uncovering the truth
Tech Hottips
A new series on dispelling real estate urban legends.
The latest tips and tools for the real estate professional.
January 2011 $5.00
2011 economic
outlook
MAGAZINE
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table of contents
features 6
2011 Economic Outlook
10 14
Safeguarding Personal Information
More about what you need to know if you find yourself managing a property.
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19 22
Real estate professionals collect personal information all the time; keeping it safe is paramount.
First Order of Business: Cut Spending
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The 2011 Wisconsin Legislature must find new solutions to an old problem.
news.wra.org
2011 |
vol.
27, no. 4
articles
The national housing market has stabilized, but remains fragile. Here’s the outlook for Wisconsin.
The Accidental Property Manager: Take 2
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january
Uncovering the Truth: Protected Buyer Urban Legends
The first in a series of articles dispelling real estate untruths.
Tech Hottips A new WRA product bringing you the latest in technology tips and tools.
Sales Tip: Teaming Up with our Affiliates Nurturing relationships within our community can result in help and referrals from unexpected places.
Prosser the Guinea Pig How State Supreme Court Justice David Prosser’s bid for reelection will test Wisconsin’s Impartial Justice law.
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Lawmakers Modify Wisconsin’s Smart Growth Law to Reduce Future Lawsuits
An overview of recent changes to Wisconsin’s comprehensive planning law.
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News
editor’s NOTE
I
wish you could have been here in December.
Some of you got a glimpse of the activity when visiting for CE classes, but in case you missed it, let me paint a quick picture: phones were ringing off the hook, we were sending regular email reminders about license renewal deadlines, staff were on call (even on weekends), and everywhere you looked, computer screens were open to help members find key information. It was nothing short of spectacular to see my colleagues put their projects aside and pitch in to take calls and help members. This dedication and energy is why I’m proud to be part of the WRA. Of course, even as these efforts took place, we were putting together this January edition. This month brings three new features to the magazine: First, Inside the WRA on page 4 now includes Bill and John’s columns side-by-side. While John brings us news from WRA’s leadership and the industry, Bill offers the staff’s perspective. Second, in response to your request for short, practical pieces on technology, we’re bringing you a monthly Tech Hottips column, a collection of quick articles on the latest tech news, product reviews and tools to help in your business. Read more about it in the product showcase on page 18 and check out the blog at www. techhottips.com. Finally, Cori Lamont debuts a new legal series on dispelling real estate “urban legends” on page 17. Stephen Malpezzi writes this month’s feature on the economic outlook for 2011. I don’t have to tell you how challenging the market was this past year. Stephen, the Academic Director of the James A. Graaskamp Center for Real Estate at UW’s School of Business and author of last year’s economic outlook article, offers a sobering but not unhopeful view of the coming year. I encourage you to check it out on page 6.
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wisconsin real estate magazine
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As WRA’s editor, Vanessa oversees content for WRA’s online and print publications.
Also this month, Tracy Rucka continues her series on The Accidental Property Manager and Debbi Conrad tells how to safeguard personal consumer information. On the public affairs side, Michael Theo sheds light on the ongoing budget challenges facing our new legislature and Tom Larson discusses Wisconsin’s comprehensive planning law. If that’s not enough for you, monthly housing stats and upcoming education courses are packed into this month’s edition, as well as important deadlines in Real Estate Notes on page 3. As Bill mentions in his column, we are also hard at work on a new WRA website to launch during the first quarter of 2011. The pace may have slowed a bit from the CE frenzy in December, but we are off to a productive year in terms of WRA products. As always, I encourage you to send feedback on how we’re doing. In closing, I’ll leave you with the line a member used as I was on the phone with her last month: “Stay warm, safe, and don’t eat too many holiday sweets.” While it may be too late for the sweets, here’s wishing you a warm, safe and successful new year.
Vanessa merina@wra.org 608-241-2047, ext. 272
news.wra.org
Real Estate
Wisconsin Real Estate Magazine™ is published by the WISCONSIN REALTORS® ASSOCIATION. Trademark issued pursuant to Wisconsin state statute; federal trademark is pending.
notes from the wra
John Horning, Chairman jphorning@shorewest.com
NAR’s REALTOR Benefits® Program
Robert Keefe, Chairman-Elect rkeefe@keeferealestate.com
Take advantage of NAR’s REALTOR Benefits® Program. Choose from a variety of value-added offers and savings from industry leaders. Plus, every partner provides products and services that you can use every day, in your business and personal life. A detailed description of the member benefits is available online at http://www.realtor. org/realtor_benefits.
Renny Diedrich, Treasurer rdiedrich@coldwellhomes.com William E. Malkasian, cae, President wem@wra.org
Marketing Entertainment® Book Lowe’s REALTOR.com® REALTOR Team Store®
Editorial Staff:
William E. Malkasian Publisher
Technology Dell DocuSign® Hewlett Packard Lenovo relay® SentriLock LLC Xerox zipForm®
Robert Uhrina Managing Editor
Vanessa Merina Publication Editor
Joe Leschisin Senior Designer Wisconsin Real Estate Magazine, USPS 597-850, ISSN 1548-0526, is published monthly by the WISCONSIN REALTORS® ASSOCIATION, 4801 Forest Run Road, Ste. 201, Madison, WI 53704. Periodical postage paid in Madison, WI and additional mailing offices. An annual subscription rate of $5 is included in membership dues and a copy is mailed to every paid REALTOR® and affiliate member of the association. Nonmember subscription rate: $60. POSTMASTER: please send address changes to the WISCONSIN REALTORS® ASSOCIATION, 4801 Forest Run Rd., Ste. 201, Madison WI 53704-7337.
Educational Tools ABR SRES ePRO SFR Green Office Solutions FedEx® FedEx OfficeSM Travel Avis Budget Hertz
Insurance Liberty Mutual REALTORS® Core Health Insurance REALTORS® Dental Insurance Financial Services & Personal Protection American Home Shield ***New*** - IdentitySecure® REALTORS® Federal Credit Union Subject to change.
WRA has a **NEW** Member Benefit Agreement with UPS! Here is what you can save with UPS:
Permission to reprint or quote any material from this issue is hereby granted, provided the Wisconsin Real Estate Magazine is given proper credit in all articles or commentaries, and the WISCONSIN REALTORS® ASSOCIATION is provided with a copy of any reprint. Advertising of third party products and services herein does not imply endorsement by the WRA unless specifically stated. Furthermore, the WRA does not endorse, approve, or otherwise warrant the accuracy or legality of any information or content contained in advertisements. Any questions regarding advertising policies should be directed toward the editor.
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Contact Us:
Governor-elect Walker Visits WRA Management Conference
4801 Forest Run Rd., Suite 201 Madison, WI, 53704-7337 (608) 241-2047 • (800) 279-1972
The selection process is now underway for the 2011 Wisconsin REALTORS® Foundation REALTOR® Children’s Scholarship program. This program awards college scholarships to children of WRA members. The Foundation is offering 10 scholarships in the amount of $750 each. The deadline for submitting an application is March 4, 2011.
legal hotline: (608) 242-2296 • (800) 799-4468 general fax: (608) 241-2901 products/education fax: (608) 241-5168 legal hotline fax: (608) 242-2279
facebook: www.facebook.com/wisconsinrealtors twitter: www.twitter.com/wirealtors linked-in: www.wra.org/linkedin youtube: www.wra.org/youtube
wisconsin real estate magazine
College Scholarships Available
Governor-elect Scott Walker visited WRA’s Management Conference in December to speak with attendees and discuss Wisconsin’s future.
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The application is available online at: www.wra.org/ChildScholarshipAppl or by contacting Sandy at Sandyb@wra.org.
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News
W
inside the WRA
H
appy New Year! The start of a new year gives us the opportunity to reflect on the successes and challenges of the past year as we make plans for the future. The WRA Board of Directors will meet on January 21 in Madison to review our year-end financials and make plans for the coming year.
One major success for WRA was the November 4 elections. Most candidates endorsed by the Wisconsin REALTORS® Association earned election or re-election. The non-partisan approach to endorsements will position WRA to work well with the new Republican majorities in the State Senate and Assembly, as well as seek support from Democratic leaders. Legislative staff from WRA have already had conversations with key elected officials. We now have a stronger voice with our elected leadership due to our endorsements. Thank you to all who participated in campaigns, contributed to RPAC, and exercised your right to vote. You are the reason for our success. Our annual Management Conference in December was also a success. Over 200 company owners and brokers from across the state gathered to network and learn new strategies to add to their business plans for the coming year. Keynote speaker Richard Green gave his economic outlook for real estate in 2011. Then Governorelect Scott Walker paid us a special visit to thank all Wisconsin REALTORS® for their support and to share with us his vision for Wisconsin’s future. On December 6, WRA participated in an economic summit to brief Governorelect Walker on Be Bold: The Wisconsin Prosperity Strategy (www.weda.org/bebold-wisconsin). Be Bold is a culmination of efforts by hundreds of Wisconsin’s business, academic, policy and community leaders. The program offers concepts and recommendations to jump-start our economy, create jobs and ensure the prosperous future of our state. WRA is also aware that there may be some changes to the structure of state government under Governor Scott Walker. To that end, a special WRA Task Force on the Department of Regulation and Licensing has been set up to provide input on improving the structure and operations of the Department of Regulation and Licensing. As you make your resolutions for 2011, you may plan to take a class to continue your personal development. A sure way to accomplish this goal is to sign up for Designation Week (www.wra.org/desweek) held February 8-11, 2011 at the popular Kalahari Resort in the Wisconsin Dells. Designation Week offers a variety of educational opportunities, including courses with credit toward the GRI or CRS designations. Lastly, be sure to mark your calendars for April 27, which is REALTOR® & Government Day in Madison. This will be a great opportunity to meet many of our newly elected legislators. Last year, 500 REALTORS® gathered to visit our elected officials in Madison to voice our position on significant real estate issues. We’d love to see a similar, if not greater, presence this year. May you and your families have a healthy and prosperous 2011!
John P. Horning
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elcome to 2011. My thanks to John for leading us into the first quarter and to those of you who helped support RPAC and got involved in the elections; our collective efforts really paid off. WRA staff and leadership are now working closely with elected officials and the Walker administration to make sure that organized real estate is in the strongest position possible in the new year. Sure, major changes in state government bring challenges, but we’ll continue to work with policy committees, elected officials and other associations to educate them about residential and commercial real estate and ensure your voices are heard. As for staff, we spent the last 30 days working round the clock toward the CE deadline. All told, we took thousands of calls and on December 13—our peak day—over 2000 people watched video on demand to take their exam! It’s been great seeing members believe in our products. I realize that there’s competition out there, and to see folks continually return to the WRA for their educational needs is heartening. Speaking of education, as John mentions, designation week is coming up February 8-11. We know that economic times are tough, and we’ve worked to come up with several creative ways to help you pay for the program. This is a great chance to expand your professional opportunities, so check out the payment options at www. wra.org/desweek. As we turn the corner into 2011, you’ll see lots of new things coming from the WRA. We’ll have a new website in the first quarter with better navigation and a more intuitive design. We’ll also be offering other tech tools like phone apps and regular posts on our new real estate blog, Tech Hottips. We see the industry moving to a faster, tech-savvy environment, and we want to help you stay competitive. As John mentions, we are going to Washington D.C. in February. We’ll be there with NAR getting updated on federal issues and the big opportunities facing the industry. We’ll also meet with the congressional delegation to make sure you’re represented. With the dust finally settling from elections, license renewals and dues, we at the WRA look forward to rolling up our sleeves and getting to work for you in 2011. With very best wishes for the new year,
Bill
wisconsin real estate magazine
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news monthly wisconsin housing report
November Home Sales Fall as Prices Hold Steady By David E. Clark, Economist, C3 Statistical Solutions Inc.
> WISCONSIN HOUSING STATISTICS MONTHLY ACTIVITY - DECEMBER 2010
YTD-2010
YTD-2009
% Change
119,462 47,652 $141,750
119,307 51,812 $142,800
+0.1% -8.0% -0.7%
Statewide
NOV-2010
NOV-2009
% Change
New Listings Closed Sales Median Sales Prices
6,438 3,318 $135,950
7,009 5,024 $136,000
-8.1% -34.0% 0.0%
Region
Median Price NOV-2010 NOV-2009 % Change
Existing Home Sales NOV-2010 NOV-2009
% Change
Southeast South Central West Northeast Central North
$159,000 $154,900 $134,000 $123,650 $95,000 $123,000
1110 606 383 640 237 333
-40.9% -38.6% -29.9% -27.8% -17.7% -23.4%
$153,000 $157,000 $125,000 $117,700 $112,450 $115,000
A
s expected, November home sales were significantly lower than last November, even as home prices rose slightly, according to data just released by the Wisconsin REALTORS® Association (WRA). Sales of existing homes in November were down 34.0 percent from the November 2009 levels, but median prices were essentially unchanged over the same period, falling just $50 to $135,950.
just 8.0 percent compared to last year, and prices down less than one percent,” Horning said. Horning explained that while the national economy is growing, it’s not growing fast enough to bring the U.S. unemployment rate down from its current level of 9.8 percent. “The unemployment rate remains a concern for the housing industry,” Horning said. Horning noted that job growth in Wisconsin has been modest at approximately 29,000 new jobs since the beginning of the year, and the state unemployment rate is about two percent lower than the national rate. “Governorelect Walker has indicated that job creation is a top priority, and we are hopeful that he can continue to build on the job gains seen thus far in Wisconsin so that homebuyers can take advantage of the great opportunities in our unique housing market,” said Horning.
“These current market figures continue to reflect the distortions caused by the two federal homebuyer tax credit programs last year,” said John Horning, Chairman of the WRA Board of Directors. “The expiration of the first tax credit created artificially high sales last November and the expiration of the second tax credit in June pushed 2010 sales into the first half of the year,” said Horning. “Combined, those events make November 2010 numbers look very weak.” Horning noted that these market distortions are less dramatic when year-todate figures are compared. “The first eleven months of 2010 was very similar to the same period in 2009, with total sales down wisconsin real estate magazine
+0.5% -1.3% +7.2% +5.1% -15.5% +70%
The REALTOR® report shows a 14.4 month inventory of homes on the market, which is down from the 15.3 month supply in October. However, due in large part to
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1877 987 546 886 288 435
slow sales since June, the total inventory of homes on the market has risen over the past five months. “With this much inventory, we have an excellent selection of homes and prices throughout the state,“ said WRA President Bill Malkasian. “We continue to see very low mortgage rates, stable home prices, and the preliminary indications are that family income has even grown slightly throughout much of 2010,” he said. As further evidence, Malkasian said Wisconsin’s affordability index compares favorably to other states and the nation. The index measures how much of a median priced home a buyer with the Wisconsin median family income can afford. The Wisconsin Housing Affordability Index stood at 235 for November, which is up from 217 in November of last year. “Wisconsin housing is extremely affordable compared to past years and compared to other states, making this a great time to buy a home,” said Malkasian. For More Information Contact: David E. Clark, Economist, C3 Statistical Solutions Inc. Office phone: 414-803-6537
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2011 Economic
Outlook
by stephen malpezzi
The national housing market has stabilized, but remains fragile. Here is the outlook for Wisconsin as we inch toward a tentative recovery.
Overview
The national housing ma=rket has stabilized,
In September 2010, the National Bureau of Economic Research declared that the “Great Recession” had ended in June of 2009. But though the recession is officially over – the economy is now growing – it’s hard to find anyone who’s truly satisfied with our nation’s economic performance over the past year. Over the first three quarters of 2010, real GDP has grown at a rate that would gross up to 2.5 percent per year – a modest rate of growth, roughly comparable to what we saw after the milder recessions of 1990 and 2001, but disappointing compared to the speedier growth that followed deeper 1973 and 1980-81 recessions. Unemployment has fallen just slightly from its peak a year ago, and comes in at 9.8 percent in the latest available data. Broader measures of unemployment that include discouraged and part-time workers also remain high, and all measures of the duration of unemployment are still near their all-time peaks.
REALTORS® data on house prices, adjusted
but remains fragile. National Association of for inflation, peaked nationwide in 2005 at about $250,000, saw some of the steepest declines in 2008 and began to stabilize a little over a year ago. This year looks a lot like last year, with national median prices bumping along at around $180,000. As I’ve noted in past articles, the extraordinary price growth from roughly 1996 to 2006, when house prices grew at 5 percent to 7 percent per year faster than background inflation, was clearly unsustainable; house prices had to fall from those peaks. But house prices are now roughly in line with fundamentals like incomes, interest rates, and rents. For example, for much of the 80s and early 90s national house prices were about 3 to 3½ times the median household income. During the boom the ratio peaked at about five, but now we are back in step
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with historic norms. Other data developed by my UW colleague Morris Davis demonstrate that we’re almost back in line with historic norms of price/rent ratios (Figure 1).
Figure 1
metropolitan areas like Eau Claire and Green Bay, though still affected, have seen less of a boom and bust cycle than the rest of the country, and nothing close to the highly volatile markets in states like California and Florida.
Will We Hit the Target, or Will We Overshoot? Last year, I wrote at some length about what remains the biggest short-term risk to the economy, namely the continued high rate of foreclosures. That remains a concern, but rather than repeat that discussion here, I suggest readers examine last year’s article at http:// news.wra.org/default.asp?i=88, or visit UW-Madison’s Graaskamp Center’s blog at http://wisconsinviewpoint.blogspot.com/ to learn more.
Source: Morris Davis, Andreas Lehnert and Robert F. Martin, “The Rent-Price Ratio for the Aggregate Stock of Owner-Occupied Housing.” Review of Income and Wealth, 2008, vol. 54 (2), p. 279-284. Data updated by Morris Davis. Last year, I noted that just as house prices overshot going up, they could overshoot going down. That hasn’t happened this year, and that’s a terrific plus, for our business and for the economy as a whole. However, there is still potential risk from the defaults and foreclosures that much of the nation continues to experience. I’ll discuss these and other risks – and some possible first signs of recovery – a little later. But first, let’s look at our local performance.
How’s Wisconsin Doing?
In this article, I’ll address a few other issues. First, an important positive: Interest rates – short-term and long-term – remain low, even though at this writing long-term rates are beginning to creep up a bit. The Fed has responded to this with so-called “quantitative easing,” which is a variation on ordinary open-market operations. Normally, to increase the money supply and stimulate the economy and/or the price level, the Fed buys short-term Treasury bills; the money they spend on these purchases increases the money supply and lowers short-term interest rates. The short-term “policy rate” (Fed Funds) is so low now, however, that the Fed has announced their intention to purchase up to $600 billion of longer term Treasuries. Normally, the Fed announces a target short term rate and executes more or less whatever purchases (or sales, if the economy is overheating!) are required to reach the target. In this case, the Fed has announced a (flexible) target for how much they’ll spend, rather than the rate; hence the term “quantitative easing.”
Figure 2
Wisconsin’s economy and housing markets are continuing the recovery we noted last year. Statewide, our unemployment rate is 7.8 percent, 2 points below the national average. Even our worst-hit metropolitan areas like Janesville and Racine are outperforming the really hard-hit labor markets we find in California, Nevada, Florida, Michigan and the like, where unemployment is currently running at 12-14 percent. Wisconsin housing has also outperformed national averages in most of the state. Figure 2 shows that many of our markets had smaller percentage declines over the past two years than we’ve seen nationally. The figure presents inflation-adjusted quarterly median sales prices, not seasonally adjusted; for Wisconsin locations I’ve included the preliminary (and, at this writing, incomplete) data for the fourth quarter of 2010. When the U.S. market dove in 2007-2008, Madison in particular took a much smaller hit. In the post-2006 bust, Madison’s prices fell noticeably less than the national medians, and if 2010 stays on track, we’ll post a real price increase a bit over 2 percent this year. Milwaukee’s decline was significantly steeper than Madison’s, though it bounced back from a particularly dismal Q1 2009 posting. (Other data, not shown, indicate that it was Milwaukee County that had the steepest decline and the biggest snap back; Washington, Ozaukee and Waukesha counties saw slower declines). Some of our smaller
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Source: Wisconsin housing prices, data constructed by Stephen Malpezzi. Quarterly median housing prices from the WRA website are adjusted to constant 2009 dollars using the GDP price deflator. Multicounty metropolitan areas are county median housing prices weighted by each county’s quarterly sales. So the Fed’s plan is to keep rates, short and long, low for the foreseeable future. There are risks in this; inflation is low, and all the market indicators I follo – like the TIPS market – imply that the market thinks it will stay low for a while. But history teaches us that market expectations can change in a hurry, as they did in 1981 when mortgage rates rose 500 basis points in a year. The significant news.wra.org
role played by foreign investors in U.S. capital markets also bears watching; if the dollar falls too rapidly, for example, and global investors lose their appetite for U.S. paper, this could adversely affect the capital markets on which both residential and commercial real estate markets depend.
Figure 3
The biggest long-run risk is well known to all of us. We have a tight rope to walk between encouraging the nascent recovery, and dealing with the long-run fiscal problems our nation faces. Michael Theo provides an excellent introduction to the issue in his article “Facing Budget Realities” in the December 2010 issue of Wisconsin Real Estate Magazine. Let me offer some additional comments. “Fixing earmarks,” if that happens, is largely symbolic: we’re talking perhaps $40 billion or so in a $3.6 trillion federal budget. In the long run, a lot will have to be put on the table in both the tax and spending sides, especially entitlements, and in particular tackling the rapid projected growth of Medicare and Medicaid. Pessimists point to the difficulty we’ve had as a polity moving toward a workable plan – there’s been a lot of media coverage of controversies surrounding plans put forward by the National Commission on Fiscal Responsibility and Reform (Bowles-Simpson), the Debt Reduction Task Force (RivlinDomenici) and, closer to home, the Roadmap for America’s Future (Ryan).
Source: Data on foreclosures started are from the Mortgage Banker’s Association. nationwide across loan types. The challenges in foreclosure processing that were so prominent in the news this year compound the problem. The Treasury’s Home Affordable Mortgage Program (HAMP) has been ineffective as a policy response, as we discuss at the Graaskamp Center’s blog and elsewhere. We need to do better this
Wisconsin’s economy and housing markets are continuing the recovery we noted last year. Statewide, our unemployment rate is 7.8 percent, 2 points below the national average. I prefer to be optimistic: my take is that we’re making the first baby steps toward serious reform by discussing a number of changes that were politically taboo even five years ago. But we need to keep moving forward, and that requires us to educate ourselves about the options and the numbers involved. Create your own plan! Go to http:// www.cbo.gov/ where the Congressional Budget Office offers two free downloadable volumes that detail 188 specific options to reduce the budget deficit, on both the revenue and the spending sides, from every area of the Federal budget.
What’s the Outlook for 2010 and Beyond? The U.S. economy has a lot of inertia built into it; the good news this year is very similar to the good news from last year. GDP is growing, and with any luck, as firms exhaust their ability to squeeze more output from existing resources, employment growth will strengthen. Housing prices in Wisconsin, as elsewhere, have stopped their decline and appear to have stabilized. House prices are back in line with fundamentals, broadly speaking. We have done better than most states, though we’ve certainly had pockets of pain. The bad news is that a significant risk remains of downward overshooting, if we fail to successfully work through the foreclosure problem. Figure 3 from Mortgage Bankers Association data shows that in the past few quarters we’ve been digging the hole a little less quickly, as foreclosures started during those quarters, while high, are declining. But the inventory of foreclosures (not shown) has barely budged, and currently exceeds 4.5 percent of the mortgage loans outstanding,
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year. We also need to keep a close eye on interest rates, and some of their fundamentals; for the long run, we need to get our fiscal house in order. Since I’m a teacher, I like to end these commentaries with a homework assignment. In the “sifting and winnowing” spirit inspired by my famous UW forbearer Richard Ely, this year’s recommended reading is Raghuram Rajan’s recent book Fault Lines: How Hidden Fractures Still Threaten the World Economy. We all know that the U.S. economy has increasingly become one that rewards those who are well educated and prepared for today’s economy, but works much less well for those who are not so prepared. Rajan weaves together a cogent, if sometimes controversial, story about how some poorly thought-out attempts to tackle these increasing disparities in income and wealth may actually underpin many of the issues we’ve seen arise in housing and financial markets over the past decade. Food for thought!
Stephen Malpezzi is the Academic Director of the James A. Graaskamp Center for Real Estate at the University of Wisconsin School of Business.
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The Accidental Property Manager: Take Two
W
ith the increase in lender owned properties (REOs), agents are being asked to list and sometimes provide property management services for REO properties which are usually vacant. Last month, we talked about becoming an accidental property manager in the context of renting listed properties. This month, we look at sellers requesting brokers to provide property management services addressing the physical condition of these properties. Next month, the Hotline Q and A will focus on REO listings, offers and addenda used in REO transactions.
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best of the legal hotline Securing the Property REO owners (lenders, asset managers) often ask the listing agent to arrange and pay for utilities and other services needed to maintain a vacant REO property. The agent then pays the bills and forwards the bills to the REO company. What is the agent’s obligation to secure the property for the REO owner? Can the reimbursement check be sent directly to the agent or must it go through the brokerage? What if the seller does not pay? Brokers are being asked to provide a myriad of services for REO sellers: to clean out personal property from the property, arrange for weatherization, hire contractors to make repairs, change locks, frequently drive by the property to assure it remains vacant, turn off power, change power into the agent’s name, shovel, plow, mow, pay association fees or dues, etc. The responsibility for performing and paying for this work depends upon the circumstances and the contract(s) entered into with the lender. Physical property management-type services, which do not require a real estate license, may be performed under the name of the brokerage as one of the company’s services, or this may be an activity performed by the agent as a business that is completely separate from the brokerage. If the services are part of the listing contract, then the payment goes through the listing broker because a Wisconsin licensee may not receive commissions or fees from anyone other than the employing broker. If, on the other hand, the services are contracted with an independent entity and not the brokerage, fees are paid per that separate contract. Before agreeing to conduct property maintenance services for the REO seller, the agent may wish to review company policy to determine if such services may be offered by the real estate brokerage company or by an independent company. Office policy may address the situations wherein the property does not sell or the agent leaves the listing company before the transaction is complete. Brokers and agents sometimes report difficulty in obtaining seller reimbursement and should consider which remedies they would have if the owner does not reimburse them before entering into a REO property maintenance agreement. It may be prudent to work with an attorney to create contractual remedies and whatever other protective measures are possible.
Winterizing Properties The broker is listing a lender-owned property. The lender asked the broker to go to the property and turn off the power. How to proceed? No news for us Wisconsinites: Winter is cold in the north! However, some lenders do not take into consideration the effects of freezing temperatures and Wisconsin winters on vacant REO properties. Before the power is turned off during freezing months, the
wisconsin real estate magazine
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legal with tracy rucka
property must be winterized to avoid freezing and breaking pipes. Any other liquids that could freeze should also be removed. The owner should also consider that sump pumps don’t pump and fans for radon mitigation systems don’t run when the power is off. For more information about winterizing properties, see the December 2010 edition of Legal Update at http://www.news.wra.org/story. asp?a=1394.
Home Inspections The data sheet for the listed property states the property has been winterized. The broker heard of a buyer who bought a property and discovered broken pipes when they turned on the power and water after closing. How can the buyer protect himself when an REO property is being sold as-is? Is the seller required to turn on the power and water for the inspection? Who pays for this? Unfortunately, the standard home inspection contingency in the WB-11 Residential Offer to Purchase does not address this situation or refer to winterized properties. When the water and power are off, buyers may discuss this with their home inspector before writing the offer to find out exactly what the home inspector will need. The buyer can then draft the offer to specifically address: (a) Who will turn on the power and the water and who will pay for this; (b) When this will be done; (c) Who will re-winterize the property and pay the costs; and (d) Who will be responsible for any damage that occurs during the period when the power and water are on.
As-Is Sales The broker has focused on foreclosure/distressed properties and lately has seen an increase in new and inexperienced licensees who are listing REOs and not disclosing blatant adverse facts. When asked why they did not disclose the adverse facts, their standard response is “it’s a foreclosure, so it is sold ‘As-Is.’” Doesn’t “As-Is” still require broker disclosure of material adverse facts? All listing brokers are required, prior to listing the property (including REO properties), to conduct a reasonably competent and diligent inspection of accessible areas of the structure and the immediately surrounding areas to detect observable, material adverse facts. In addition, the broker is required to ask the seller for a written statement regarding the property condition. Granted, REO sellers may refuse to complete a Wisconsin Real Estate Condition Report; however the broker is required to ask. The listing broker is then to disclose material adverse facts and potential material adverse facts to the parties in writing. This is not waived in “As-Is” sales. In fact, where the buyer is purchasing “AsIs” it is very important for the buyer to know the condition of the property. Generally, the buyer has expert contractors inspect the property as a condition of the offer to purchase, but this does not excuse the licensee from his or her duty to assure that all known material defects are disclosed in writing to the buyer, and that any affirmative statements made are, in fact, true.
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If the seller provides a condition report, the broker compares the report to the broker’s observations from the inspection. If there are inconsistencies between the report and the broker’s observations, the broker must disclose the inconsistencies to the parties in writing, as well as any material adverse facts the broker observed. The fact that the seller will sell the property “As-Is” does not relieve the broker from conducting inspections and making disclosures. A sample material adverse fact disclosure is available on page 26 of the October 2009 Legal Update, “Diligent Disclosure,” at www.wra.org/ LU0910 or on ZipForm. An REO seller has an “As-Is” clause in its addendum to the offer. Does this mean the buyer cannot have a home inspection? REO transactions are often “as-is, where-is” transactions. The seller often will not provide an RECR and will rarely make any repairs. REO sellers may not disclose major ongoing problems like frozen or leaking pipes or a failed septic system, even if they have specific notice. The use of an “As-Is” clause, however, does not necessarily mean that the seller may still not need to make some disclosures about the property or that the seller cannot be liable for misrepresentations about the property. Generally, an “As-Is” clause alerts the buyer that he or she is responsible for determining the condition of the property being purchased. The buyer retains the right to conduct a home inspection unless the offer specifically provides otherwise. More information about REO transactions is available on pages 7-8 of the December 2009 Legal Update at www.wra.org/LU0912 and in the February 2008 Broker Supervision Newsletter, “Listing and Selling REO Properties,” at http://www.wra.org/online_pubs/broker_supervision/2008/ br0802.asp.
Listing Protection and the Sheriff’s Sale An agent wrote an offer for the buyer when the first broker had the property listed. The offer didn’t go together before the sheriff’s sale where the lender bought the property. The lender listed the property with a second listing company. The buyer still wants to purchase the property. Is this buyer a protected buyer with the first company? The agent wants to know if she can write an offer and receive commission. The first listing contract was an agreement between the seller and the listing broker. When the title of the property transferred by sheriff’s deed to the lender, the lender became the new seller. The buyer protection with the first listing agent is really a non-issue as there is no way the foreclosed seller could convey title now that the bank is the legal title holder. The agent should submit a new offer to the bank’s listing agent. If the second broker has the property in the MLS, the cooperating broker may earn the MLS offer of compensation if the cooperating broker is procuring cause. If the property is not in the MLS, the cooperating broker may negotiate a commission agreement with the new listing broker.
Apps!
info@virtualproperties.com +1 608 271 9601
For a review of the mortgage foreclosure process, read the May 2005 Legal Update, “Mortgage Foreclosures,” at www.wra.org/LU9905 and the March 2009 Legal Update, “Working with Distressed Sales,” at www.wra.org/LU0903. Tracy Rucka is Director of Professional Standards and Practices for the WRA.
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wisconsin real estate magazine
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january 2011
news.wra.org
legal
Safeguarding Personal Consumer Information by debbi conrad
Data security is a growing concern throughout the country. Technology has dramatically increased the amount of consumer data collected and used by businesses, including real estate businesses. Keeping personal consumer information safe, and thus protecting consumers from identity theft, is a paramount goal.
Ensuring the security of consumer data is also a hot issue in Washington. Federal legislation requiring reasonable security policies and procedures to protect data containing personal information has been introduced and is expected to be enacted at some point. Many states have laws addressing the proper disposal of personal identifying information as well as security breach notification laws. Personal identifying information is typically defined as a person’s name in combination with the person’s Social Security number, driver’s license or state ID number, or a financial account number. Data breaches and high rates of identity theft have led the Federal Trade Commission and the National Association of REALTORS® to provide policy guidance for REALTORS® and other businesses that collect sensitive personal information from consumers. These policies encourage real estate companies and other businesses to: 1. Take stock and consider what personal information and data is in the company files and on its computers. 2. Scale down by collecting and keeping only personal information that is absolutely necessary for essential business purposes. 3. Pitch it—that is, properly dispose of whatever personal information and data are no longer needed. 4. Lock it by implementing physical and computer-based data security measures to protect all personal data that must be kept. 5. Plan ahead and create a plan for responding to a consumer data breach.
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wisconsin real estate magazine
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january 2011
Data Collection Wisconsin brokers and their agents collect, store and share a great deal of consumer information throughout the course of their real estate transactions for a variety of reasons. Often the collected data is of a sensitive financial nature. What kinds of personal information and consumer reports do Wisconsin licensees collect? A residential broker might collect: •
Drivers license numbers as a safety precaution when agents leave the office with a new client for the first time
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Personal checks given as earnest money
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CLUE reports
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Medical history for persons with disabilities seeking reasonable accommodations
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Social Security numbers in order to complete the Wisconsin Real Estate Transfer Return at closing
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Bank account information and Social Security numbers contained in mortgage documents and closing statements
A broker working on short sales might collect: •
Social Security numbers and loan account information
•
Complete copies of seller financial statements, income tax returns, W-2s, bank statements, etc. for submission to the lender
news.wra.org
“...Any data included in transaction documentation or within any documents or correspondence associated with a transaction will need to be retained for at least three years...”
to qualify the seller for short-sale approval •
Seller’s hardship letter, employment background, medical history, credit report, credit scores, etc.
A property manager might collect: •
Social Security numbers in order to perform credit checks on rent applicants
•
Personal checks given as earnest money, security deposits or rent
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Credit reports, credit scores, employment background, tenant history reports, etc. regarding rental applicants
•
Medical information for persons with disabilities seeking reasonable accommodations or modifications
Data Protection Trust is at the heart of the real estate business. The safeguards real estate professionals take to protect the personal information they use in their businesses play an important role in earning the trust of consumers. Data security and protection measures generally must address both physical security and electronic security. Physical security measures may involve the company’s central computer database, individual laptops, disks, file cabinets, branch offices, files employees/ licensees have at home and mobile devices. Brokerage companies may need to:
Oftentimes, personal information is collected because the agent is trying to be helpful to the client and provide top-notch service, but in reality the agent may be unintentionally creating additional legal risk. Because of Wisconsin real estate record retention rules, it may not be possible to simply discard personal information and data once the need for them has passed. Wis. Admin. Code § RL 15.04 requires a broker to retain for at least 3 years “exact and complete copies of all listing contracts, offers to purchase, leases, closing statements, deposit receipts, cancelled checks, trust account records and other documents or correspondence received or prepared by the broker in connection with any transaction.” The retention period runs from the closing date or from the date of the listing or buyer agency agreement, if there is no closing. Any data included in transaction documentation or within any documents or correspondence associated with the transaction will need to be retained for at least three years, so the primary focus may need to be ensuring that the consumer’s personal information is protected during the time it must be retained by the brokerage. In addition, licensees may wish to study whether there are ways to avoid collecting personal information in the first place, for instance, guiding the parties to provide their personal data directly to thirdparty recipients rather than passing the information through the broker or agent as a conduit.
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Brokers also need to address accounting records, corporate records, employment records, legal documents and other important files and records that might be maintained in a brokerage office. Some of these records may need to be retained permanently while others should be retained for varying periods of time best established by the brokerage attorney.
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•
Store paper documents and files containing personal information in a locked room or locked file cabinets and limit access to those with a legitimate business need.
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Require employees to put files away, log off their computers and lock their file cabinets and office doors at the end of the day.
•
Limit employee access to off-site storage facilities to those with a legitimate business need.
With respect to electronic security, brokerage companies would be prudent to ensure that any copies of e-mail and other electronic transaction documents that must be saved under § RL 15.04 are saved as read-only PDFs or in another unalterable format. Other electronic security measures may include: •
Strong passwords, firewalls and other controls to prevent unauthorized access to systems, data and communications
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Establishing methods to detect unauthorized access, use or alteration of data
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Avoiding storing personally identifiable information on any computer with an Internet connection whenever possible
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Let Pearl’s Real Estate Errors & Omissions team
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•
Receiving and transmitting credit card information or other sensitive financial data using Secure Sockets Layer (SSL) or another secure connection that protects the information in transit.
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Avoiding storing personal information on a laptop whenever possible or moving it to more secure computer as soon as possible
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Encrypting sensitive data when stored or transmitted
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Establishing personal agent responsibility for data security
Obviously, sensitive data should be stored only as long as it is needed or as long as is necessary to meet legal requirements.
Data Destruction Creating a data security program for a business means implementing and maintaining reasonable safeguards to protect the security, confidentiality and integrity of data, including the proper disposal of the data. The following measures, recommended by the FTC for the disposal of consumer records, are equally prudent for the disposal of other personal consumer information: •
Burning or shredding papers containing consumer personal information so that the data cannot be read or reconstructed (cross-shredders are recommended)
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Destroying or erasing electronic files or media containing personal consumer report information so that the data cannot be read or reconstructed
•
Hiring a document destruction contractor to dispose of personal consumer information after conducting a due diligence review of the contractor’s qualifications, reputation and integrity
Comprehensive E&O coverage that includes: • • • •
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Data Policy Guidance There is no one-size-fits-all approach to data security and compliance, but assistance is available for crafting policies that work for a particular real estate company or business: •
NAR provides some of the tools necessary for developing a program that best suits a real estate business. Find the link to the NAR Data Security and Privacy Toolkit at http://www. realtor.org/government_affairs_secured/privacy_data_security.
•
The FTC guide “Protecting Personal Information: a Guide for Business” is available at http://www.ftc.gov/infosecurity/
•
Consumer data security and privacy measures are also addressed, along with social media use guidelines and an array of liabilityreducing real estate practice guidelines and office policies in the Office Policy Manual Guide, now available in its Twelfth Edition (2010) from the WRA at www.wra.org/pub239.
Debbi Conrad is Senior Attorney and Director of Legal Affairs for the WRA.
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wisconsin real estate magazine
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january 2011
news.wra.org
legal
Uncovering the Truth: Protected Buyer Urban Legends
The First in a Series of Articles Dispelling Real Estate Untruths By cori lamont
In an effort to dispel real estate untruths, we have instituted a series of periodic articles written throughout the year exposing the truth of real estate practices that many believe are true but are not; also known as “urban legends.”
W
hile the exact origin of these untruths is unclear, hopefully this new series of articles will demystify the matter and stop the perpetuation of the myths. Each article will focus on a specific realm of the transaction or practice of real estate. Today, we highlight protected buyers. Let’s first begin with a basic overview of protected buyers. Who are protected buyers? They are buyers, who, during the term of the listing: (1) submitted a written offer to purchase the protected property; (2) negotiated directly with the seller; (3) attended an individual showing; or (4) “negotiated” with a broker. Buyers who fall under categories (1) and (2) are automatic and the listing broker would not be required to perform any additional steps to protect the buyer. Buyers who fall under categories (3) and (4) will be protected only if the listing broker delivered the buyer’s name to the seller no later than three days after the expiration of the listing contract. “Negotiated” for these purposes means that the buyer discussed the potential terms upon which the buyer might acquire an interest in the property. Timeframe basics: 1) buyers are protected for one year; 2) the broker’s list must be filed with the seller no later than three days of expiration of the listing; and 3) the seller’s list must be provided to the new broker within seven days of the date of the new listing contract. URBAN LEGEND #1: Protected buyers protect the cooperating broker’s commission.
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THE TRUTH: The parties to a listing contract are the listing broker and seller. The listing contract includes the protected buyer language and therefore protects the listing broker’s commission. If after the expiration of the listing contract a protected buyer purchases the property within one year of the expiration or termination of the listing contract, then the listing broker’s commission is protected, not the cooperating broker’s. URBAN LEGEND #2: If the seller does not provide the list of protected buyers to the new listing broker, the buyers are not protected. THE TRUTH: If the buyers were properly protected, either automatically or by delivering the broker’s list to the seller within the three days, the buyers are still protected regardless of whether the seller provides a list of protected buyers to the new listing broker. Additionally, nothing prevents the previous listing broker from providing another copy of the list copy to the new listing broker. URBAN LEGEND #3: The new listing broker should contest the previous listing broker’s protected buyer list. THE TRUTH: Since the listing contract was between the seller and previous listing broker, it is the seller’s responsibility to contest the list of protected buyers. The new listing broker should refrain from making any comment to the seller about their previous contract and should tell the seller to discuss the issue with the previous listing broker and the seller’s attorney. A licensee who gives a seller legal advice about another broker’s contractual rights may be accused of violating Wis. Admin. Code § RL 24.06(1) and Code of Ethics Article 13.
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URBAN LEGEND #4: Only buyers shown the property by the listing company can be placed on the protected buyer list. THE TRUTH: The listing broker may include on the list of protected buyers any buyer that attended an individual showing, including those shown the property by agents from other companies. URBAN LEGEND #5: Cooperating agents who showed the property are required to provide the listing agent with the buyer’s names. THE TRUTH: Although Wisconsin’s licensing laws do not specifically address this type of policy, the Code of Ethics in Standard of Practice 3-5 states that subagents must provide listing agents with all pertinent facts relating to the transaction. Because the name of a prospective buyer is arguably a pertinent fact, a subagent should provide this name if requested by the listing agent. If the buyer wished to be confidential, then identifying the broker with whom the buyer negotiated and the date(s) of any showings or other negotiations would fulfill the delivery of the buyer’s name requirement. URBAN LEGEND #6: Protected buyers include open house attendees. THE TRUTH: The listing contract definition of protected buyers does not include open house attendees. The sole act of attending an open house would not rise to the level of negotiation as defined in the listing contact. However, the listing contract may be modified to include open house attendees as protected buyers. Cori Lamont is Director of Brokerage Regulation and Licensing for the WRA.
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product showcase
Tech Hottips
ZipForm Expires March 1 Here’s How to Renew Your Subscription
Give Members Bite-sized Tips and Tricks
ZipForm is an electronic forms product available to REALTOR® and Legal Section members as a benefit of membership with the Wisconsin REALTORS® Association. It’s available for download free of charge at www.wra.org/zipform. Two products are available for download – an online version and a desktop version. Feel free to try both.
How can you get text messages from the WRA? What’s with the new Facebook profile? What’s the deal with cloud computing? Who’s linking to your website? Are there free tools like Photoshop available online?
During the download, the software is stamped with an expiration of March 1. Within 30 days of the expiration, a message will display indicating that the program license is expiring. To renew ZipForm, you must be a member of the WRA and follow a series of steps. Step-by-step renewal instructions can be found at www.wra.org/zipform.
WRA’s new TechHottips is your source for how-to’s, product reviews and top-notch tools for your real estate business. As the name implies, the product is all about technology. And not just any technology—real estate technology.
Each month, you’ll receive Tech Hottips in a variety of ways. Catch them monthly inside Wisconsin Real Estate Magazine or twice a week on the Tech Hottips blog. Just visit techhottips.com to read them all. Once there, you can even sign up to receive posts directly to your Inbox as well as search articles by keyword or view them by category. Desktop users should note that manually extending the expiration date for another year will not update the forms. To successfully update forms, you must perform a forms update either within the program when prompted or by visiting www.zipform.com/support/updates.asp, selecting Wisconsin REALTORS® Association library or your company’s custom library. The forms in the online program are automatically updated. For additional questions regarding ZipForm renewal, call 800-383-9805.
So let’s talk topics. What do we cover? Tech Hottips gives you tips on Facebook, Internet Risk, Online Marketing, Photography, Smart Phones, Apps, Tech Tools, Websites and lots more. Amy Chorew and Kim Wood are the main writers for Tech Hottips. Amy is a nationally-acclaimed instructor who has been helping managers and real estate agents maximize their use of technology for over 15 years. Kim holds both a REALTOR® and broker license, contributing hands-on experience. Last but not least, Tech Hottips is all about you! Got a technology question? Submit it at www.techhottips.com. We’ll write about it. We’ll review it. Our job is to report on what’s relevant to you. Check out techhottips.com. While you’re there, leave us a comment and let us know how we’re doing.
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wisconsin real estate magazine
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news.wra.org
techhottips
View more posts at www.techhottips.com
Technology Tips & Tools for the Real Estate Proessional
Working in the Cloud
“wall,” has a whole new look.
about your life outside real estate.
Have you worked in the CLOUD? Cloud computing is becoming more and more popular with its ease of use and accessibility. Real estate agents tend to work on multiple computers (and mobile phones) as well as various other places. With cloud computing, you can have access to your documents online “in the cloud” versus storage on a drive.
If you want in on the newest release, sign into your Facebook account, then go to http://Facebook. com/about/profile. From there, you can select the new profile and take some tours around the new features.
Twitter – Ah, the water cooler atmosphere is evident on Twitter – so you’ll see the more casual sides of people here. Twitter profiles are just 160 characters, so make sure you choose key words that you want people to identify you with and search by.
•
The status update box is hiding under the photos
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You can hide photos you don’t want to appear by mousing over and clicking the ‘x’
Most important? Be yourself! Your online reputation is formed first by your profile and then by who you are. First impressions count.
•
I miss the quick look of the BIOs
•
It’s quite “busy” looking
Let’s Talk SKYPE
Once you’ve activated your new profile, all profiles you access will also have the new appearance. Give it a try and let us know what you think.
First Impressions Count!
Two common cloud spaces are:
When creating your bio and profile on various social networking sites, make sure you write your bio and use a picture that fits the personality of the site. First impressions count with the reader, and this may be when they make the decision to work with you. Keep in mind: perception matters.
Google Docs: Upload and access documents through your Google Account for free. If you choose to share your documents to collaborate with others, multiple people can work at the same time in the cloud. Dropbox.com & Box.net also have free options to upload and store your documents online. You can upload to these platforms and share with others. To work within the document you work in your computer space – and when you save the document, stored online is updated. Options include: Sharing Folders with Sellers of their current showings/ statistics/task manager, sharing Folders with buyers of homes viewed/prices/pictures/feedback.
With SKYPE you can IM (Instant Message), make phone calls around the world, and even video chat. You can have conference calls with more than one person for no additional charge. And you can even use the mobile application with many carriers.
Drift away in the cloud… it could save you time and money !
Facebook Facelift
Your real estate website might be the place you post your education, designations, and specialties. Tell them what kind of real estate you sell and how to get in touch with you. Your photo should be a professional headshot. LinkedIn is often referred to as the business meeting – so you’ll want this to be your resume on steroids; much more professional. Include education, past jobs, interests, anything to help people connect with you. And make sure your photo avatar mirrors that professional side Facebook tends to be like a reunion or BBQ. . . a little more casual. Show some of your fun side and interests in your bio. People will be sharing pictures of their activities, family, pets, etc. so let them know a little about you too. People want to connect with you with similar interests, so let people know
Did you hear? Have you seen? Facebook released new Personal Profile pages. Change can be hard to get used to – but there are some pretty cool enhancements. The profile, otherwise known as the
wisconsin real estate magazine
Talking via the computer? Really? Who would have thought it would be so easy to talk via an Internet phone company? If you haven’t tried it yet, what are you waiting for? It’s free! Download and try SKYPE now.
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january 2011
As a matter of fact, if you communicate with another SKYPE user, you pay nothing. If the other party doesn’t have SKYPE, you’ll have to pay a small subscriber or by-the-call fee. You’ll need a headset and microphone to get started. This makes chatting over a computer much clearer. It also will help prevent feedback and echos. I like the Microsoft Life Chat combination sets, but I find they only last about a year and a half. Make sure you include your SKYPE “handle” or username in your email signature if you have clients who want to use SKYPE to communicate with you. Visit www.skype.com to download the free software and check out the website. Once there, you’ll find clear instructions on how to use the tools and specials on headphones. If you have a smartphone, you can even download the “app” for your phone so you can SKYPE when you’re out and about.
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education
Appraisal Conference March 16-17, 2011 Ho Chunk Casino and Hotel - Baraboo March 16, 2011
March 17, 2011
2010-2011 7-Hour National USPAP Update Course – 7 hours*
The Appraisal Profession After Dodd-Frank, HVCC and the Mortgage Crisis What Comes Next? – 7 hours**
Residential Market Analysis - How to Meet Your Obligations – 3.5 hours** Residential Sales Analysis – Tools and Strategies – 3.5 hours**
2011 FHA Update – 3.5 hours** Complete and Accurate Appraisal Reviews – 3.5 hours**
*USPAP course approved for 7-hours CE credits for Wisconsin Appraiser and Assessor CE and Michigan and Minnesota Appraisers. ** Submitted for approval
CRS 111 - Short Sales and Foreclosures February 9, 2011
GRI Course 2 February 8-11, 2011 Wisconsin Dells This 4-day program includes CRS201 (Listing Strategies) so you can earn required education credits toward your CRS designation while earning your GRI Designation. The course also covers Business Ethics, Social Media, Environmental Issues, Cameras and Virtual Tours and Internet Marketing. (submitted for 2011-2012 CE). Instructors: Jackie Leavenworth, CRS, Mark Porter, CRS, Doug Hoffman and Cori Lamont
CRS201 – Listing Strategies February 8-9, 2011 Wisconsin Dells (included in GRI Course 2) The quality of your listing skills can give you a strong competitive edge. Only those professionals who learn proven listing strategies will win over the client and increase their conversion rate. Listing Strategies will provide you with the important skills necessary to conduct successful listing presentations, price a home to sell, close the transaction and market and promote effectively. The course will take you through an actual listing presentation that will help you understand the key steps in this process and create a system for success.
CRS 202 – Effective Buyer Sales Strategies February 10-11, 2011
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Wisconsin Dells Working with buyers and sellers of distressed properties can be frustrating and timeconsuming, but also very rewarding. The Short Sales and Foreclosures Course provides you with practical approaches to the pre-foreclosure and foreclosure processes that will result in the successful disposition of these properties. Complete core course for your SFR certification (Short Sales & Foreclosures Resource) and earn 8 credits toward your CRS Designation plus you can earn your CRS faster with the Pro-Program with 10 years’ experience and 150 transactions plus one other CRS core course.
GRI Course 3 February 8-11, 2011 Wisconsin Dells Included in this 4-day program is CRS202 (Sales Strategies), giving you the opportunity to earn required education credits toward your CRS designation while working on your GRI Designation. Also included is real estate investments and exchanging. Calculator is required. (Submitted for 2011-2012 CE). Instructors: Tom Lundstedt, CCIM and Frank Serio, CRS
New Broker Training February 16-18, 2011
Wisconsin Dells (included in GRI Course 3)
WRA Headquarters - Madison
You can enjoy a competitive advantage because you will understand what motivates and influences your customers. Sales Strategies will give you the inside track to win over prospective buyers by teaching you the necessary strategies that make your sales quick and efficient. You will learn how to work with today’s new buyers through counseling, salesmanship and negotiation. These effective strategies will give you customers for life.
The WRA is offering a class dedicated to new brokers in preparation for starting your own office. You will learn about the daily practice of broker operations and management. Some of the topics include: Business structures and models, employment and compensation of agents, financial management and budgeting, company policies, trust accounting, plus more. Registration includes the latest version of the Broker Desk Reference.
wisconsin real estate magazine
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january 2011
news.wra.org
Course Schedule
Visit wra.org/CourseSchedule for full schedule.
Sales & Marketing Management Date Course Location
Early Reg.** $Reg.
$
*Fulfills core education for NAR Short Sales and February 8-11, 2011 Foreclosure Resource (SFR) certification February 8-11, 2011 ** Early registration applies two weeks prior to start of the course. Designation Week’s early February 9, 2011 the registration ends 1/14/11. February 10, 2011 # Appraiser section members receive a discount. ^Check out Multiple Registration Discount ^^Check out special REBAC pricing. - $30 discount
February 16-18, 2011 March 10-11, 2010
Conference and Conventions Date Event February 8-11, 2011 Designation Week Appraisal Conference# WRA Annual Convention
Baraboo Wisconsin Dells
Real Estate Continuing Education
Date
Course
Location
*Plus books ** early registration applies two weeks prior to start of the course. the ***Agents attending Designation Week receive 2 free CE courses & can register for additional courses for $15 each.
***February 7, 2011 ***February 8, 2011 ***February 9, 2011 February 17, 2011 February 22, 2011 February 23, 2011 February 23, 2011
2011-12 Course 1 & 3 2011-12 Course 2 & 4 2011-12 Elective C & D 2011-12 Course 1 & 2 2011-12 Course 1 & 2 2011-12 Course 1 & 2 2011-12 Course 1
Wisconsin Dells Wisconsin Dells Wisconsin Dells Brookfield Marinette Madison Sheboygan
Appraisal Continuing Education
Date
Course
QuickStart sales training program
www.wra.org/QuickStartOnDemand
Date
370 370 180 180 315 315 325 270
390 390 200 200 335 335 345 290
Wisconsin Dells To register call 800-279-1972
March 16-17, 2011 September 13-15, 2011
Pre-License * Plus books Available online!
^360 ^360 ^170 ^170 ^305 ^305 315 ^^260
Location
March 16-17, 2011 March 16, 2011 March 17, 2011
GRI Course 2 Wisconsin Dells GRI Course 3 Wisconsin Dells *CRS 111 Short Sales & Foreclosures Wisconsin Dells CRS: Microsoft Outlook E-Marketing Strategies Wisconsin Dells CRS201 only CRS202 only New Broker Training Madison 2-day ABR Course Madison
ATD
$
Location
800-279-1972 $27/m/$35/nm 800-279-1972 $27/m/$35/nm 800-279-1972 $27/m/$35nm 800-279-1972 $27/m/$35nm 715-735-0547 800-279-1972 $27/m/$35nm 920-457-7908
Appraisal Conference# Ho-Chunk Casino, Baraboo 7-hour Mandatory National USPAP update course or #A.M. - Residential Market Analysis - 3.5 hours and P.M. - Residential Sales Analysis - 3.5 hours #The Appraisal Profession After Dodd-Frank, HVCC and the Mortgage Crisis - What Comes Next? 7 hours or #A.M. - 2011 FHA Update 3.5 hours and P.M. - Complete and Accurate Appraisal Reviews - 3.5 hours Course
Location
Member
Non-Member
January 4-7; 10-13, 2011 Sales Pre-License Course 8:00 - 5:00 Madison 325* April 4-7; 11-14, 2011 Sales Pre-License Course 8:00 - 5:00 Madison 325* May 9-12, 2011 Broker Pre-License Course 8:00 - 5:00 Milwaukee $260 member
325* 325* $280 non member
QuickStart On Demand The QuickStart program assists agents in learning the business of real estate. Courses focus on contract issues, agency relationships and negotiating strategies. The program is designed to help agents become confident in their practice as well as focused on their personal business plan. Completion of the QuickStart program (four days) and passing the exams fulfills the requirements for GRI Course 1. Visit: www.wra.org/ QuickStartondemand
wisconsin real estate magazine
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Realtor® sales tip
By marcus a. wally
Teaming Up with our Affiliates
W
e all know how important relationships are to our industry. In fact, nothing is more important to me than maintaining solid ties with the affiliates in my community. The term “affiliate” means
anyone whose business has some type of connection with the real estate
business. These team players often join our local associations/boards and eagerly participate in many of our functions. They often step up to the plate and sponsor a number of activities to show their involvement in our business. Affiliates are a critical spoke in the wheel of real estate. Having strong relationships with all sorts of affiliates is critical to your long-term success. We need them and they need us. And if you nurture these relationships, they can be some of your strongest allies and biggest referral generators. Their referrals can notch up your business to a much higher level so that you wonder, how did I get along without them? How strong of a relationship do you have with a talented carpenter? A dependable surveyor? A trustworthy banker? An accurate tax advisor or a knowledgeable attorney? These professionals play a critical role in my ability to deliver exceptional customer service from our initial meeting until we finally put something on paper (a contract). Without my team, I would not have all my bases covered. Case in point: I recently received an email from Jinn-Ming Hwang, a gentleman from Taiwan who was inquiring about purchasing a multi-family property in my town. My initial reaction to the email was that it might be a scam but being aware of the amount of international business that takes place in the United States, I did not want to discard him without further investigation. After all, I am an instructor and I teach classes all over the world, so this inquiry was close to my heart.
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Additionally, I live by the philosophy that everyone deserves a certain amount of good, old fashioned customer service. And his email signature provided all of his contact information in Taiwan, which gave me comfort. So I decided to pursue the Internet inquiry. I responded to the inquiry by sending a list of all the duplexes currently available for sale and the buyer responded right away. He wished to make an offer and asked me to prepare the paperwork for one particular property out at the beach. At this point, I was still skeptical but also believed he could very well be legitimate. His offer was not for full price and he inquired about having a local attorney guide him as he was a foreign citizen. Not offering full price and seeking the referral of a local attorney gave me more reason to believe that this might just be a real deal.
news.wra.org
me from going down a road that could have had me expending more time and perhaps even some of my own money. The savvy attorney later told me of a similiar situation that got all the way to closing. Contracts were signed, closing documents returned, and the proceeds check was enclosed to pay for the purchase. It was only after verifying the funds that the agent discovered that the bank the check was drawn on was not even a real operating bank. WOW!! My situation could have been much worse.
Following up on the buyer’s request, I called a local real estate attorney who recently assisted me with a similar sale with an international seller. The attorney was so knowledgeable about FIRPTA (foreign Investment in real property tax act) and the other unique aspects of that sale that I decided to refer Mr. Hwang to her for guidance. After calling the local attorney to fill her in, I asked that she reach out to the buyer and introduce herself and offer her professional services as a lawyer who is most knowledgeable about international transactions. The entire process was falling into place.
We all have valuable relationships with our local affiliates—just today I put a home under contract that I will need to close in 5 days—and although the buyer will pay cash, I suggested a survey and elevation certificate and she agreed.
In the meantime, I had emailed the buyer a few times asking him to tell me who had referred him, as I wanted to thank the person for tooting my horn and sending this buyer my way. He never answered me and he also never answered my inquires as to his county of residency and whether or not he had ever been to America or owned other property here or had established bank accounts here. These are the questions that I have been trained to answer to establish just how familiar a foreigner is with doing business in the U.S.
So I called a local surveyer I know and he was most willing to make it happen for me...even during the holiday season. I’ve known this man for 15 years and work with him all the time. He is there for me and I am there for him. When I placed this order, we even talked about me listing a property for him. Take time in the new year to seek out qualified
Other than those unanswered questions, I still thought this guy might be real.
affiliates and start working together with them to increase your sphere of influence and your ability to call on them for all your needs. In 2011, you may need their guidance and expertise many times and having a personal relationship will increase your ability to call on them for favors and for them to send you business. These dedicated professionals need you as much as you need them. Let them know of your desire to help them with all their real estate needs, as everyone you meet has the need to buy and sell real estate...even these affiliates. The key is establishing and nurturing these affiliate friends as you navigate the road of real estate. Happy New Year! Marcus A. Wally, MBA, is an active Florida REALTOR® in St. Augustine, Florida. Marcus is the founder and broker of New World Realty, which also manages coaching and facilitation of education classes around the world. Marcus earned his MBA from the University of North Florida in Jacksonville. He can be reached at (904) 669-1081 or by e-mail at marcuswally@comcast. net.
A few days later, I followed up with the attorney to inquire as to what she had learned. The attorney stated that she had never been able to contact Mr. Hwang and that he never responded to her emails and phone calls. Now I started to get worried that I had been scammed. Could it be? While the attorney was on the phone with me, she decided to Google his name and immediately found out that he was involved in a number of fraudulent business dealings. His name was all over the search results pages. The attorney sent me the following link
http://antifraudintl.org/showthread.php?t=38823
Of course as soon as she said she Googled his name, I wondered: Why hadn’t I thought of that? I was so excited to help an international person that I allowed a few early warning signs to be overshowed by my desire to help and be compensated.
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Thank goodness for my dedicated affiliate who was my partner in this transaction. She prevented
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public affairs
Prosser the Guinea Pig
By joe murray
State Supreme Court Justice David Prosser will run for re-election in the April 2011 spring election as a kind of guinea pig. Prosser, appointed to the court in 1998 by Governor Tommy Thompson and elected without opposition in April 2001, is the first incumbent Justice to run for re-election under the new public finance law passed by the Democratically controlled Legislature in 2009 called “Impartial Justice.”
Taxpayer Funded Supreme Court Campaigns
income tax check-off in Wisconsin was very unpopular with taxpayers at $1, so it’s unlikely to generate more support from taxpayers at $3. Assuming this voluntary funding mechanism fails to fund Supreme Court elections, general purpose tax dollars will be appropriated to pay for expensive Supreme Court races. Currently, the state budget deficit is $3 billion going into the January session. There isn’t enough money to fund these elections.
Here is how the new taxpayer-funded option works: To qualify for a $400,000 public financing grant, Prosser must raise “qualifying contributions” (not less than $5 or more than $100) from at least 1,000 separate Wisconsin donors during the “qualifying period” prescribed by the law (January 4, in Prosser’s case). Total contributions cannot exceed $20,000 and candidates who accept public financing must comply with all restrictions on campaign fundraising and spending.
• The Impartial Justice legislation significantly reduced individual contribution levels to Supreme Court candidates from $10,000 maximum to $1,000. For candidates who might decide to opt out of the new public financing option, the $1,000 contribution limit makes it even more difficult than it is today to raise larger individual donations to run a campaign. This is designed to force candidates into the publically-funded campaign option, driving more candidates into the system at a higher cost to taxpayers.
The grant to Supreme Court candidates will be financed through a new voluntary $3 checkoff on individual state income tax returns. A portion of the money ($2 of the $3) is placed in the “Democracy Trust Fund” for use by qualifying Supreme Court candidates. The remaining $1 is placed in the existing Wisconsin Election Campaign Fund that provides grants to candidates for other state offices. In addition to the check-off funds, general purpose revenue (state tax dollars) will be provided to the Democracy Trust Fund if the voluntary checkoff doesn’t raise enough to cover the grants.
• The Impartial Justice legislation will not succeed with its stated goals by those who supported it: It will not drive down the cost of Wisconsin Supreme Court elections and it will not drive away the “special interests” that care about and participate in these crucial elections. It will drive down individual contribution amounts, but it will also encourage more independent thirdparty spending, especially issue advocacy spending by the very “special interests” its proponents hoped to drive away.
Driving the cost to taxpayers even higher is the “Matching Grants” provision of the new law. The Impartial Justice legislation provides matching funds to a publically-funded candidate in response to independent expenditures. A participating candidate is entitled to receive additional grants ($300,000 for the primary, $900,000 for the general election) if an independent expenditure is made against the candidate or in support of his or her opponent.
• The Impartial Justice title leads one to believe that Supreme Court candidates, incumbents or challengers, run on a nonpartisan, bias-free platform. Insiders know this isn’t true and voters clearly understand the difference between the candidates’ judicial philosophy as well. The Wisconsin Supreme Court currently has
This may be a little confusing, so let me explain in simple language what passed the legislature and was signed into law by Governor Jim Doyle: • The Impartial Justice legislation will fund state Supreme Court elections from tax dollars one way or another. The voluntary
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a 4-3 “conservative majority” reflected in most of their high-profile decisions. Probusiness, pro-labor, conservative and liberal organizations, along with the political parties on both sides, are involved in virtually every Supreme Court election. They know who sides with them philosophically and they organize on their behalf. Impartial Justice is a title, not a reality. • Impartial Justice imposes a $400,000 spending limit on a statewide race that requires far more money to effectively communicate a candidate’s message. It’s nearly impossible to run a modern day statewide campaign without significant money to hire staff, outfit a campaign office and pay for expensive statewide media outreach. This will encourage independent third parties to spend even more money to elect their favored candidate. This is a classic unintended consequence. What the Legislature and Governor Doyle did with Impartial Justice was this: they largely shifted the funding of Wisconsin Supreme Court races from voluntary individual contributions to primarily taxpayer financed campaigns; they provided a faulty funding source ($3 check-off) with a guaranteed taxpayer financed backup (general purpose revenues) from a state facing a staggering $3 billion budget deficit in the next two years; they dramatically reduced individual contribution limits ($10,000 to $1,000) and tilted the system in favor of publicly funded candidates (Matching Grants) to coerce candidates to participate; and they titled the new law using a name (Impartial Justice) that sounds reform-minded to the casual voter. Justice Prosser has virtually no choice but to accept taxpayer funding this spring and live with the consequences. That, unfortunately, was the real goal of the Impartial Justice law. Joe Murray is Director of Political Governmental Affairs for the WRA.
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public affairs
Lawmakers Modify Wisconsin’s Smart Growth Law to Reduce Future Lawsuits
Tom Larson is Chief Lobbyist and Director of Legal and Public Affairs for the WRA.
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During the 2009-10 legislative session, Wisconsin lawmakers made significant changes to Wisconsin’s comprehensive planning law. These changes were signed into law by Governor Doyle as part of the 2009 Wisconsin Act 372 (Act 372). The changes were intended to clarify several key sections of the law and delay the consistency deadline for some local communities. In addition, the changes were supported by the Wisconsin REALTORS® Association and other organizations that developed the comprehensive planning law.
news.wra.org
Background Wisconsin’s comprehensive planning law (commonly referred to as “Smart Growth”) was enacted in 1999. The law requires most local communities to create a comprehensive plan to help guide them in making land-use decisions. Under the law, a comprehensive plan must contain at least nine elements (housing, natural resources, economic development, etc.), and most local land-use regulations are required to be consistent with the local comprehensive plan after January 1, 2010.
Recent Changes Act 372 made a number of significant changes to Wisconsin’s comprehensive planning law, such as: Delaying the consistency requirement for some local governments – Prior law required that beginning January 1, 2010, zoning, subdivision and official mapping ordinances needed to be consistent with a local comprehensive plan. However, a number of local governments were having difficulty meeting the January 1, 2010 deadline due to a shortfall in revenue and the fact that they applied for, but did not receive, state planning grants. Other communities have received state planning grants but also received time extensions from the Wisconsin Department of Administration (DOA) to complete their comprehensive plans. The new change delays the January 1, 2010 consistency deadline until either January 1, 2012 or the date agreed to by DOA for any community that has (a) applied for, but has not received, a comprehensive planning grant from DOA, or (b) received a comprehensive planning grant and an extension of time to complete it by DOA. Clarifying that Comprehensive Plans Are Not Regulations – One of the most important changes to the law is the attempt to clarify the legal status of a comprehensive plan. In other words, is the comprehensive plan a regulation, or merely a guide? Some confusion has resulted from the fact that comprehensive plans must be adopted by ordinance and that zoning regulations have to be consistent with comprehensive plans. Some people believed that since the comprehensive plan is adopted by an ordinance, a local government can directly regulate land use based on the comprehensive plan alone. In other words, a community does not need to have a zoning ordinance or subdivision regulations. Act 372 attempts to clarify that comprehensive plans are advisory in nature and do not create regulatory requirements independent from other requirements. Adopting a comprehensive plan is only one step in the process and local communities must take additional steps to implement the plan, if desired, through zoning ordinances and subdivision regulations.
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Specifically, the new changes define “comprehensive plan” to mean “a guide to the physical, social, and economic development of a local governmental unit.” In addition, the new changes specify that the enactment of the comprehensive plan by ordinance does not make a comprehensive plan by itself a regulation. Defining “consistency” – Under the comprehensive planning law, all zoning and subdivision regulations are required to be “consistent with” a comprehensive plan. However, “consistency” is not defined. As a result, considerable litigation could occur to define the meaning of “consistency,” which would create tremendous uncertainty for local communities and property owners trying to use their property in accordance with a comprehensive plan. Act 372 attempts to clarify the consistency requirement by defining “consistent with” to mean “furthers or does not contradict the objectives, goals and policies contained in the comprehensive plan.” This definition gives discretion to local communities as to how they interpret their local comprehensive plans. Moreover, the definition clarifies that local comprehensive plans do not need to contain the same detailed land use regulations found in a zoning ordinance in order for the zoning ordinance to be “consistent with” the comprehensive plan. Clarifying what must be consistent with the comprehensive plan – Under prior law, confusion existed as to which actions must be consistent with the comprehensive plan and with which parts of the plan these actions must be consistent. For example, if a community makes a zoning change, it was unclear whether the zoning change had to be consistent with the land use map, the housing element, the economic development element, or every word of every section of the comprehensive plan. Because plans are supposed to be visionary, rather than regulatory, in nature, this created tremendous confusion. Act 372 clarifies that only the ordinances enacted after January 1, 2010 have to be consistent with the comprehensive plan. This is intended to clarify that that the day after a local community adopts a comprehensive plan, the community’s zoning and subdivision regulations are not invalid if they are not consistent with the newly adopted comprehensive plan. Since planning is intended to focus on the future, only future ordinance changes need to be consistent with the comprehensive plan. The WRA will continue to monitor the implementation of Wisconsin’s comprehensive planning law to ensure that local communities are adopting local plans that, among other things, encourage economic development, protect our natural resources, and provide for an adequate supply of housing.
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First Order of Business – Cut Spending The 2011 Legislature Faces an Old Problem with a New Mandate Wisconsin’s new Governor, Scott Walker, along with the new Republican majorities in the state Senate and Assembly, got elected in large part on their promise to fix the state’s recurring budget deficits without raising taxes. For better or worse, their first order of business then appears to be cutting spending. This task will be much harder to accomplish than in the past because unlike the last budget, they can’t get money from other state segregated funds (which they promised not to do) or the federal government (which is now also broke). This makes fixing the projected $3 billion budget deficit much harder than balancing the last budget, which had a deficit nearly twice as big. Despite the well-publicized looming budget deficit, state agencies continue to ask for more money. According to a report released in November by the Department of Administration, state agencies are requesting new spending increases from all funds of $1.5 billion in the first year of the next biennium, and an additional $826 million in the second year. If approved, state spending would increase from the current base of $31.75 billion, to $33.31 billion in 2011-12 and $34.13 billion in 2012-13. That equals general fund spending increases of 4% the first year and 4.9% the second year. Given the size of the projected budget deficits and the campaign promises of the new Governor and Republican majorities, it’s safe to say these agency budget requests are not likely to be approved.
Long-term Solutions In the short run, then, it appears sharp spending reductions will be in order. Which programs will be cut and by how much will be determined by July 1, 2011. There’s no doubt these cuts will cause a great deal of legislative and political angst. But the chronic nature of our budget deficits illustrates the need for more systemic reforms to our budget process. What can the state do to better ensure that our
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By Michael theo
spending stays in line with our revenue? One state lawmaker has a plan. Near the end of the last legislative session, State Representative Mark Gottlieb (R-Port Washington) unveiled a proposal for a constitutional amendment to cap state revenues and thus put a permanent lid on state spending. Unlike a related proposal known as TABOR (the Taxpayers Bill of Rights, which was defeated in 2004 by a bipartisan majority in a Republican-controlled state Senate), Gottlieb’s “Wisconsin First Amendment” would require all general tax revenues in excess of 6.5% of statewide personal income be deposited into a rainy day fund to be used in times of economic recession and thus not available for additional spending. If revenues are less than 6.5%, only one-half percent of revenues would be required to be deposited in the fund. If economic times are good and the rainy day fund balance exceeds 10% of annual tax revenues, the plan calls for the additional revenues to be distributed as a property tax credit. A constitutional amendment requires passage of the bill by two consecutive legislatures and then must be approved by voters in a statewide referendum. It’s clear that the first order of business for the new legislature will be to cut spending. But it’s equally clear that the state budget process must be reformed if habitual budget deficits are to be avoided in the future. Rep. Gottlieb’s proposal may be just the first of many new ideas on how to permanently align state spending with state revenues. Michael Theo is Senior Vice President of Legal and Public Affairs for the WRA. news.wra.org
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