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

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.

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]

$15,000 Homebuyer Tax Credit Trimmed To $8,000

From the Zillow Blog:

Details have not yet been ironed out, but the proposed $15,000 tax credit amendment in the economic stimulus package that was sponsored by Sen. Johnny Isakson has been trimmed down to an $8000 tax credit, according to the NY Times. This is all very preliminary until the bill is actually signed, but here is the before ‘n after of what’s been thrown around:

Before:

  • $15,000 tax credit
  • Available for all home buyers
  • No repayment necessary

After:

  • $8000 tax credit
  • Available for first-time home buyers within certain income limits
  • Repayment? Not known at this time

Details on the bill could come this afternoon or tomorrow, but it is expected to be signed by President Obama by Monday.

Why do they have to put an income limit on it?  That will likely cut out half of San Francisco homebuyers. WTF!

$15,000 Tax Break For Homebuyers, Good Or Bad Idea?

The news of the day is the Senate approved $15,000 tax break for new homebuyers:

-WASHINGTON — The Senate on Wednesday voted to expand the economic stimulus package with a tax credit for homebuyers of up to $15,000, a provision championed by Republicans as addressing a root cause of the recession.

-Senator Johnny Isakson, Republican of Georgia, a former real estate broker, who was the prime sponsor of the homebuyer credit, said it was modeled after a similar, $2,000 homebuyer incentive that helped lead the country out of recession in 1975.

“We do have a history in this country with housing and it goes back to the crash of 1974, which actually in terms of inventory and price declines was comparable to what’s happening now,” Mr. Isakson said at a news conference.

“Within one year of the inception of that tax credit, two-thirds of the available inventory that was on the market was gone. The market moved back to a balanced inventory, values stabilized and things became very healthy. The only reason I know all of that is I was selling houses in 1974, that’s what I was doing to feed my family and make a living.”

The tax credit would give buyers 10 percent of the price of a primary residence bought within one year, up to $15,000, and is intended to stabilize plummeting home prices, which caused a wave of foreclosures and led to the near collapse of the financial system as Wall Street firms wrote down billions in mortgage-backed assets.

Realtors are celebrating, no doubt, as should many others, but some are not so convinced:

New home sales increased from a 477 thousand SAAR in March 1975 to over 600 thousand SAAR later in the year. But that was from a depressed level as shown on the graph. The real boom in sales happened when the economy recovered – so I’m not sure of the actual impact of the 1975 tax credit.

Click to enlarge

And so goes the cycle of life…We humans will always argue, we will always fight, we will always have our differences, but dammit you need to start buying houses again! ;-)

-Home-buyers tax cut raises cost of stimulus bill [Yahoo News]
-Senate Adds Homebuyer Tax Credit to Stimulus Bill [New York Times]
-$15,000 Tax break for homebuyers [Calculated Risk Blog]

TIC? Got Cash? To The Front Of The Line Please…

Good news on a Monday morning:

-Waiting to go condo is San Francisco’s version of waiting for Godot [seeing that phrase a lot lately...good on ya Malcolm.]

Building owners can spend years vying for one of 200 condo-conversion slots awarded annually via a lottery. But this year San Francisco is considering letting people skip the line, offering a one-time chance to the hundreds of folks on the lottery list to go condo now – for an extra fee. The goal is to generate more revenue for the cash-strapped city and to create building-industry jobs, because condo conversions generally require some construction work to bring buildings up to code.

-A proposal to expedite condo conversion would require approval by either the supervisors or the voters – no easy task in a city where housing issues are famously contentious. Tenant advocates say the practice hurts renters who get evicted when buildings convert to tenancies in common, the step before going condo. Previous proposals for increased condo conversions have failed miserably.

-”It’s a win-win if the fee is not too high,” [says one TIC owner]. “The city also will make more money when property taxes go up, when they reassess the units (as condos rather than TICs).”

On the other hand, TIC owner Daniele Mills, an administrative assistant at Genentech, said she thinks the proposal doesn’t seem democratic.

“It has a lot of repercussions for people with less income than other people,” she said. “The lottery seems more fair.”

Nothing in life is fair. It’s kinda like going to a club and tipping the doorman to get in, skip the line, and party on, instead of losing your buzz waiting in line.

Proposal: Pay fee, skip condo-conversion line [SFGate]

House Passes Stimulus Bill, Senate What Next?

We pulled this directly from a C.A.R newsletter:

The U.S. House of Representatives passed H.R. 1, the Economic Recovery Package, by a 244 to 188 vote. Amid all the negative economic news we’re hearing on a daily basis, this is good news, as the bill contains a number of issues critical to REALTORS® and the industry, including extending all 2008 Metropolitan Statistical Areas’ (MSAs’) Fannie Mae, Freddie Mac, and FHA loan limits through the end of this year.

The extension prevents an MSA’s 2008 loan limit from being reduced in 2009 for Fannie Mae, Freddie Mac and the FHA. Language in the bill also specifies that if an MSA’s loan limit is set to change, it can increase, but is prohibited from declining.

The proposed legislation also will eliminate an existing payback requirement on the first-time home buyer tax credit for qualified buyers who purchase a home between Dec. 31, 2008, and July 1.

Congress included these provisions as a direct result of the grassroots efforts put forward by REALTORS®, and the advocacy efforts of both NAR and C.A.R. Congress elected not to include numerous housing provisions beyond those previously mentioned. It looks like Congress will begin to address other housing issues next week when the Financial Services Committee meets.

The legislation also contained a laundry list of appropriations for various affordable housing programs, neighborhood stabilization programs, and other housing and/or real estate-related issues, including:

Public Housing Capital Fund
Native American Housing Block Grant
Home Investment Partnership Program
Self-help & assisted homeownership
Elimination of lead paint in homes
Repairing leaking underground storage tanks
Low-income home energy assistance
Rural Housing Insurance Fund
In addition to tax credits for individuals and married couples, other provisions in the bill include funds for increasing access to high-speed and broadband Internet; highways and roads; railroads; alternative energy incentives; unemployment insurance; Medicaid insurance; health care technology upgrades; childcare; education; and low-income and affordable housing programs.

The Senate now is working on its version of the stimulus legislation, and is expected to vote on it next week. Congress would like to get a bill to the President’s desk by President’s Day, Feb. 16.

So what next? More importantly, what kind of impact will this have for San Francisco? Here’s your chance to go on record and compare the power of your crystal ball to that of other readers.

Obama Wants to Jump in on the Real Estate Crisis. Which Way should He Jump?

barackme

You might have already read Alex Clark’s article on the Bush plan to help homeowners, named optimistically “Hope for Homeowners.” Commenters on that post were less optimistic. Seems a lot of lenders won’t touch the program, though that might be because the program itself is new and everyone is so gun-shy right now.

That leaves President-elect Obama (Hi, Obama, if you’re reading!) in a tough place. He wants to act immediately on this issue, but has multiple, and conflicting voices to listen to as he plans a methodology. I feel for the guy. We want someone to bail us out of a clusterf*** that is 8 years in the making, and we want him to do it yesterday.

Sunday’s Chron outlines the issues Obama will draw from in taking action:

“Unlike his opponent, Sen. John McCain, he did not urge the government to buy up bad home loans and reduce them to the homes’ new values, putting taxpayers on the hook for the difference. But some of Obama’s proposed $10 billion fund would help homeowners who are facing foreclosure ‘through no fault of their own’ by letting them refinance mortgages through the Federal Housing Administration, Fannie Mae or Freddie Mac.

What Obama accomplishes depends, in part, on what the Bush administration does about housing in its waning days.”

Well, that admin is credited with the Hope for Homeowners program, to which $300 billion dollars was allocated. Other moves under consideration:

  1. a proposal by the Federal Deposit Insurance Corp. similar to what it is doing to modify IndyMac mortgages. The FDIC plan would use $50 billion from the $700 billion bailout bill to modify mortgages.
  2. a mortgage-industry proposal to split losses on modified mortgages with the government. Treasury has not confirmed these reports.
  3. In recent weeks, some large lenders including Bank of America and JPMorgan Chase have announced their own mortgage-modification plans.
  4. Rick Harper, director of housing at the Consumer Credit Counseling Service of San Francisco, says it’s becoming much easier for borrowers to get a mortgage modification.

In his address to the nation last Friday, Obama said: “It’s ‘absolutely critical that the Treasury work closely with the FDIC, HUD and other government agencies to use the substantial authority they already have to help families avoid foreclosure and stay in their homes.”

To do that though is not going to be an easy task. That’s why I want to ask the experts out there what Obama, in case he’s reading (and if you are, Obama: Hi!) what he should do first. And then second. And third.

Some conflicting advice and ideas he’s already getting:

  • Dean Baker, co-director of the Center for Economic and Policy Research, says the most expedient thing Obama could do would be changing the law so Bankruptcy Court judges can modify mortgages on primary residences. These judges already can change the terms of other debts, including commercial loans and loans on second homes. On the opposite side of that argument: “Allowing judges to reduce mortgage balances on primary residences ‘will destabilize the market exactly at a time when we should provide stability,’ says Steve O’Connor, senior vice president with the Mortgage Bankers Association. “
  •  a 90-day moratorium on foreclosures (but what would come after that?)
  •  a $10 billion foreclosure-prevention fund
  •  a mortgage tax credit of up to $800 a year for homeowners who don’t itemize  their deductions, but some experts say “the tax credit would do little to stimulate housing because it would mainly benefit people who have owned homes for many years”

It’s all enough to make a President run off to Camp David–only we need this President on the job. How can he maybe do it well?

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Photo: Javno.com