The Creel Deal

In recent months I've had many younger clients that are actually designing their life around mass transit. They want homes that are within walking distance of some of Washington's newest mass transit hubs. One such hub is the beautiful new Kent Station; the station offers restaurants, theaters, shopping, and dining.

There are still many affordable homes within a half mile radius of Kent Station, starting at around 300k. Many young clients have determined that sitting in traffic burning gas at almost $4.00 per gallon (and it's not getting cheaper) is the way of the past. By living close to the major stations they can catch express shuttles to downtown Seattle without the headache of navigating through gridlock in their car, or waiting in the rain and cold for a neighborhood bus pick-up.

Soon many stations will be completed all over Washington and some will offer the new monorail to zip them to work, shopping, and to just go have fun. Since Washington State hasn't the advantage of a subway system, it's inevitable that these new modern stations will become the way to travel from suburbia into the city and back.

Prices on the homes around such stations are sure to prove an excellent investment for those with the foresight to buy in now. It's good to see the younger generations trying to get away from the gas guzzling automobile. If only we all could.

I've used H&R Block for about 15 years to file my taxes. Each year I paid the extra money for the assurance they offered that if ever I had an issue with the IRS, they would come to my defense.

About a year ago here came the IRS, claiming I had over-reported the amount of interest we paid on one of our mortgages. I believe the interest came to about 14k and I sent in the correct forms from the lender to show that when we filed. Problem was, in the middle of the year in dispute we had refinanced. Now, my wife is from China, and on the first loan had her resident ID number, and when we refinanced, she used her newly issued Social Security number. Uncle Sam only wants to recognize the interest credited to the loan with the social security number on it, and not the loan and interest paid prior to that under the resident ID number. They are ignoring $11,000 in interest paid.

I've asked H&R for help for over one year, and the most they did for me was have me gather all of the needed documentation from the bank, write a letter of explanation, and they mailed it for me. Those are your people! Now the fines have climbed to over $4,000 and I can't get H&R to do much of anything, so I've had to hire a retired IRS auditor to help me. The IRS didn't even respond to the letter we sent, so I'm doubtful they ever actually sent it.

Needless to say I will never use them again, and I doubt many agents do use them. I just know there are people out there seeing these commercials touting "You've Got People!" and I'm here to tell you, you may have people, but there not at H&R Block.

As the foreclosure rates increase across the nation thousands are finding themselves homeless for the first times in their lives. Nationally, 233,001 homeowners received notice from lenders last month due to overdue payments; that's a 57% increase from a year prior.

We hear phrases used such as "they lost their house", when the truth is many of these people are now homeless. These people now have ruined credit scores in a society that makes just about every decision based on that score. Employer's pull credit on job applicants, landlords for rental approval, insurance companies to set your rates, and of course credit card companies.

Credit card companies can even close the debtors account even if they are current in their payments; a sort of preemptive strike against the cardholder running up a debt they cannot afford to pay. Where will all of these people go? How do you rent an apartment or home with a foreclosure on your record? How do you buy a car to go to work? These people, who were our clients not so long ago, now may find themselves living in a shelter and the family pet they once loved sitting at the pound

Sadly, even house pets have found themselves homeless as a result of the fiasco, and are being abandoned  across the nation. Although there is no way to track the actual number of abandoned pets, it's thought to be in the thousands. There have even been instances where pets were found starving inside abandoned homes and had to be Euthenized.

What can we do?

Maybe we can lighten up on judging people by what credit bureaus say, and talk to the people themselves and see what's in their heart. I recently rented a home of mine to a fellow who had gone through a divorce, and I ran no credit report on him. He impressed me as being a good person, with a good heart, and he had a good job (that's still required). I also knew his employer does strict background checks and drug screening, so that helped.

He was quite surprised when he asked how long before he had an answer regarding his application, and I said you can move in tomorrow. He was shocked and quite happy to say the least. He's been an ideal renter, always pays on time, and keeps the property spotless.

Now to be honest, he may very well have impeccable credit, to this day I still don't know. My point is that intuition still works, and some of these thousands of people out there will need a break. They will need landlords that will judge them by their character, and the fact that they have a job and need a home for their family.

So I would ask those of you that are in a position to give somebody a break, and a chance to start over, to consider doing so. I'm certainly not suggesting you should rent to anyone that comes down the pike, and criminal background checks are still a must, but a person shouldn't live and die by their FICO. Perhaps just ask to look through their foreclosure docs and get a feel for what happened to them, after all, they're not alone in this, it's happened to a lot of good people.  

Also, if you want a pet, go adopt one (I did), they could use a break too! 

Popcorn is great at the movies, but it's no longer cool on your ceiling. Sadly, a majority of the homes I visit still have it. You wouldn't expect someone to buy your old orange polyester suit with the white zip-up boots, so why would they want your popcorn ceiling and burgundy carpet?

One thing we at Brio do on a weekly basis is tour homes that are on the market in our area. We typically view about 7-9 each week as a group, and then many of us will visit various open houses during the week on our own. For the most part (and I'm not going to single any homes out), what I've noticed is that a great deal of the homes still languishing on the market could be considered the left-over's of the sales boom. Many of these homes are being sold by the original owners and haven't been upgraded or altered since the 70's or 80's. It also appears owners still expect top price for these homes in a buyers market.

My suggestion is that sellers take a little of that equity they have accrued over 30 years and bring that house up to speed. You don't have to spend a fortune, but you need to spend something! Telling potential buyers "Yes, we're offering a credit for the ceiling and carpet" isn't really closing deals these days; people aren't anxious to buy a home and then have to remodel, and lenders aren't too happy about allowing credits at closing.  

So let's get those ceilings scraped down, and get that old gold vinyl off the floors in the kitchen, bathrooms, and laundry room. Replace the George Jetson light fixtures, filthy rusted old washing machine, single pane windows, faded wood paneling, and any carpet that's color looks like it belongs on a sports jersey. Then, consider doing a little painting, and I suggest steering clear of some of the more creative looking "designer colors" I see out there. Also keep in mind, mirror tiles were barely cool when they came out, to the trash they must now go!

The first 15 seconds a buyer looks at your home are the most important, that's when they will either say "Wow!" or "Woe" (and woe's not good). A buyer shouldn't feel like they've stepped into a time machine when they walk into your home, and if they do, the odds of them buying at your price are next to nothing. If you want maximum price, you must offer maximum value. A good agent can still get you a good price for your home, but they need a home that works with them, not against them.

You may consider hiring a design consultant if your not up to the task of bringing your home into the new millennium, but believe me, you will sell your home faster, and you will get your price. Then you can relax, go see a movie, and yes, get some popcorn!

After reading the paper today I was a bit surprised at the high number of foreclosures coming out of some areas around the country. Detroit appears to be in a real crises. Roughly 4.9 percent of the households in the Detroit metro area were in some stage of foreclosure in 2007, which is 4.8 times the national average; according to the study released by mortgage research company RealtyTrac Inc.

Stockton, Calif., ranked second with about 4.8 percent of its households in some stage of foreclosure, while the Las Vegas metro area was third with a 4.2 percent rate. In all, 72,616 filings on 41,273 properties were reported in the Detroit metro area, which includes Livonia and Dearborn. The foreclosure rate represents a 68 percent jump from 2006.

In Stockton, 22,184 foreclosure filings were reported on 10,608 properties last year, up 271 percent from 2006, RealtyTrac said.

The Riverside-San Bernardino metro area east of Los Angeles was ranked fourth, with 102,506 filings on 51,739 homes, a rate of 3.8 percent.

Sacramento was ranked fifth, with 3.1 percent of its households reporting late payments.

The other California metropolitan areas in the top 20 were Bakersfield, ranked seventh; Fresno, ranked 14th; and Oakland at 16th.

The Las Vegas metro area, which also includes Paradise, Nev., reported a total of 59,983 foreclosure filings on 30,375 properties in 2007.

Ohio, which has also been racked by high unemployment, had four metro areas among the top 20, including Akron at 12th, Dayton at 15th and Toledo at 19th.

The metro area comprising Cleveland, Lorain, Elyria and Mentor was ranked sixth, with some 2.9 percent of all households in some stage of foreclosure.

Miami ranked eighth with a 2.7 percent rate, the highest among all metro areas in Florida. Fort Lauderdale was 10th and Orlando was 20th.

The other areas in the top 20 were Denver-Aurora, Colo., at No. 9; Atlanta-Sandy Springs-Marietta, Ga., at No. 11; Memphis, Tenn., at No. 13.; and Indianapolis at No. 18.

With all of this happening, I can't say I understand why banks don't simply re-negotiate the loans with their clients instead of following through with converting those ARM loans to a full amortized loan; knowing it will lead to default. Most of these homes will end up in the hands of overseas investors buying them in bulk for 50-70 cents on the dollar from the banks. How sad.

In an increasingly Fine oriented society, those that work in the real estate industry  are getting more and more attention. Personally, I'm all for it, I think it keeps the industry honest. Out of curiousity, I did a little research to see what types of people were getting hit hardest.

Here are quite a few interesting penalties levied:

·         In Boston The U.S. Environmental Protection Agency filed enforcement complaints against two New Hampshire realty companies for failing to properly notify home buyers and renters of risks from exposure to lead paint, as required by federal law. EPA is proposing a fine of $33,892 against Senecal Properties and $13,200 against Lacerte Realty, both based in Manchester, NH.

·         In the first case of its kind, the Alexandria Human Rights Commission unanimously agreed that Long & Foster Real Estate Co. discriminated against a single gay man who wanted to buy a home in a quiet, tree-lined neighborhood. Instead, the house went to a young married couple, which continues to own it. The commission cited the McLean-based real estate company for discriminating against Lawrence Cummings, 52, because of his marital status or his sexual orientation. In February 2004, Cummings and his partner had already made offers on six houses and were getting tired of looking. When he saw the ranch-style house on Pullman Lane on a Saturday, he   thought he had found what he was looking for. "I thought, 'Oooooh, cute" he explained. He met the sellers briefly and made an offer for the asking price -- $555,000 -- that same day. "I thought surely I was going to get this house," he said. But two days later, his agent called and said the owner had chosen a young married couple that had made an offer of $45,000 less. "She said it was the fact that I'm single and they sensed that I'm gay," Cummings said. And so he filed his complaint.

·         REALTOR® compliance with the DATCP telephone solicitation rules continues to be a frequent Legal Hotline topic, while amendments to the Code of Ethics Amendments Standard of Practice 16-13 raise new questions about a requirement for REALTORS® to ask buyers if they are party to a buyer agency agreement. The high court, in the case Meyer v. Holley, reversed a decision by the U.S. Ninth Circuit Court of Appeals in California, which had extended liability to owners and officers. In the case, a racially mixed couple sought to make the owner of Triad, REALTORS®, personally responsible for the actions of one of its agents who allegedly had made disparaging remarks about the couple. "NAR is pleased that the Supreme Court adopted the position advanced by NAR in its amicus curiae (friend of the court) brief that traditional principles of vicarious liability apply in fair housing cases. As a result, the court found that innocent officers and owners of residential real estate corporations would not be held personally liable for the unlawful conduct of the corporation's employees or agents," said Laurie Janik, NAR general counsel.

·         In Meyer v. Holley, an interracial couple alleged that they were discriminated against by a real estate agent, and brought a claim under the Fair Housing Act against the agent and the real estate firm for whom the agent worked. The couple also personally sued the individual owner and officer of the firm, claiming that he also was responsible for the agent's alleged conduct.

The trial court applied well-recognized principles to dismiss the Fair Housing Act claims against the individual owner, holding that vicarious liability principles permitted only the corporation, and not the individual owner and officer of the corporation, to be liable for misconduct by the corporation's agents. The Ninth Circuit Court reversed the decision, concluding that traditional vicarious liability rules did not control with respect to the personal liability of corporate shareholders and officers in Fair Housing Act cases, and that owners and officers may be liable "simply on the basis that the owner or officer controlled (or had the right to control) the actions of the employee."

·         Hefty fines -- $60 million worth -- have been recommended in response to a lawsuit filed in the mid-1990s against Sandicor Inc., which operates the Multiple Listing Service in San Diego County, and the five regional realtor associations that access the local MLS. In a March 10 opinion written by Federal Judge Alex Kozinski of the 9th U.S. Circuit Court of Appeals based in San Francisco, the groups would pay the fines in addition to attorney's fees. San Francisco attorney David Barry filed the lawsuit on behalf of local licensed real estate agents Arleen Freeman and Jim Alexander. Barry is still seeking certification for a class action suit.

It alleges Sandicor and the local realtor associations have engaged in price fixing since they combined three MLS services for the region into one in 1990 and 1991.  Before the single MLS, 11 associations worked from three different listing services, charging members for access to the service and technical training and support. Fees were as low as $10 per month for the San Diego Association of Realtors -- the largest association in the county -- and $50 for the associations in Fallbrook and Valley Center.

Sandicor's price was $25 per month. The corporation said it set prices so that low pricing at another association couldn't hurt another association.
Now, according to SDAR President Cheryl Betyar, close to 14,000 members subscribing to Sandicor's MLS pay $127 per quarter.
Antitrust law says price fixing and barriers that impact commerce are illegal.

Experts and analysts have determined the pricing has not hurt agents, their commissions, or their clients, Betyar said. Barry asserts Sandicor and the associations hurt agents by overcharging. The plaintiffs bid out the MLS and support services to an independent contractor, which would have charged only $4 per month, not $25. The lawsuit has been heard at the state and now the federal levels, and this is the first ruling against the local associations.

·         As of June, the number of complaints opened with the Arizona Department of Real Estate had jumped 53 percent since 2003, the year before the housing boom took the Valley by storm. Complaints forwarded for discipline increased 150 percent in that same time.

·         The broker-owned listing service, Northwest MLS, of which Redfin is a member, ruled that the reviews violated its regulations against advertising other brokers' listings. The MLS has issued a $50,000 fine to Redfin and threatened to terminate the brokerage firm's access to MLS data, which it displays on its Web site.

·         If you are a Realtor in Georgia, you may indirectly be a party to campaign violations in the last election cycle. What the Georgia Association of Realtors call a mistake, the State Ethics Commission calls election fraud. More than $400,000 in campaign contributions were never disclosed during the 2006 election cycle. Odds are this is a mistake as the Realtors have been huge contributors in state politics over the years. What is interesting is that they face an $80,000 fine for their failure to follow the law. And if things have not changed, making a mistake when breaking the law does not absolve the parties.

·         The Real Estate Council of B.C. has fined a Vancouver realtor $10,000 and cancelled his license - its stiffest penalty ever - for misappropriating client funds.

Council spokesman Anthony Cavanaugh said the disciplinary action followed an investigation into allegations made against Smrat (Sam) Sharma.

The most serious accusation came from one Sharma's clients, who had made a successful offer on a home on Vancouver's Westside.

Cavanaugh said Sharma had the buyer make out a $45,000 deposit check to his own numbered company, instead of putting it in trust with his brokerage.  "Trust monies are sacred in trust accounts," Cavanaugh said. "Real estate licensees cannot touch those monies, and if they do, obviously the consequences are quite severe, as you can see in this instance."

The client's money has been refunded from a special compensation fund. Cavanaugh said Sharma is the first realtor suspended under new powers given to the real estate council last year. Sharma will have to wait at least five years before being able to apply to work as a real estate agent again.

·         In a fair trading first, a Sydney real estate agency has been fined more than $14,000 for understating the estimated price of a house to prospective buyers. The agency was caught out after several people who attended the auction complained that the house fetched as much as $400,000 over what had been quoted to them as an estimate. The house, in the upmarket north shore suburb of Lane Cove, was auctioned for $1.535 million by the company Sandra Peach Real Estate Pty Ltd, trading as Ray White Lane Cove.

However, complainants to NSW Fair Trading said they had been quoted as much as 36 per cent below that. On the back of the estimate given by the agent, one prospective buyer had paid for a building inspection, thinking the house was within budget. Sandra Peach Real Estate Pty Ltd had been fined $9900 under new provisions in the Property, Stock and Business Agents Act. The agency's director, Sandra Peach, was fined $4400 for understating the estimated sale price of the property.

·         St. Catharines, Ontario, December 11, 2007 ... Jeanette Martin, of Port Colborne, pleaded guilty in the Ontario Court of Justice in St. Catharines on December 6, 2007, to two counts of failing to file tax returns. She was fined $2,000 and given nine months to pay. Martin, a self-employed real estate agent, failed to file her 2004 and 2005 personal income tax returns as required. The Canada Revenue Agency (CRA) made several requests for the tax returns before serving notices demanding that the returns be filed. Failure to comply with these notices resulted in charges being laid.

·         In Honolulu Hawaii, The Real Estate Commission fined Thomas F. Schmidt, doing business as Tom Schmidt Realtors, $5,000 and revoked his license.

·         In Maryland Weichert Realtors and Century 21/AAA Realty, had their License REVOKED and licensee FINED $5,000 for providing false and misleading information in a lease application, for immediately defaulting on the lease, and for providing false information to the Commission investigator.

·         In Maryland W.F. Chesley Real Estate, Inc. and O'Conor, Piper & Flynn had their License REVOKED and licensee FINED $40,000 for leading the buyer to believe that he had purchased property while failing to disclose that the property belonged to a third party who was facing foreclosure, for taking deposit money from the buyer and failing to place that money in trust, for failing to give the buyer a written contract memorializing the agreement, and for failing to make payments on the existing mortgage as promised to the owner. A Guaranty Fund award in the amount of $9,900 was made as a result of the conduct of the licensee.

·         In the largest enforcement action, First American Title Insurance Company of Santa Ana, California, agreed to close down their sham affiliated businesses and pay a $500,000 civil penalty to the State of Minnesota. Commerce Department investigators identified 35 affiliated business arrangements between First American and over 600 referral partners that included real estate agents and brokers, mortgage originators, building contractors, land developers, and others. First American set up partnerships or limited liability companies, offering 80 percent ownership to their referral partners while retaining 20 percent ownership for themselves. 

The referral partners' initial investment was typically $500. According to the consent order, First American allegedly set up offices, hired and trained employees and directly supervised those employees. Some of the affiliated businesses even shared employees and office space. In some instances, officers of First American were listed as the office manager or "responsible person" for the affiliated business.

The referral partners and their associates were allegedly encouraged to direct their customers to the affiliated businesses for closing services and title insurance and, in return, receive an annual dividend from the business. While neither admitting nor denying the department's allegations, First American agreed to pay a civil penalty of $500,000 and will also help the Department of Commerce inform consumers about title insurance by developing content for the department's website.

·         The Department of Commerce recently imposed a $500,000 civil penalty against Dale Dodge, owner of Verity Title and Abstract, Bloomington, MN, for allegedly misappropriating funds owed to its customers so Dodge could support an extravagant lifestyle. To date, the Department of Commerce has been able to identify a total of $2.4 million in outstanding claims against Verity Title. The company has filed for bankruptcy protection.

·         Gibraltar Title Agency of Edina, Minnesota signed a consent order agreeing to close down their affiliated businesses including Clear Title, Star Title, AM Title, and Sound Title. They also agreed to reimburse customers a total of $100,000 and pay a $10,000 civil penalty to the State of Minnesota.

·         American Residential Mortgage of Maplewood, Minnesota signed a consent order agreeing to a $5,000 civil penalty. The Department alleged that American Residential Mortgage failed to disclose their affiliated business arrangement with Titles Plus.

·         In September 2005, the Department of Commerce entered into a consent agreement with Powerhouse Title, LLC of Lino Lakes, Minnesota, requiring them to cease and desist from selling title insurance without a license and pay a $100,000 civil penalty to the state. Powerhouse was alleged to have sold title insurance without a license and accepted commissions from Chicago Title Insurance Company in violation of Minnesota law. They also failed to properly disclose their affiliated business relationships, also a violation of Minnesota law and the Real Estate Settlement Procedures Act (RESPA).

·         In the Blue Mountains of New South Wales, Australia real-estate agent who ripped his competitors' advertisements out of newspapers and magazines, and then lied about his conduct, has been fined and ordered to perform 200 hours of community service. John Patrick Neville, 63, who ran the Century 21 Combined Wentworth Falls real-estate agency from 1994 to 2005, organized for rivals' advertisements to be torn out of The Blue Mountains Gazette and Focus on Property magazine at various real-estate offices. Justice Lindgren fined Neville $2160 and ordered he perform 200 hours of community service.

So as you can all see, the crimes committed get pretty creative and pretty ugly. Fortunately, one good thing that has happened as a result of the mortgage/housing crises is that activities that damage the industry we work in, are being cracked down on and not tolerated. As these crimes damage our image, we must weed out these people or the industries image as a whole will suffer.

All professional sectors have their share of bad apples, and we are no different. It does not change the fact that undoubtedly a majority of the people working within our industry are hard working, honest, and respectable people with only their clients best interest at heart. Lets do all we can to keep it that way.

When many homeowners decide that the time has come to sell their home, they may ask themselves:

"Why do we need a real estate agent? An agent will charge us thousands of dollars and that commission comes right off the top!"

Any real estate agent can give you an impressive list of reasons why it makes sense to hire a professional to help you sell your home, and from a marketing perspective, there are indeed many benefits in doing so. An experienced agent can utilize any number of marketing opportunities and strategies that the typical "For Sale by Owner" (a.k.a. "FSBO") does not even know about.

For example, only a professional agent can take advantage of the Multiple Listing Service, organized tours, key box access, etc. However, there is another reason to seek professional help in selling your home; an important reason that you may not have thought about. In today's world, the sale of real property is not just a marketing exercise; there are many legal issues involved, which can create liability in the sellers. Of all the things you want and expect from selling your home, a lawsuit is probably not one of them!

Unfortunately, residential transactions have seen an alarming increase in the number of claims and lawsuits. Of these claims, the majority are filed against the sellers, by their buyers. Home sellers who think they can "go it alone" might want to seriously talk to lawyers that have defended many sellers and real estate agents against claims made by "The Buyer from Hell."

In most states, the process by which title to real property is transferred is rather complicated, and the typical home seller is not familiar with the many legal issues that can and do arise, even in a fairly simple transaction. Important decisions must be made concerning contract terms, escrow matters, transfer of title, apportionment of costs and any number of other matters. Also, bear in mind that a simple missing word or a mistake in the grammar can create a dispute which, in turn, can give rise to a lawsuit. Aside from the problem of drafting the contract language itself, sellers can face other dangers as well. For example:

• In most states, there are substantial risks involved when a sellers agrees to "carry back" a note from the buyer; risks than can cost you thousands of dollars?
• That your good credit rating could be ruined by your buyers default, many months, or even years, after the buyer "assumes" your loan?
• That a clever buyer may be able to stay in possession of your property for many months after he defaults on the contract, and in effect "live for free" at your expense?
• That most buyer complaints involve alleged damages of less then $10,000, yet it can cost you thousands in attorney's fees to defend such a claim?

Even if you know the buyer's claims are completely bogus, it can take many months and many thousands of dollars to prove that you are "innocent." What's worse, you have no "malpractice" insurance to pay these legal bills; you will have to write all those checks yourself. And, of course, you could lose ... and losing a case like this can be disastrous. You and the buyer have a contractual relationship, and in many states, sellers who lose such suits could find themselves having to pay not only the amount of the damages awarded to the buyer, as well as their own attorney's fees, but they may also be ordered to pay the fees of the attorney who sued them!

Experienced, professional real estate agents understand these kinds of risks, and they can help you to minimize them in a variety of ways. They devote many hours to training and educational programs which emphasize risk reduction, and protecting their client's interests.

There are any number of reasons why your buyer may decide to take action against you.  Most of these complaints allege problems relating to the condition of the property, and/or alleged representations made to them about the property or the transaction. An experienced agent knows how to reduce the risk of these types of complaints, by including effective "AS IS" and other clauses in the contract language, and by providing for such things as a professional home inspection, and a home warranty.

When a problem arises in the transaction, an experienced agent can move swiftly to "nip it in the bud". Their thorough understanding of modern transactions can help them to identify the real problem, and then to either solve it themselves, or seek help calling upon resources that the typical seller may not have access to.

The best way to deal with a complaint is to prevent it in the first place. The organized real estate community has spent a lot of time thinking about how to reduce the likelihood of claims, and has responded to this threat in a number of ways. For example, the standard contract forms that agents in many states use, are full of language which can help protect you, and reduce your exposure to claims and litigation. If you are in a state in which real estate transactions are handled by attorneys, many of the problems discussed herein will be minimized, but a top-flight agent can still play a major role in helping your sale move toward a smooth closing.

Selling your home without professional help is very risky business indeed. Yes, it costs money to use a real estate agent, but if you find the right one, you will likely be able to sell your property faster and reduce the chance that your buyer will come back to haunt you.