Category Archives: legislation

Real Estate Commissions…

(Editor’s Note: The following is reprinted from the Real Estate Bulletin, spring 2012 issue, published by the California Department of Real Estate.)

“The California Real Estate Law (Business and Professions Code §10000, et seq.) does not prohibit the sharing of commissions. Before going further, it must be understood that this section and its analysis only covers the California Real Estate Law. Other laws, such as the Federal Real Estate Settlement Procedures Act (known as RESPA) must also be considered by licensees.

From a technical point-of-view, the agent/client relationship, and the right to commissions therefrom, belong to the broker. Nevertheless, it is recognized that real estate agents may work together and decide to share or split a commission.

A licensee may share or split his or her commission with another person or entity provided that person or entity has not performed any acts for which a real estate license is required. The Real Estate Law prohibits the payment of compensation to unlicensed persons who are performing acts requiring a license on behalf of another or others.

For example, a licensee may give a share of the licensee’s commission to a buyer, as an incentive to a prospective buyer, assuming the incentive payment is not a violation of some other provision of law. Where an unlicensed person is acting as a principal in a transaction (i.e., seller or buyer), that person is not “acting on behalf of another or others” (licensed activity) and the prohibition described above would not apply.

If licensed acts were performed, a commission can be shared only if the person was a licensed real estate broker or salesperson acting within the scope of his or her license.

Even though a licensed salesperson may share his or her commission, as discussed above, the salesperson’s employing broker must actually direct and control the manner and payment of a salesperson’s share of the earned commission to ensure compliance with B&P §10137.

Pre-supposing that the broker has authorized escrow to directly pay a commission to the salesperson, the commission can be paid to the salesperson out of escrow.

Depending on the circumstances, there may be a disclosure requirement if such payment is a material fact to a party to the transaction.

Lastly, B&P §10137 allows “a licensed real estate broker to pay a commission to a broker of another State”. This refers to another State in the United States of America. It does not refer to a foreign country. However, there is no prohibition in the Real Estate Law against a real estate broker, licensed in the State of California, paying money to a foreign individual or company (which may or may not be a licensed real estate broker in their respective countries), as long as the payment of money is not for acts which require a real estate license in the State of California.”

Got it?

$8000 First Time Homebuyer Tax Credit: the fine print

We would advise, before you run outside screaming, “I need to buy a house! I need to buy a house! This $8000 won’t last!” Read the fine print, particularly question 9.

From the California Association of Realtors Website (verbatim):

A.  FIRST-TIME HOMEBUYER TAX CREDIT

Q 1.  What, in a nutshell, is the $8,000 tax credit for first-time homebuyers under the new law?

A  A first-time homebuyer as defined may receive a refundable tax credit up to $8,000 for purchasing a principal residence in the U.S. from January 1, 2009 to November 30, 2009, inclusive (see Questions 5 to 16).  No repayment is required if the buyer owns and occupies the property for 36 months (see Question 17).  This new law enhances the preexisting $7,500 tax credit enacted in 2008 which still applies for purchases from April 9, 2008 to December 31, 2008 (see Questions 18 and 19).

Q 2.  How will the new $8,000 tax credit affect REALTORS® and their clients?

A  The new $8,000 tax credit provides a monetary incentive for first-time homebuyers to purchase homes.  First time homebuyers represent a significant segment of U.S. homebuyers.  According to the U.S. Department of the Treasury, nearly half of the homebuyers in 2008 were first-time homebuyers.  Hence, the new tax credit for first-time homebuyers, along with affordable home prices and historically low mortgage rates, should help spur the housing market.
 
Q 3.  What is a tax credit?

A  A tax credit is a dollar-for-dollar reduction of tax owed.  In contrast to a tax credit, a tax deduction is merely a reduction of taxable income.  Hence, a tax credit is generally more valuable to the taxpayer than a tax deduction.  To illustrate, an $8,000 tax deduction for a taxpayer in a 25% tax bracket would only save the taxpayer $2,000 in taxes, whereas an $8,000 tax credit would save the taxpayer $8,000 in taxes. Continue reading $8000 First Time Homebuyer Tax Credit: the fine print

Being a Landlord is Such a Drag…

I have to admit, watching the banks, AIG, the automakers, and finally, homeowners get a bail out, I did more than once cry out piteously: “But who the f— will bail out me?”

Answer: Chris Daly.

I didn’t really ask for this kind of bailout, but Daly’s constituents are largely renters; and hey, so is San Francisco. Thus a little protection for us too is a nice gesture.

Specifically, Daly’s proposals, to quote from the Chron, are as follows:

Three laws proposed by Supervisor Chris Daly on Tuesday would bar landlords from increasing rent to more than one-third of a tenant’s income, would expand the rights of tenants who want to add roommates, and would limit the amount of so-called banked rent increases in which annual increases allowed under city laws are saved up and then imposed all at once.

I should embrace this, since I am a renter. However, I’m also aware of the ironic side effect of many “renter protection laws” that actually end up keeping the rental market as expensive and competitive as it is here, even now. So I eye these laws cautiously, though they excite me, if only because I hope they make my landlady unhappy. Because I hate her.

But I digress. Surprisingly, Mayor Newsom, who is by all accounts not a member of the Daly fan club (in fact, I believe he’s probably the founder of whatever club is the opposite of that one), appears amenable to these laws.

It’s not yet clear whether the proposed laws will have sufficient support at the Board of Supervisors, but Mayor Gavin Newsom – who advocates had expected to oppose the measures – appeared open to the ideas.

So, does that mean SF is about to get even harder on landlords? 

In the end, I’m out of my league. My bias is obvious, but I don’t want to rent forever, so I like to undertand long term effects.  I bring this article to you, the educated Front Steps populace, to explain why these laws are a bad idea, a good idea, a crazy idea, or a pipe dream.

Forget Web 2.0, We’re In Recession 2.0 …”Come Back Often”

Recovery.gov:

For the things that apply to San Francisco real estate and you, the homeowner, check this page specifically.

And since we’re at it, can we get a show of hands for how many of you San Franciscans out there are looking for help under the Making Home Affordable Plan recently enacted by President Obama?

Just curious.

Adjusting Housing Relief Plans For Bay Area Residents

From SFGate:

‘[Rep. Jackie Speier, D-Hillsborough] drafted an amendment so that rather than being limited to whether the loan was conforming at time of origination, it will be based on (whether it’s conforming at) the time of (modification), which will take the limit up to $729,750 in high-cost areas. This should make more people in the Bay Area eligible.’

Speier’s amendment addresses an aspect of the plan that encourages mortgage services to modify loans to make them more affordable for struggling borrowers. The modifications are supposed to reduce monthly payments to 31 percent of a borrower’s income for five years; they also could include lowering the principal or refinancing the loan.

The amendment says that loan modifications must be available to loans that are “conforming,” meaning those that can be securitized or guaranteed by Freddie Mac or Fannie Mae. The conforming loan limit was $417,000 until July 1, 2007. About 60 percent of homes purchased in the expensive Bay Area in 2005 and 2006 were bought with higher-cost “jumbo” loans above $417,000; about 30 percent of homes in California were jumbos in those years, according to MDA DataQuick. The limit is now $729,750 in high-cost regions, including most of the Bay Area.

-A central aspect of the bill, called the “Helping Families Save Their Homes Act of 2009,” is a change to bankruptcy law. That controversial proposal, fiercely opposed by the lending industry, would allow judges to “cram down” or reduce the principal owed on mortgages to the home’s actual value.

Wish we would have bought a $1,000,000 house with zero down a few years back. And we wonder if a judge would “cram up” some stock values to be worth what they were when we bought them. Hmmmm…might be on to something there.

To learn more please visit, www.financialstability.gov

-Speier plan would aid refinancing in Bay Area [SFGate]