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Real Estate Associations

Breaking down NAR’s down payment tax break program

(REALTOR NEWS) Last year, the board voted to support a tax program for helping people save money for down payments – what does that approved vote actually mean?

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NAR Tax Program

Eight out of ten American potential homebuyers do not buy a house because they cannot afford it. The National Association of Realtors (NAR) Board of Directors wants it to be easier for American citizens to buy a house, particularly through a tax program.

In 2016, the Board voted to support tax incentive programs for individuals who want to save money for a down payment. But the big question is: what does that mean for the potential homebuyer?

Essentially, this vote means that the NAR is making a policy decision for the trade group and its members. The decision, in brief, states that the Association supports policy changes at the the state government level to create homebuyer saving account programs.

These homebuyer saving account programs are special due to the fact that they are exempt from taxes on interest and capital gains at the state and federal level.

Other policy areas use saving accounts in similar ways, such as the 529 college savings accounts that do not incur taxes as long as the funds withdrawn are used on college expenses.

“NAR believes individuals or families saving for homeownership should be able to put a percentage of income or maximum amount of funds into an account that is tax free to be used within a specified amount of time for the purchase of a home,” NAR Spokesperson said.

The homebuyer saving account are usually for first time homeowners, although returning homebuyers may be able to cash in, depending on their state. This program tends to be packaged for the first time homebuyer who is seeking to go all in on their first real estate purchase.

“The support of this vote from the NAR Board of Directors has lead to changes at the state policymaking level.”

After the Board decided to enact this decision, the NAR Community and Political Affairs Division, along with state level Realtor organizations, lobbied to pass legislation at state legislative chambers. The partnership efforts included resources to legislators to support the economic case for these accounts.

States that passed this legislation just this year already include Iowa, Mississippi, and Minnesota. Two states, Colorado and Virginia, already had the program initiated before this past legislative session.

The program will continue into 2018 as several state REALTOR® associations will prioritize passing First Time Home Buyer Saving Account (FTHBSA) legislation with NAR assistance.

Will this type of legislation prove effective in stimulating home ownership? Time will only tell, but in the meantime, first time and returning homebuyers will be saying a big “thank you” to the states that have the policy.

Alexandra Bohannon has a Master of Public Administration degree from University of Oklahoma with a concentration in public policy. She is currently based in Oklahoma City, working as a freelance filmmaker, writer, and podcaster. Alexandra loves playing Dungeons and Dragons and is a diehard Trekkie.

Real Estate Associations

NAR’s settlement with the DOJ expires this year – what’s next?

(REAL ESTATE) Ten years ago, the U.S. Justice Department struck a deal with the NAR to establish limits on anti-competitive practices but will the decree hold, or will it expire?

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Once upon a time, when the real estate market was just getting familiar with internet technology, prospective Realtors® dreamt of using the new technology to both excel and fine-tune their craft. One Realtor®, Aaron Farmer, thought about offering his services based on “per task” scale, rather than the standard 6 percent fee. Not long after he considered this scale, the Texas Real Estate Commission passed rules establishing what they termed “minimum levels of service” that real estate agents had to meet (effectively making Farmer’s idea of a fee scale, illegal).

Since Farmer’s idea was in line with the beginning of the internet boom, he felt as though TREC’s rules were unfair. In 2002, he decided to sue them for restricting his trade and was assisted, astonishingly, by the U.S. Department of Justice (DOJ) and Federal Trade Commission (FTC). Surprisingly, the government was investigating the real estate industry already, mainly claims that new players to the real estate game were not afforded the same opportunities as vested professionals. In many instances, veteran professionals were blocking or restricting access of the newer agents (particularly it seemed those agents who had an eye for the budding technology that was/is the internet).

After years of back and forth debates, the DOJ came to an agreement with the National Association of Realtors® (NAR). This settlement, set forth in 2008, outlined and limited anti-competitive practices, as well as situations where agents were denied access to listing data.

The decree specifically outlines acceptable and prohibited conduct for Realtors® and brokers. The decree clearly states how VOWs (Virtual Office Websites) should operate. In essence, since the internet was just getting started, VOWs were the primary way technologically-minded brokerages presented their information to consumers.

Nowadays, these VOWs are commonplace through multi-state online brokerages like Redfin, Compass, and Zillow, as well as, smaller, local brokerages which allow customers to search for homes currently on the market in any given location.

Here’s the issue: The “VOW policy” imposed restrictions on how brokers could access listings from the MLS across the US, but simultaneously exempted other “traditional” brokers (those who weren’t using VOWs, but were instead keeping to the “old school” principles of using mail, faxes, paper, or postcard to deliver their information).

Given this inequity, the Antitrust Division of the U.S. Department of Justice launched an investigation and began to conclude that the playing field wasn’t equal, and was in fact, violating antitrust laws. Thus, why they interceded and why the decree to block their current VOW policies was created and put into effect. The decree basically states play nicely and everyone should have a fair shot at accessing MLS data and sharing it, regardless of whether or not you share this data through traditional “old school” means, or the new online method.

The decree stated that the NAR shall not adopt, maintain, or enforce any rule, or enter into, or enforce any agreement or practice that directly or indirectly prohibits a Broker from using a VOW (Virtual Office Website).

VOW includes all of the listing information that a Broker is permitted to provide to customers by hand, mail, facsimile, electronic mail, or any other delivery methods. It also stated the NAR® cannot unreasonably discriminate against a Broker who uses a VOW to provide customers all listing information.

It also details the required conduct expected from the NAR. The original decree states, that within five business days, the following actions are expected: the NAR shall repeal the policy and implement the new VOW policy; NAR shall not change the new policy; the NAR shall direct each coveted entity to adopt the new VOW policy; NAR will notify the DOJ if the coveted entities do not comply, the NAR shall notify the DOJ if any member board violates the new VOW rules after notifying that member to cease; NAR will furnish the DOJ copies of communication with any person that alleges a member boards’ noncompliance or failure to enforce the new rules.

In order to ensure the NAR complied, authorized DOJ representatives would inspect and copy records, including books, ledgers, accounts, records, data, and documents. They are also allowed to interview NAR® officers, employees, or agents and more.

The decree is set to expire on November 18th of this year.

The industry is already beginning to assess what will happen. Already, two members of Congress have written to the DOJ and asked them to consider extending the 10-year decree. It is possible the decree could be extended, but both the DOJ and the FTC may hold hearings to determine the continued validity of the decree.

If the decree is not renewed, the NAR and MLS will no longer be required to support VOWs. While I don’t expect they will go back to the “old school” methods, it does beg the question, will they restrict current brokerage services?

The bigger question seems to be, not if the decree will be extended or not, but rather, since the internet has become such an incredibly integral part of our lives, is the decree even valid any longer? To clarify, aren’t VOWs a common practice now? Would extending the decree change anything? Instead of worrying about whether or not the NAR and their associates will revert to practices that kept individuals like Farmer from operating, perhaps our government should be looking at the bigger picture: is the decree even valid in this technologically-driven age?

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Real Estate Associations

One year later, NAR + CMLS partnership is going strong

(ASSOCIATION NEWS) The NAR and CMLS partnership is just over a year old and it’s proven itself effective and useful.

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Last year, The Real Daily reported about an initiative to partner with the Council of Multiple Listing Services (CMLS) to better marry the two and better serve Realtor members.

As we heard last year, former NAR CEO Dale Stinton, told us that no money would be changing hands between the groups for the duration of this collaboration, rather that the partnership was built on common interest to serve Realtors®.

Stinton said, “The agreement will stay in effect as long as both parties find the relationship to be useful and beneficial.”

Apparently the NAR + CMLS partnership is both useful and beneficial because it is still going strong.

According to one NAR representative, “The CMLS/NAR partnership was and continues to be a huge step in the right direction. Consistent networking with Caitlin McCrory (NAR’s MLS Manager) and Denee Evans (CMLS CEO) has created an open and transparent dialogue on common issues of interest and concern for NAR and CMLS.”

The representative also noted that the volunteer leadership of both organizations are invited to give reports at each of the respective organizations business meetings.

NAR has received valuable insights from the committee appointment seats CMLS acquired through the partnership, particularly CMLS’ participation on the MLS Emerging Issues and Technology Advisory Board.

The breakdown of the partnership is as follows: NAR appointed three CMLS-specific seats to the NAR MLS Technology and Emerging Issues Advisory Board. Two CMLS members joined the AE Institution Curriculum Advisory Board. One CMLS member has a seat on the NAR Association Executive Committee.

The partnership was approved by the CMLS board and the NAR leadership team last year and has served its purpose as a way to cross-pollinate discussions with NAR and CMLS committees.

What began as NAR’s way to tackle MLS problems has been in action seems to be successful.

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Real Estate Associations

What happens when Associations don’t comply with the new Core Standards?

(ASSOCIATIONS) If the real estate board you’re a member of is not in compliance with the Core Standards, what happens then!?

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In May 2014, the National Association of REALTORS® (NAR) approved a set of core standards, which were amended two years later, replacing the previous Organizational Standards. Now each year, REALTOR® associations must prove compliance or risk losing their charters.

Grants were extended through June 30, 2016 for mergers taking place after the adoption of the new standards. Further extensions were offered to the first 25 mergers that occurred after the June compliance cycle, with a third cycle running through December 31 of this year. But what happens if associations still don’t meet the new standards?

Enforcement is up to the local, state, territorial, and National Association. So basically, everyone. According to Sara Wiskerchen, NAR’s Managing Director of Media Communications, there is an appeal hearing process if compliance isn’t reached by the new deadline. If the hearing determines compliance is completely unachievable, the applicable association will lose their charter.

Since the adoption of the new standards, only 16 charters have been revoked. More than one revocation proves this program was necessary in the first place. The new standards are simple enough. Associations must meet or exceed core standards in six categories:

  1. Code of Ethics
  2. Advocacy
  3. Consumer Outreach
  4. Unification Efforts and Support of the REALTOR® Organization
  5. Technology
  6. Financial Solvency

Each category is further outlined on NAR’s site, with more detailed information about compliance. Every association is responsible for maintaining and enforcing a code of ethics, as well as providing mediation services as required, and issue citations. For advocacy, associations are encouraged to contribute to NAR RPAC funds (unless prohibited by state law), and participate in NAR Calls for Action efforts.

Consumer outreach requires at least four “meaningful consumer engagement activities” per year, with at least two demonstrating the association is a “Voice for Real Estate” in their market, and two specifically related to investment in local communities. Repeating the same activity four times will not count, nor will financial contributions to charities without further participation in the charity’s activities.

Unification efforts essentially state that associations must follow all applicable laws, and need to offer professional development opportunities. Leadership is required to complete at least six hours of REALTOR® association professional development annually. Additionally, associations
with paid staff must conduct annual performance reviews of their chief of staff.

The technology standard merely stipulates associations need to exist in this decade, providing an interactive website that includes state-of-the art features. Just kidding, they’re only required to have active links to products, services, standards, filling processes, and member programs. Oh, and the really tough part of this one is that members must have email or some other internet based communication.

Lastly, the financial solvency core specifies associations must ensure their fiscal integrity, report to CPA as necessary based on revenue, and get permission from NAR to file bankruptcy. If an association files for bankruptcy, that’s an automatic charter review.

“While some associations can meet these easily, smaller organizations might struggle with acquiring resources to complete all six segments.”

Fortunately for those that might be struggling, NAR provides Association Merger Procedures to assess if a merger would best fit member’s needs. NAR also suggests utilizing shared services for those anticipating difficulty, which help associations expand services and implement strategic partnerships to meet core standards.

If these steps don’t help, associations not in compliance by the end of the year will be subject to an appeal hearing, which includes a panel of at least five members of the NAR Association Executive Committee. The panel will report their recommendation to the Board of Directors, who will determine if the charter should be revoked.

According to NAR, the new standards are meant to “raise the bar for REALTOR® associations and ensure high-quality service for REALTORS®.” There are plenty of chances for associations to reach compliance before endangering their charters. Although it truly is a wonder that only 16 have been revoked so far, here’s to hoping everyone will be able to meet the new standards by the deadline to improve service across the board.

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