmack Don Cecil Steve Cline Angi Cline Bridgett Collier Sue Ann Collins Cathy Corbett Jayne Cox Judy Craft Barbara Curtis William D’Andrea Sallie Davidson AnnElizabeth Delahanty Lois Ann Disponett Myrna Downing Kristy Dugan Merle Edmiston Marcie Estepp Barbara Flannery Gambrel Larry Freels Lonnie Gann Mike Gooch Brenda Gooslin Donna Gordon-Willoughby John Groft Emily Hacker-Todd Deni Hamilton Elaine Hangis Jeff Harrison Jennifer Haubner-Vories Stephen Heartsill Daryl Hibbs David Hill Miranda Hinchman Charles Hinckley Mary Ann Hollon Alicia Huff Ron Hughes Todd Hyatt
Cheryl Johnson Bobbie Johnson Norman Jones Rhonda Karageorge Tanya Kaup Connie Lawson Brenda Loyal Amanda Marcum Rue McFarland Jerry McMahan Tucker McAlpin James McKee Jonah Mitchell Elizabeth Monarch Joy Murphy Becky Murphy Betty Musselman Kelley Nisbet Paul Ogden Mike Parker Judie Parks Dave Parks Rip Phillips Nita Phillips-Allen Charlene Rabold Arthur Reed Laura Rice Nancy Robertson Robin Roseberry Lester Sanders Jan Scholtz Kurt Schuler Kathy Sears Jim Sewell Mary Anne Simmons Joseph Simms Mike Spicer Steve Stevens Carl Tackett Harrell Tague Libbi Taylor Greg Taylor James Tinsley Rusty Underwood John Vince Matt Weaver Danny Willis Janie Wilson Melissa Winchell Kathy Wolfe
2017 RPAC HALL OF FAME The Hall of Fame recognizes dedicated members who have made a significant commitment to RPAC over the years by investing an aggregate lifetime amount of $25,000 or more.
$50,000 Level
Charlie Murphy
Betty Schutte
In February, over 200 REALTORS® from across the Commonwealth traveled to Frankfort to meet with legislators and make their voices heard at the KYR Capitol Conference and Hill Visit.
John Weikel
$25,000 Level
Jess and Carolyn Kinman Award presented to Senator John Schickel
Tony Clark
Jerry McMahan
Bill Snyder
Carl Tackett
Ann McDonald Guy Montgomery
Harrell Tague
2017 PRESIDENT’S CIRCLE INVESTORS The President’s Circle is a group of REALTORS® who contribute directly to REALTOR®-friendly candidates at the federal level. The President’s Circle Program supports REALTOR® Champions, who are members of Congress that have made significant achievements in advancing the REALTOR® public policy agenda. The President’s Circle Program allows REALTORS® to contribute beyond RPAC dollars and increase the strength of the REALTOR® voice on Capitol Hill. Al Blevins Tony Clark Steve Cline Lois Ann Disponett David Earls Mike Inman Ann McDonald
Jerry McMahan Guy Montgomery Charlie Murphy Paul Ogden Carl Tackett John Weikel
VOTER
R E G I S T R AT I O N
Make your voice heard by heading out to the polls to support REALTOR® Champions. Please visit elect.ky.gov for voter registration, information about polling places, and sample ballots.
Kentucky REALTORS® have awarded the Jess and Carolyn Kinman Award to Senator John Schickel. The award was presented in the Capitol Rotunda for his efforts as Co-Chairman of the Licensing and Occupations Committee and his involvement with House Bills 112, 309, and 443 from the 2017 General Assembly. “REALTORS® are the very essence of small business, of which I have always been a staunch supporter,” said Senator Schickel. “I am proud to represent Kentucky REALTORS® in their quest to represent home ownership and promote the residential and commercial real estate market.” As part of the award, First Federal Savings Bank of Frankfort makes a charitable donation in the name of the award recipient. This year, Senator Schickel selected the Area 7 Special Olympics which operates in Northern Kentucky and is an organization for people with intellectual disabilities. The award is named in honor of Jess Kinman, a former Kentucky REALTORS® president and REALTOR® of the Year who passed away in 2007, and his wife Carolyn Kinman, who worked for many years at the Legislative Research Commission and General Assembly. The Kinman Award is presented to an outstanding Kentuckian whose involvement in the legislative and political arenas have left an indelible mark on all those who have known or worked with him or her.
Important dates to remember: Kentucky State Primary Election: May 22 Voter Registration Deadline: April 23 Deadline to Request Absentee Ballot: May 15 Kentucky State General Election: November 6 Voter Registration Deadline: October 9 Deadline to Request Absentee Ballot: October 30
SPRING 2018 | Kentucky REALTORS® | 15
LEGISLATIVE UPDATE Kentucky’s state budget: from start to finish What is the state budget?
The Kentucky General Assembly is required by the State Constitution to pass a balanced biennial budget every other year. These budgets set the maximum sum of public funds that state agencies can spend during a given fiscal year. In Kentucky, the fiscal year begins on July 1 and ends the following June 30. Budget appropriations are separated into two categories: the operating budget and the capital budget. The operating budget provides funding for the everyday programs and services of the Kentucky state government, and the capital budget provides financing for expenditures tied to expansion rather than day-to-day operations.
How is the state budget created?
First, state agencies make requests for what they anticipate spending over the two-year budget period. Then, the Governor and his staff consider these recommendations in conjunction with their own administrative priorities, and they create an Executive Branch Budget. This Executive Branch Budget is presented to the General Assembly, and House files the Executive Branch Budget in the form of a bill. This process will also be replicated by the Chief Justice of the Kentucky Supreme Court to create the Judicial Branch Budget and by the Director of the Legislative Research Commission to create the Legislative Branch Budget. Once the budget bills are filed in the House, they are referred to the House Appropriations and Revenue Committee, where they are discussed and amended. If the bills pass out of committee, they are reported to the full House and given three readings before a vote. Budget bills require a majority vote to pass. Once a budget bill passes the House, it moves to the Senate, and flows through the Senate Appropriations and Revenue Committee. Once both chambers have passed a budget, any differences in the bills are worked out by a conference committee comprised of members of both the House and Senate, and the agreed-upon changes must then be voted on again by a majority of members of each chamber. After the budget passes out of the General Assembly, it heads to the Governor, who can sign it into law or make line-item veto changes. These changes can be reversed by a majority vote in both chambers of the General Assembly.
What does the 2018 budget process look like?
In January, Governor Matt Bevin addressed the Kentucky General Assembly for his State of the Commonwealth and Budget Address. During his hourlong remarks, he laid out his Executive Branch Budget plan, which cut spending across most state agencies by 6.25% and eliminated 70 programs while fully funding the state’s troubled pension system. The Executive Branch budget proposal was subsequently filed in the House as HB 200 by Representative Steven Rudy, Co-Chair of the House Committee on Appropriations and Revenue. On February 28, HB 200 was reported favorably out of committee with a Committee Substitute and a Committee Amendment, which made changes to the Governor’s initial proposal.
30644
The number to text the word REALTOR to 30644 to sign up for the REALTOR® Party Mobile Alerts. By signing up, REALTORS® have a way to stay connected directly from their cell phone or tablet. Get information on finding your polling locations, election and primary voting day reminders and participate in Calls for Action. Kentucky’s goal is to hit 20% overall participation and currently has reached 94% of the goal.
Lawmakers say these changes will strengthen funding for public education and public safety, while ensuring that Kentucky can still meet its pension obligations. On March 1, members of the House passed HB 200 in a 76-15 vote, and the bill was referred to the Senate Committee on Appropriations and Revenue on March 6. As of publication, the budget had not been passed.
Pension reform In October, Governor Matt Bevin released his “Keeping the Promise” plan, which he said would save Kentucky’s failing pension systems while still meeting obligations to current and retired public employees. Governor Bevin planned to call a special session to enact his pension reform plan before the end of 2017, but those plans didn't come to fruition. Legislators have been hard at work this session, meeting with key stakeholders and working on bill drafts, and pension reform has finally made its way back to the forefront as Senator Joe Bowen filed SB 1. This bill uses Governor Bevin’s framework, but makes several key changes including the removal of two provisions that caused consternation for public employees: the provision earmarking 3% of public employees’ salaries to pay for health care costs and the provision moving public employees to a 401(k)-style defined contribution retirement plans. On March 7, the Pension bill took a crucial first step toward passage when the Senate State and Local Government Committee approved a revised version with a vote of 7-4. The bill moved to the full Senate where Senate President Robert Stivers said he expects the bill to pass. It will then fall to the House to markup and approve its own version of the bill.
Tax reform possible in 2018 Tax reform also moved back into the spotlight after Rep. Stephen Rudy, Co-Chair of the Appropriations and Revenue Committee, said he expected to see this issue handled in the 2018 session. Several bills dealing with tax provisions have been filed, with those bill sponsors saying their measures were meant to be a starting point for discussion. While the proposals run the gamut, the REALTORS® are speaking with one clear voice and asking legislators to oppose a sales tax on professional services and to protect mortgage interest and property tax deductions.
NAR Legislative Meetings & Trade Show: May 14-19 The REALTORS® Legislative Meetings & Trade Expo is where Kentucky REALTORS® have the opportunity to be front and center with their members of Congress at the Capitol to discuss important federal legislative topics that impact the real estate industry. At this event, REALTORS® take an active role to advance the real estate industry, public policy, and the association by participating in special issues forums, committee meetings, legislative activities, and the industry trade show. To register for the event, please visit nar.realtor/midyear. 16 | kyrealtors.com
How your taxes are changing if you’re a homeowner No drastic changes this year. But next year is very different.
T
he sweeping tax bill signed into law just before the 2017 holidays brings changes for virtually all homeowners — but, for the most part, not until you file your 2018 tax return in 2019.
Homeowner tax deductions don’t really change for taxes due this year. So file as you normally would on April 17 (or Oct. 15, if you get an extension). After this tax season, here’s how the new law can affect your home ownership tax benefits.
The standard deduction is going up Because the standard deduction has increased across the board — to $12,000 from $6,500 for single individuals and to $24,000 from $13,000 for joint returns — fewer people will have a reason to itemize. And you guessed it, to get home ownership tax benefits, you have to itemize. If you do have enough deductions to itemize, some things have changed:
The mortgage interest deduction remains, but with a new cap The maximum mortgage debt on which you can deduct interest for new loans is now $750,000, not $1 million as before. Secondhome mortgage interest follows the same rule. If your mortgage existed on Dec. 14, 2017, you’re grandfathered in on the $1 million maximum. Also, you can refinance that existing mortgage and keep deducting the interest on up to $1 million of debt, so long as you don’t increase the amount you owe with the refi.
Home equity loan interest is only deductible for home improvements If you’re planning to redo a bathroom or a kitchen or fix up a fixer-upper, the interest on new home equity loans, home equity lines of credit, and second mortgages will still be deductible, but only up to the maximum amount (for all mortgages) of $750,000. (The new rules refer to “substantial” home
Moving expense deductions are limited to the military Unless you’re in the military, moving expenses you pay out of pocket for a job relocation (at least 50 miles farther from your house than your current job) are no longer deductible. And you can no longer exclude employer reimbursements for moving expenses from your income.
What’s not changing
improvements, though the rule makers didn’t define that word. Talk to your tax pro.) The rules no longer allow you to use home equity loans to get tax-deductible financing for such things as consumer debt and tuition. However, if you have an existing home equity loan (approved before Dec. 15, 2017) and the proceeds were used to substantially improve your home, the interest will remain deductible, so long as you don’t exceed the total cap.
State and local tax deductions are capped Through 2017, these deductions were unlimited. Starting with tax year 2018, state and local taxes, including property and income or sales taxes, are capped at a total of $10,000 combined. BTW, talk with your tax preparer if you prepaid your 2018 property taxes in 2017 in hopes of maxing out your deductions before the tax law change. Whether it’s actually deductible depends. • If you had a 2017 property tax bill in hand, that means the tax was assessed and you should be able to deduct it with your 2017 taxes if you itemize. • If your local taxing authority said it would accept prepayments, but the tax hadn’t yet been assessed — just estimated — the payment likely isn’t deductible on your 2017 tax returns.
Casualty losses have been pared back Casualty losses for such things as a home burglary or a fire are no longer deductible. To claim a casualty loss, the loss has to fall under a presidentially declared disaster, like a hurricane or earthquake.
The capital gains exclusion on a gain on the sale of your home stays the same. When you sell your primary residence, you can make up to $250,000 in profit if you’re single, or $500,000 if you’re married, and not owe any taxes on those gains. Most people are eligible for this exclusion, but you must have lived in your home for at least two of the five years before you sell. The student loan deduction — up to $2,500 if you’re repaying — stays put, and you don’t have to itemize to take it. The home office deduction remains for independent contractors. But for employees who work from home, it’s been repealed. The prepaid interest (or points) you paid when you took out your mortgage is still 100% deductible in the year you paid it, if you itemize. If you refinance your mortgage and use that money for home improvements, any points you pay are also deductible in the same year. But if you refinance to get a better rate or shorten the length of your mortgage, or to use the money for something other than home improvements, such as college tuition, you’ll need to deduct the points over the life of your mortgage. Say you refi into a 10-year mortgage and pay $3,000 in points. You can deduct $300 per year for 10 years. If you’re a landlord, there’s good news: Your mortgage interest and property tax deductions on your rental real estate remain unlimited.
What’s been renewed, at least for now The private mortgage insurance (PMI) deduction was re-upped for tax year 2017. Ditto the residential energy tax credits for installing things like energy-efficient windows and doors, water heaters, furnaces, and insulation. Originally published on HouseLogic.com, a free source of information and tools from NAR that can help home buyers and sellers make smart and timely decisions about their home. SPRING 2018 | Kentucky REALTORS® | 17
EDUCATION
GRI covers all PLE requirements… and more www.kyrealtorinstitute.com > GRI www.kyrealtorinstitute.com > Post-License Post-licensing education (PLE) law went into effect on January 1, 2016, which requires all new licensees to take 48 hours of approved PLE courses within two years of license activation. KRI has you covered, as all 6 GRI courses (GRI 100-600) satisfy the 48 hours of PLE requirements. The GRI program has been redesigned to meet the needs of real estate professionals and include one day courses and a full year of CE per course. The courses also count for broker credit and PLE credit. With GRI, the most recognized professional designation nationwide, you can build your business and expand your knowledge through courses that offer specific training in key areas of real estate. You will increase your network of real estate professionals that can assist in generating leads and referrals from across the state. Already have your GRI designation but there’s a GRI course being taught near you? GRI grads can take any of the courses again at a discounted rate ($50) and still get CE credit.
2018 GRI Course Schedule Over 30 GRI courses have been scheduled across the state, including some offered through a live web cam option so you can attend virtually from your home or office. Check the schedule online for dates, locations and to register. The following locations will have courses available: Greater Louisville Association Greater Owensboro REALTOR® Association Hopkinsville, Christian & Todd County Association Kentucky REALTORS® Lexington-Bluegrass Association Madisonville Hopkins County Board Northern KY Association Paducah Board Pennyrile Board REALTOR® Association of Southern KY Somerset-Lake Cumberland Association
Start real estate classes today www.kyrealtorinstitute.com > pre-licensing In order to meet the needs of today’s student, KRI offers the 96-hour prelicensing program entirely online. All the materials and resources needed to get started in real estate are included in the $599 course price, one of the lowest cost programs in the state. Know someone that wants to get their real estate license? Refer someone to the program and get a discount for an upcoming KRI class or event! Want to know more? Contact Nicole at kri@kyrealtors.com. 18 | kyrealtors.com
2017 GRI Recipients: Christie Harper Rachel Brown Rick Hogue Karen Bhatt Lisa York Matthew Mitchell Greg Taylor Steve James Chris Fox Carolyn Peffer Linda Jackson-Bailey Judith Head Tony McDaniel Pamela Jury Robin Roseberry Lori Tolson Trey McCallie
Steven Bagby Amy Boone Shirley Carr Sandra Sisco Johnny Phillips Desiderio Maldinado Rex Hall Deondra Sailors Carol Harper Ashlie Hogan Karen Randels Kimberly Bridges Christy Collier Janette DeWitt Bettina Merritt Tracy Williams Lester Sanders
CRS Course: Zero to 60 Home Sales a Year (and Beyond) September 24, 2018, Galt House, Louisville, KY, 8 hours of CRS and GRI credit, other CE credits TBD Registration opens soon Do you dream of selling 60 homes or more per year, but aren’t sure where to begin? Whether you are looking to jumpstart your business or just starting out, this course will focus on what’s involved in taking your sales from “zero to 60” and how you can create a plan to turn your sales goal into reality. Learn new methods for marketing and bringing in a continuous flow of business and discover techniques for positioning yourself as the REALTOR® of choice in your area.
Code of Ethics The Code of Ethics training requirements are now on two-year cycles. A new two-year cycle began January 1, 2017. The deadline for this cycle is December 31, 2018. If you haven’t taken an ethics course since January 2017, then you likely need to before the end of the year. Check with KRI for upcoming courses.
KRI scholarships available
Online education has you covered
www.kyrealtorinstitute.com > scholarships
www.kyrealtorinstitute.com > Courses > Online Education
KRI Trustees award scholarships on an annual basis to provide assistance in enhancing real estate professionalism and knowledge through quality educational services and programs for the real estate industry and the public. KRI makes scholarships available to members who want to obtain the GRI designation, as well as provide scholarships to Kentucky residents (members and nonmembers) who wish to pursue a career in real estate.
Scholarship Deadlines: Pre-licensing Application Deadline: May 31, 2018 GRI Application Deadline: May 31, 2018 College Application Deadline: March 29, 2018 (Closed)
KRI offers a wide selection of online education, with both local and national instructors. You will find courses covering everything you need for education - law and elective CE, PLE, ethics and even the core course. The newest courses are video-based, putting the instructor right in front of you. Courses are available 24/7 and can be taken at your pace – all you need is a computer and internet access. Sign up now to get started and complete before the end of the year!
Coming in 2018: 48 Hour Online PLE Packages
SPRING 2018 | Kentucky REALTORS® | 19
things real estate agents can learn from superfans BY LEE DAVENPORT
F
or what are you willing to rearrange your schedule, budget and comfort? The newest tech gadget? Your favorite celebrity? A sick family member? Your favorite team going to the national championship? You have probably seen others do it: camp outside for hours to purchase the newest iPhone or see the latest blockbuster movie, spend several hundreds of dollars to see a sports team play at a championship game that it may ultimately lose or become a borderline “stalker� to connect with a celebrity.
20 | kyrealtors.com
Some may call these people crazy, but I understand that they will do anything for their priorities — anything. Will you? As a real estate coach, I am honored to connect with thousands of people across the globe. From many of them, I hear, “I want to close 50-plus deals this year, and I will do what it takes to make it happen!” But when I look at their lives, I see: • No consistent plan for lead generation • Months without them learning anything new • Follow-up only once or twice • No tenacity if a prospect isn’t ready or responsive today • Complaints about how far they have to drive for a client, class or other business growth opportunity • Appointments with clients, vendor and coaches/mentors missed • Inconsistent and sporadic use of technology • Not getting prepared to meet with a prospect until something is actually scheduled Saying you have a goal, a resolution or an expectation is great because you have to start most journeys with an affirmation, but our actions must speak louder than our words. Many real estate agents could take a page from the fanatics I mentioned at the beginning of this article. Here are five things they can teach us:
1. Plan like a maniac The best fanatics plan their fanaticism so they don’t lose jobs and alienate family or friends. Ask yourself: • How does my schedule need to change to be consistently effective at lead generation, follow-up and transaction management? • What distractions need to be eliminated, given away or postponed?
2. ‘Stalk’ the news Don’t you dare quiz fanatics on their prized possession or favorite events because you know they’ll know every detail, no matter how useless. • Do you know anything and everything concerning your goals? • Do you know where the latest classes are and what designations are key to have? • Do you know what your broker and other industry leaders project as trends to watch? • Do you have Google alerts set up for the keywords of your business and market?
3. Get coverage Because fanatics are “in the know,” the release date is no surprise to them, and they get help to keep their responsibilities and commitments. Ask yourself: • Who can help me handle my other responsibilities while I go all-in? • In what automation should I invest? • Are there any commitments that I need to forego and give proper notice to resign?
4. Show-up early and ready Notice fanatics arrive before they anticipate others showing up and they bring tents, coolers, lawn chairs and whatever else needed to arrive early and stay late. Will you be the “early bird that gets the worm” by not waiting until something is in front of you to prepare for it? For example, how will you prepare for your next listing appointment before you have it? This may mean role-playing a lot, getting a second set of eyes on your listing packet or hiring someone to add pizazz to your presentation.
5. Don’t go home until you’ve got it I have seen true fanatics barter and form alliances with people in front of them in line to make sure they leave with what they came to get. Think about: • What will your strategy be to follow up with leads, sphere of influence and past clients? Following up once or twice means you will not have very much business on a consistent basis. Get off the sales roller-coaster! • How often will you evaluate what you are doing to focus on your strengthens and giveaway/outsource your weaknesses? • Who will be your “sounding board” to help you stay on track? • Do you need to start forming more alliances (with vendors, contractors, other real estate pros and mentors) to get more deals closed? Be that person who won’t let anything get in the way of his or her goals. If people put this much forethought into getting the newest iPhone, you can put even more effort into real estate. Make today the day you become a fanatic about your career. Lee Davenport is a licensed real estate broker, trainer and coach. She is known for helping newbies and veterans alike find and follow-up with (thereby growing) business based on today’s technology and their unique personalities. Lee will be a featured speaker at the upcoming Broker Summit in Louisville on April 25. To register, visit bit.ly/2018BSE. Visit Lee’s website at learnwithlee.realtor.
SPRING 2018 | Kentucky REALTORS® | 21
LOCAL ASSOCIATION NEWS Local boards/associations are encouraged to submit information for this section. Pictures must be at least 300dpi. Send all association news to hcooper@kyrealtors.com.
Paducah Board and Kentucky Barkley Lakes Board In December, 50 REALTORS® from the Paducah Board and the Kentucky Barkley Lakes Board rang bells for the Salvation Army. With 112 volunteer hours, 18 different locations and 56 shifts worked in McCracken and Marshall counties, the Boards raised $4,250 to help toward the local Salvation Army’s budget for 2018. With the help of the REALTORS®, help was provided to people who face struggles with food, heating and cooling, Christmas for children, youth camps and more. To learn more about helping with the Salvation Army this December, see page 4.
Lexington Bluegrass Association In November 2017, LBAR was awarded a $15,000 grant from the NAR’s Housing Opportunity Program to support activities that create and expand affordable housing opportunities. LBAR donated $1,500 to the project. With the Rent & Deposit Assistant (RDA) Project, the grant is being used to pay deposit and first month’s rent for households experiencing homelessness who have documented income to pay ongoing rent. LBAR also offers the broker business+ version of DotLoop to all broker members. This member benefit empowers brokers to manage documents, eSignatures, storage, compliance and overall collaboration - all in one platform! This member benefit is no additional charge to members. LBAR is also announcing Justin Landon as its new CEO. Landon previously served as the Vice President of Government Affairs for the San Antonio Board of REALTORS® and was chosen after a nationwide search.
Greater Louisville Association GLAR hosted their Spring Week of Service in March. During this dedicated week, REALTORS® sign up for various volunteer opportunities listed on the dedicated REALTORS® Week of Service website at www.WeekofService.com. Non-profits helped this year included Active Heroes, Snacks in Sacks, Home of the Innocents, Mom’s Closet and Fuller Center for Housing. The Association also introduced a new 59.5 Minute Series, which was created to get members in and out in under an hour, armed with essential information and emerging trends on a variety of topics for their business. These free sessions are held monthly with changing topics.
Northern Kentucky Association NKAR is planning its first 2018 community service project with Housing Opportunities of Northern Kentucky (H.O.N.K.) in late April. NKAR annually donates sweat equity and supplies to help families complete the rehab of the home they have been selected to own. Since 1991, H.O.N.K. has helped members of the northern Kentucky community to realize the American dream of homeownership by providing affordable housing solutions to deserving families and individuals, allowing them to reconstruct their lives by building their futures on a solid foundation of faith, education, and support. NKAR named Mike Spicer as the 2017 ROTY, Art Reed was presented the Robert J. Enos Dedicated Service Award and Rebecca Trout received the Good Neighbor Award for her commitment and dedication to New Day NKY.
Edgewood has a healthy housing market
Henderson Audubon Board The Henderson Audubon Board received a $5,000 placemaking grant from NAR to help make downtown Henderson a better place to live by transforming an unused space into a vibrant public space for the community to gather and enjoy. The Board will use the funds to help with the building of “The Perch,” Henderson’s first pocket park. They are partnering with the Downtown Henderson Partnership, City of Henderson, Henderson County Tourism, OVAL, HAAA and the Preston Foundation on this project, making it a true collaborative effort. The park is set to be completed in early summer 2018. NAR placemaking grants are intended to help REALTOR® Associations partner with others to build, beautify and protect public spaces. Communities that offer a variety of public spaces - pocket parks, trails, pedestrian plazas, and community gardens - are often more desirable making them better places to live and buy a home. 22 | kyrealtors.com
A recent study suggests Edgewood, Kentucky, located in northern KY, is a great place to live as far as housing goes. The city ranked sixth in a study of the healthiest housing markets conducted by financial technology company SmartAsset. The study was based on factors such as the average number of years residents spend in their homes, home values, ease in selling the home and costs associated with home ownership. According to the study, Edgwood had the following statistics: The average homeowner lives 19.5 years in their home 6.7 percent of the homes have a negative equity Only 17. 1 percent of the homes are decreasing in value The average home is on the market 23.3 days It ranks 96.23 on the Healthiest Markets Index
Louisville makes Realtor.com list of hottest zip codes After analyzing 32,000 ZIP codes based on the time it takes properties to sell and how frequently homes are viewed in each ZIP code, the top zip codes in the country were identified. The hottest
ZIP codes for 2017 are the ones that appeal to millennial preferences, illustrating the power of millennial gravitation toward affordable suburbs with local “it” factors such as hiking trails, great restaurants, and nightlife. The largest generation in U.S. history, millennials seem to be driving the market in many ways and helped Louisville score a hotness factor of 97.78 percent ranking the city #13 on the list.
Lexington makes the grade for college grads SmartAsset, for the third year in a row, took a look at the best cities for new college grads and Lexington took home #7 on the list, up 11 spots over last year. The survey looked at the 108 largest cities in the U.S. using metrics that fell into the categories of jobs, affordability and fun.
Owensboro is for millennials Young people are looking to get their start in places outside the big cities like New York and Washington DC and Business Insider compiled the towns that millennials have moved to in droves over the past few years. Using data from personal finance company SmartAsset, real-estate analytics firm RCLCO, and mortgage software firm Ellie Mae, Owensboro made the list of the top 11 cities where millennials chose to live. According to Ellie Mae, in 2015, millennials made up 48% of homebuyers in this riverside town of 60,000 that is also within a few hours drive of Nashville, Louisville and St. Louis which added to its appeal.
Lexington is a best place to live To determine America’s 50 best cities to live in, 24/7 Wall St. considered roughly 590 cities the U.S. Census Bureau reported as having populations of more than 65,000. Data points were collected in nine major categories, crime, demography, economy, education, environment, health, housing, infrastructure, and leisure, using three dozen socioeconomic measures to identify the 50 best American cities to live in. Lexington came in at #31 in the ranking.
Bowling Green attracts millennial buyers One of the main take-aways from Ellie Mae’s most recent list of the cities where millennial borrowers represented the highest percentage of homebuyers as shown on its Millennial Tracker, is that the largest demographic is settling down in smaller cities. The list is based on the percentage of closed home loans by millennial borrowers born between the years 1980 and 1999, which were initiated by Ellie Mae’s Encompass® all-in-one mortgage management solution. At #10 on the list, Bowling Green showed that 47 percent of the loans closed were by millennial borrowers and the average age was 28.6.
Quality of life high for Lexington residents NerdWallet analyzed 177 U.S. cities with over 150,000 residents using data estimates from the 2016 U.S. Census Bureau American Community Survey. They analyzed the number of hours worked, commute times, percentage of income spent on housing, health insurance coverage, poverty levels and unemployment rates to get a picture of quality of life in each location. Lexington scored well coming in at #12 overall for best cities for quality of life.
At the legislative meeting in Lexington, Kentucky REALTORS®, along with many of the state’s local REALTOR® Associations and dozens of members, stepped up to donate to Marshall Strong, the organization which supports the families of the victims of the mass shooting at Marshall County High School in Western Kentucky. If you or anyone you know wants to contribute, donations can be sent to the KY Barkley Lakes Board of REALTORS® at 75 Vine Street, Benton, KY 42025. Checks should be made payable to “Marshall Strong.” 100% of all proceeds will help victims and their families pay for funeral expenses, medical bills and other expenses incurred due to the tragedy. Any remaining funds after those expenses have been paid are planned to be used for scholarships for those injured who survived the shooting, and memorial scholarships for the 2 students who did not survive. The KY Barkley Lakes Board, the local association in the area, held a dessert auction at their February Membership Meeting, and along with affiliates, were able to raise almost $3,000 for the organization. Total raised across the state from the REALTOR® family has reached nearly $10,000.
Louisville ranks high in Thumbtack survey Louisville has earned an A grade from small business owners through Thumbtack’s 2017 Small Business Friendliness Survey, which is the largest continuous study of small business perceptions of government policy in the US, surveying more than 13,000 small business owners. Louisville ranked No. 7 out of the 80 cities surveyed and is the only city in Kentucky to receive this top ranking. The city scored an A+ in the employment, labor and hiring regulations and licensing regulations categories and scored above the national average in the tax regulations and government website categories. The state received a grade of A-, ranking 17 out of 50 states surveyed.
Vogue names Lexington as a top destination A national fashion magazine, Vogue, has named Lexington one of the top travel destinations in 2018. Vogue says Lexington’s horse farms and up-and-coming food, bourbon and micro-brewery scene has made it one of nine midsize American cities worth visiting in 2018.
Bourbon country named a top travel destination Travel media authority Lonely Planet named Kentucky’s bourbon country one of the “Top 10 U.S. Travel Destinations” for 2018. Landing at #8 on the list, Lonely Planet had this to say about Kentucky bourbon country: The state of Kentucky is known for its rolling hills topped with stately horse farms, its fierce devotion to college basketball and, most importantly, its bourbon. The state’s distilling heritage runs deep, and those looking for a taste should head straight to Kentucky Bourbon Country, the golden triangle between Louisville, Lexington and Elizabethtown where this seasoned spirit comes to life. You’ll find an enticing network of the country’s most well-known distilleries and top-notch restaurants with bourbon-inspired menus. But this industry isn’t so steeped in tradition that it forgets progress – craft distillers are opening their doors, long defunct bourbon districts are being revitalized, and in 2018 the Frazier Museum will be named the official starting point of the Kentucky Bourbon Trail. SPRING 2018 | Kentucky REALTORS® | 23
BY THE NUMBERS The average closing costs for Louisville and Lexington, placing them at #6 and #9 on the SmartAsset ranking for the category on the affordability index list.
The percent of the more than 3,000 respondents to Coldwell Banker’s survey who say they’d choose a real estate agent who offers virtual reality (VR) house tours as a service to their clients over one who does not. Further, 84 percent express the desire to take a VR house tour before seeing a property in person; 77 percent say they’d be satisfied with a traditional video tour
The percent of Americans who intend to buy a home in the next 12 months have been searching for a whopping three months or more. Some 42% of respondents told NAHB they “can’t find a home at a price I can afford,” while 36% “can’t find a home with the features I want” and 34% “can’t find a home in the neighborhood I want.” And even if would-be buyers can overcome all those obstacles, nearly 30% said they “continue to get outbid whenever I make an offer.” The percent of renters surveyed who say they expect their rent to increase this year, according to NAR’s newly released Aspiring Home Buyers Profile. However, only 15 percent of renters said the increase in rental costs would make them consider purchasing a home.
More than half of homebuyers who purchased approximately 5.5 million existing homes in 2016 attended an open house at some point during their search, according to the recent Real Estate in a Digital Age report from NAR.
24 | kyrealtors.com
$2,068 and $2,165
60 percent
62% 64.2% vs 63.7% & 63.9%
61% 47% vs 23%
51 percent
57 percent More than half
A study conducted by Michael Seiler of Old Dominion University stated that buyers spend 60 percent of their time reviewing a listing looking at the photos. A Redfin survey found that homes with professionally taken photographs get an average of 61 percent more page views and have a 47 percent higher asking price per square foot. The homeownership rate was 64.2% in the fourth quarter of 2017. This is up from 63.7% the year before and 63.9% in the third quarter. Among Millennials, the homeownership rate ticked up slightly from 35.6% to 36%. The homeownership rate is significantly higher at 75.3% for those aged 55 to 64 years and 79.2% for those aged 65 years and older. What’s even more positive news for the housing market is that much of the increase in the homeownership rate over the past year has come from 18 to 44-year olds.
According to a report from NAR, about 47% of Generation X respondents said they were having difficulty saving up for a down payment. That’s compared with 23% of millennials. Nonowners aspiring to own a home in the future reached 82% with the main reason that many are unable to do so is because they can’t afford it. The percent of brokers who said they were “optimistic” about the future of the housing industry, followed by 20 percent who say they have a high confidence level. Twenty percent were neutral and only 3 percent said they have a low confidence level in the housing industry, according to a survey by Better Homes and Gardens Real Estate and RISMedia.
HOUSING STATS
Real estate activity remains strong in Kentucky Prices increase and sales hover at all-time highs Coming off a record-breaking year in 2017, the real estate market in Kentucky continued its run of strong sales activity and increasing home values in January. Total home sales in January were the second highest on record at 3,024, only 27 sales shy (0.1 percent) of the 3,051 sold during the same month in 2017. January was only the 13th month in the past six years that sales dipped year over year. It did, however, mark the third straight month where homes sold were down compared to the same month the year prior. “Even though home sales were down slightly in the first month of the year, activity is still strong across most parts of the state and hovering at all-time highs, despite the suppressed inventory levels,” said Steve Cline, 2018 president of Kentucky REALTORS® (KYR). “This year should continue to see good movement in the market and will pick up even more if the number of homes available for sale increases, especially through new construction.” Median home prices across the state rose 4.6 percent in January to $122,433, up from $116,994 in January 2017, making it the highest median price recorded for January in any year. Total sales volume hit $544 million in January, a 5.9 percent increase over 2017. Home prices, according to Lawrence Yun, chief economist for the National Association of REALTORS® (NAR), are being driven higher due to lack of available properties not only in Kentucky, but across the entire country. “The utter lack of sufficient housing supply and its influence on higher home prices muted overall sales activity in much of the U.S. last month,” Yun said. “While the good news is that REALTORS® in most
areas are saying buyer traffic is even stronger than the beginning of last year, sales (nationally) failed to follow course and far lagged last January’s pace. It’s very clear that too many markets right now are becoming less affordable and desperately need more new listings to calm the speedy price growth.” In Kentucky, however, affordability is less of a problem than in many parts of the country. The median home price nationally was $240,500, almost double what is seen throughout the state. In the three largest metro areas, Louisville, Lexington and northern Kentucky, median home prices were still 30 to 35 percent lower than the U.S. as a whole. Housing inventory in the state leveled in January, down only 2%, after rising 2.4 percent in December and remaining even in the fourth quarter of 2017. With 5.3 months of inventory reported, this is considerably more than the national level of 3.4 months. Six months of inventory is considered a balanced market. NAR is reporting the tide may finally be turning for housing inventory as new home construction jumped in January and homebuilder confidence is high. These two factors will hopefully lay the foundation for the building industry to meaningfully ramp up production as 2018 progresses. Days on market (DOM), an indicator that shows housing demand, dipped 11.5 percent to 116 days in January. In 2017, days on market dropped to 118 days, which reflects that homes are still moving quickly when brought to market. “The market is only going to become more competitive as the weather changes, buyers continue their search for homes and the promise of higher interest rates stays on the horizon,” says Cline. “Those planning to buy a home this spring should get pre-approved for a mortgage soon and, conversely, sellers that will be listing their home in the spring or summer months should start preparations now so it’s ready to go when the time comes to get it listed. With the economy in good shape, I’m predicting that real estate in Kentucky will continue at a strong pace throughout the year.”
To view housing statistics for the state, visit housingstats.kyrealtors.com. JANUARY 2017 vs JANUARY 2018 Board/Association
# Sold 2017
# Sold 2018
Sold %
Median Price 2017
Median Price 2018
Median Price %
Ashland Area Board Central Kentucky Association Eastern Kentucky Association Greater Louisville Association Greater Owensboro Association Heart of Kentucky Association Henderson-Audubon Board Hopkinsville-Christian Board Kentucky-Barkley Lakes Board Lexington Bluegrass Association Madison County Board Madisonville-Hopkins Board Mayfield-Graves Board Murray Calloway County Board Northern Kentucky Association Old Kentucky Home Board Paducah Board Pennyrile Board REALTOR® Association of SKY Somerset-Lake Cumberland Board South Central Kentucky Association
62 33 37 957 79 155 20 26 28 776 42 40 25 21 378 46 42 23 174 66 21
73 31 46 988 92 144 21 24 24 728 25 32 22 19 401 33 55 12 164 67 23
18% -6% 24% 3% 16% -7% 5% -8% -14% -6% -40% -20% -12% -10% 6% -28% 31% -48% -6% 2% 10%
98000 73000 79500 162000 130500 131000 111250 117500 125000 146000 133250 115950 62500 154000 135500 133500 97750 89175 146000 117500 98000
84000 123000 67000 166550 111250 145450 108500 108500 117450 159000 127500 99500 90200 122000 160000 155000 114000 115000 146200 127000 124000
-14% 68% -16% 3% -15% 11% -2% -8% -6% 9% -4% -14% 44% -21% 18% 16% 17% 29% 0% 8% 27%
Totals
3051 3024
122433
5%
-1% 116994
SPRING 2018 | Kentucky REALTORS® | 25
Real estate professionals should pay close attention to
commercial drone regulations Stiff penalties may be assessed for non-compliance BY DOUG KILLINGSWORTH, AVIATION SAFETY INSPECTOR – OPERATIONS RONALD.KILLINGSWORTH@FAA.GOV
R
ecently, the FAA has received several complaints from Certificated Unmanned Aerial Systems (UAS) pilots about violations to commercial drone use. In many instances, these are real estate professionals who are using drones for photography and video, but are not certificated UAS pilots. The purpose of this article is to inform real estate professionals about the consequences of using drones commercially without a certificate and to provide the correct information about the laws and regulations regarding Unmanned Aircraft System (UAS) operations conducted within the National Airspace System (NAS). The FAA’s safety mandate under 49 U.S.C., § 40103 requires it to regulate all aircraft operations conducted in the NAS, which include UAS operations, to protect persons and property on the ground and to prevent collisions between aircraft and other aircraft or objects.
An Unmanned Aircraft is an Aircraft An unmanned aircraft is an “aircraft” as defined in the FAA’s authorizing statutes and is therefore subject to regulation by the FAA. The FAA has promulgated regulations that apply to the operation of all aircraft, whether manned or unmanned, irrespective of the altitude at which the aircraft is operating. Unmanned aircraft, including model aircraft, have always been, and continue to be, subject to the statutory and regulatory requirements applicable to aircraft.
UAS Registration Requirements All unmanned aircraft, including those operated exclusively as model aircraft, that weigh more than 0.55 pounds and that are operated in the NAS must be registered with the FAA under either 14 CFR part 47 or part 48.
26 | kyrealtors.com
The FAA will issue a unique registration number that must be placed on the unmanned aircraft so that it is readily visible (this may be inside a battery compartment or other place in the aircraft provided no tools are needed to open the compartment). This number will be unique to the operator if operating strictly as a model aircraft, and unique to the aircraft if operating other than as a model aircraft. The operator of the UAS must carry a Certificate of Aircraft Registration in either paper or electronic form and make it available to law enforcement upon request. Failure to register a UAS, including model aircraft, in accordance with these rules may result in regulatory and criminal sanctions. The FAA may assess civil penalties up to $27,500. Criminal penalties include fines of up to $250,000 and/or imprisonment for up to three years. To register your UAS or for more information about UAS registration requirements, visit the FAA website at www.faa.gov/uas/registration.
Model Aircraft Operations An important distinction for UAS operators to understand is whether the UAS is being operated for hobby or recreational purposes, or for some other purpose. This distinction is important because there are specific requirements in the FAA Modernization and Reform Act of 2012, Public Law 112-95 (the Act), that pertain to model aircraft operations, which are conducted strictly for hobby or recreational purposes. While flying model aircraft for hobby or recreational purposes does not require FAA approval, all model aircraft operators must operate safely and in accordance with the Act. Section 336(c) of the Act and 14 CFR § 1.1 define “model aircraft” as “… an unmanned aircraft that is: 1) Capable of sustained flight in the atmosphere; 2) Flown within visual line of sight of the person operating the aircraft; and 3) Flown for hobby or recreational purposes.” Each element of this definition must be met for a UAS to be considered a model aircraft under the Act. Under Section 336(a) of the Act, the FAA is restricted from conducting further rulemaking specific to model aircraft as defined in Section 336(c) so long as the model aircraft operations are conducted in accordance with the following requirements of Section 336(a): 1) “the aircraft is flown strictly for hobby or recreational use; 2) the aircraft is operated in accordance with a communitybased set of safety guidelines and within the programming of a nationwide community-based organization; 3) the aircraft is limited to not more than 55 pounds unless otherwise certified through a design, construction, inspection, flight test, and operational safety program administered by a community-based organization; 4) the aircraft is operated in a manner that does not interfere with and gives way to any manned aircraft; and 5) when flown within 5 miles of an airport, the operator of the aircraft provides the airport operator and the airport air traffic control tower (when an air traffic facility is located at the airport) with prior notice of the operation (model aircraft operators flying from a permanent location within 5 miles of an airport should establish a mutuallyagreed upon operating procedure with the airport operator and the airport air traffic control tower (when an air traffic facility is located at the airport).” Section 336(b) of the Act makes clear that the FAA has the authority under its existing regulations to pursue legal enforcement action against persons operating model aircraft in accordance with Section 336(a) and 336(c) when the operations endanger the safety of the NAS. So, for example, a model aircraft operation conducted in accordance with Section 336(a) and (c) may be subject to an enforcement action for violation of 14 CFR § 91.13 if the operation is conducted in a careless or reckless manner that may endanger the life or property of another.
Failure to register a UAS, including model aircraft, in accordance with these rules may result in regulatory and criminal sanctions. The FAA may assess civil penalties up to $27,500. Criminal penalties include fines of up to $250,000 and/or imprisonment for up to three years. Commercial and Other Non-Model Aircraft UAS Operations UAS operations that do not meet the definition of model aircraft or are not conducted in accordance with Section 336(a) of the Act, may only be operated with specific authorization from the FAA. The FAA currently authorizes UAS operations that are not for hobby or recreational purposes through one of four avenues: (1) 14 CFR part 107; (2) Section 333 exemptions3; (3) civil aircraft certification; or (4) public aircraft operations. 1) 14 CFR Part 107: The new regulatory framework that enables certain small UAS operations for non-hobby purposes. The rule addresses airspace restrictions, remote pilot certification, visual observer requirements, and operational limits. Certain provisions in the rule are waivable. Operators may also seek relief from the provisions of the rule using the 14 CFR part 11 exemption process. Read the full regulation at http://www.faa. gov/regulations_policies/. 2) Section 333 Exemptions: The FAA issued these exemptions to authorize certain commercial operations as a bridge to 14 CFR part 107. These exemptions are valid for two years. Existing Section 333 exemption holders will still be able to operate under the terms of their exemption after the small UAS rule takes effect. UAS operators who have obtained an exemption must also obtain a COA (certificate of waiver or authorization). Instructions on how to apply for an exemption can be found at http://www.faa.gov/uas/legislative_ programs/section_333/. 3) Public Aircraft Operations: Further information about public aircraft operations is available in Advisory Circular (AC) 00-1.1A, Public Aircraft Operations. Public aircraft operators must obtain a COA prior to operations. Instructions on how to apply for a COA can be found at http://www.faa.gov/uas/. 4) Airworthiness Certification: Refer to the current edition of FAA Order 8130.34, Airworthiness Certification of Unmanned Aircraft Systems and Optionally Piloted Aircraft. The full civil type certification process allows for production and commercial operation of UAS and is a lengthy process typically undertaken by aircraft manufacturers. Note: UAS operations that are not operated as model aircraft under Section 336 of the Act are subject to future FAA regulation.
For All UAS Operators The FAA provides guidance and information to individual UAS operators about how they can operate safely under current regulations and laws. Guidance may be found at http://www.faa.gov/uas/.
SPRING 2018 | Kentucky REALTORS® | 27
CEO'S MESSAGE
In the end, it’s all about leadership
A
s an organization management professional for many years, I’ve always been fascinated by what makes organizations tick. As long as I’ve been at it, I can say that I’ve come across dozens of reasons why organizations - both large and small - did well. It’s been evident to me that a few “constants” have made a difference. There is one in particular that has been a standout and that is innovation. There are no best-practice solutions to seed and cultivate innovation – believe me when I say that I’ve been looking for more than 20 years! Ninety-four percent of senior executives say that people and corporate culture are the most important drivers of innovation. Executives pointed to leadership as the best predictor of innovation performance. For those that thought their own organization was more innovative than its peers, they rated their own leadership capabilities as “strong” or “very strong.” They rated their leadership capabilities just the opposite if they believed their own organization’s ability to innovate was below average. Leadership and innovation seem to go hand in hand. What inhibits innovation and change? There are three inhibitors that rise to the top: 1. A culture that is too bureaucratic or hierarchical 2. An intolerance of failure by the organization, and 3. More focus on the risk of doing certain things versus the opportunities if a change is made. So, if we know some of these inhibitors exist where we are, how do we change the culture? • Hold leaders accountable for encouraging innovation in their own organization. Shouldn’t this be measured by someone and then rewarded if it occurs? • Add innovation to the agenda of team meetings in an organization and make it a regular part of the discussion. What could happen if we rewarded great new ideas and helped team members know how much innovation from them is valued by our organization? 28 | kyrealtors.com
STEVE STEVENS, CCE
CEO – KENTUCKY REALTORS
• Communicate the kind of innovation that drives growth or meets the strategic objectives of the organization. Sharing best practices of growing companies regularly with team members and encouraging them to embrace them will yield results. So, how do we apply this to the real estate industry and what we do every day? Let me tell you what I see exhibited among some of our most successful industry leaders: A display of fearless loyalty for doing what’s right for the organization and customer – Pleasing a “boss” or higher authority always takes a back seat to doing the right thing for the company or customer. I’m sure this comes from our fierce adherence to our 100-year old Code of Ethics and the celebration of Fair Housing’s 50th Anniversary. Being candid in communication – These successful leaders and innovators give open, honest and, at times, even “blunt” feedback. Colleagues always feel they can count on straight answers from their leader. Putting faith in a culture that magnifies upward communication – These leaders believe that most great ideas come from the bottom up and strive to create a culture that uncorks good ideas. They tend to project optimism, energy and are always receptive to new ideas – no matter how crazy!! The speed of the leader determines the speed of the group – These leaders prefer trial and error, prototypes and experiments over lengthy study by large committees which grind things into dust. Persuasiveness – These leaders are highly effective in getting others to accept good ideas – not by pushing or forcing their ideas onto others – but presenting them with enthusiasm and conviction which leads to willing acceptance. Back in my former days working in economic development, I often heard people say that it seemed like Kentucky was preparing for a low hurdle race in a high hurdle world. That view appears to be quickly changing, in large part due to leadership across many sectors. Even with the challenges we see with low inventory and sorely needed new construction, our favorable conditions and healthy economy present many opportunities. Let’s be sure we too are an industry sector that also sets the bar high and we force ourselves to get out of our comfort zone. I’m fairly certain that if we do, there will be big rewards ahead! Aim Higher!!
GET YOUR DUCKS IN A ROW:
5 Tips for a Better Policies & Procedures Manual
A
BY TRISTA CURZYDLO, J.D.
few years ago I was approached by a client to assist them in reviewing their policies and procedures manual. The brokerage had recently merged with another smaller brokerage and had new leadership at the helm. It was, as the broker/owner said, “time to get our ducks in a row.” After blowing the dust off the policies and procedures manual that had been sitting on a shelf over their copier for a few years, I began to read an extremely well-written manual. As I started on the third page of disclaimers, I realized the reason I felt the manual was so well-written was that it had been drafted by an attorney to be enjoyed by other attorneys. This is a common mistake made by many brokers and it’s one of five missteps I identified for this client: • Write your policies and procedures manual in a language everyone can understand. • Keep your policies and procedures manual current by doing annual reviews and revisions. • Retain flexibility for management within the policies and procedures manual. • Provide adequate training on the policies and procedures of the manual and encourage questions. • Enforce the policies and procedures described in the manual. It is important to work with the legal counsel of the brokerage or a qualified human relations attorney in drafting the manual, but it is equally important that the manual reflect how you want the office to operate. Leave out the heretofore, whereas and therefore clauses and focus on writing a manual that anyone could read and understand. Avoid turning to the internet for a boilerplate policy and procedures manual: every state has its own set of laws regulating the real estate industry and your manual should reflect this. A manual that was not drafted with your individual brokerage in mind may also have unexpected legal ramifications, such as committing you to providing benefits you hadn’t planned on providing or treating some of your staff as employees when you view them as independent contractors. A one-size-fits-all manual will also fail to incorporate the culture of the brokerage. The policies and procedures manual sets the tone for the operation of the brokerage and it’s vital that its “personality” is a reflection of the brokerage’s culture. The brokerage I mentioned above was extremely active
in several non-profit housing related organizations and yet the policies and procedures manual didn’t include any mention of their philanthropic endeavors. Part of the culture of the brokerage was community involvement and this should have been highlighted. The laws regulating the real estate industry are in a constant state of change, brokers have a responsibility to themselves, their agents, and their clients to remain abreast of these changes. Your REALTOR® association has a phenomenal staff devoted to tracking the actions taken at the local, state and national level that impact your practice. Take advantage of this resource and build on the information they provide to revise your policies and procedures manual on an annual or as-needed basis. For example, a policies and procedures manual that was drafted two years ago may not have an adequate section on the use of social media by agents or staff. A broker can’t shy away from new technology or new trends in the real estate industry, the policies of the brokerage need to address social media or whatever the new big thing is. A well-drafted policies and procedures manual will make it clear that the Broker is the ultimate decision maker and will include the appropriate flexibility for management of the business. I consider this the “may vs. shall conundrum”: when the manual says you shall do something, you’re committed to that course of action. When the manual states the broker may do something, it provides the broker with flexibility to determine the course of action. When drafting each section of the manual, ask yourself if that section calls for flexibility in management or for clear cut expectations of behavior. If you’ve ever found yourself in a conversation where someone is saying “But, my understanding is that . . .” there is most likely a misunderstanding between the parties. The most effective way to avoid misunderstanding in your brokerage is to spend time training your agents, management team, and office staff on the policies and procedures described in the manual. You probably already have a section in your independent contractor agreement that calls for the contractor to agree he or she has received and read the manual; take this a step further and ensure the manual has been received, read, and understood. A policies and procedures manual can only be effective if everyone understands what the manual says. To be effective, a policies and procedures manual must be enforced. Agents and office staff talk and frequently they are talking about the broker. Often those conversations are quick to focus on how the treatment one person received was unique from the treatment of others. Consistently referencing a policies and procedures manual allows a broker or manager to approach situations in a fair and rational manner.
Trista Curzydlo, JD, is a graduate of Washburn University, School of Law. Her extensive legal experience includes serving as Assistant Legal Counsel to a governor and as an Assistant District Attorney assigned to the Consumer Fraud division. Trista is the former Government Affairs Director and Legal Counsel for the Wichita Area Association of REALTORS® and the South Central Kansas MLS. Trista now speaks nationally on topics related to real estate law and ethics. Trista will be a featured speaker at the upcoming Broker Summit in Louisville on April 25. To register, visit bit.ly/2018BSE. This article is reprinted by permission of Trista Curzydlo and C4 Consulting, LLC. SPRING 2018 | Kentucky REALTORS® | 29
A DAY IN THE LIFE OF...
a Commercial REALTOR® & President of the Greater Louisville Association
Dave Parks, CRS, ABR, CRB, Broker, Owner
Berkshire Hathaway HomeServices Parks & Weisberg, REALTORS® How many years have you been in real estate?
Currently, what are the biggest challenges on the commercial side?
I have been in Real Estate since 2001 after retiring from the United States Marine Corps.
I think the most pressing challenge in commercial right now is that as interest rates are rising, there are large commercial deals, especially multi-family that were contracted with capitalization rates that no longer hold. A ½ percent increase in the interest rate on a single-family home usually doesn’t kill a deal. However, a leveraged multi-family project could definitely fail if interest rates move ½ percent, especially when rates are as low as they are right now. For example, if you have a multi-family project that is underwritten with even as low as 50% debt to equity and rates go up ½ point, and the original rate was 4% and now it is 4.5%, you have reduced the value of cash flow by 10%.
You own your own brokerage. When did you start that and what motivated you to take that step? Our firm was most recently owned by Frank Weisberg, Ron Weisberg and my mother Pat Parks. About nine years ago, they decided they wanted to transition. Knowing that we wanted to retain the culture and leadership that our families brought to the company, we made the decision to buy the company. What did you do before real estate and how did you make the change? I was a career Marine Officer. I spent many years in Marine Corps Recruiting Command and it was a natural fit to come to the real estate business and use the combination of leadership and sales skills obtained from my past. What was the one thing that helped propel your real estate career forward when you first started? Early on, our firm had a large builder team that was in need of leadership. I was fortunate to be selected to lead the team and it really propelled my career in terms of knowing that I wanted to lead a company. How did you get started in commercial real estate? Early in my career, I was approached by a client with an almost unsolvable commercial problem. They had a client with no money and no credit, but they had a reputation for running a great business. Many agents in town would not have represented them, but it was right up my alley, giving me the chance to solve the difficult problem. I found a local church that had 10,000 square feet of unfilled space and we brokered a deal where they staffed the day care center. As part of the transaction, they also got a number of "reserved" spots for their congregation. That transaction led me to enjoy commercial real estate. What are the three major differences between residential and commercial? I think first, you have to understand the financials of both clients. While there are still plenty of emotions involved, if you don't know the numbers it's a big problem. Next, commercial is much more cyclical. While you always need a house, businesses don't always need to expand. And finally, the commercial industry is dominated by fewer agents and brokers, and in many firms, agents specialize in one type of transaction i.e. retail, industrial, etc. Residential agents tend to have a much freer reign to develop many lines of business. 30 | kyrealtors.com
What is your outlook for commercial real estate in Kentucky over the next 12-24 months? I believe that given the new tax code and its incentives for accelerated depreciation, and the current interest rate environment which is still historically low, we will continue to see a strong commercial market as long as we don't have a major event that shakes up the long term business environment. Has there been a commercial transaction of yours that stands out above all others? I had a transaction recently where a young couple with a growing business needed a building and land to run their business. We were able to get the investor to build them a new building on the land and lease the building and the land to them with an option to purchase. Since then, they have built a second building and it has been a great relationship for everyone, and one of my most personally rewarding transactions in terms of a win-win for all. What are a few of the highlights you’ve experienced since you started in real estate? I’m having a great ride so far. I’ve made plenty of mistakes and grown tremendously over the years, but the partnerships that I have with my family and friends have definitely been the most rewarding. Outside of business, what is your favorite pastime? I love to compete. Hollywood Gin and playing golf are tops on the list. What is the best advice you have ever received? Never, never, ever give up - life is all about how you handle "Plan B."
Mark your calendar
2018 KYR Convention & Expo Galt House Hotel & Suites Louisville, Kentucky September 25 - 27
For more info about the Convention & Expo, visit bit.ly/2018kyrconv
Wednesday, April 25
2018
BROKER
Louisville, KY • The Brown Hotel Elevate Your Business
SUMMIT
...the only statewide broker training event in KY Key objectives for the event: - Understanding violations in real estate practice regarding risk management - Obtain more leads using today's social media techniques
Registration includes all materials needed as well as morning refreshments and lunch Discounts available - $149 walk-in rate
- Your legal questions answered, top legal issues in KY - Legislative issues that can impact real estate and how elections are playing a role - 2018 mortgage trends and financing options for clients
Groups of 2 or more only $79 each a savings of 40% (group walk-in $99 each) Attendees will receive 8 hours of GRI credit, 6 hours of CE (3 law) & 8 hours of broker credit
- Cybersecurity and how to protect your business - Learn about the hot issues in real estate
Lunch is included in registration! (a $20 value)
- E&O coverages and things not covered by your insurance - Networking and idea exchange - Participate in an idea exchange and network with colleagues
Call 800.264.2185 for more details.
Register online at bit.ly/BS18OBM
Jeff Ratanapool
Harry Borders Trista Curzydlo
Diane Disbrow Other speakers include: Cindy Rice Grissom John McCarthy Tom Holobowski
Lee Davenport
Melanie Wyne
Special thanks to our sponsors: