Insight | Winter 2015 by NC REALTORS®

TECH TIPS: TAMING THE SYNDICATION BEAST

NC RPAC EARNS TRIPLE CROWN

THE VOICE OF REAL ESTATE IN NORTH CAROLINA

VOL 94 NO 4 | WINTER 2015

Setting Your Sights on

MILLENNIAL + HOME BUYERS NC REALTORS速 are well braced to take advantage of this market trend

CONFERENCE PHOTO RECAP

5 MINUTES WITH OUR 2015 NCAR AWARD WINNERS END OF SESSION BRINGS CHANGES AND QUESTIONS ELECTION RESULTS NCREALTORS.ORG

Winter 2015

[CONTENTS]

TECH TIPS

Departments 4

President’s Message

Something to Talk About 2015 NAR Profile of Home Buyers and Sellers

18 20

Inside NC REALTORS® 2015 Rising Stars NC Homeowners Alliance Headed in a New Direction

21 Commercial 1031 Exchanges: What’s at Stake

your listing

22 Homes4NC News from Homes4NC

Features

A look back at this year’s Conference & Expo.

5 Minutes with...2015 NCAR Award Winners

Government Affairs Session End Brings Changes and Questions for Future

Forms Guy Avoiding the Potential Pitfalls of Additional Earnest Money

REALTOR® Partner Program

Find out what drives them, why they feel it’s important to give back to the community and how you can get involved.

2015 Conference Recap

Take control of your data once again with simple tips from NCAR member Stephen Long.

24 RPAC 2015 RPAC Success Stories

Setting Your Sights on Millennial Home Buyers COVER: As the under-35 crowd shifts toward more homeownership, NC REALTORS® are well braced to take advantage of this trend.

WE NEED

YOU

Have something to talk about? Sure you do — and we want to hear it! Send your stories to bwilburn@ncrealtors.org and you could be featured in the next Insight. ncrealtors.org • INSIGHT 3

President’s MESSAGE

At the beginning of this year, I encouraged you all to play an active part in “Building the N.C. REALTOR® Nation.” As I look back on our year in review, I can say that you certainly rose to the occasion. With our growing membership — now at 35,000 REALTORS® across North Carolina — we accomplished many milestones of which to be proud. Legislatively, we continued to prove a powerhouse in our great state. When Calls for Action arose, you stepped up against issues that threatened to harm homeownership. Together, we exceeded NAR’s CFA participation goals this year, accomplishing our highest response rate in history. You made it your responsibility to support RPAC and helped NCAR achieve its first ever NAR Triple Crown Award. This is a huge accomplishment for our state and something in which we should all take pride. And on the advocacy side, grassroots efforts with the NC Homeowners Alliance have soared. The Alliance has a growing database of 53,000, about 19,000 of whom are nonREALTOR® homeowners. Thank you for encouraging the homeowners you work with to sign up and engage with us. It is clear that NC REALTORS® have a thirst for knowledge and professionalism. The newly revamped Graduate REALTOR® Institute (GRI) was met with enthusiasm in all areas of the state. Courses are already scheduled for 2016. And, I’d be amiss not to reflect on our time in Hilton Head at the Carolina REALTORS® Conference where we reconnected with our South Carolina friends. The conference was a great success. In the pages to come, you’ll find information on shifting market trends and engaging millennial home buyers. The National Association of REALTORS® recently published the 2015 Profile of Home Buyers and Sellers. We learned from this report that nearly 90 percent of all respondents worked with a real estate agent to buy or sell their home, pushing for-sale-by-owner transactions to their lowest share ever. While growing technology has made it easier for sellers to market their listings to a wider pool of potential buyers, the preference to use a REALTOR® to sell a home has never been stronger. This is an important time for us and for our industry. As I hand over the reins to your incoming president, Kim Dawson, I want to thank you. We’ve worked hard this year and grown our involvement. We’ve given back to the industry that has given so much to us. We’ve helped to build the N.C. REALTOR® Nation. Let’s keep it going.

Insight Magazine, Volume 94, Issue 4 President Tony Smith

Treasurer Treasure Faircloth

President-Elect Kim Dawson

Immediate Past President Tomp Litchfield

REGIONAL VICE PRESIDENTS Region 1: David Perrot, Kill Devil Hills; Region 2: Jody Wainio, Wilmington; Region 3: Bruce Gates, Goldsboro; Region 4: Greg Payne, Durham; Region 5: Amy Hedgecock, High Point; Region 6: Phil Rector, Winston-Salem; Region 7: Marsha Jordan, Lincolnton; Region 8: Alison Royal-Combs, Leslie Fisher, Charlotte; Region 9: David Wall, Asheville; Region 10: Linda Trevor, Jose Serrano, Raleigh; At-Large: Stephanie Walker

Chief Executive Officer Andrea Bushnell Editor Blair Wilburn Assistant Editor/Designer Mckenzie Allen Contributors Nicole Arnold Will Martin Mike Landes Bridget McCrea Stephen Long Kristin Nash Seth Palmer For Advertising information, contact Mike Buescher at 336-808-4229 or mbuescher@ncrealtors.org. Insight is published four times a year during the months of March, June, September, and December by the North Carolina Association of REALTORS®, 4511 Weybridge Lane, Greensboro, NC 27407. Application to Mail at Periodicals Postage Rate is Pending at Greensboro, NC and additional mailing offices. POSTMASTER: Send address changes to Insight Magazine; 4511 Weybridge Lane, Greensboro, NC 27407. This publication is designed to provide accurate and authoritative information regarding the subject matter covered. Articles which appear in Insight are an informational service to members. Their contents are the opinions of the authors alone and do not necessarily represent those of the North Carolina Association of REALTORS®. Advertising of a product or service does not imply endorsement, unless specifically stated. Prefer to read Insight electronically? To opt-out of paper copy mailings, email ncar@ncrealtors.org with a subject line of “Insight opt-out.”

Tony Smith 2015 President 4511 Weybridge Lane, Greensboro, NC 27407 Phone: (336) 294-1415, Toll Free: (800) 443-9956

ncrealtors.org

4 INSIGHT • Winter 2015

[SOMETHING TO TALK ABOUT]

800 The number of

attendees from across North Carolina and South Carolina who convened at Conference in Hilton Head, S.C. this fall. (pg 9)

32 The percentage of

millennial home buyers in today’s market, the largest share according to NAR’s 2015 Home Buyer and Seller Generational Trends Report. (pg 14)

2,207 The number of

members who voted in this year’s elections, representing our fourth highest turnout since we began online voting. (pg 18)

$559,585 The amount raised for NC RPAC this year. We surpassed our national fundraising goal and qualified for the Triple Crown for the first time in N.C. history, thanks to your efforts. (pg 24)

ncrealtors.org • INSIGHT 5

[SOMETHING TO TALK ABOUT] January 27, 2016 Washington Duke Inn & Golf Club

EVENTS Dec. 3 GRI: Balancing Business Risks & Ethics, Charlotte

Dec. 3 NCAR’s Ombudsman & Citation Policy Training, Hickory

Dec. 4 NCAR’s Ombudsman & Citation Policy Training, Cary

Dec. 9 Webinar Wednesday: How to Pay Less Taxes and Never Worry About an IRS Audit NC REALTOR® Partner Taxbot will lead a tax planning webinar with five strategies to help put thousands of dollars back in your pocket.

Jan. 13 Webinar Wednesday: BB&T Insurance Services Meet our newest REALTOR® Partner, BB&T Insurance Services, and learn about the products they provide.

Jan. 26-29 Inaugural Meetings & Vision Quest Washington Duke Inn, Durham We’ll kick things off with Vision Quest, January 26-27, then celebrate with NCAR’s 2016 President, Kim Dawson, at the Inaugural Gala on Thursday, January 28.

Jan. 26-28 Leadership Academy Retreat Washington Duke Inn, Durham 6 INSIGHT • Winter 2015

THE LEADERSHIP If you’re taking on a leadership role in 2016, Vision Quest is designed for you. This year’s program will teach you the three key business practices of The Leadership Triangle, all focused on helping you define your role as a leader: efficiency, etiquette and ethics.

SESSIONS AT A GLANCE: — Profit Producing Productivity: This session will provide easy to use solutions and innovative answers to the age-old question — where did the time go? — Reputation Management: Understand how the reputations of a business, organization or individual play out over the Internet, through social/traditional media and in any public forum. — Exquisite Communication: Polish up your communication skills by learning the three stages of interaction, the four things everyone wants to know and how to minimize defensiveness. Register by Jan. 15 | www.ncrealtors.org

Here’s to you for loving what you do. Nationwide® salutes your commitment and passion for being a member of NC Association of REALTORS®. At Nationwide, we’re passionate about making a difference, too. It’s just one way we prove that we’re More Than a Business®.

Learn more about our partnership and special discounts. nationwide.com/NCAR Local Agent 1-866-688-9144

Nationwide Insurance has made a financial contribution to this organization in return for the opportunity to market products and services to its members or customers. Products underwritten by Nationwide Mutual Insurance Company and Affiliated Companies. Home Office: Columbus, OH 43215. Subject to underwriting guidelines, review, and approval. Products and discounts not available to all persons in all states. Nationwide, the Nationwide N and Eagle and More Than a Business are service marks of Nationwide Mutual Insurance Company. © 2015 Nationwide AFR-0236AO (10/15)

8 INSIGHT • Winter 2015

conference 2015 RECAP

To see more of the 2015 Conference & Expo, search #RECONNECTREALTORS on Facebook, Twitter and Instagram. Cindy Chandler was honored as the 2015 REALTOR® of the Year at a special ceremony.

NAR Chief Economist Lawrence Yun updated a room full of REALTORS® on the status of the real estate economy.

RPAC Trivia Champions “LOTSA” with RPAC Chair Jay Dowdy.

REALTORS® M ark and Teresa Connor enjoyed a be autiful sunset on the Homes4NC D olphin Cruise .

The trivia night event successfully raised over $50,000 for NC RPAC.

Attendees enjoyed the sunny beach setting on Hilton Head Island. Homes4NC hosted a fundraiser for individual and team REALTOR® headshots and raised $2,000.

red Expo featu This year’s test la e th h it 60 booths w rvices nd se products a RS®. ive REALTO ct u for prod

More than 800 attendees from across North Carolina and South Carolina convened this fall at the Hilton Head Marriott Resort for the Carolina REALTORS® Conference & Expo. The event, which marked the third time the states have partnered for annual conference, offered attendees an opportunity to network with colleagues across state lines. Photos by Robin Cooper Photography and NCAR staff.

ncrealtors.org • INSIGHT 9

minutes with... 2015 NCAR Award Winners

This year’s award winners are an impressive group of compassionate REALTORS® from all walks of life and all parts of the state. We spoke to them to find out a little more about who they are, how they got involved and why it’s important to give back.

Vickie Gallimore

BEN BALL COMMUNITY SERVICE Firm: RE/MAX Central Realty Years in real estate: 28 Top leadership highlights: Receiving the 2014 NC Governor’s Award for Volunteer Service, the Randolph Chamber of Commerce Athena Award in 2008 and Asheboro/ Randolph REALTOR® of the Year in 1996. Leadership role model/mentor: David Stedman, owner of Stedman Corporation and philanthropist. Best piece of advice you’ve received: Work hard, believe in yourself and never give up. Reason it is important to give back: I feel success is never achieved without the willingness to serve and share. Advice for others who want to get involved: Find something you love doing and do it to the best of your ability.

Carlton Fisher

REGIONAL SERVICE REGION 2 Firm: Coastal Realty Years in real estate: 36 Top leadership highlights: UNCW Board of Trustees co-chair, Boy Scout Leadership luncheon chair, youngest president of Wilmington Regional Association of REALTORS®, chairman 10 INSIGHT • Winter 2015

of UNCW Foundation board and most of all, being a dad. Leadership role model: My dad. Best piece of advice you’ve received: Keep it simple. Guilty pleasure: A good cigar. Things we’d be surprised to know about you: I love to hunt. I started when I was 45 with my best friend and I’ve been hooked ever since. Reason it is important to give back: Because your community gives back to you.

Sofia Crisp

REGIONAL SERVICE REGION 5 Firm: Housing Consultants Group Years in real estate: 20+ Top leadership traits: Observe, listen, think, plan and do. Leadership role model/mentor: Jennette Silverthorne, my mother. Best piece of advice you’ve received: From my father: “You have two ears and one mouth,” which means, you should listen more. Guilty pleasure: Spending Sunday afternoons watching football. Things we’d be surprised to know about you: I’ve been a Girl Scout leader for 10+ years and I’m the Cookie Mom this year, even with no children still in Girl Scouts! Reason it is important to give back: The average person is really blessed and has talents they can lend

to the community — services that don’t necessarily require being paid. We all work, we get paid for our skills knowledge, but you can lend your expertise to so many organizations. Advice for others who want to get involved: You should volunteer — call the association and say, “This is what I like doing, where do you think I’ll best fit?” It does involve you opening the door and making it known that you want to volunteer. Associations will welcome you.

Todd Long

REGIONAL SERVICE REGION 8 Firm: Keller Williams Years in real estate: 15+ Top leadership highlights: Serving as Realtors® Care Day Core Committee Chair in 2013 and 2014 and overseeing the critical repairs of 33 homes those years, serving on the MLS Task Force committee that chose Matrix as our new MLS system in 2013 and serving on the Greenwood Cliff Task Force committee that made decisions regarding our property and the future site of our association. Best piece of advice you’ve received: Keep your foot on the gas. In life, even when you need to take a moment to tap the brake it’s good to keep your foot on the gas as well to keep the positive momentum you’ve built up so far. Guilty pleasure: Chocolate anything.

REALTOR® OF THE YEAR

NCAR HALL OF FAME

The NCAR REALTOR® of the Year award was the first of its kind in the country. It recognizes dedication and service to the organization, the real estate industry and the community.

This award honors REALTORS® who have contributed and continue to contribute service to our profession in the areas of development, environment or government and/or leadership which have an enduring effect upon the real estate profession.

Things we’d be surprised to know about you: I am a REALTOR® who also owns investment property. It shocks me how many of my peers are not investors in a product we know so well and deal with everyday. What you’re reading right now: “The Midas Touch.” One, because it is written by Robert Kiyosaki, who inspires me, and Donald Trump, who is in the news just a little bit right now, and two, because I’m in the process of expanding my real estate agent coaching business. Reason it is important to give back: In my years working with Realtors® Care Day, it quickly became evident to me that this project was larger than any of us and much more than working together on a house. It was about what hundreds of REALTOR® could do in a day to have a positive impact on our community. Advice for others who want to get involved: Find a group to support that means something to you and it won’t ever feel like you are giving; it will always feel like receiving. Remember, you can’t out give a giver.

Diana Braun

REGIONAL SERVICE REGION 10 Firm: Real Living Pittman Properties Years in real estate: 7 Top leadership traits: Vision, engaging leaders, self awareness, humility and commitment. Leadership role model/mentor: Jean Hunt, REALTOR®, past president of the Raleigh Regional Association of REALTORS® and one of the founding Board Members of Women’s Council of REALTORS® Raleigh Chapter. Best piece of advice you’ve received: Everyday holds a possibility of a miracle Guilty pleasure: The 4 C’s — coffee,

BEN BALL COMMUNITY SERVICE AWARD This program is designed to recognize REALTORS® at the local and state levels for their continuing contributions to the betterment of their communities through outstanding public service.

chocolate, cheese and cowgirl hats. Things we’d be surprised to know about you: I’m an avid photographer, a deltiologist, a golfer and I perform daily random acts of kindness! What you’re reading right now: “Sell with Soul” by Jennifer Allan. Reason it is important to give back: Using your voice, hands, resources and expertise to help build viable and thriving communities. Be a change agent — community lead and community driven. Advice for others who want to get involved: Find your niche and contribute. Understand that education is key and there are plenty of opportunities to grow in your business as it changes daily. Attend local, state and national conferences. The power of networking with other members of our profession will help you find ways to improve both personally and professionally.

Myra Zollinger

HALL OF FAME Firm: Coldwell Banker Howard Perry and Walston Years in real estate: 37 Top leadership highlights: Local board president, state president, national CRS president, NAR regional vice president and liaison to two different NAR presidents. Leadership role model/mentors: Tom Heffner, Wanda Proffitt and Ace Robbins Best piece of advice you’ve received: To your own self, be true… Sometimes it’s hard for us to know our own selves and this saying serves as a good reminder. Guilty pleasure: Playing slot machines Things we’d be surprised to know about you: Every morning I watch SpongeBob SquarePants. I’m also known for bringing flashy toys and making cookies.

REGIONAL SERVICE AWARDS This award recognizes REALTORS® in each NCAR region who have contributed to and continue to serve their local board, community and NCAR.

What you’re reading right now: I read a lot of historical mystery on my Nook. Reason it is important to give back to community: We should all live by the golden rule. That’s the basis for so many things. Never get too big for your britches and always remember who you’re representing. It’s your community and you’ve got to live in it. Advice for others who want to get involved: Find a mentor and get involved. It helps you learn and make new friends. You have to do what makes you feel good at the end of the day.

Cindy Chandler

REALTOR® OF THE YEAR Firm: The Chandler Group Years in real estate: Over 30 Top leadership highlight: I was so honored when CCIM created an endowed scholarship and named it in my honor. Leadership role model/mentors: So many — Jim Rogers, Mark Erwin, Allen Tate, John Crosland and Gary Taylor. Best piece of advice you’ve received: Stop talking. Guilty pleasure: Flopped on beach in Hilton Head Island, reading a Cobin mystery. Things we’d be surprised to know about you: I’m an introvert. Reason it is important to give back: The quality of what grows is dependent upon its fertilizer. Advice for others who want to get involved: Pick something. It’s best to pick something you’re “passionate” about, but get over yourself — you can learn how to best serve in nearly any position. I’ve taken slots no one wanted. There are lots of opportunities! ncrealtors.org • INSIGHT 11

As the under-35 crowd shifts toward more homeownership, NC REALTORS® are well braced to take advantage of this market trend. BY: BRIDGET MCCREA

Setting your sights on

MILLENNIAL

12 INSIGHT • Winter 2015

HOME BUYERS

Getting to Know Your Generations According to Pew Research Center, generational names are the handiwork of popular culture. Each generation possesses different preferences and needs as consumers and customers and knowing these characteristics will only help you work with them in the future. THE MILLENNIAL GENERATION Born 1981 to 1997 Age in 2015: 18 to 34 The first generation to come of age in the new millennium. They’ve grown up dominated by technology and are driven by group decisions. GENERATION X Born 1965 to 1980 Age in 2015: 35 to 50 Xers are often depicted as savvy, entrepreneurial loners. They want efficiency and proof of cost-value. THE BABY BOOMER Born 1946 to 1964 Age in 2015: 51 to 69 This label is drawn from the great spike in fertility that began in 1946, right after the end of World War II. Demanding, inquisitive consumers, they want integrity and common courtesy from you.

When the National Association of REALTORS® pinpointed the best purchase markets for aspiring millennial home buyers, at least one North Carolina city surfaced as a potential target for these young buyers. In its report, NAR ranked Raleigh as one of the “other markets with strong potential for attracting millennial home buyers,” along with cities like Madison, Wis., Nashville and Omaha, Neb. “Limited job prospects, student debt and flat wage growth have combined with tight credit conditions and low inventory to price millennials out of some of the top cities such as New York and San Francisco,” said Lawrence Yun, NAR chief economist. “However, NAR research finds that there are other metro areas millennials are moving to where job growth is strong and homeownership is more attainable. These markets are wellpositioned to soon experience a rise in first-time buyers as the economy improves.”

THE SILENT GENERATION Born 1928 to 1945 Age in 2015: 70 to 87 Children of the Great Depression and World War II, their “Silent” label refers to their conformist and civic instincts. They prefer one-on-one discussions and desire quality. THE GREATEST GENERATION Born before 1928 Age in 2015: 88 to 100 This generation “saved the world” when it was young, in the memorable phrase of Ronald Reagan. It’s the generation that fought and won World War II. They are very concerned with the value and security of their belongings. ncrealtors.org • INSIGHT 13

Now playing: The millennials Identified by Pew Research Center as those individuals born after 1980 – and also referred to as “Gen Y” – millennials tend to be confident, self-expressive, liberal, upbeat and open to change. And while the Great Recession clearly impacted older millennials’ entry into careers and first jobs, Pew says this young generation is “more upbeat than their elders about their own economic futures as well as about the overall state of the nation.” That’s good news for agents who take the time to get to know this generation (or, those under-35 agents who are immersed in it by default), understand its nuances and explore the most effective ways to turn these buyers into long-time clients and solid referral generators. According to the National Association of REALTORS® Home Buyer and Seller Generational Trends Report 2015, Gen Y or millennial home buyers comprise the largest share of home buyers at 32 percent. Millennials also make up the largest share of first-time buyers at 68 percent. Among all generations of home buyers, millennials are most likely to also look online for information about the process. At the same time, NAR reports, “younger buyers are more likely to want the agent to help them understand the process as they are more likely to have never purchased a home before.”

Success tips Generational stereotypes are common in the U.S. When Gen Xers — born between 1965 and 1980 — were coming of age, they were referred to as the “slacker generation” and labeled as underachievers who were reared on TV, divorce and the earliest home computers. Now, millennials are earning their own labels with their 24/7 connected status to social media, texting and streaming music. Steeped in digital technology, these potential home buyers treat their multi-tasking, hand-held gadgets almost like a body, says Pew, with eight-in-10 of them admitting that they sleep with a cell phone glowing by the bed every night. It’s no secret that millennials communicate a little differently than their parents and grandparents do. Not interested in lengthy phone calls (or any calls at all, in some cases), multipage email messages or any type of snail mail, this younger set of buyers prefers quick responses via text mixed in with the occasional social media update or collaboration. Ignore this fact, says Bob Corcoran, and you may quickly find yourself passed over for a more tech-savvy agent. “Relationships are still extremely important, but they are handled differently with millennials than they were with older buyers,” says Corcoran, founder and president of real estate consultancy Corcoran Consulting Inc., in Chicago. “When they text you a quick message asking about a property, resist the urge to call them back and instead practice communicating with them on their terms.” 14 INSIGHT • Winter 2015

Also remember, millennials respond better to short messages versus large ones. Lisa Orrell, a generational expert and author of “Millennials Incorporated; Millennials into Leadership,” says breaking down information into digestible chunks is a good strategy. One agent she knows, for example, distilled the typical 5-inch-thick closing document folder into more readable and understandable portions and shares that information with millennial buyers over time versus all in one day. “This is a great way to adapt to these buyers’ desire for shorter bites,” says Orrell.

Coming soon to Raleigh In Raleigh, Allen Wyde, team lead and broker-in-charge at Redfin, works often with under-35 home buyers who gravitate to his technology-centric brokerage. “We’re actually geared towards working with millennials,” says Wyde. The biggest difference between these buyers and their older counterparts? The fact that they find their own homes, according to Wyde, whose team members typically come on the scene after the buyer has already scouted for what he or she wants online. “They’re more educated buyers due to technology and the fact that they have a lot of information at their fingertips,” says Wyde. Agents who have adapted to this shift tend to be well positioned to work with these younger buyers, he points out, while others may run into challenges forming and cultivating relationships with the under-35 crowd. “Instead of helping them find houses, we bring expertise to the table and guide them through what can be a very complicated process.” Take North Carolina’s new due diligence requirements for example. Wyde says he’s been advising millennials on how to manage these requirements in a market where multiple offers are becoming more and more common. “We can show them how it’s not only price that impresses the seller,” says Wyde, “and how they can also raise their due diligence money to show how serious they are about buying.” In return, Wyde says he walks away from the closing table feeling more appreciated than he ever has in the past. “We used to match people up with houses and we weren’t necessarily known for our expertise,” says Wyde. “I feel that millennials actually come to us for our expertise; they know what’s on the market and they rely on us to capably get their deals closed.” In the end, the agents who put the time into learning their millennial buyers’ nuances and preferences definitely see a payoff. “This is a very connected generation that has big social circles and that relies on REALTORS® more than any other generation has,” say Wyde. “When our team does a good job, these buyers are quick to share that information with their circles of influence – a phenomenon that can quickly turn into referrals, goodwill and more business.”

[TECH TIPS]

Quick Tips for NC REALTORS®

BY: STEPHEN LONG BROKER/OWNER THE CAROLINA CREW, INC.

[Taming the

Syndication Beast[ Major syndication sites like Zillow and realtor.com® have been acquiring listing data to generate web traffic and leads to sell back to the highest bidding agent. Worried? Don’t be! NCAR member Stephen Longs offers some tips for taming the syndication beast.

Once upon a time, in a land not so far away, REALTORS® listed homes for sale. That process of marketing included flyers, newspaper ads, real estate books and sharing with other brokers at meetings. Then one day, along came the big bad Internet. REALTORS® did not understand this new beast or how to tame it, but recognized it as a new place to market. In fact, the Internet sucked in poor unsuspecting real estate agents with the promise of better marketing for their listings and more leads to grow their business. The rush was on and trusting real estate professionals gave their listing data away. 16 INSIGHT • Winter 2015

your listing

After all, it was a better way of making sellers happy and getting more listings. They fed the beast for years and it got bigger and bigger. One day, the real estate agents paused and noticed that the Internet marketing monster had betrayed them and now was using their data against them. In a haste to slay the beast, they reacted, but it was too late; listing syndication was born. This sounds like a story with a tragic ending. However, the epilogue is still being written. The current condition of the syndication system is not as bad as it may seem. There are

[TECH TIPS] many agents who have either built or launched their real estate career using the power of these large data aggregators. If you care to spend some money and really focus on conversion (long-term follow-up) you can make a living from purchased leads. However, keep in mind that while many purchase leads, few actually have a positive return on investment. Just because you write the check doesn’t guarantee the consumers will work with you. Internet leads require a special kind of follow-up and commitment. Most Internet leads are four to six months away from being ready to work with an agent. Hence, the fortune is in the follow-up. While bigger projects are underway, each REALTOR® has the ability to leverage their listings and local expertise. There is not a national website that can match the hyperlocal expertise of the real estate agent. The online game is just a part of the business. As mentioned before, online leads take longer to cultivate and close. Therefore, focus on other items like open houses, door knocking and even picking up the phone to call your friends and family. In fact, one of your most powerful sources of online traffic can be offline marketing. Leverage flyers with a call to action that requires a consumer to visit your website to receive an item of value (free Comparitive Market Analysis, etc). In the real estate game, the focus is location, location, location, while online it’s traffic, traffic, traffic. Why do you think the big sites aren’t concerned about accurate data? It is all about traffic. REALTORS® are here to stay; no technology will ever supplant the agent. However, technology will evolve and consumers have the expectation that brokers evolve with it. While data syndication is a big deal now, it’s really just a blip in time. Focus on your clients and always put people first and you will survive. Stay current on education as well as technology trends and you will thrive. After all, learning-based is earning-based.

Each REALTOR® has the ability to leverage their listings and local expertise. LONG’S TOOLS Now it’s probably too late to cut the head off the beast, but you can take control of your data once again. Here are some ways you can tame the syndication beast:

Create a free account on the larger syndication sites like Zillow and ListHub

Log in and claim your listings and make sure they are accurate. I like to edit the “description” section so the first line states “Contact me at 123-456-7890 or visit my site at bestbrokerever.com for more information or to schedule an appointment.” This way when a consumer is browsing they know exactly who to call and do not have to choose from the gamut of high bidding agents that are displayed on your listings.

Brand your listing images with your logo

Then replace the current images that these sites snagged from your MLS with your branded images. This way you get a little more awareness that this is your listing.

Use your MLS “syndication remarks” section

If your MLS has this option, you can use it to include your contact information and website. It then feeds out to all other sites and does not violate your local MLS rules.

Create a YouTube channel

Shoot a quick, one-minute video of yourself at the listing using the property address in the title and description. Then on the syndicated sites, put the link to this video in your “virtual tour” section. DO NOT put YouTube links in your local MLS, as this is typically a violation.

Support Project Upstream and REALTORS® Property Resource (RPR)

This partnership aims to create a common back-end platform where brokers and franchises can enter and collect listing data, as well as manage how that data is integrated with multiple listing services, vendors and other partners. How nice would it be to input a listing one time and know that it will feed to the Internet with your correct data? Learn more about Project Upstream at www.realtor.org/videos/rpr-introduces-project-upstream.

TALK TO US

Our guest columnist, Stephen Long, is broker, co-founder and part owner at The Carolina Crew, Inc. He also serves as 2015 president of the Winston-Salem Regional Association of REALTORS®. Want to offer your own tech advice and tips as a guest columnist? Email bwilburn@ncrealtors.org. ncrealtors.org • INSIGHT 17

[INSIDE NC REALTORS®]

Congrats to Leadership Academy graduates NCAR would like to congratulate the graduates of the Leadership Academy Class of 2015! Representing all areas of North Carolina, this year’s academy participants attended an intense series of retreats designed to help them increase their effectiveness as leaders and grow both personally and professionally. If you’re interested in learning to be a more effective leader within your community, association or business, look no further than the NC REALTORS® Leadership Academy. We are currently accepting applications for the 2016 class. Log in to www.ncrealtors.org, click on the Education tab and then the Leadership Academy page to get started. Applications are due December 14, 2015. This program can be life changing, but don’t take our word for it. See what other graduates had to say about their experience: “The Leadership Academy was an excellent opportunity to better understand the inner workings of our local, state and national REALTOR® organizations. It also provided an opportunity to learn and to build a statewide referral network with other REALTORS®.” Bill Aceto, Class of 2015 Broker/REALTOR® Blue Ridge Realty & Investments,LLC Boone “My wish is for everyone with a thirst for knowledge, and a desire to be better, to be able to go through NCAR’s Leadership Academy. It is an intense condensed version of what it takes leaders years to learn from personal experience. NCAR’s Leadership Academy has helped me understand my association better, and has also given me the tools I need to be a better leader in any organization, including my own business and family.” Wendy Harris, Class of 2014 Broker/REALTOR® Team Harris, Inc., Fayetteville 18 INSIGHT • Winter 2015

From left: Bill Bass, Leadership Academy Commissioners chair, Bill Aceto, Randall Blankenship, Brenda Carroll, Sandy Ellington-Graves, Jenna Hinman, Lucia Turlington, Brenna Booker-Rouse, Lisa York, Teresa MacFarlane, Steven Norris and Stephen Long.

BB&T Insurance Services joins REALTOR® Partner Program NCAR Members can now access an array of insurance services from our newest REALTOR® Partner, BB&T Insurance Services. Headquartered in Winston-Salem, BB&T is one of the largest financial services holding companies in the U.S. BB&T Insurance Services provides a dedicated team of insurance specialists who are knowledgeable about the real estate industry. From commercial general liability to worker’s compensation, BB&T can develop an insurance plan that includes the right lines of coverage to protect your business. Members will receive competitive pricing on all lines of coverage, certificates of insurance within 24 hours and claims assistance and loss control services. To speak with a BB&T Insurance Services team member, call Michael Ostman at (919)-716-9965 or email ServiceNow@BBandT.com. To learn more about the REALTOR® Partner Program, visit www.ncrealtors.org/partners.

The election results are in We had 2,207 members vote this year, our fourth highest voter turnout since we began using online voting. Thank you to all members who participated in the election process. President-Elect: Treasure Faircloth, Winston-Salem Treasurer: Kelly Marks, Greensboro Regional Vice Presidents: Region 1: Kathleen Perry, Cedar Point Region 2: Sherri Pickard, Wilmington Region 5: Lolita Malave, Greensboro Region 7: Todd Pierceall, Gastonia Region 8: Joe Rempson, Charlotte Region 10: Asa Fleming, Raleigh Finance & Budget: Tomp Litchfield, Washington Stephen Long, Winston-Salem Wilson Sherrill, Sunset Beach Issues Mobilization: Mark Zimmerman, Chapel Hill NAR Directors: Danny Brock, Wilmington; Cindy Chandler, Charlotte; SandraO’Connor, Greensboro; Stephanie Walker, Kitty Hawk; Bruce Williams, Calabash; Mary Edna Williams, Raleigh.

[INSIDE NC REALTORS®]

A New Class of Rising Stars TOM COLLEY Firm: Peak, Swirles & Cavallito Properties Association: Durham Regional Association of REALTORS® Served on DRAR Board of Directors in 2014 and as secretary in 2015, member of DRAR’s Durham Public Schools Committee, has shown great commitment and shared valuable insights and opinions to help further the goals of his association. HUGH WILLIAMS Firm: The Property Shop Association: Wilmington Regional Association of REALTORS® Has served on WRAR Finance Committee since joining in July 2014, very active in WRAR events and contributes to his community through Paws4People5KRun, Out of Darkness Walk for Suicide Prevention, member of Coastal Carolina Real Estate Investors Association. CHERIE FLYNN Firm: Allen Tate, REALTORS® Association: High Point Regional Association of REALTORS® Served on HPRAR Social Functions Committee from 2013 to present, the Foundation Fundraising Committee in 2013-2014 and was the recipient of the association’s Bright Beginning Award. Described by her board as someone who exemplifies the professional attributes of a REALTOR® and trusted advisor. RICH MANZI Firm: Keller Williams Association: Greensboro Regional REALTORS® Association Since becoming a REALTOR® in 2012, has actively pursued involvement at GRRA through the Government Affairs Committee, participation in Legislative Day and the LIFE Group. Recipient of Rookie of the Year Award and is a Multi-Million Dollar Producer.

Meet the 2015 Rising Stars – a bright, energetic group full of potential and great ideas. Their backgrounds are as varied as the communities they hail from, but they do share one common trait: in a short period of time, they’re already taking the industry by storm. BRIAN CASPER Firm: Keller Williams Ballantyne Association: Charlotte Regional REALTOR® Association A REALTOR® since late 2013, closed 23 transactions with a sales volume of more than 3.4 million dollars in his first 12 months of business. Integral member of CRRA’s Young Professionals Network, Government Affairs Committee and Rookie of the Year winner in 2014. STEVEN NORRIS Firm: Raleigh Cary Realty Inc. Association: Raleigh Regional Association of REALTORS® A devoted association member since 2012, he is currently serving as 2015 chair of Women’s Council of REALTORS® - Raleigh Chapter and the president’s appointee to the RRAR Board of Directors. An active RPAC supporter, he is extensively involved in his community through volunteering in children’s schools and serving on the United Arts Council and Equality NC. ERICA LOWERY Firm: Berkshire Hathaway HomeServices Association: Winston-Salem Regional Association of REALTORS® Has served in various capacities at WSRAR, including Home Inspectors/REALTOR® Committee since 2012, Appraiser and Mortgage Lender Forum, as vice-chair of Social Committee in 2013 and chair of this year’s Housing Opportunity Committee.

Stand out in 2016! The Graduate REALTOR® Institute (GRI) designation allows you to stand out to prospective home buyers and sellers as a REALTOR® who has in-depth knowledge on technical subjects and the fundamentals of real estate. Classes are already being scheduled for 2016. Visit www.ncrealtors.org/gri to find a class near you! ncrealtors.org • INSIGHT 19

[THE ALLIANCE UPDATE]

The Alliance Is Headed in a New Direction BY: MIKE LANDES | DIRECTOR OF POLITICAL OPERATIONS

he NC Homeowners Alliance has taken a step in a new direction. During NCAR’s Conference in September, the NCAR Board of Directors approved a structural change to the Alliance that will redirect focus to grassroots advocacy. Instead of taking part in partisan elections by supporting individual candidates, the Alliance will now direct its efforts solely on issue advocacy. This change was instituted in response to a wide range of helpful feedback from REALTORS® and nonREALTOR® homeowner members of the Alliance. We’re excited to put the full weight of the Alliance behind the

important work of advocating for the specific issues that affect North Carolinians, and to take part in local conversations about homeownership and property rights all over the state. We’re also proud to announce that the National Association of REALTORS® (NAR) has highlighted the Alliance as a successful, important part of the REALTOR® advocacy network on its new consumer advocacy-based website, www.homeownershipmatters.realtor. If you seek out North Carolina’s state advocacy page on the site, you’ll find a link to sign up to be a part of the Alliance. This kind of organizational support is important to the Alliance’s success and we deeply

appreciate NAR’s willingness to place a spotlight on our local advocacy process. We’re now looking ahead to 2016, which promises to be an exciting year in politics. Please feel free to contact the NCAR Government Affairs team or mlandes@ncrealtors.org directly if you have any questions or comments about the work we do to advocate for REALTOR® and property owner rights.

Contact Mike Landes at mlandes@ncrealtors.org.

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20 INSIGHT • Winter 2015

The North Carolina Association of REALTORS® would like to thank all 2015 Annual Sponsors.

[COMMERCIAL]

1031 Exchanges: What’s at Stake

ith time running out in 2015, it is unlikely that federal lawmakers will move forward with comprehensive tax reform this year. However, time still remains for some specific tax code modifications. One provision of particular interest, especially to commercial REALTORS®, is the protection of 1031 “like-kind” exchanges.

What is a 1031 exchange? Section 1031 of the Internal Revenue Code allows an investor to sell a property, reinvest the proceeds in a new like-kind property and defer all capital gain taxes. The investor must meet numerous requirements and complete the purchase of the replacement property within 180 days of the sale of the first property. The benefits of a 1031 exchange to an investor are far more than just the ability to defer taxes. These exchanges allow the preservation of 100 percent of equity and the chance to maximize return on investment. Other advantages include the opportunity to diversify an investment portfolio into other property types, as well as to leverage a high equity position in one property into a larger property with financing.

Why are 1031 exchanges so important to REALTORS®? Research by the National Association of REALTORS® found that 63 percent of NAR members participated in a 1031 exchange in the past four years. “Like-kind exchanges play a key role in the economy by facilitating billions of dollars in real estate transactions that otherwise would not take place,” said Lou Baldwin, owner and president of Baldwin Properties in WinstonSalem. “There are a lot of situations where an investor’s tax consequences

for selling create an obstacle to their being willing or able to sell.” Like-kind exchanges are essential for a thriving investment and commercial real estate market. If repealed, fewer redevelopment projects will go forward, resulting in fewer new jobs. The likekind exchange provision provides liquidity to an illiquid asset. Repealing it would harm economic growth. “The 1031 allows the seller to exchange into a more suitable property for them, while allowing the property they sold to be positioned for improvements under new ownership,” said Baldwin. “This situation is typically a win for the community, in that key properties are rehabilitated and the tax base is expanded.” REALTORS® are not alone in fighting to retain the Section 1031 provision. Our allies include the National Association of Real Estate Investment Trusts, NAIOP, International Council of Shopping Centers, National Association of Home Builders, Real Estate Roundtable, National Apartment Association and The Nature Conservancy.

Honoring Kim Dawson, 2016 NCAR President

What should you do? Leaders of the Senate Finance Committee and House Ways and Means Committee are already discussing the outline of tax reform legislation. Now is the time to contact the members of North Carolina’s congressional delegation to help them understand that repealing or limiting 1031 exchanges is bad policy. NCAR Government Affairs staff encourages commercial REALTORS® to share their perspective about the importance of 1031 exchanges. If you have a story about how you or your clients utilized a 1031 likekind exchange to facilitate economic development in your community, please email it to gainfo@ncrealtors.org.

6:45 p.m. Social | 7:30 p.m. Dinner Entertainment to follow. Black Tie Optional Register by Jan. 15, 2016. www.ncrealtors.org

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ncrealtors.org • INSIGHT 21

[HOMES4NC]

News from Homes4NC BY: NICOLE ARNOLD | DIRECTOR OF COMMUNITY OUTREACH

SEPT. 2015 Members, affiliates and sponsors registered for the Sunset Cruise side trip hosted by Homes4NC during Conference. Attendance levels and post-Conference feedback demonstrated the overwhelming popularity of this event. After the daylong threat of rain, the clouds parted and attendees enjoyed a gorgeous sunset over Calibogue Sound. NC REALTORS® (and even some South Carolina REALTORS®) supported our affordable housing foundation during Conference by updating their headshots with Studio 16. The studio matched each $10 contribution to Homes4NC and provided excellent service to our members by helping update their marketing materials. The Board of Directors has plans for more exciting initiatives to launch in 2016. If you have an interest in serving as a volunteer for your affordable housing and disaster relief foundation, please contact narnold@ncrealtors.org. Join us as we tell others how REALTORS® give back to their communities.

For more info visit www.homes4nc.org

When donors give to Homes4NC, their contributions expand affordable housing opportunities and provide disaster relief for deserving homeowners. In 2015, NCAR’s charitable foundation has picked up momentum with perennial fundraising efforts as well as some exciting new initiatives.

OCT. 2015 The Homes4NC Board of Directors planned for future fundraisers and sent out a call for Board of Director appointments. NC REALTORS® responded to the call, and the Board of Directors will announce appointments soon.

NOV. 2015 Homes4NC volunteers launched new fundraising initiatives for our programs. Foundation ambassadors sold AutoBell carwash coupons throughout the state. Homes4NC also debuted our first-ever holiday honor card for purchase online, allowing members and affiliates to send cards that honor colleagues and communicate the social good Homes4NC and REALTORS® are doing in our state.

HAVE YOU SEEN THIS HASHTAG?

#NCREALTORSGIVEBACK

Contact Nicole Arnold at narnold@ncrealtors.org.

22 INSIGHT • Winter 2015

Search for this hashtag on NCAR’s social media accounts and learn about the social good that REALTORS® represent in every community in our state.

Happy Holidays Honor your colleagues, friends and family by sending Homes4NC cards in support of affordable housing and disaster relief.

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24 INSIGHT • Winter 2015

[GOVERNMENT AFFAIRS]

Session End Brings Changes and Questions for Future BY: SETH PALMER | DIRECTOR OF POLITICAL COMMUNICATIONS

he adjournment of the North Carolina General Assembly’s long session on September 30 brought with it both relief and questions about the status of many programs. This year’s session lived up to its name as “long session,” lasting over nine months with more than 1,600 bills being introduced. Throughout the session, NCAR Government Affairs staff worked diligently with legislators to support REALTOR® priorities such as the mortgage interest and property tax deductions, historic preservation tax credit program, underground storage tank fund and many others. While most faced challenges throughout the session, we were fortunate to find support on many fronts, thanks to NCAR leadership, REALTORS® and our legislative champions.

2015 budget One of the most significant pieces of legislation during this session was the state’s budget. Its negotiation took most of the session, lasting over 206 calendar days, but its final version included support for many REALTOR® priorities. Increased funding for the Workforce Housing Loan Program and Housing Trust Fund. NCAR has consistently supported both of these programs through the appropriations process due to the strong value that each provides to underserved communities across the state. While both have seen reduced funding in past years, they were each treated favorably in this year’s budget. Appropriations to the Workforce Housing Loan Program increased to $12.5 million for FY16 and $15 million in FY17. The Housing Trust Fund retains its annual funding of approximately $10 million over the next two years.

Preservation of the Mortgage Interest and Property Tax deductions. This was a major point of debate for legislators this year, focusing on the preservation of changes that were originally made during the 2013 tax reform efforts. The Senate’s budget placed all deductions under the $20,000 cap, essentially eliminating the MID; the House budget left the cap as it is now. While numerous proposals were presented, legislators ultimately decided to leave these deductions unchanged. Restored Historic Preservation Tax Credits. Due to inaction, the state’s Historic Preservation Tax Credits expired on December 31, 2014. Thanks to the push made by Republican legislators and our allies, the restoration of the program was a key topic throughout the budget negotiations. Ultimately, legislators reached an agreement to restore the credits for both residential and incomeproducing properties through 2020. Film grants. Since the General Assembly transitioned the former film tax credit to a grant program last session, this has been a topic of much discussion. The program was originally created with an annual $10 million appropriation, but after negotiation it was determined that the appropriation would be increased to $30 million for the coming year. UST Fund changes. Unfortunately, one REALTOR® priority did not receive the same type of support in the budget. The state’s underground storage tank fund provides assistance to property owners who find tanks on their property. In many cases, these tanks have fallen into disrepair, potentially

Look for this graphic on the NCAR website to submit your comments on how the underground storage tank fund changes have impacted you.

causing them to leak and pose an environmental issue. The remediation of the damage caused by these tanks can be extremely costly, making it difficult for many homeowners to take on these projects without assistance. Through this year’s budget, the General Assembly appropriated funds to clear a backlog of projects which had been submitted prior to October 1, 2015. However, they also ended funding for the noncommercial program going forward. To ease potential burdens to homeowners, they altered the rules for remediation if a leak in a noncommercial tank is found. This fund has been a vital tool in protecting our state’s environment and property owners. We are concerned about the impact that these changes will have on the real estate market and will continue to work with legislators and regulators at the Department of Environmental Quality to determine ways to lessen the impact that these changes will have. We have launched an online portal at www.ncrealtors.org where we will post information as it becomes available. We also have a form where you can submit stories about how these changes have impacted you, your clients and your business. ncrealtors.org • INSIGHT 25

[GOVERNMENT AFFAIRS] Policy changes In addition to our budget successes, REALTORS® were also successful in policy changes on aesthetic controls and foreclosure law changes. Senate Bill 25, sponsored by Senator Rick Gunn, a REALTOR® from Burlington, strengthens the law prohibiting municipalities and counties from enacting ordinances regulating many aesthetic aspects of properties. This legislation has been proposed each of the past five sessions; this was a long overdue victory for property rights. The law does allow for aesthetic regulation in historic or landmark districts, areas governed by private covenants (e.g., homeowners associations) and in instances to meet health and safety requirements. Changes to the state’s foreclosure laws which can impact landlords and tenants were addressed in House Bill 174, sponsored by Representative and REALTOR® John Bradford, from Charlotte. While an extremely technical piece of legislation, it makes changes to the reporting requirements when

a managed property, both multi-unit and single family, enters foreclosure proceedings. The legislation also modifies other components of the Homebuyer’s Protection Act, adding continued clarification to “option to purchase contracts.” These changes took effect on October 1, 2015. Finally, legislators took on election law and campaign finance changes during the waning hours of the session. In order to move up the state’s presidential primary from its current May date, legislators decided to move all primary elections up to March 15, 2016 to save costs. This means that filing for the 2016 primaries will now occur from December 1-21, 2015. Additionally, legislators modified the state’s campaign finance laws to allow for the creation of “affiliated party committees.” These groups function much in the same way as traditional political parties but are operated by the leadership of the majority and minority legislative caucuses of each chamber, rather than party officials.

Thank you Even though the legislature adjourned until April 25, 2016, many activities will take place during the interim. From a study on subdivision street maintenance by the NC Department of Transportation to an examination of homeowner’s insurance rate making, NCAR Government Affairs staff will be busy over the coming months. We would like to thank everyone who has participated in advocacy efforts this year. From NCAR leadership speaking on behalf of REALTORS® at legislative committee meetings and the hundreds of members from across the state who attended NCAR Legislative Meetings, to the thousands of REALTORS® who have participated in Calls for Action, we couldn’t have done it without you. Keep watching your emails for additional opportunities to get involved and thank you for your support of issues which impact your business. Contact Seth Palmer at spalmer@ncrealtors.org.

NCAR STAFF CONTACTS NCAR staff can be reached by telephone at 800-443-9956 during normal business hours Monday through Friday, from 8:30 a.m. to 5 p.m. Greensboro: 4511 Weybridge Lane, Greensboro, NC 27407; Raleigh: 421 Fayetteville Street, Suite 1109, Raleigh, NC 27601 ADMINISTRATION Andrea Bushnell Chief Executive Officer abushnell@ncrealtors.org Direct Dial: 336-808-4222 Bryan Jenkins Chief Financial Officer bjenkins@ncrealtors.org Direct Dial: 336-294-3112

Lee Ann Martin Accounting & Education Assistant lmartin@ncrealtors.org Direct Dial: 336-217-1048 Sherry Harris Administrative Assistant sharris@ncrealtors.org Direct Dial: 336-808-4230

Donna Peterson Executive Assistant dpeterson@ncrealtors.org Direct Dial: 336-808-4221

Mike Buescher Director of Business Development mbuescher@ncrealtors.org Direct Dial: 336-808-4229

Caitlin Thompson Compliance Counsel cthompson@ncrealtors.org Direct Dial: 336-217-1042

Caroline Main Receptionist cmain@ncrealtors.org Direct Dial: 336-808-4220

Phyllis Lycan Accountant plycan@ncrealtors.org Direct Dial: 336-808-4224

COMMUNICATIONS & MARKETING

Denise Daly Membership Records Coordinator/Bookkeeper ddaly@ncrealtors.org Direct Dial: 336-808-4223

Blair Wilburn Director of Communications & Marketing bwilburn@ncrealtors.org Direct Dial: 336-808-4228

26 INSIGHT • Winter 2015

Mckenzie Allen Communications Specialist mallen@ncrealtors.org Direct Dial: 336-808-4227 Samantha Ashburn Electronic Communications Manager sashburn@ncrealtors.org Direct Dial: 336-808-4226 Tyler Helms Technology Manager thelms@ncrealtors.org Direct Dial: 336-808-4225 Robin Cooper Partner Program Manager rcooper@ncrealtors.org Direct Dial: 336-217-1047

EVENTS Mandy Lowe Events Director mlowe@ncrealtors.org Direct Dial: 336-808-4236 Keri Epps-Rashad Meeting & EXPO Manager kepps-rashad@ncrealtors.org

Direct Dial: 336-217-1049

GOVERNMENT AFFAIRS Cady Thomas Chief Lobbyist cthomas@ncrealtors.org Direct Dial: 919-573-0996

Seth Palmer Director of Political Communications and Shared Local Government Affairs Director spalmer@ncrealtors.org Direct Dial: 919-573-0992

Kristin Nash Director of Political Fundraising knash@ncrealtors.org Direct Dial: 919-573-0995

Mike Landes Director of Political Operations mlandes@ncrealtors.org Direct Dial: 919-573-0984

Shanell Smaw Political Fundraising Assistant ssmaw@ncrealtors.org Direct Dial: 919-573-0991

Isabel Villa-Garcia Legislative Specialist ivilla-garcia@ncrealtors.org Direct Dial: 919-573-0983

Nicole Arnold Director of Community Outreach and Local Government Affairs narnold@ncrealtors.org Direct Dial: 336-808-4237 Jason Evans Shared Local Government Affairs Director jevans@ncrealtors.org Direct Dial: 336-808-4234

Susanna Hailey Field Representative shailey@ncrealtors.org Direct Dial: 919-573-0989 Paul Mott Field Representative pmott@ncrealtors.org Direct Dial: 919-573-0988

LEGAL Will Martin General Counsel wmartin@ncrealtors.org Kay Bailey Legal Programs Coordinator kbailey@ncrealtors.org Direct Dial: 336-808-4235

PROFESSIONAL DEVELOPMENT Ellie Edwards Director of Professional Development eedwards@ncrealtors.org Direct Dial: 336-808-4231 Monica Huckaby Professional Development Coordinator mhuckaby@ncrealtors.org Direct Dial: 336-217-1051

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FORMSGUY Avoiding the Potential Pitfalls of Additional Earnest Money

BY: WILL MARTIN | GENERAL COUNSEL

Dear Forms Guy, It’s becoming more common in my marketplace for contracts to be written up with no initial earnest money and an additional earnest money deposit to be delivered by the end of the due diligence period. I have some questions about some issues that are coming up relating to this practice. Can you help? Sincerely, Marvin DEAR MARVIN: I’ll give it my best shot. What seem to be the problems?

immediately, discuss the options with him or her and let the seller decide.

MARVIN: Well, in one case, the contract said that the additional earnest money deposit (EMD) was due the day after the due diligence period (DDP) ended. My firm was representing the seller and was acting as the escrow agent. The DDP came and went and the buyer didn’t terminate. Late afternoon the day after the DDP ended, the buyer’s agent delivered the additional EMD. The problem was, it was a personal check rather than “immediately available funds” as required by the contract. We took the check and deposited it. Though there wasn’t any problem with the check and the sale closed, I’m wondering now if we should have refused to accept it. What do you think?

MARVIN: What are the seller’s options in that situation?

FORMS GUY: I’m glad there weren’t any problems, but I think a listing agent in that situation should contact the seller

DID YOU

KNOW

FORMS GUY: The seller can accept the personal check or refuse to accept it and insist on the payment of immediately available funds. Your client should make the decision because it can have consequences for him or her. MARVIN: What are the consequences if the personal check is accepted? FORMS GUY: If the seller directs the listing agent to deposit the personal check, it gives the buyer an argument that the seller has given up any right to terminate the contract on account of the buyer’s failure to pay the additional EMD in immediately available funds. This could affect the seller’s ability to accept another offer or move

NCAR’s lawyers write weekly Q&As and those appearing in Insight based on calls they receive through the Legal Hotline. As a member of NCAR, you now have free, unlimited access to the Hotline! Have a legal question? Call 800-443-9956 or email ncarlegal@ncrealtors.org to get started.

ncrealtors.org • INSIGHT 29

[FORMS GUY] a backup contract into primary position. Also, if the listing firm receives notice days later that the check didn’t clear and the buyer doesn’t make it good, the seller will have lost the opportunity during that period of time to market and sell the property to another buyer. MARVIN: What are the consequences if the personal check is rejected? FORMS GUY: If the personal check is rejected, it’s possible the buyer may never replace it with immediately available funds, and the seller could be out that money if the buyer fails to close. MARVIN: In my situation, if our seller had insisted on the payment of immediately available funds, it’s very unlikely that the buyer would have had time to comply with the request by the end of the day, which was the day the additional EMD had to be delivered. What happens if the additional EMD is late? FORMS GUY: If the additional EMD is not delivered before the end of the 24-hour period that makes up the date in the blank for the additional EMD in paragraph 1(d) of the contract, the seller may terminate the contract immediately since time is “of the essence” regarding the payment of the additional EMD. MARVIN: I thought the seller first had to give the buyer written notice and one banking day to deliver the funds before the seller could terminate the contract.

MARVIN: That leads to another situation we dealt with recently. In that case, our firm represented the buyer, who lived in Colorado. She told our agent that she wanted to pay the additional EMD by wire transfer. For some reason, our agent didn’t get the wiring instructions from the attorney who was acting as the escrow agent until the day the additional EMD was due. By the time the buyer set the wire transfer up with her bank, it was mid-afternoon in Colorado. Although the wire was sent by her bank that day, it wasn’t credited by the closing attorney’s bank to the attorney’s trust account until the next day. The seller gave everybody a hard time about it and threatened to terminate the contract. I thought wire transfers happened immediately. FORMS GUY: I’m not an expert on wire transfers, but it’s my understanding that when a wire is processed, a reference number is issued, the transfer takes place at the precise moment when the number is issued and the credit between banks is effective immediately. However, the uniform commercial code provides that the receiving bank can fix a cut-off time for the receipt and processing of payment orders, and if a payment order is received after the close of a “funds-transfer business day,” the receiving bank may treat the payment order as received at the opening of the next funds-transfer business day. MARVIN: So what does all that mean in plain English?

FORMS GUY: That’s correct with respect to delivery of the DDP and the initial EMD, but not the additional EMD. Read paragraph 1(d) of the contract more carefully.

FORMS GUY: What it means to me is that there is room for argument in the situation you described to me as to whether the wired additional EMD was “delivered” timely for purposes of the contract.

MARVIN: Why the different treatment of additional EMD?

MARVIN: So what are we supposed to do in such a situation?

FORMS GUY: Because unlike the DDP or initial EMD, the due date for delivery of the additional EMD may be late in the transaction. It is felt that the seller shouldn’t be forced to delay any further before deciding to terminate if the additional EMD is not timely paid.

FORMS GUY: Don’t wait until the last minute to get things done, especially if time is “of the essence.” Your agent should have gotten the wiring instructions to the buyer before the last day the additional EMD was due. Stuff happens, Marvin. You know what I mean?

30 INSIGHT • Winter 2015

MARVIN: I hear you, Forms Guy. Any more words of wisdom? FORMS GUY: A couple of things come to mind. First, as I said earlier, if there’s any question about whether an additional EMD has been timely delivered or is in a proper form of payment, the listing agent should consult with the seller immediately to discuss the seller’s options. The main thing here is that whatever the seller decides, the agent should get something in writing, such as a follow-up email to the seller, confirming the discussion and the seller’s decision. That’s just good risk management. MARVIN: That sounds like good advice. What’s the other thing? FORMS GUY: You said at the outset that the practice of using additional EMD is becoming increasingly common in your marketplace. I can certainly see the buyer’s benefit to tying the EMD to the end of the DDP, since if the buyer terminates the contract during the DDP, there’s no potential for any delay in a refund of the buyer’s EMD, which as we both know does occasionally happen. However, from a practical point of view, the longer the seller permits the buyer to delay delivery of the EMD, the greater the possibility it may never be delivered. The only damages the seller is entitled to for a breach of contract by the buyer is whatever EMD the contract provides. If the buyer abandons the contract after the end of the DDP and the EMD hasn’t been delivered, the chances that the seller will get anything on account of the buyer’s breach are pretty slim. Before a seller agrees to such an arrangement, they should understand this practical reality. MARVIN: Thanks very much, Forms Guy. FORMS GUY: Sure thing, Marvin.

Contact Will Martin at wmartin@ncrealtors.org if you have a suggested discussion topic for Forms Guy.

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Start Saving Today! Contact Robin Cooper at 336-808-4233 or rcooper@ncrealtors.org.

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Visit www.zipLogix.com or call 866-MY FORMS to learn more. zipLogix Digital Ink® is not endorsed by the National Association of REALTORS® and is not included as part of NAR’s REALTOR Benefits® Program.