Did you know that closing documents are among the few sets of papers that should be kept for a lifetime? Though virtually everything in the file can be replaced by the title agency or other sources, you'll want to have all of it in one handy place so you don't have to go begging when you need it.
The settlement statement is especially helpful when prepping your income tax return. Sometimes called a HUD1, this standardized form is either two or three pages, depending on how it's printed. It reconciles the financial accounting of the sale, with credits and debits to the seller on one side and credits and debits to the buyer on the other. Purchase price, loan amount, tax adjustments, - that's all on page one. On page two are the closing costs.
You'll reference your settlement statement not only when prepping your tax return for the year in which you purchased the property but also potentially in the year in which you sell it, when the HUD1 from the sale of your home can be compared with the HUD1 from the purchase to determine what capital gains might be due - for instance, if the property was not your primary residence or if the sale falls outside the exclusion limits on the sale of a primary residence.
Friday, February 27, 2009
Thursday, February 26, 2009
MARKET PSYCHOLOGY
So much of what happens in the market is about psychology, both at the micro level, when you're buying or selling real estate, and at the macro level, when you look at the big factors that influence the market. As we're hearing on the news these days, we can't afford to ignore the psychology of the market. Economics is a social science. Markets are, in the end, about people - about how they react, and why.
Which is why I'm taking a day away from my plan to say more about closing docs, covenants, zoning, and private agreements to talk about something I heard on the radio last night that I found not just irritating and irresponsible but also - to use an adjective I try to avoid - unpatriotic.
"You think the mortgage market is bad now? Just wait," the right-wing rabblerouser admonished. "If you've got a mortgage, you better stay right where you are, because under Obama's plan, you won't be able to get another one."
Wrong. False. And while I understand that even right-wing rabblerousers have a right to speak and line their pockets by distorting truth over the airwaves, it's important for all of us to understand that this is a guy trying to make a living by stirring things up.
Somewhere in the last decade, people began to equate fear with patriotism. Let's be frank. Fear is bad for our country. It's bad for our economy. It's bad for you as a home owner. So, please file this encouragement to sit on your mortgage in fear you'll never get another in the same basket where you tossed other predictions that have come from the far right - that riots would follow Obama's election, that the President is the Antichrist or the reincarnation of Hitler.
Free speech. I understand. But don't buy into it.
Off my soapbox. Tomorrow I'll get back to the nuts and bolts of your closing docs. Unless I hear something equally stupid that potentially affects your real estate values, and mine.
Which is why I'm taking a day away from my plan to say more about closing docs, covenants, zoning, and private agreements to talk about something I heard on the radio last night that I found not just irritating and irresponsible but also - to use an adjective I try to avoid - unpatriotic.
"You think the mortgage market is bad now? Just wait," the right-wing rabblerouser admonished. "If you've got a mortgage, you better stay right where you are, because under Obama's plan, you won't be able to get another one."
Wrong. False. And while I understand that even right-wing rabblerousers have a right to speak and line their pockets by distorting truth over the airwaves, it's important for all of us to understand that this is a guy trying to make a living by stirring things up.
Somewhere in the last decade, people began to equate fear with patriotism. Let's be frank. Fear is bad for our country. It's bad for our economy. It's bad for you as a home owner. So, please file this encouragement to sit on your mortgage in fear you'll never get another in the same basket where you tossed other predictions that have come from the far right - that riots would follow Obama's election, that the President is the Antichrist or the reincarnation of Hitler.
Free speech. I understand. But don't buy into it.
Off my soapbox. Tomorrow I'll get back to the nuts and bolts of your closing docs. Unless I hear something equally stupid that potentially affects your real estate values, and mine.
Wednesday, February 25, 2009
ON COVENANTS, ZONING, AND WELLS
The following question brings up several issues for homeowners. My response follows. In future posts, I'll cover the details of covenants, zoning, and private agreements.
Question: I just noticed that our neighbors have built the framing for a cabin on their lot right next to the house. Are there any zoning
restrictions on subdividing on these lots? If it's not dry (which I
assume it is), what are the regulations for governing water dispersion
through the well. Since the pump is being paid for by us, I am
reluctant to water three houses. We did get pretty dry last year when
they were running water for a long time.
Answer:Without looking again at the paperwork for your property, I can't say for sure. But the covenants and private well agreement should be included in your closing documents, as part of the preliminary title report. The original MLS listing has a slot for the zoning code. Once you know the code (I suspect it's RR for this property, but again, please check, as I'm going only on memory), you can read the restrictions in the FNSB Code of Ordinaces Code 18 Zoning.
If you can't locate your closing documents, the borough's assessing office and/or community planning division can assist you in reassembling and interpreting these papers.
Off the cuff, my thought is that if the zoning is indeed RR, a guesthouse is permitted. The covenants may more specific restrictions. And do check the language of the well agreement, but I don't think there are restrictions as to the number of dwellings. Usage would have more to do with habits and the number of occupants than anything else. I'm surprised to hear there have been problems with well flow, as at 50 gallons per minute, the well could likely service an entire subdivision. But if the well was drilled long ago, extraneous factors like earthquakes can affect well flow after the fact.
Question: I just noticed that our neighbors have built the framing for a cabin on their lot right next to the house. Are there any zoning
restrictions on subdividing on these lots? If it's not dry (which I
assume it is), what are the regulations for governing water dispersion
through the well. Since the pump is being paid for by us, I am
reluctant to water three houses. We did get pretty dry last year when
they were running water for a long time.
Answer:Without looking again at the paperwork for your property, I can't say for sure. But the covenants and private well agreement should be included in your closing documents, as part of the preliminary title report. The original MLS listing has a slot for the zoning code. Once you know the code (I suspect it's RR for this property, but again, please check, as I'm going only on memory), you can read the restrictions in the FNSB Code of Ordinaces Code 18 Zoning.
If you can't locate your closing documents, the borough's assessing office and/or community planning division can assist you in reassembling and interpreting these papers.
Off the cuff, my thought is that if the zoning is indeed RR, a guesthouse is permitted. The covenants may more specific restrictions. And do check the language of the well agreement, but I don't think there are restrictions as to the number of dwellings. Usage would have more to do with habits and the number of occupants than anything else. I'm surprised to hear there have been problems with well flow, as at 50 gallons per minute, the well could likely service an entire subdivision. But if the well was drilled long ago, extraneous factors like earthquakes can affect well flow after the fact.
Tuesday, February 24, 2009
NOT SO SECRET CODES
According to the American Council for an Energy Efficient Economy, Alaska ranks 41st among the 50 states in terms of its commitment to energy efficiency. Perhaps that comes as no surprise, given that 90% of our state income is from oil revenue. But perhaps you've heard that oil is a non-renewable resource, and Alaska's supply is dwindling.
That's why the co-chairs of the Alaska Senate Resources Committee are introducing legislation to ramp up our efficiency efforts. Drill, baby, drill does not an energy policy make, no matter how chipper it sounds on the campaign trail.
Among the proposed action would be Statewide Building Energy Codes for both residential and commercial construction. A new concept for Alaskans, but one that's long overdue. In Alaska's housing industry, quality has been sacrificed under the guise of independence. Shoddy homes constructed in places where there are no building standards are more than just the homeowner's problem when they waste resources that all of us need. Expect a lot of heated discussion about the proposed changes, though. Alaskans are notorious about not wanting to be regulated.
That's why the co-chairs of the Alaska Senate Resources Committee are introducing legislation to ramp up our efficiency efforts. Drill, baby, drill does not an energy policy make, no matter how chipper it sounds on the campaign trail.
Among the proposed action would be Statewide Building Energy Codes for both residential and commercial construction. A new concept for Alaskans, but one that's long overdue. In Alaska's housing industry, quality has been sacrificed under the guise of independence. Shoddy homes constructed in places where there are no building standards are more than just the homeowner's problem when they waste resources that all of us need. Expect a lot of heated discussion about the proposed changes, though. Alaskans are notorious about not wanting to be regulated.
Monday, February 23, 2009
NAR ON THE STIMULUS
Lawrence Yen, Chief Economist for the National Association of Realtors, has released a summary take on the Economic Stimulus Plan and its effect on housing. NAR is understandably pleased with the stimulus package - almost everything they'd lobbied for was included. Yen's prognosis? The first-time buyer tax credit combined with higher loan limits and lower interest rates will raise home sales by 850,000 this year.
And for those who are still complaining about the stimulus, check this impressive figure: Yen estimates that as the stimulus stabilizes home prices, each American homeowner will benefit from an $18,000 average housing value preservation - meaning that values won't decrease as much as they would have.
NAR's mortgage rate forecast for mid-2009: 5.2%.
And for those who are still complaining about the stimulus, check this impressive figure: Yen estimates that as the stimulus stabilizes home prices, each American homeowner will benefit from an $18,000 average housing value preservation - meaning that values won't decrease as much as they would have.
NAR's mortgage rate forecast for mid-2009: 5.2%.
Friday, February 20, 2009
AREC is busy
The Alaska Real Estate Commission, mentioned in yesterday's post, is busy. They're auditing approximately 57 offices around the statement, looking particularly at trust account records and compliance with regulations regarding display of licenses, policy and procedures manuals, and use of the AREC consumer pamphlet.
Regulations requiring brokers to carry Errors and Omission Insurance are out for public comment. Proponents argue that this insurance provides another layer of protection for the public; critics say it encourages frivolous lawsuits. If enacted, the E & O regulation will take effect on March 1, 2010.
In disciplinary action, the commission accepted the voluntary license surrender of Christopher Haydon, a Fairbanks licensee, and imposed sanctions against Wasilla broker Mae Sprague for allowing a former licensee to practice real estate.
Of five surety fund cases considered, four were dismissed. A claim of fraud and misrepresentation against David Dowd resulted in a surety fund payout of $15,000 to the claimant.
Regulations requiring brokers to carry Errors and Omission Insurance are out for public comment. Proponents argue that this insurance provides another layer of protection for the public; critics say it encourages frivolous lawsuits. If enacted, the E & O regulation will take effect on March 1, 2010.
In disciplinary action, the commission accepted the voluntary license surrender of Christopher Haydon, a Fairbanks licensee, and imposed sanctions against Wasilla broker Mae Sprague for allowing a former licensee to practice real estate.
Of five surety fund cases considered, four were dismissed. A claim of fraud and misrepresentation against David Dowd resulted in a surety fund payout of $15,000 to the claimant.
Thursday, February 19, 2009
WHAT'S YOUR RECOURSE?
Like flying after an air disaster, this should be one of the safest times to conduct a real estate transaction. Irresponsible and predatory lending practices have been outed. So have scams that pulled in licensees and appraisers. Despite the devastation wreaked on the economy, discovering the truth in the adage about things that seem to good to be true is a wholesome and necessary correction.
Federal plans will mitigate some of the bloodletting. Scrutiny is tight, and it should be the rare client who falls victim to mortgage scams. But the market is tight as well, creating a sense of financial desperation for some in the real estate industry, including the shady characters who have a hard time making a living the honest way.
Prevention is the best recourse. Don't work with pushy people. If something feels wrong, object. If there's a problem you can't reconcile with the licensee, go to the broker...though, yes, sometimes the problem is with the broker. Your local Board of Realtors Association isn't authorized to pursue ethical violations on behalf of the public - only other Realtors can seek damages for ethical slip-ups. But statutory and regulatory violations should be brought to the attention of the state licensing agency. In Alaska, that's the Alaska Real Estate Commission (AREC). They have the power to suspend and revoke licensing. They also administer the surety fund, to which the public can make claims if they feel they've been damaged by the actions of a licensee.
Federal plans will mitigate some of the bloodletting. Scrutiny is tight, and it should be the rare client who falls victim to mortgage scams. But the market is tight as well, creating a sense of financial desperation for some in the real estate industry, including the shady characters who have a hard time making a living the honest way.
Prevention is the best recourse. Don't work with pushy people. If something feels wrong, object. If there's a problem you can't reconcile with the licensee, go to the broker...though, yes, sometimes the problem is with the broker. Your local Board of Realtors Association isn't authorized to pursue ethical violations on behalf of the public - only other Realtors can seek damages for ethical slip-ups. But statutory and regulatory violations should be brought to the attention of the state licensing agency. In Alaska, that's the Alaska Real Estate Commission (AREC). They have the power to suspend and revoke licensing. They also administer the surety fund, to which the public can make claims if they feel they've been damaged by the actions of a licensee.
Wednesday, February 18, 2009
LOAN FRAUD FALLOUT
As the nation struggles with fallout from poor mortgage practices comes news that most of the Alaskans implicated in the state's biggest loan fraud scheme have struck a plea deal. According to a recent article in the Anchorage Daily News, seven individuals pleaded guilty to a scheme that involved buying and selling homes at inflated prices. Real estate licensees, mortgage brokers, an escrow officer, investors, and a builder were among the guilty. One appraiser who changed his plea will go to trial.
As with Alaska's recent political scandals, it's unfortunate that it took Federal agents to squash the scheme. Prosecution goes a long way toward squelching predatory lending and loan fraud. And Alaska has taken another important step: at last, mortgage brokers must be licensed.
As with Alaska's recent political scandals, it's unfortunate that it took Federal agents to squash the scheme. Prosecution goes a long way toward squelching predatory lending and loan fraud. And Alaska has taken another important step: at last, mortgage brokers must be licensed.
Friday, February 13, 2009
AND WHAT NOT TO EXPECT...
Valentine's Day is tomorrow, and just as you can expect too much from a romantic relationship, so too can you expect too much from your buyer's representative.
Don't expect your buyer's rep to set up showings at the drop of a hat. Showings have to be coordinated with several busy schedules - yours, hers, and the sellers - so unless the house is vacant, allow 24 hours or so to set up showings. (If the house is tenant-occupied, 24 hours is minimum notice for them).
I've seen buyers, particularly those visiting from out of town, demand fulltime, non-stop attention their buyer's reps. That you want to maximize your time in town is understandable, but to expect a buyer's rep to be your fulltime chauffeur and tour guide is another. Do you really want to work with a rep with so much time on her hands that she has nothing else to do but cater to you?
Don't expect your buyer's rep to read your mind. A good buyer's rep will seek out your reaction to the homes you're seeing. Be straightforward and forthcoming in your response. If there's an aspect of her service you're not happy with, tell her. If things don't change, let her know you're making a switch.
Buyers should demand loyalty from their representatives, but they should return the favor. No sneaking around behind your rep's back, seeing houses with listing Realtors and making offers on For Sale By Owner. Your buyer's rep will be happy for you to expand your market awareness by attending open houses, but do let the Realtor hosting the open know that you've already got a Realtor. Talk with your buyer's rep about a strategy for viewing homes that are offered for sale by owner (FSBO).
There is no perfect house. If she's worthy of her license, your buyer's rep will help you find the best possible house for your wants and needs, given your budget and timeframe. But don't expect perfection. In houses, as most everything else in life, it doesn't exist.
Don't expect your buyer's rep to set up showings at the drop of a hat. Showings have to be coordinated with several busy schedules - yours, hers, and the sellers - so unless the house is vacant, allow 24 hours or so to set up showings. (If the house is tenant-occupied, 24 hours is minimum notice for them).
I've seen buyers, particularly those visiting from out of town, demand fulltime, non-stop attention their buyer's reps. That you want to maximize your time in town is understandable, but to expect a buyer's rep to be your fulltime chauffeur and tour guide is another. Do you really want to work with a rep with so much time on her hands that she has nothing else to do but cater to you?
Don't expect your buyer's rep to read your mind. A good buyer's rep will seek out your reaction to the homes you're seeing. Be straightforward and forthcoming in your response. If there's an aspect of her service you're not happy with, tell her. If things don't change, let her know you're making a switch.
Buyers should demand loyalty from their representatives, but they should return the favor. No sneaking around behind your rep's back, seeing houses with listing Realtors and making offers on For Sale By Owner. Your buyer's rep will be happy for you to expand your market awareness by attending open houses, but do let the Realtor hosting the open know that you've already got a Realtor. Talk with your buyer's rep about a strategy for viewing homes that are offered for sale by owner (FSBO).
There is no perfect house. If she's worthy of her license, your buyer's rep will help you find the best possible house for your wants and needs, given your budget and timeframe. But don't expect perfection. In houses, as most everything else in life, it doesn't exist.
Thursday, February 12, 2009
WHAT SHOULD YOU EXPECT FROM YOUR BUYER'S REPRESENTATIVE?
So you've entered into a formal relationship with a buyer's representative. What can and should you expect?
First, your buyer's representative should ask specific questions and what you're looking for and do a complete search of the market, electronically, using her MLS database. Results can be delivered efficiently by email. She should also set up an automatic, ongoing method for you to be notified when new listings matching your criteria come on the market. Again, this is most readily accomplished by email. You should let your representative know as your criteria change (and they often will as you get to know the market) so she can modify your search parameters.
Your buyer's representative will set up showings of the houses you want to see. It's most efficient for everyone if you see three or four homes in a row, at least initially, so she can gauge your reaction and get a better idea what you're looking for. Unless you're in a real crunch for time, it's not normally wise to see upwards of five houses in a row. Everyone gets worn out, and the houses will start to blend together.
Your buyer's representative should point you toward detailed information on the houses you're interested in. She should advise you of the logistics of writing an offer, including the intricacies of financing, as you zero in on a property that you like. And of course she'll write your offer, counseling you on the realities of the market, strategies for negotiation, and clauses that will address matters of importance to you. From there she'll guide you through the escrow period (from accepted offer through closing). She gets paid if and when the transaction closes, usually through a commission split offered by the listing Realtor through the Multiple Listing Service agreement.
First, your buyer's representative should ask specific questions and what you're looking for and do a complete search of the market, electronically, using her MLS database. Results can be delivered efficiently by email. She should also set up an automatic, ongoing method for you to be notified when new listings matching your criteria come on the market. Again, this is most readily accomplished by email. You should let your representative know as your criteria change (and they often will as you get to know the market) so she can modify your search parameters.
Your buyer's representative will set up showings of the houses you want to see. It's most efficient for everyone if you see three or four homes in a row, at least initially, so she can gauge your reaction and get a better idea what you're looking for. Unless you're in a real crunch for time, it's not normally wise to see upwards of five houses in a row. Everyone gets worn out, and the houses will start to blend together.
Your buyer's representative should point you toward detailed information on the houses you're interested in. She should advise you of the logistics of writing an offer, including the intricacies of financing, as you zero in on a property that you like. And of course she'll write your offer, counseling you on the realities of the market, strategies for negotiation, and clauses that will address matters of importance to you. From there she'll guide you through the escrow period (from accepted offer through closing). She gets paid if and when the transaction closes, usually through a commission split offered by the listing Realtor through the Multiple Listing Service agreement.
Wednesday, February 11, 2009
PERSONAL SERVICES CONTRACTS
Will you have to sign a contract to get the services of a buyer's representative? In Alaska, probably not, though market practices are always changing. Buyer's contracts are used more extensively in the Lower 48.
A buyer's contract is similar to the listing agreement a seller signs with the listing Realtor. It commits the licensee to providing a specified set of services to meet the buyer's goal of purchasing a home. It commits the buyer and the licensee to working with one another for a set period of time. Typically, there's a clause in the contract that authorizes the licensee to collect their commission from a seller. Like most contracts, it can be declared void by mutual consent.
If the person you've chosen to be your buyer's representative present a buyer's contract, don't be frightened off. Remember a contractual arrangement protects you because it commits the licensee to helping you achieve your goals. One fact of life of the real estate professional is sorting through potential clients to figure out who's worthy of your time and who isn't. Serious buyers who want to get the job done go to the top of the list. One way to find those is to offer a buyer's contract.
A buyer's contract is similar to the listing agreement a seller signs with the listing Realtor. It commits the licensee to providing a specified set of services to meet the buyer's goal of purchasing a home. It commits the buyer and the licensee to working with one another for a set period of time. Typically, there's a clause in the contract that authorizes the licensee to collect their commission from a seller. Like most contracts, it can be declared void by mutual consent.
If the person you've chosen to be your buyer's representative present a buyer's contract, don't be frightened off. Remember a contractual arrangement protects you because it commits the licensee to helping you achieve your goals. One fact of life of the real estate professional is sorting through potential clients to figure out who's worthy of your time and who isn't. Serious buyers who want to get the job done go to the top of the list. One way to find those is to offer a buyer's contract.
Tuesday, February 10, 2009
SHOULD YOU WORK WITH A BUYER'S REPRESENTATIVE?
In my opinion, buyers are foolish to play the field, refusing to commit to one Realtor until they find the house they want. By then, they're generally stuck with the listing licensee acting as a neutral, which isn't necessarily a bad thing, but they missed out on a whole lot of service that wouldn't have cost them any more in the long run.
While in some markets buyers pay their own licensees, in Alaska it's most common for the seller to pay a commission to both licensees in the transaction. By settling on one buyer's representative early in your house-hunting, you can have listings that match your criteria emailed to you as they come on the market. It's absolutely the most efficient way to search. And of course your buyer's representative can show you any homes that are listed in the Multiple Listings Service - that's the vast majority of those on the market - regardless of who listed the house.
A buyer's representative is by law committed to working for your best interests. As you work with your Realtor, she'll learn about you and your needs, which will help her write the best possible offer on your behalf. You're her client, and you'll have her attention (If not, switch to a different representative.) Play the field? No thanks. Even independent Alaskans realize that when it comes to looking for a house, they're silly not to have someone helping them look.
While in some markets buyers pay their own licensees, in Alaska it's most common for the seller to pay a commission to both licensees in the transaction. By settling on one buyer's representative early in your house-hunting, you can have listings that match your criteria emailed to you as they come on the market. It's absolutely the most efficient way to search. And of course your buyer's representative can show you any homes that are listed in the Multiple Listings Service - that's the vast majority of those on the market - regardless of who listed the house.
A buyer's representative is by law committed to working for your best interests. As you work with your Realtor, she'll learn about you and your needs, which will help her write the best possible offer on your behalf. You're her client, and you'll have her attention (If not, switch to a different representative.) Play the field? No thanks. Even independent Alaskans realize that when it comes to looking for a house, they're silly not to have someone helping them look.
Monday, February 9, 2009
IS NEUTRAL FOR YOU?
The decision about whether you want to authorize or preauthorize a neutral relationship with your real estate licensee in transactions where the licensee is working with the other party is strictly up to you, under the law. Some licensees have their own policies - they'll only work with clients who authorize neutral, or they won't do neutral. If their policies don't work for you, the law allows you to choose another licensee, because licensee relationships should be established, with the decision about neutral settled in writing, before you enter into any contracts. Remember the licensee disclosure (aka consumer pamphlet) is not a contract; it does not bind you to a particular licensee.
There may be advantages to having one licensee working both sides of your transaction. He or she will know each party's situation and can facilitate negotiations based on that knowledge. And sadly, a bad licensee (unfortunately, there are some) on the other side of the transaction can create unnecessary complications and tensions. Under the old adage that the best way to get something done is to do it yourself, many licensees would prefer to have both sides of a transaction, especially since they get paid for both sides. That usually means twice the commission for the licensee. Some offer a commission discount if they handle both sides; others (myself included) don't like the temptation that presents to exclude the clients of other licensees in what could potential be a better deal in the long run.
There may be advantages to having one licensee working both sides of your transaction. He or she will know each party's situation and can facilitate negotiations based on that knowledge. And sadly, a bad licensee (unfortunately, there are some) on the other side of the transaction can create unnecessary complications and tensions. Under the old adage that the best way to get something done is to do it yourself, many licensees would prefer to have both sides of a transaction, especially since they get paid for both sides. That usually means twice the commission for the licensee. Some offer a commission discount if they handle both sides; others (myself included) don't like the temptation that presents to exclude the clients of other licensees in what could potential be a better deal in the long run.
Thursday, February 5, 2009
SHIFTING TO NEUTRAL
When you first meet an Alaskan real estate licensee, unless it's in a casual setting like an open house or a cocktail party, the licensee should hand you an "Alaska Real Estate Commission Consumer Pamphlet" to read and sign, disclosing the nature of the relationship between you and the licensee. Is the licensee representing you, or is she offering what statutory language calls "specific assistance"? In either case, the licensee has basic duties, such as honesty and fairness.
If the choice is representation, there are additional duties, all specified on the disclosure form - things like confidentiality, disclosure of conflicts of interests, loyalty, and making a good faith effort to accomplish your real estate goals. If you're serious about accomplishing those goals, you probably want someone to represent you. That way any confidential information, such as how much you COULD pay for a property, isn't shared with other clients to your potential detriment.
If you're selling your house, you'd be (in my opinion) foolish to opt for any choice other than representation. But what if your listing licensee has buyers she's representing who want to see and potentially buy your home? Sounds like a no-brainer. Of course you want everyone to be clamoring for a look. But wait - your licensee also represents the buyers. Now what?
One option is to preauthorize, for those specific situations only, a neutral relationship. Oddly, the set of duties for a neutral relationship is virtually the same as for representation. But no one pretends that the licensee is representing both sets of interests. Instead, she's required to remain neutral, while continuing loyalty, confidentiality and such to both parties.
If the choice is representation, there are additional duties, all specified on the disclosure form - things like confidentiality, disclosure of conflicts of interests, loyalty, and making a good faith effort to accomplish your real estate goals. If you're serious about accomplishing those goals, you probably want someone to represent you. That way any confidential information, such as how much you COULD pay for a property, isn't shared with other clients to your potential detriment.
If you're selling your house, you'd be (in my opinion) foolish to opt for any choice other than representation. But what if your listing licensee has buyers she's representing who want to see and potentially buy your home? Sounds like a no-brainer. Of course you want everyone to be clamoring for a look. But wait - your licensee also represents the buyers. Now what?
One option is to preauthorize, for those specific situations only, a neutral relationship. Oddly, the set of duties for a neutral relationship is virtually the same as for representation. But no one pretends that the licensee is representing both sets of interests. Instead, she's required to remain neutral, while continuing loyalty, confidentiality and such to both parties.
Wednesday, February 4, 2009
AN AGENT IS AN AGENT - OR NOT
Yesterday when I talked about what the term Realtor actually means, I mentioned that in Alaska, real estate salespeople (including brokers and associate brokers) are called licensees instead of agents. Does that really matter?
Hard to say. The change came about because of problems with consensual dual agency - one agent was legally able to work with both buyers and sellers in the same transaction. The idea was that as long as all parties agreed in writing, one agent could work a transaction with the best interests of all parties in mind. The problem, of course, is that these interests are often conflicting. The buyer, for instance, wants the lowest possible price for the house. The seller naturally wants the highest.
It used to be that no one had to worry about dual agency because no one represented buyers. In real estate it was caveat empetor - buyer beware - and all agents looked after sellers, while buyers were on their own. No wonder real estate salespeople got bad reputations. Buyers felt like they got the shaft, and if seller's agents were doing their jobs, they probably did.
Thankfully that changed. Buyers can now have their own representation in a real estate transaction. In Alaska, real estate statutes and regulations obliterated the terms agent and agency, so there's no possibility of dual agency and its inherent conflicts.
But wait, you say. My Realtor - or licensee (do you know the difference now?) - worked with both me and the seller. Was that illegal?
Not at all. Now we have a system that allows clients to authorize a licensee status called "neutral." More about that tomorrow.
Hard to say. The change came about because of problems with consensual dual agency - one agent was legally able to work with both buyers and sellers in the same transaction. The idea was that as long as all parties agreed in writing, one agent could work a transaction with the best interests of all parties in mind. The problem, of course, is that these interests are often conflicting. The buyer, for instance, wants the lowest possible price for the house. The seller naturally wants the highest.
It used to be that no one had to worry about dual agency because no one represented buyers. In real estate it was caveat empetor - buyer beware - and all agents looked after sellers, while buyers were on their own. No wonder real estate salespeople got bad reputations. Buyers felt like they got the shaft, and if seller's agents were doing their jobs, they probably did.
Thankfully that changed. Buyers can now have their own representation in a real estate transaction. In Alaska, real estate statutes and regulations obliterated the terms agent and agency, so there's no possibility of dual agency and its inherent conflicts.
But wait, you say. My Realtor - or licensee (do you know the difference now?) - worked with both me and the seller. Was that illegal?
Not at all. Now we have a system that allows clients to authorize a licensee status called "neutral." More about that tomorrow.
Tuesday, February 3, 2009
WHAT'S A REALTOR?
Duh, you're thinking. Even way up in Alaska, a Realtor is one of those people who helps you buy or sell a house.
Yes. And no. Technically, a Realtor is a member of the National Association of Realtors. That's not doublespeak. Realtors created the term Realtor, which is why they insist it be capitalized and accompanied by the little copyright C. (Sorry, NAR. There's probably a way to make that happen on my laptop, but I don't know it). The publishing world doesn't pay a lot of attention to those rules. Other nouns naming professions (doctor, lawyer, professor) aren't capitalized unless used as part of someone's name, so why should Realtors get special treatment?
If a real estate professional is helping you buy or sell property, odds are very, very high that he or she is a member of NAR and hence a Realtor. That's because you have be join NAR and your local association of Realtors in order to access the Multiple Listing Service, the lifeblood of the industry.
That being said, you don't have to be a Realtor to be licensed to sell real estate. At last count, Alaska has 1460 licensed real estate salespersons, 405 licensed associate brokers, and 484 licensed brokers. None of them, technically, are real estate agents. That's because Alaskan statute was rewritten several years ago in an attempt to circumvent the pitfalls of agency. So we're all called licensees.
Yes. And no. Technically, a Realtor is a member of the National Association of Realtors. That's not doublespeak. Realtors created the term Realtor, which is why they insist it be capitalized and accompanied by the little copyright C. (Sorry, NAR. There's probably a way to make that happen on my laptop, but I don't know it). The publishing world doesn't pay a lot of attention to those rules. Other nouns naming professions (doctor, lawyer, professor) aren't capitalized unless used as part of someone's name, so why should Realtors get special treatment?
If a real estate professional is helping you buy or sell property, odds are very, very high that he or she is a member of NAR and hence a Realtor. That's because you have be join NAR and your local association of Realtors in order to access the Multiple Listing Service, the lifeblood of the industry.
That being said, you don't have to be a Realtor to be licensed to sell real estate. At last count, Alaska has 1460 licensed real estate salespersons, 405 licensed associate brokers, and 484 licensed brokers. None of them, technically, are real estate agents. That's because Alaskan statute was rewritten several years ago in an attempt to circumvent the pitfalls of agency. So we're all called licensees.
Monday, February 2, 2009
FREE SEMINARS FOR HOMEBUYERS
A few weeks ago we discussed the great Energy Rebate Program adminstered by the Alaska Housing Finance Corporation. Today I want to remind you of another great AHFC program: the Home Choice Seminars.
Offered throughout the state, the eight-hour Home Choice seminars cover topics such as getting a loan, title insurance, purchase contracts, and home inspections. While parts of the information apply more to Anchorage than other markets around the state, overall these seminars are a great (and free!) way to educate yourself about home buying in Alaska. As an added bonus, seminar participants get a discount on their AHFC commitment fee if they're using one of the AHFC add-on loan program such as the First-Time Home Buyer.
For more information, visit http://www.ahfc.state.ak.us/workshops/homechoice.cfm
Offered throughout the state, the eight-hour Home Choice seminars cover topics such as getting a loan, title insurance, purchase contracts, and home inspections. While parts of the information apply more to Anchorage than other markets around the state, overall these seminars are a great (and free!) way to educate yourself about home buying in Alaska. As an added bonus, seminar participants get a discount on their AHFC commitment fee if they're using one of the AHFC add-on loan program such as the First-Time Home Buyer.
For more information, visit http://www.ahfc.state.ak.us/workshops/homechoice.cfm
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