Mortgage Lending and Ancillary Services

Transcription

PUBLIC POLICY FORUM
BEST OF LEGAL HOTLINE
Wisconsin residents name taxes the
number one concern in the state.
Working with lenders, mortgage
brokers, and financial institutions.
WISCONSIN
A PUBLICATION OF THE WISCONSIN REALTORS® ASSOCIATION
May 2005
$5.00
MAGAZINE
TM
NEWS.WRA.ORG
Predatory
Lending
Recognize the warning signs
and help your clients avoid
the trap.
Mortgage Lending and
Ancillary Services
How Property
Surveys Can Help
Avoid Disputes
Learn how to help buyers
avoid costly litigation and ugly
feuds with neighbors.
Power Tool for
Mobile Tech
Geeks
Keep your business running
even when the mobile
batteries fizzle out.
Property Owners
Score Major
Victory
Wisconsin Court of Appeals
upholds decision to wave
nonconforming structure
regulations.
YO U R S O U R C E F O R T H E L AT E S T R E A L E S TAT E N E W S
Improve
your ROI with the
RE/MAX Smart
Renovator Guide.
RE/MAX presents the Smart Renovator Guide — a unique,
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renovation and every dollar you spend.
The choices you make regarding improvements and
renovations can have a huge impact on your home’s value.
So, at a time when remodeling trends are up dramatically,
RE/MAX has used the knowledge gained through thousands
of real estate evaluations to help you predict which
renovations will generate the largest return on investment.
Smart Renovator. It’s just another way you can benefit
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WISCONSIN REAL
REAL ESTATE
ESTATE MAGAZINE
MAGAZINE
WISCONSIN
THE OFFICIAL
OFFICIAL PUBLICATION
PUBLICATION OF
OF THE
THE WISCONSIN
WISCONSIN REALTORS
REALTORS®® ASSOCIATION
ASSOCIATION
THE
MAY 2005
MARCH
2004
VOL. 20,
21, NO.
NO. 78
VOL.
Contents
FEATURES
COVER
mortgage
lending report
I
n the world of real estate, mortgage
lenders and REALTORS® partner
in many ways to assist people in
some of the most important personal
and financial decisions they will ever
make. The Wisconsin Mortgage Bankers Association (WMBA), representing
companies and individuals engaged in
virtually all aspects of mortgage lending,
believes that the more we share our
interests, concerns and
observations, the better
we can both serve our
mutual customers.
8
5
Using E-mail Marketing
9
Predatory Lending
Are you wondering how you can use e-mail to the greatest
benefit in your business? Find out how to establish a two-way
relationship with your customers and clients using e-mail.
Predatory lenders seek out those with damaged credit and low-income
levels, using a number of practices that leave buyers unable to repay their
loans. Recognize the warning signs and help your clients avoid this trap.
11
How Property Surveys Can Help Avoid Disputes
16
Power Tool for Mobile Tech Geeks
26
Property Owners Score Major Victory
Property surveys aren’t typically thought of as part of a real estate
transaction. However, title insurance may not cover boundary line defects
without a current survey. Learn how to help buyers avoid problems.
Technology is great as long as it works, right? Avoid
problems with battery-operated gadgets when you need them
most. Keep your business from fizzling out when your batteries do.
Wisconsin’s 50 percent rule doesn’t hold up in the case of a home that
violates a setback requirement in the Hillis v. Village of Fox Point case. Find
out why the Wisconsin Court of Appeals upheld a circuit court’s decision.
ARTICLES
8
Warning from the BBB
10
RESPA Quiz
12
14
19
Trouble Ahead?
20
Public Policy
Best of Legal Hotline
21
Transfer Tax Diversion Averted
Educational Opportunities
22
Agricultural Land Conversions
Mortgage elimination schemes have
hit the state and consumers should be
on the lookout.
Test your RESPA awareness by
taking this short quiz.
Get answers to frequently asked
questions about working with lenders.
Check out upcoming educational
opportunities to propel yourself to the
top of your field!
WISCONSIN REAL ESTATE MAGAZINE, MAY 2005
Governor Doyle could be in trouble in
next year’s gubernatorial race.
Taxes, taxes, and more taxes.
Wisconsin residents name taxes as the
number one concern in the state.
A transfer tax proposal is eliminated
from the state budget bill.
New penalty amounts are now in
effect for landowners converting
agricultural land to other uses.
1
Real Estate
n o t e s
f r o m
t h e
w r a
Wisconsin Real Estate MagazineTM is published by the
WISCONSIN REALTORS ASSOCIATION.
®
Trademark issued pursuant to Wisconsin state statute; federal trademark is pending.
Kitty Jedwabny, CRB, CRS, Chairman
[email protected]
Jeff Kitchen, CRS, GRI, Chairman-Elect
[email protected]
Roger Rushman, Treasurer
[email protected]
William E. Malkasian, CAE, President
[email protected]
Editorial Staff
William E. Malkasian
Publisher
Robert Uhrina
Managing Editor
Robert Uhrina and Terry O’Connor
Publication Editors
Wisconsin Real Estate Magazine, USPS 597-850,
ISSN 1548-0526, is published monthly by the
WISCONSIN REALTORS ASSOCIATION, 4801 Forest
Run Road, Ste. 201, Madison, WI 53704. Periodical
postage paid in Madison, WI and additional mailing offices. An annual subscription rate of $5 is
included in membership dues and a copy is mailed
to every paid REALTOR and affiliate member of
the association. Nonmember subscription rate: $60.
POSTMASTER: please send address changes to the
WISCONSIN REALTORS ASSOCIATION, 4801 Forest Run
Rd. Ste. 201, Madison WI 53704-7337
®
®
WRA Launches New Navigation for
Association Web Site
BY CINDY REBHOLZ & ROB UHRINA
A critical component of any well-designed
Web site is being able to find information
quickly. In mid-April, the WRA launched
new navigation on wra.org to streamline
Web site usability. New drop down
menus were developed to create dynamic
entry points to the site and replace legacy
navigation that ran horizontally across
the screen. The goal of the new model is
to follow standard Windows conventions
and give users an intuitive approach for
accessing information on the Web site.
Next time you visit wra.org, be sure to
try the new navigation by hovering over
each of the nine colored tabs and accessing
different areas of the Web site. Please let
2
us know what you think by sending us
feedback at www.wra.org/ContactUs.
As always, we continuously strive to make
wra.org a better resource for members. If
you have ideas for future enhancements,
please send your requests our way.
Over the years, we’ve committed ourselves
to designing an award-winning Web site
and to giving you more resources for your
day-to-day business. Some of the tools we’ve
recently developed include: “myWRA,”
over 30 resource pages full of information
on a wide range of topics, distance learning
options, and an extensive library of Legal
Updates dating back more than 10 years.
®
Permission to reprint or quote any material from this
issue is hereby granted, provided the Wisconsin Real
Estate Magazine is given proper credit in all articles
or commentaries, and the WISCONSIN REALTORS
ASSOCIATION is provided with a copy of any reprint.
®
Advertising of third party products and services herein
does not imply endorsement by the WRA unless
specifically stated. Furthermore, the WRA does not
endorse, approve, or otherwise warrant the accuracy
or legality of any information or content contained in
advertisements. Any questions regarding advertising
policies should be directed towards the editor.
Contact Us:
4801 Forest Run Rd., Suite 201
Madison, WI, 53704-7337
(608) 241-2047 • (800) 279-1972
legal hotline: (608) 242-2296 • (800) 799-4468
general fax: (608) 241-2901
products/education fax: (608) 241-5168
legal hotline fax: (608) 242-2279
president fax: (608) 242-2267
[email protected]
www.wra.org
Inside
the wra
with Bill Malkasian
L
Bill Malkasian
WRA President
ast month, the WRA visited six areas of the state for a series of strategic planning focus groups.
Joining us was Steve Murray, a leading real estate economist for Real Trends, Inc and Jeff Kitchen
of Beaver Dam, our 2006 Chairman of the Board. Our meetings were a great success. We heard
from REALTORS® all across the state, including the Northwest, Central, Northeast, and Southeast
regions, as well as Sheboygan and Milwaukee. In our travels, we interviewed 50 brokerage firm
managers, totaling 115 offices and 2,585 sales associates. Thank you to everyone who participated.
During our visits, we held a series of roundtable discussions, focusing on WRA member needs, market
trends and key issues in Wisconsin. Below, are some items we noted during our focus group visits.
• Most Wisconsin housing markets are stronger today than they were a year ago.
• The number and quality of people entering the business is increasing, and a lot of technology-savvy
agents are entering the field. In addition, younger people coming into the market are used to
customized solutions, and they like to deliver customized solutions to their customers as well.
• Competition among real estate service providers is increasing. In the past five years the number of
listings has not kept up with the number of REALTORS® entering the market.
• The cost and complexity of doing business is increasing, with technology being one factor
contributing to the increase.
• Health insurance availability and costs are major issues throughout the state.
• Internet lenders and the variety of Internet lead sources and overall technology costs are contributing
factors to consumer confusion in the transaction.
• Virtually every broker indicated that the development of higher standards for those desiring to be
supervising brokers would be a very positive move.
• While the number and variety of alternative realty service models continue to grow, Wisconsin real
estate professionals are learning to co-exist with them better than a year ago.
• There are signs that government bodies are beginning to erect barriers to development that are
raising the costs for new homes.
• While not a significant trend in 2004, continued growth in the housing market could affect future
development.
These facts are included in a report you can download on the WRA Web site at www.wra.org/
FocusGroupRpt. Now that we have your feedback, our next step is to begin formulating our strategic
plan for next year, starting on May 6th at the WRA Board of Directors meeting in Lake Geneva.
Last, but not least, be sure to mark your calendars on May 18 for REALTOR® and Government Day.
It will be our largest one yet. It’s your day to come to the state Capitol to help legislators and other
government officials understand key issues that impact our industry for this legislative session. Topics
include property taxes, agency law reform, health insurance, telemarketing fines and campaign financing.
With an impressive show of REALTOR® strength and commitment, it will be a day remembered when
key votes are taken by elected officials this year. Please join us and make a stand. Be the one to shape the
laws before someone else does. To learn more about REALTOR® and Government Day, visit the WRA
Web site at www.wra.org/Education/RGDay/RGDay.htm.
Sincerely,
Bill Malkasian, WRA President
news.wra.org
3
new development
4
Private Beta Testers Wanted
WRA Seeking Beta Testers for WRA Toolbar
BY ROB UHRINA
I
f you’re like most real estate professionals,
you use the WRA Web site to find industryrelated information, but wish you could find the
information quicker. That’s where the WRA’s latest
“tech tool” comes into play. The WRA is currently
developing an Internet Explorer Toolbar that will tie
your Web browser to the WRA Web site and give you
one-click access to its resources from anywhere.
The WRA Toolbar will install directly into Internet
Explorer and gives you a set of icons that, when clicked,
provide instant access to key areas of the WRA Web site.
The toolbar even allows you to search the WRA Web
site from any Web site, whether you are on your own
default home page or surfing another company’s Web
site. Other bonus features include a pop-up blocker for
eliminating annoying pop-ups, an MLS property search
on REALTOR.com, a Google search for expanding results
beyond the WRA, a zoom tool for enlarging Web page
content, a mortgage calculator and a links menu for
accessing popular destinations on the Web.
Set for a spring release, the WRA is currently seeking
30 private beta testers to provide feedback on current
builds of the software. If you are interested in becoming
a private beta tester for the WRA, please contact Rob
Uhrina at (608) 241-2047 or complete the online beta user
application at www.wra.org/beta.
sales tip
REALTOR
®
@
Using E-mail Marketing
Achieve
withto
Kitty
JedwabnyTwo-Way
Relationships with Customers
BY ELIZABETH KUHN
W
hile many industries have been using technology
for several years, many real estate agents are just
beginning to harness its power. Savvy use of e-mail
and the Web can enhance your ability to alert past and present
customers to new listings quicker than direct mail or word of
mouth advertising.
Why e-mail? Three reasons. According to a study by McKinsey &
Company (Harnessing the Power of E-mail):
HAS
1. Response rates are 15 percent versus one percent for e-mail
versus direct mail.
2. E-mail can cost three to 10 cents per e-mail versus $2 for
traditional print direct mail.
3. E-mail generates 80 percent of responses within 48 hours.
E-mail marketing is neither a replacement for conventional
marketing nor a “magic bullet.” Rather, it is an additional tool
for generating credible leads and business. Used properly, it can
establish strong relations with your market base. If used poorly,
it will be ignored and regarded as spam.
So how can you establish strong e-mail communications to
bolster business relationships? Here are a few tips:
• Promote your Web site and e-mail address. By now, you
should have a Web presence that is informative and easily
accessible. Your Web address and e-mail address should be
included on every mailing, advertisement, and collateral
piece you develop so people know how to get in touch with
you using electronic means.
• Establish permission-based e-mail. Web savvy shoppers
of any product are wise to spamming. “Stealing” e-mail
addresses from Web sites, message boards and the like is not
illegal, but it won’t help you. People know when unsolicited
mail arrives and get turned off. Giving people the option to
receive your e-mails establishes you as a credible and trustable
source. When speaking with potential buyers and sellers
– either in your office, at open houses or over the telephone
– always ask if they would like to receive e-mail from you
about potential opportunities. Also, be compliant with CANSPAM legislation, which prohibits the illegal distribution of
deceptive and fraudulent commercial e-mail. More on CAN-
WISCONSIN
ISCONSIN REAL
EAL ESTATE
STATE MAGAZINE
AGAZINE, MAY
AY 2005
NEWS.WRA.ORG
SPAM can found in the January 2004 WRA Legal Update at
www.wra.org.
• Make your e-mail message pop. The best information in
the world may get overlooked if it’s not eye-catching. Your
e-mail messages to customers are more than letters, they are
statements about your service. Develop an attractive design
that promotes the message you want to convey.
• Keep it short and informative. Readers have short attention
spans when it comes to e-mail. Keep the length of your message
brief, but pack it with useful content. Tips and helpful “how
to” items are always well received.
• Use proper grammar and spelling. E-mail is a casual medium
between friends. But nothing loses credibility faster for
business than a marketing message with errors or ambiguity.
Take time to craft your message for maximum impact and
clarity, and ask others to proof it before sending.
• Avoid bulk e-mail. Internet Service Providers have spam
filters that recognize bulk e-mail messages as spam. Even
legitimate e-mails to large groups can get blocked. To ensure
your e-mail is not unwittingly caught by a spam filter,
tailor your e-mail messages to specific customers – make it
personal.
• Streamline the process. E-mail marketing is a work-inprogress. As you continue to gather new leads and new e-mail
addresses, you should refine your lists to specify the needs
and wants of your customer base. The more information you
gather about your customers, the more useful your e-mail
marketing becomes.
Unlike advertising, e-mail truly provides us with an opportunity
to establish two-way dialogue with homebuyers and sellers. By
adopting the technology and latest trends in marketing, you will
achieve greater success as an agent.
Just like a cell phone, your e-mail account is a powerful
communication tool. The sooner you utilize it to its maximum
potential, the stronger your ties will be with your customers.
Elizabeth Kuhn is Director of Communications at the regional
headquarters for RE/MAX North Central. RE/MAX North Central
services 180 real estate franchises throughout Minnesota and Wisconsin.
55
Wisconsin Mortgage Bankers Association’s
Mortgage Lending Report
BY MARIE JONES, PRESIDENT, WISCONSIN MORTGAGE BANKERS ASSOCIATION
I
n the world of real estate, mortgage lenders and REALTORS®
partner in many ways to assist people in some of the most
important personal and financial decisions they will ever
make. The Wisconsin Mortgage Bankers Association (WMBA),
representing companies and individuals engaged in virtually
all aspects of mortgage lending, believes that the more we
(REALTORS® and bankers) share our interests, concerns
and observations, the better we can both serve our mutual
customers.
In that light, I would like to identify some of the current issues facing
our industry that also have relevance to REALTORS® or impact
our mutual ability to serve our customers. These issues include
new products and pre-approvals; competence, qualifications and
service; Internet lending; fraud; funding; and multi-jurisdictional
regulations and consumer education. All of these issues, however,
rely upon communication.
Communication
While seemingly obvious, the need to communicate – lender to
REALTOR®; REALTOR® to prospective buyer; lender to borrower;
REALTOR® to lender; REALTOR® and lender to the consuming
public – is critical, particularly in today’s fast-changing world.
Lenders need to keep REALTORS® apprised of the existence and
availability of numerous mortgage products, the importance and
availability of pre-approvals, and specific borrower information,
to the extent privacy laws permit. REALTORS®, in turn, need to
share basic financing information with prospective buyers in a
timely fashion. The WMBA and WRA need to communicate key
issues and concerns to each other and, where appropriate, to key
policy makers.
Mortgage Products / Pre-Approvals
The real estate finance industry has seen the market change
from a fixed-rate loan environment to one of mortgage loan
products tailored to different individuals, their needs, and their
financial circumstances. While the Midwest tends to be somewhat
conservative, less than 40 percent of closings in our part of the
country today involve fixed-rate products. The remainder of the
6
business is a mix of typical adjustable rate mortgage products;
several interest only and payment option-type ARMs; high loanto-value financing; and FHA products.
The availability of expanded and varied products means that
a greater percentage of people can qualify for home ownership.
It also means that the process of qualifying a borrower and the
products themselves are more complicated. The key to serving the
customer well is loan originator knowledge and full disclosure to
the borrower at the time of application. There are advantages to
each product and the goal is to find the one that is the right fit for
the borrower. Even though current loan products are diverse, most
have in common the ability to utilize an automated underwriting
system to make the loan decision. Automation in our industry has
enabled us to approve more borrowers at a faster pace than in the
past.
We believe that it is extremely important, particularly with the
new products, to have a prospective buyer / borrower preapproved. The pre-approval process has many advantages for
all involved in the process. The challenge to the lender is to get
the buyer / borrower into the right program. Once accomplished,
however, the pre-approval process helps the REALTORS® know
the affordability limits and helps to control prospective buyer
expectations. Additionally, a pre-approved buyer will have an
immediate advantage in gaining an accepted offer where there is
competition for a particular property.
REALTORS® can help buyers, lenders, and themselves by
communicating the importance of pre-approval and the importance
of obtaining pre-approval as early as possible. It is also important
for REALTORS® to know which lenders are reputable and which
issue pre-approval letters that are not subject to additional
verification and, thereby, potential delay and surprises.
Competence / Qualifications / Service
REALTORS® have a legitimate right to expect to be dealing
with qualified lenders who have adequate training, understand
their products, are available and accessible, and perform
their responsibilities in a timely manner. This is admittedly a
challenge to the mortgage lending industry, in its broadest
definition, particularly when the market is hot and re-financing is
consuming huge blocks of time. While the Legislature last session
passed a requirement for testing and training loan originators,
implementation of that law will not alleviate employers from
having the primary responsibility for education, particularly as it
relates to new products, which surface with great regularity as
noted above. Real estate brokers and salespeople are in a unique
situation to share their experiences, good and bad, with local
mortgage lending principals. It is also important for real estate
brokers and salespeople to encourage prospective buyers to be
selective in choosing a lender to attempt to maximize accurate
and timely information and services and to minimize potential
problems.
Internet Lending
Despite the message in the last sentence, we all realize that many
borrowers are obtaining financing on their own and REALTORS®
may not be as involved, particularly early in the stages, in
recommending lending options. While many legitimate, local
lenders have Web sites that can be used to assist in the borrowing
and qualification process for their own products, there are many
multiple lender / lead generation programs that consumers are
using that lead to questionable outcomes. The quality of lenders
engaged in these “dot com” processes may be unknown, there is
no opportunity for face-to-face meetings, and there is no brick and
mortar in Wisconsin. Even legitimate national companies (with
no presence in Wisconsin) participating in this type of Internet
lending have frequent difficulties because they do not understand
Wisconsin law and its terminology. The potential for delay and
serious problems at closing is very real and significant. While it
may sound self-serving, educating consumers to understand the
importance of dealing with local lenders makes life easier for real
estate professionals as well.
of people in our industry. The activities of a few “bad actors”
can give a bad name to all of the responsible people and entities
involved in the important practice of real estate financing.
Funding at Closing
Technology has provided us with speed in making loan decisions,
obtaining appraisals, and preparing documents, which, in turn,
allows us to get to the closing table faster. The number of signatures
and documents that are required at loan closing, however, seems
to be increasing rather than decreasing. As we rush to the closing
table, we may still experience issues with loan funds at the table.
It is the goal of both the lender and the closing agent to provide a
check at the closing. Since Wisconsin is a “Good Funds State” we
may, however, be required to wire the funds to the closing agent.
If the time frame from loan approval to closing is short, the funds
being wired may not make it to the closing agent at the same speed
as the closing documents. The wired funds must go through the
Federal Reserve System, then on to the bank. To add more time
delay to the process, if a closing agent’s account is at a smaller
bank or branch, the funds are wired to a larger institution before
being credited to the local bank. We recognize this as an issue and
hope that we can work together to improve the process.
Compliance and Multi-State Operations
The real estate finance industry and the players involved are
dependent, to a large extent, on multi-state operations and federal,
as well as state regulations. Several Wisconsin lenders operate in
many different states, and several of our institutions are governed
by federal and not state law, and vice versa. Much of what drives
the WMBA’s legislative positions is based on the goal of having
our state’s mortgage lenders in a position to compete fairly in the
marketplace in order to offer the best rates to customers, while
ensuring that those customers have adequate statutory and
regulatory protections.
Fraud
In Conclusion
Fraud is a high-profile issue within the mortgage lending
industry. Our industry experiences seller, originator, appraiser
and borrower fraud. Fraud is not only costly due to unpaid loans
or foreclosed properties, but the concern about fraud also requires
the implementation of many quality controls in the origination
process.
At WMBA, we believe that the open communication that has
existed for years between our government relations representatives
and those of the WRA is an excellent example of how to avoid
misunderstandings and how to achieve public policy results to
our mutual benefit.
The most costly occurrence of fraud is likely to be misrepresentation
of the property value. We now have automated systems to help us
verify borrower income, chain of title, and appraised value. This
technology, although initially costly, has limited the occurrence of
high expenses later in the transaction. We do have the benefit in
the state of Wisconsin of having some of the lowest occurrences of
fraud in the mortgage industry nationwide.
From the WMBA’s perspective, the 2003-04 legislative session
was highlighted by the passage of legislation that established
prohibitions and restrictions on various practices involving high
cost mortgage lending, commonly referred to as predatory lending
practices. We proactively supported legislation that shows no
tolerance for egregious behavior engaged in by a small minority
The funding issue discussed above is one example of a common,
non-legislative concern you may share with the members of our
association. We look forward to providing information on this
and other issues affecting mortgage lenders, and to addressing
those concerns. We invite you to share your concerns with us by
contacting our board, officers, or professional consultants. We are
always looking to maintain important relationships that assist us
in serving our common customer, the homebuyer, to the greatest
extent possible.
Marie R. Jones is president of the WMBA and CEO of Paragon Home Lending, LLC.
The WMBA is made up of companies and individuals engaged in virtually all aspects
of mortgage lending, including owners and officers of mortgage banks (either freestanding or affiliates of larger institutions), other lending institutions (including
savings banks and credit unions), and private mortgage insurance companies.
Affiliate members include title companies, credit score companies and law firms.
7
Mortgage
Elimination
Scheme
Hits
Wisconsin
Warns Wisconsin Better Business Bureau
T
he Wisconsin Better Business Bureau (BBB) is
warning businesses and consumers of a mortgage
elimination scheme victimizing area lenders while
leaving homeowners facing dire consequences. As of
February, the Wisconsin BBB’s investigation has found a
Milwaukee County property, two Waukesha County properties, and three Dane County properties that are involved
in this complicated scheme, which attempts to eliminate
someone’s mortgage for a fee by filing false documents
with their lender. “This is a widespread and very serious
scheme that could cost mortgage companies millions of
dollars and is making the homeowner, perhaps unwittingly, an accessory to a crime,” warned Randall Hoth,
president and CEO of the Wisconsin BBB.
who participate in a mortgage elimination scheme likely face
several potentially serious legal problems – default on their
original mortgage, foreclosure, difficulty selling the home due
to the irrevocable trust and the title issues it creates, potential
liability for failure to pay any additional loans procured by
the trust, and the possibility of being an accessory to criminal
activity.
Here’s how it works: The homeowner pays a $3,000 fee and
agrees to place his / her home in a family trust naming the
perpetrators as trustees. A quitclaim deed is recorded naming
the new trust as the owner of the property. Next, the trust
presents a document to the lender that contains 40 to 50 “legal”
challenges to the loan and claimed “violations” of federal laws
committed by the lender. The lender must respond with proof
of the validity of the loan. When the lender fails to respond, a
power of attorney is filed which gives the trustees authority
to act on behalf of the lender. Using the power of attorney, a
“Discharge of Mortgage” is filed certifying that the loan has
been fully paid. The next step is to apply for refinancing on
the home. Once obtained, the homeowner, the agent broker
and the family trustees divide the funds. This new loan is then
“eliminated” using the same technique.
This scheme is typical of other “mortgage elimination”
schemes. Most create documents that attempt to release
mortgages, and then take out second loans on the properties
in order to pay perpetrators. These companies often proclaim
the entire U.S. banking system is flawed and use these claims
to persuade homeowners that mortgage elimination is legal
and ethical.
Of the six Wisconsin properties known to be involved in this
scheme, all of them had a quitclaim deed filed giving ownership
of the home to a trust. The BBB believes that homeowners
8
Richard Jungen, a director for the Wisconsin Mortgage
Bankers Association, warned consumers that participation in
these types of schemes could do irreparable harm.
“The seller of these schemes will be long gone when the
person’s credit is permanently destroyed, or the title on their
home is compromised,” Jungen said.
The BBB advises consumers to be skeptical of offers from
any company claiming to eliminate their mortgages for an
advance fee. In addition, the BBB advises that homeowners
should consult an attorney before relinquishing their homes
to an irrevocable trust and agreeing to participate in these
programs.
For more information or further inquiries, please contact
Randall Hoth at 800-273-1002.
Attribution: article based on BBB press release issued February 4, 2005.
PREDATORY
lending
BY DEBBI CONRAD
P
redatory lenders impose unfair and deceptive loan
terms on vulnerable borrowers through the use
of aggressive and misleading sales tactics. False
promises and outrageous loan terms and fees can ruin
a person’s credit and even lead to foreclosure. Fees representing more than 10 percent of the loan amount may
be “packed” into the amount financed rather than being
itemized and paid up-front.
Predatory lenders target people with damaged credit and
low-income levels. African Americans are five times more
likely to pay too much for a loan as any other group, and
seniors on fixed incomes are the prime target for abusive
mortgage and home equity loans.
A lender’s decision to originate a mortgage loan should
be guided by the borrower’s ability to repay the loan from
income and liquid assets. Predatory lending, however,
targets borrowers’ equity in their homes, ignoring the fact
that they clearly do not have the financial capacity to repay
the loans.
In particularly egregious cases, elderly people living on fixed
incomes have monthly payments that equal or exceed their
monthly incomes, quickly propelling them into default and
foreclosure.
Nobody deserves to be victimized in a predatory loan
situation!
Predatory Lending Warning Signs
• Targeting minority neighborhoods, especially long-time
homeowners.
when american dreams turn to nightmares
• Seeking out vulnerable homeowners with medical, credit
card or other consumer debt.
• Frequent, unnecessary refinancing with no benefit to the
borrower.
• Basing the loan amount on the borrower’s equity in the
property, rather than ability to pay.
• Falsifying loan applications, especially the borrower’s
income level.
• Loan amounts that far exceed the fair market value of the
home.
• Rolling the cost of unnecessary insurance and other
products into the loan, drastically increasing its cost.
• Excessive prepayment penalties.
• Large balloon payments, interest-only loans or loans that
are “non-amortizing” or “partially amortizing.”
• Contractors linked to the lender are paid for poorly
constructed or nonexistent repairs.
Learn how to protect clients and customers from the predatory
lending practices. Make sure that vulnerable buyers are
educated about the dangers of predatory lending.
Start by providing them with HUD’s “Don’t Be a Victim
of Loan Fraud” brochure or fact sheet, available at
http://www.hud.gov/offices/hsg/sfh/buying/loanfraud.
cfm, or use the WRA consumer handouts or the other
extensive resources at www.wra.org/LoanAssist.
9
?
Test Your RESPA Awareness.
S
ixteen builders across the country were recently involved in
a massive kickback scheme where kickbacks of one-third to
one-half of the title insurance premium were given to builders,
lenders, and real estate brokers in return for the referral of their
customers to the title company. Customers were overcharged $325, on
average, to pay for these kickbacks. The Department of Housing and
Urban Development (HUD) plans to launch further investigations.
Under Section 8(a) of the Real Estate Settlement Procedures Act (RESPA),
no person may give or receive fees, kickbacks, or a “thing of value” for
the referral of settlement services, or give or receive a split or percentage
of settlement charges other than for services actually provided (subject to
some exceptions). Do you know what conduct is prohibited under RESPA?
Take the following short quiz to test your RESPA awareness.
Yes. Normal promotional and educational activities not
directly conditioned on the referral of business are not
violations.
7
No, the lender may only collect $175 as the actual
charge. It is a violation of Section 8(b) of RESPA for
any person to accept part of a fee when services are not
actually performed.
6
Can a lender hold a contest for real estate agents, in which the
agent who provides the lender with the most business wins a
trip to Hawaii?
Joint advertising is permitted under RESPA as long
as each individual pays his or her share of the cost
for the brochure or advertisement in proportion to his or
her prominence in the ad. If not, there could be a RESPA
violation.
2
Can brokers and agents accept flyers with financing
information from lenders and distribute them to prospective
buyers? For instance, at an open house, may a lender provide
flyers that offer closing cost calculations for various down
payment scenarios, to be distributed by brokers and agents?
4
A cooperating broker brings in an offer on a listed
property. The cooperating broker is also part owner of a
title company and a lending company, but this is not disclosed
to the parties. Must the cooperating broker disclose this
ownership to the buyer and the seller?
3
Can a lender give a real estate agent note pads with the
lender’s name on it?
10
Answers
7
1
Can a lender collect an appraisal fee of $200 from the
borrower when the lender only owes the appraiser $175
and keep the $25 difference?
No. Under RESPA the trip, and even the opportunity to
win the trip, is a thing of value given in exchange for
the referral of business. RESPA forbids paying someone for
the mere referral of business. This means no “gifts” or fees
to brokers and individuals who refer business to settlement
service providers.
If a real estate company has an affiliated title company and
charges its agents a transaction fee, is it a RESPA violation if
the company waives the transaction fee for parties referred to the
affiliated title company?
2
Can a mortgage banker and a real estate broker advertise
their services together, for example, in the same brochure
or newspaper advertisement?
Distribution of such flyers provided by lenders does
not violate RESPA – no separate benefit flows to the
agent from the lender – and it is reasonable for an agent to
provide mortgage loan information to help facilitate a sale.
4
6
Yes. An Affiliated Business Arrangement Disclosure
Statement must be provided when a broker refers a
consumer to an affiliated settlement service provider to
avoid liability under Section 8 of RESPA. The Affiliated
Business Arrangement Disclosure Statement format
required by RESPA is found at www.hud.gov/offices/hsg/
sfh/res/resappd.cfm. Many firms with affiliated settlement
service companies provide the disclosure form in all
transactions to minimize potential liability.
3
5
5
1
The waiver of the transaction fee appears to be a
“thing of value.” There is a RESPA exemption whereby
employers may pay bona fide employees a fee in return for
the referral of business, but that exemption does not apply
to real estate agents who are independent contractors.
Accordingly, the described practice appears to be a referral
fee in violation of RESPA.
Quiz
?
Put the Gloves
DOWN!
How Property Surveys Can Help Avoid Disputes
I
t’s a familiar story told on the
WRA Legal Hotline. The real
estate transaction is completed
without a hitch. Everyone is
happy, until one day the buyer receives a letter from the next-door
neighbor asking for the removal
of the buyer’s driveway and
garage. The neighbor contends
BY TOM CULLEN
that portions of these improvements are on his property and he
wants them removed. Why was this not detected when
the buyer purchased the property?
Generally, a listing agent asks the seller to complete a real
estate condition report (RECR) to fulfill the broker’s § RL
24.07 inspection and disclosure duties. Item C. 14 of the
residential RECR asks the seller about lot line disputes,
encroachments and other encumbrances. In this case,
apparently the seller and/or the listing agent neglected to
properly disclose the encroachment. This oversight would
have been rectified and the buyer could have avoided this
dispute if a survey had been used in conjunction with the
title insurance in his purchase transaction.
A survey can go a long way in avoiding costly litigation and
ugly feuds with neighbors. However, there seems to be a
general perception in the real estate industry that a survey
is unnecessary in most real estate transactions. There also
is a misguided belief that the title insurance policy will
“protect” the seller and buyer from boundary line disputes
and other encroachment problems. What is typically
misunderstood is that title policies exclude, as a standard
exception to insurance coverage, all facts that would be
disclosed by a comprehensive survey of the premises. In
other words, if a current survey is not submitted to the title
insurance company before closing, there may not be title
insurance coverage for boundary line defects.
Without title insurance protection, the only remedy left
for the buyer may be to proceed against the seller based
upon the seller’s failure to disclose the encroachment or
based upon the seller’s a warranty, stated in the deed, that
the property is free and clear of
liens and encumbrances. This is
not a desirable outcome. In order
to avoid this nasty situation, the
agent should always discuss
the benefits of a survey when
reviewing the title insurance
commitment with the parties.
What Type of Survey is Needed?
Not all surveys are identical, and
depending on the real estate parcel in
question, the title insurance company
may require varying levels of detail
in the survey before insuring overencroachments and boundary disputes.
For commercial properties, an American
Land Title Association (ALTA) survey
is generally required. Any ALTA land
survey must meet the “Minimum Standard
Detail Requirements for ALTA/ACSM Land
Title Surveys” as adopted by the American
Land Title Association, the American Congress
on Surveying and Mapping, and the National Society of
Professional Surveyors.
For residential properties, title companies will usually
accept a more limited and less costly survey, such as a
boundary survey, which establishes the true property
corners and property lines of a parcel. Boundary surveys
are typically performed to obtain building permits and
resolve property disputes, and for erecting fences.
Another type is a topographical survey, which locates
natural and man-made features such as buildings,
improvements, fences, elevations, land contours, trees, and
streams. The title insurance company may require a site
plan survey, which is a combination of a boundary and a
topographic survey. For more general information about
surveys and land surveyors, visit the Wisconsin Society of
Land Surveyors on line at www.wsls.org.
11
Best of the Legal Hotline
FREQUENTLY ASKED QUESTIONS
Working with Lenders
BY DEBBI CONRAD & TRACY RUCKA
W
e recently received the following Hotline questions
concerning transactions involving mortgage brokers,
lenders and financial institutions.
Is it against the law in the state of Wisconsin to have a
prepayment penalty on a single-family residential mortgage?
Prepayment penalties are not illegal per se. Depending on the
type of loan program, prepayment penalties may be permitted.
For example, Wis. Stat. § 138.052(2)(a)2 provides that with respect
to residential mortgage loans, “...the parties may agree that if a
prepayment is made within 5 years of the date of the loan, then the
lender shall receive an amount not exceeding 60 days’ interest at
the contract rate on the amount by which the aggregate principal
prepayments for a 12 month period exceeds 20% of the original
amount of the loan.” For more information regarding mortgage
issues, contact the Department of Financial Institutions online at
www.wdfi.org. Sellers with specific questions may contact the
lender or their attorney.
remains in the same condition and the seller were to sign a new
RECR not noting the observed problems, the seller would be lying,
committing fraud, and assisting the lender to commit fraud upon
the secondary market. The listing broker or the seller may wish
to consider filing a complaint with the Department of Financial
Institutions regarding the behavior of this lender. This may be done
online by visiting www.wdfi.org/contact_us/ComplaintDefault.
htm.
A mortgage broker is offering $300 for each deal that closes to
the real estate licensee who sent them the lead. Is this legal?
The Real Estate Settlement Procedure Act (RESPA) forbids paying
fees or giving gifts for the referral of business to settlement service
providers. For instance, it is illegal for a mortgage brokerage firm
to pay $300 per loan to real estate agents who steer homebuyers in
its direction.
Can a financial institution request that the seller revise the real
estate condition report (RECR)? The seller’s RECR indicates
that there is a slight bulge in the left side of the basement
caused by a tree that was removed, and that the seller has
not experienced any leakage. The lender wants the seller to
prepare a new RECR without mentioning these facts. Is this
legal?
Under RESPA, no person may give or receive fees or kickbacks
for the referral of settlement services, or give or receive a split or
percentage of settlement charges other than for services actually
provided. Paying or receiving a fee or a “thing of value” for the
referral of business related to a mortgage loan settlement without
rendering a service is illegal under RESPA. A charge by a person
for which no or nominal services were performed or for which
duplicative fees are charged is an unearned fee and is also a RESPA
violation.
Unless the condition of the basement has been rectified, there is no
reason for the seller to amend or redo the RECR. If the basement
“Settlement services” are defined under RESPA to include any
services related to (1) the origination, processing or funding of
12
a federally-related mortgage loan; (2) mortgage broker services
such as counseling, taking applications, obtaining verifications
and appraisals, lender-borrower communications, etc.; (3) title
company services; (4) an attorney’s legal services; (5) closing
document preparation; (6) credit reports and appraisals; (7)
property inspections; (8) conducting the settlement; (9) mortgage
insurance; (10) hazard, flood or casualty insurance and homeowner
warranties; (11) mortgage life, disability or similar insurance; (12)
real property taxes and assessments; (13) and real estate brokers
and agents.
An agreement or understanding that a “thing of value” will be
given in exchange for a settlement service referral need not be
written or even verbalized. Such an agreement can be established
by a practice, pattern or course of conduct.
For more information about RESPA, go to www.hud.gov/offices/
hsg/sfh/res/respa_hm.cfm.
The buyer delivered a loan commitment to the seller that was
subject to an appraisal. The appraised value was less than
the purchase price. Does the buyer have a way out of the
contract?
Not unless there was a separate appraisal contingency in the offer.
The buyer may request an appraisal contingency in a transaction
to assure the subject property will appraise at a certain value. If
the buyer uses a separate appraisal contingency and receives a
loan commitment subject to an appraisal, the separate appraisal
contingency is not waived by submitting the loan commitment. If
there is no separate appraisal contingency and the buyer submits
a loan commitment that is subject to an appraisal, the buyer is
assuming the risk that the property will appraise at required value.
If the property does not appraise at that value, a buyer without a
separate appraisal contingency is in breach of contract if he or she
does not close. If an independent appraisal contingency was used,
the buyer is protected and is not in breach if the property did not
appraise at the required value, even if a loan commitment subject
to an appraisal had previously been submitted to the seller.
A mortgage company has asked the listing agent to winterize
the listed foreclosure property, keep the sidewalks shoveled,
change the locks and contact the power company. Is this part
of the listing?
Property management services are not part of the standard listing
contract. If company policy does not prohibit such services, the
agent could agree to assist the seller with these items. A “Model
Release from Liability” form, as well as information about avoiding
liability when ordering services for parties is found in Legal Update
04.05, “Avoiding Liability When Signing and Making Referrals,”
www.wra.org/LU0405.
The seller has deeded the listed home back to the lender in
lieu of foreclosure. The listing broker had listing protection for
a buyer. Does it apply now to the lender?
In cases where the seller provides the lender with a deed in lieu
of foreclosure, the lender becomes the new seller. The listing
protection between the listing broker and the owner is terminated.
The listing broker would need to enter into either a listing with
the lender or a buyer agency with the buyer to provide real estate
brokerage services for a transaction between the interested buyer
and the lender. Legal Update 99.05, “Mortgage Foreclosures”
(www.wra.org/LU9905), contains additional information about
foreclosures and the effect on real estate transactions.
The sellers owe $175,000 to the first mortgagee and $64,000
to the second mortgagee. The sellers are not making their
payments and may go into bankruptcy. There is an offer for
$230,000. The second lender may take a short sale, but wants
30 days to make a decision. The seller does not want the listing
broker to let the buyer know that it will be subject to a short
sale. What should the listing broker do?
Whether the possibility of a short sale, foreclosure or bankruptcy
needs to be disclosed by the broker as an adverse material fact is a
judgment that only the broker can make after considering all of the
facts and circumstances in the transaction. For example, the fact of
the short sale itself may not require disclosure if the transaction is
going to come together and close. On the other hand, a short sale
may need to be disclosed if it appears that the seller will not be
able to complete the transaction. A foreclosure may not need to be
disclosed if the buyer can close before judicial confirmation of the
sheriff’s sale. A bankruptcy may cause the property to come under
the control of the bankruptcy trustee. Although disclosure may
not need to be made initially based on the information available
at the commencement of the transaction, facts and circumstances
may change resulting in the obligation of the broker to make timely
written disclosures.
If the listing broker knows that the seller is not able to or does
not intend to meet his or her obligations under the contract, then
the short sale constitutes an adverse fact that must be promptly
disclosed to the parties in writing. Alternatively, § RL 24.07(3) states
that a broker will be practicing competently if the broker promptly
discloses the information suggesting the possibility of a short sale,
in writing, to all parties, recommends that the parties obtain expert
assistance to investigate or evaluate the situation and, if directed
by the parties, drafts appropriate contingencies.
The fact that the lender is demanding 30 days to review the
transaction will dictate the terms and conditions under which
the seller may accept an offer and may result in a contingency
provision. The seller may be referred to legal counsel for advice on
the most appropriate way to respond to the offer.
13
Education & Products
Broker Prelicense. Get Your Broker’s
License.
Classes Coming to Madison and Milwaukee!
Are you interested in obtaining your broker’s license? If so, this course
will count toward the 36 hours of education that is required for taking the
broker’s exam.
Want a Competitive Edge?
CRB is the Answer. Attend CRB on
Sept. 11-12 in the Wisconsin Dells.
CRB – Financial Planning & Management
These days, profit margins for many real estate
businesses are razor-thin. A keen appreciation of
financial planning and management principles
can give you the edge you need. This course
delivers critical decision-making tools you can
use to increase profits while offering top-notch
services. Real-life examples and case studies show
how these techniques can be smoothly integrated
into the daily operation of your business. You’ll
also discover how to set financial objectives to
achieve superior performance.
This course will help you:
- Understand three types of financial statements
(income statements, balance sheets and
statements of cash flow) and use them to
make decisions to improve productivity and
profitability.
- Identify those factors affecting the value of a
firm.
- Forecast future revenues for your firm.
- Develop an expense budget and chart of
accounts to monitor your firm’s performance.
- Calculate your firm’s break-even point.
- Analyze the effects of operational changes to
your firm’s bottom line through a variety of case
studies.
Be sure to join us on September 11-12, 2005 in the
Wisconsin Dells for this course.
14
Areas of study in this course include:
• Fair Housing
• Real Estate Practice
• Approved Forms
• Trust Accounts, and more
This course will be offered June 20-23, 2005 in Madison, and August 22-25,
2005 in Milwaukee.
This course is also available in self-study formats on video and via the
Internet. Completion of this program, passing the broker exam and
applying for your broker’s license fulfills your 2005-2006 continuing
education.
For more information, visit www.wra.org/qscourses.
ABR. Learn the Secrets to Success!
Earn Your Accredited Buyer Representative Designation.
Want to find out the secret to so many agents’ success? Join more than
40,000 real estate professionals who are thriving as Accredited Buyer
Representatives (ABRs) by attending the WRA’s ABR designation course
on August 10-11, 2005, in Brookfield.
This is one of the hottest classes around because buyer agency is the
business model that more and more buyers are looking for today. This
course covers agency, service delivery, marketing and promotion, and
negotiation and risk management.
To earn your ABR designation, you need to complete the two-day Buyer
Agency course plus one elective Buyer Agency course, which is being
offered August 12, 2005 and complete five transactions representing a
buyer. The elective course being offered is Negotiation for the Real Estate
Professional. Completion of the two-day ABR course fulfills your 20052006 CE4 course requirement.
For more information, visit www.wra.org/ABRcourses.
Education Registration Form
CRS 200. A Vital Component of a
CONTACT INFORMATION
Name ________________________________________________
Successful Business.
Firm name ___________________________________________
Build a Strong Foundation For Your Career!
Address _______________________________________________
A strong foundation is the key to building a successful real
estate career. In CRS 200 (Business Planning and Marketing
for the Residential Specialist), you will learn the fundamentals
of business planning – identifying the benefits of a business
plan, developing income goals using the budgeting process,
and creating a marketing plan to meet the goals and objectives
of your business plan. These business essentials will generate
increased profit and productivity.
Areas covered in this course include:
• Business plan development
• Budgeting and cost analysis
• Prospecting techniques
• Personal promotion techniques
This course is being offered at the annual WRA convention on
September 11-12, 2005, in the Wisconsin Dells.
For more information, visit www.wra.org/CRScourses.
City ______________________ State _______ Zip ___________
Phone (W)______________________ (H)____________________
*e-mail address ________________________________________
SS# or WRA member # _________________________________
DATES AND FEES – Fill in information for course attending
Course _______________________________________________
Location ______________________________________________
Date _________________________________________________
*Confirmation will be sent by e-mail, or you may check myWRA at
www.wra.org to verify course registration.
PAYMENT
Total $ ________
❏ Enclosed is my check made payable to the WRA.
Sales
Prelicense
The First Step
Give your recruits the education and preparation they
need to obtain their real estate license for the state of
Wisconsin by having them complete the WRA’s 8-day
Accelerated 72-hour sales program. Courses will be
held at the WRA in Madison on July 11-14 and 18-21,
2005. As soon as recruits complete the course, they
may register to take their exam to earn their real estate
license. Brokers, help recruits get started by purchasing
a coupon for $10 that recruits can redeem for $50 off
their registration fee. This course is also available in
self-study formats on video and via the Internet.
For more information, visit www.wra.org/
SalesPLcourses.
❏ Charge my VISA/MasterCard. (Circle one.)
Card number _________________________ Exp. date ________
❏ Special Services: Check here if you require special services to attend. Attach a written description of needs.
Register by Mail:
WISCONSIN REALTORS® ASSOCIATION
4801 Forest Run Road, Suite 201
Madison, WI 53704-7337
Register by Phone: (800) 279-1972 or (608) 241-2047
Register by Fax: (608) 241-5168
Online Registration: www.wra.org
CANCELLATION POLICY: The WRA reserves the right to cancel
a course if not filled. Cancellations must be made in writing
prior to the start of the course and will be refunded, minus a
$25 administrative fee. Registrations cannot be transferred from
person to person.
15
productSHOWCASE
REALTOR
®
POWER TOOL FOR MOBILE TECH GEEKS
How in-car power inverters can save the day in your mobile office
BY ROB UHRINA
A
re you a gadget geek who loves to have a
portable office while on the road? Staying in
touch and maintaining communications with
your clients while you’re out of the office is no longer
just a convenience, it’s an expectation. For us gadget
geeks, stockpiling the latest technology allows us to
create the ultimate in “out-of-office” connectivity.
is “continuously” delivered to a device. For example, an
inverter that can sustain 75W of continuous power would
not be able to adequate power a laptop with a 100W draw
even if had a peak rating is 120W. It would however, be able
to charge your laptop battery. Always check the rating of
your laptop and other accessories you use in your car before
making your purchase.
From cell phones to wireless Internet to portable digital
cameras and printers, we do everything to keep ourselves
on the cutting edge. So what could go wrong? Two words:
power loss. Losing power to your gadgets on the road is more
than just an inconvenience – it’s downright frustrating. Let’s
face it. Batteries don’t last forever and are usually drained
when you need them the most, making your investment in
all that technology worthless.
Another feature to not overlook is fuse protection against
surges or low-voltage battery cut-outs. Sudden surges in
power can contribute to shortages in your gadgets. When a
surge happens, fuse protection prevents excessive electricity
from entering the circuit boards in your devices and causing
your mobile gadgets to “fry out.”
One solution to this problem is to spend several hundred
dollars and buy in-car rechargers for everything you own
(like most of us do today), or for less than $80, you can pick
up a power inverter. This wonderful add-on device takes
standard DC power from your car’s cigarette lighter and
converts it to three-prong AC power that you can use to
plug in your laptop, cell phone or digital camera. Best of all,
power inverters are small, lightweight and compact enough
to fit into your car’s glove compartment. Another bonus is
you no longer need to purchase separate rechargers for your
car and your home. All you need is one recharger — the one
you use inside your home — because it now works in your
car too. Just don’t forget to bring it along with you when
you’re on the road so you are not without power to your
device when you need it.
When purchasing your power inverter, here are a few tips
to keep in mind. Be sure to check the sustained rating on
the device. Inverters are rated for their handling at peak
power and continuous power (also called sustaining
power). Continuous power is the amount of power that
16
Beyond professional use, power inverters are perfect for
portable video games, DVD players, small electronics and
other devices you might need while you’re on the road. So,
on your next visit to the local electronics store, be sure to
ask the salesperson where the power inverters are located.
Buying one means your portable office on the road will
never suffer from a frustrating power loss again.
Manufacturers:
- Vector
- APC
- Belkin
- Kensington
- Targus
- Recoton
Where to buy:
- Best Buy
- Amazon
- CompUSA
- Computer Discount Warehouse
- J & R Computer World
www.vectormfg.com
www.apc.com
www.belkin.com
www.kensington.com
www.targus.com
www.recoton.com
www.bestbuy.com
www.amazon.com
www.compUSA.com
www.cdw.com
www.jr.com
Introduction to
Commercial Investment
Real Estate Analysis
Kalahari Resort | September 11-12, 2005
T
his introductory course provides an overview of
the commercial investment real estate industry
and familiarizes you with the core concepts taught
throughout the certified commercial investment member
(CCIM) curriculum. You’ll be introduced to each phase of
investment analysis, from selecting a property to estimating
annual revenues, and learn how to apply these skills using a
real-world case study.
You’ll also learn the importance of conducting a complete
market analysis and engaging in tenant negotiations to achieve
your investment goals. Enhance your knowledge of commercial
investment real estate and expand your contacts among commercial
practitioners by enrolling today.
Highlights of This Course Include:
An Overview of Commercial Investment Real Estate
Recognize the features of the different commercial real estate types,
and gain an understanding of the space, capital and property
value market. You’ll also find out about lucrative services like
tenant representation, land acquisition, leasing, finance, property
management and appraisal, and learn how to identify the resources
and data needed to analyze and market commercial properties.
Solving Problems Using a Financial Calculator
Learn the functions of the financial calculator through this activity,
which is specifically designed for commercial real estate.
Understanding Commercial Leases
Review common lease clauses and costs that impact the bottom
line for the owner and the tenant.
Performing the Basics of Investment Analysis
Review the fundamentals of investing, apply compounding and
17 WISCONSIN REAL ESTATE MAGAZINE, MAY 2005
discounting techniques to investment decisions, and learn how
to calculate the internal rate of return for a variety of different
investment scenarios.
Understanding Mortgage Loans
Evaluate mortgage loans using compounding and discounting
techniques, and calculate amortization values (mortgage payment,
loan balance, interest, and principal for different amortizing
periods).
Real-life Case Study Enhances Your Learning Experience
A case study is used throughout the course to apply the concepts to
an actual property. You will leave this course with the ability to see
how these concepts affect a commercial property’s performance.
Who Should Attend This Course?
- New commercial real estate professionals
- Residential agents who conduct some commercial transactions
- Anyone interested in moving into commercial real estate Real
estate investors
- Any student who would like more preparation before starting
the CCIM core curriculum
- Allied professionals
Pricing
Before 8/1
Before 8/26
After 8/26
At the door
$320
$330
$340
$360
To register for this program, call the WRA at (800) 279-1972. Course
registration includes your entrance fee to the WRA Convention at
the Kalahari Resort in September.
17
Real Estate CE
Appraisal CE
Sales & Mktg
Management
Prelicense
Education
Education Calendar
Date
Course
Time
Location
Regular Reg.**
May 2-5; 9-12, 2005
June 20-23, 2005
July 11-14; 18-21, 2005
August 22-25, 2005
72-Hour Sales
36-Hour Broker
72-Hour Sales
36-Hour Broker
8:00 a.m. – 5:00 p.m.
8:00 a.m. – 5:00 p.m.
8:00 a.m. – 5:00 p.m.
8:00 a.m. – 5:00 p.m.
Madison – WRA
Madison – WRA
Madison – WRA
Milwaukee
$325 (plus books)
$255 (plus books)
$325 (plus books)
$255 (plus books)
Date
Course
Location
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Oct. 20-21, 2005
Oct. 19, 2005
Oct. 26, 2005
2005-2006 CE 2
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18
18
Early Reg.*
# Group discount for six registrations mailed in one envelope.
WISCONSIN REAL ESTATE MAGAZINE, APRIL 2005
t
trouble
ahead?
Governor
Doyle’s
Left Flank Unhappy
G
overnor Jim Doyle has a
political problem. Not from
Republicans who control the
legislature and battle with him on a
host of social and tax issues. That’s to
be expected. Doyle’s problem seems
to be with the more progressive wing
of the Democratic Party. Many enviBY JOE MURRAY
ronmentalists, state employees and
liberal party activists are seething. For
a variety of policy reasons, the governor seems to have alienated this important segment of his
political base, and that could give him problems in his 2006
bid for re-election.
Third Party Threat
A real threat to Doyle’s re-election in 2006 could come in the
form of a credible third-party candidate from the left. If someone
with reasonable name identification and solid progressive
credentials were to emerge, Doyle’s election year math could
be scrambled. Why?
At the top of the ticket, Wisconsin is a very competitive state,
evenly divided between Democrats and Republicans with a
large number of independent voters. In recent statewide races
with a strong Democrat running against a strong Republican,
the end result is a close election: Gore versus Bush in 2000;
Doyle versus McCallum in 2002; Kerry versus Bush in 2004.
But Wisconsin voters also illustrate their independent streak
by voting in large numbers for credible third-party candidates
when they are unhappy with either of the two major party
candidates: Ross Perot in 1992 and 1996; Ralph Nader in 2000;
Ed Thompson in 2002.
The Third Party Influence
The following shows results from past races where third-party
candidates have received a significant number of Wisconsin
votes:
1992 Presidential Vote
Clinton (D)
Bush (R)
Perot (I)
1,041,066 (41%)
930,855 (37%)
544,479 (22%)
Clinton (D)
Dole (R)
Perot (I)
1,071,970 (49%)
845,028 (38%)
227,310 (10%)
Gore (D)
Bush (R)
Nader (Green)
1,242,987 (48%)
1,237,279 (48%)
94,070 (4%)
2002 Gubernatorial Vote
James Doyle (D)
Scott McCallum (R)
Ed Thompson (Libertarian)
800,515 (45%)
734,779 (42%)
185,455 (11%)
Kerry (D)
Bush (R)
Nader (I)
1,488,935 (50%)
1,477,122 (49%)
16,324 (1%)
Problem With Progressives
Just how unhappy are progressives with Democrat Jim Doyle?
Some are plenty mad. On several issues, Jim Doyle has angered
the political left of his party in ways normally reserved for
Republicans.
continued on page 20
19
19
Public Policy
Taxes Top the List of Concerns for Legislature and Voters
BY MICHAEL THEO
T
here’s lots of talk these days about taxes – the property
tax freeze, constitutional spending and/or taxing limits,
the state budget deficit, a proposal to increase the cigarette
tax, social security taxes, and federal tax reform, just to name a
few. But there’s a reason lawmakers at all levels of government
are focusing on taxes – it’s because that’s what voters have on
their minds.
In a statewide survey conducted in mid-March by Public Opinion
Strategies for the WRA, voters were asked to identify the most
important problem facing Wisconsin today. By a wide margin, voters
said taxes were their number one concern. No other issue came even
close (see table at right for breakdown).
So, while lawmakers deserve credit for focusing on the right issue, the
hard part is doing something about it.
Most Important Issues According to
Wisconsin Residents
31% Taxes
18% Economic
14%
Education
6%
5%
State/local government
Crime
11%
3%
2%
2%
Health issues
Growth / transportation
Environment
Other / specific local issues
continued from page 19
When Doyle signed the “Job Creation Act” in early 2004, legislation
designed to speedup and streamline the permitting process in
Wisconsin, environmental activists, along with fellow Democratic
Attorney General Peg Lautenschlager, lambasted the governor not
only on policy grounds but also for negotiating the details of the
bill behind close doors. Rebecca Katers, executive director of the
Clean Water Action Council, had this to say: “In Governor Doyle’s
first year, he has made several environmental decisions that are
as bad as, or worse than, those of his Republican predecessors.
Indeed, many believe Doyle has seriously weakened Wisconsin’s
environmental protections in several ways that Republicans might
have dreamed of, but never dared.” Doyle’s support for another
version of the Job Creation Act this session will only exacerbate his
problem with some environmentalists.
Doyle’s pledge to eliminate 10,000 state employee positions over
eight years has profoundly demoralized veterans of state civil
service. “That makes us pretty angry. Clearly it’s my people
– it’s the bulk of my people,” said Marty Beil, executive director
of Council 4 of the American Federation of State, County and
Municipal Employees (AFSME).
The governor’s recent conversion from an opponent of the
Republican property tax freeze to a supporter of his own freeze
drew this response from progressive activist and former Democratic
candidate for governor, Ed Garvey: “Instead of addressing
regressive taxes, Doyle’s brain trust copied the Republicans with a
20
property tax freeze that saves homeowners a dollar more. Then he
suggested a bold initiative to add taxes on (and I am not making
this up) diapers, tea, chocolate chips and packaged ice!”
Some progressives have frowned on Doyle’s promise to avoid
raising general fund taxes as well. “You spend 16 years in the cave
waiting for a Democrat to emerge with a flashlight, and it’s been
business as usual,” said Garvey. The criticism however, has had no
impact on Doyle, who is determined to keep his “no new taxes”
pledge.
To further complicate Doyle’s electoral math, his favorability
ratings dipped from 60.2 percent in February down to 54.6
percent in March, according to a Wood Communications Group
poll. Doyle’s campaign team will surely watch these numbers as
the state budget debate heats up over the property tax freeze this
summer.
If Doyle is challenged in a Democratic primary he will win easily. It’s
the possibility of a strong third-party challenge from progressives
in the general election that could cause problems for his chances of
re-election in 2006.
The governor’s potential problem is best illustrated by a quote
from a disgruntled and anonymous state employee. “I’d vote for
Thompson if he returns in 2006. If Gard runs against Doyle, I still
wouldn’t vote for Doyle. I’d vote Green (party).” Too many such
voices from his base could spell trouble for the governor.
Too Close for Comfort in Milwaukee County
Transfer Tax
Diversion Averted
A
state budget proposal to divert
real estate transfer tax revenues
from Milwaukee County to the
city of Milwaukee for affordable housing
programs has been eliminated from the
budget bill. The WRA opposed the proposal and applauded its removal.
BY MICHAEL THEO
Under the plan proposed by Governor
Doyle, revenues generated by the
current tax on real estate transfers would be taken away from
Milwaukee County and given to a new City of Milwaukee
Housing Trust Fund. The Milwaukee City Council voted to
establish the fund on April 12, in anticipation of the redirected
transfer tax revenues. It is estimated that the diversion of
funds would total more than $1 million dollars a year.
But the next day, on April 13, the state Legislature’s budgetwriting Joint Finance Committee removed the provision from
Doyle’s budget as one of 21 non-fiscal policy items that the
committee felt should not be in a budget bill.
The WRA opposed the original provision because it makes little
sense to tax housing to pay for housing. Providing “affordable
housing” programs for some with revenues derived from a tax
that hurts housing affordability for others, is at best counter
intuitive. While REALTORS® have always actively supported
affordable housing programs, taxing real estate to pay for
such programs is wrong. Moreover, the precedent of asking
one young family trying to buy their first home to subsidize
another young family trying to do likewise is bad. We would
prefer to see the transfer tax eliminated not elevated.
When originally created over 20 years ago, the real estate
transfer “fee” was intended to generate funds to pay for the
compilation of real estate sales statistics at the local level.
The fee was established at $1 per $1,000 of property value.
However, in the late 1970s and early 1980s, as the state faced
budget deficits, Republican Governor Lee Sherman Dreyfus
and a Democratically-controlled Legislature increased the fee
to $3 per $1,000 of property value and divided the revenues
between the county (20 percent) and the state (80 percent).
When that occurred, the “fee” became a “tax” in the lexicon
of real estate. Over the years numerous proposals have been
introduced to try to raise the tax to fund a variety of
new spending programs – some related to real estate
and some not. The WRA has successfully opposed
all such efforts.
Also opposing Doyle’s proposal was Milwaukee
County Register of Deeds John LaFave, who called
the proposed shift a blatant money grab and said,
“They tried to sneak it through, and now they
are trying to come up with a justification for it.”
Milwaukee County Executive Scott Walker also
strongly opposed the plan and the budget hole it
would have created for the county. Walker is an
announced candidate for governor against Doyle
in next year’s election – a fact some in the Capitol
believe contributed at least in part to the original
provision in the budget.
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21
Public Policy
DOR Releases New Penalty Amounts
for Agricultural Land Conversions
L
BY TOM LARSON
ast month, the Wisconsin Department of Revenue
(DOR) released new per acre penalty figures
that are to be assessed against landowners who
converted the use of their agricultural land in 2004 (so
that the land could no longer be assessed at its use value
on January 1, 2005). The new penalty figures, which may
be viewed at the DOR’s Web site (www.dor.state.wi.us/
slf/uvpen.pdf), vary by county and by the number of
acres converted, ranging from $0 per acre in Menominee
County to $832 in Milwaukee County.
The penalties are imposed as part of Wisconsin’s Use Value Law, which assesses
agricultural land based upon its use for agricultural purposes rather than its fair
market value. The assessment of land at its use value results in a significant property
tax savings to the owner, which is intended to reduce financial pressures for farmers
that may otherwise require them to sell their property prematurely. However, when
the owner of the agricultural land changes its use (e.g., stops farming or converts to
residential, industrial or commercial use), the owner is required to pay a penalty.
For more information on Wisconsin’s Use Value Law, visit the WRA Web site at
www.wra.org/UseValue.
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Quality of Life
The Wisconsin REALTORS® Association
The People’s Agenda
Economic mood brightens, but
local governments must continue
development efforts
State residents increasingly believe that Wisconsin is on the
“right track,” as the economic recovery takes hold, although
optimism over hard-won employment and income gains
appears to be tempered by rising costs for health care,
housing and energy. At the same time, a majority of people
believe their local governments must remain focused on
economic development efforts to keep their communities
strong.
Those views were shared by residents as part of the
Wisconsin REALTORS® Association’s ongoing Quality of Life
survey research and in a series of focus groups held around
the state over the past few months. The topic of economic
development is timely as recent unemployment and job
creation data show continued slow but steady gains in a
variety of industries and state regions.
Since the Quality of Life research series began in summer
2002, the overall mood of state residents has improved along
with the economy. In the first Quality of Life survey, state
residents were almost evenly divided in terms of their overall
mood, with 43 percent reporting that things were on the right
track, 41 percent saying that things were on the wrong track
and 16 percent were undecided.
In the most
recent survey,
from winter 2005,
residents were
similarly asked,
“When you think
about how things
are going here
in Wisconsin,
would you say things are on the right track, or do you believe
that they have gotten pretty seriously off on the wrong
track?” This time, 48 percent said things are on the right
track, while 40 percent said things are on the wrong track.
State residents
increasingly believe
that Wisconsin is on
the “right track.”
The growing sense of optimism also was evident in a series of
in-depth discussions with people in communities throughout
the state. Panel members often referred to the increased pace
of commercial and residential development as evidence of
better economic performance.
Like many communities around the state, said one Wausau
area panelist, “Kronenwetter is going from rural to urban,”
Are things on the right track or off on the wrong track?
100
90
Wisconsin
Community
80
70
60
50
40
30
20
10
0
24
The
Respondents feel positively
Respondents
feel positively
about how things
are going.
about how things are going.
AGENDA
and creating a variety of challenges for local government
because of the rapid growth. Panelists in Madison and
Appleton noted recent improvements in the number of jobs
being created and in their employers’ pay raises compared
with previous years.
Eric Grosso, an economist with the State Department of
Workforce Development, said such improvements are being
felt statewide, although regional differences remain.
“It really depends on what part of the state you’re in,”
Grosso said. “In Madison, we weren’t affected nearly as
much as some others were. In the Milwaukee Metropolitan
area, it was very slow to get into the recovery, but now
it’s leading the way … the West Central and Fox Valley
are doing very well because of the diversification in their
economy.”
From March 2004 to March 2005 alone, the state added 6,400
manufacturing jobs for a total of 500,900 manufacturing jobs
currently in Wisconsin, Grosso said. While other sectors
are experiencing even more rapid growth, economists often
point to the importance of manufacturing employment here
because the state ranks second in the nation in terms of
manufacturing’s percentage of total jobs.
“It’s a high-wage industry,” Grosso said. “We’re talking
about premium work here. (Manufacturers) are linked with
other industries, too. It’s a foundation.”
Between March 2004 and March 2005, the state added a total
of 31,800 jobs. Although it’s too soon to accurately predict
the boost in income from this job growth in areas such as
professional services, manufacturing, education and health
care, Grosso said he suspects there will be a noticeable gain.
Even so, participants in the recent Quality of Life focus
groups mentioned concerns about the rising costs of health
care and housing affordability when discussing their overall
financial situation.
“My wife got a 4.5 percent raise, which was pretty good for
her company,” said one Appleton area participant. “But,
after her health care costs increased, she’s now back to $15
per week.”
Rising taxes — specifically property taxes — also were
on the minds of discussion group members, and several
participants commented on the relationship between higher
taxes and housing affordability. Depending on how local
services such as public education continue to be funded, the
tax structure could have the effect that, “a lot of people who
would buy would be priced out of the market.”
Grosso said wage growth in Wisconsin may not be keeping
up with the overall rise in housing costs, although the
problem here likely is not as severe as in other states
where home prices are more volatile. Also of concern to
the economic picture, particularly in lower wage and rural
areas, are rising gas prices.
“If their wages are lower, it’s a disproportionate amount
of their income,” he said. “And if they commute a greater
distance — if you’re driving an hour each way — you’re
certainly going to feel that.”
As in previous Quality of Life surveys, the latest results
show respondents feel more positively about how things
are going closer to home. For example, in the latest survey,
62 percent said things are on the right track in their
community, compared with 48 percent for the state.
Still, residents want to see their local government taking
an active role in supporting economic development, to
maintain the appeal of the community for young job seekers
and sustain a growing tax base. According to the study,
91 percent of residents said local economic development
services are important to their family’s well-being.
The grades local government received for providing
economic development services were mixed, however. For
example, while 50 percent of residents felt local government
was doing an excellent or good job in providing economic
development services, 47 percent felt it was doing a fair or
poor job.
As memories of the 2001 recession and uncertain recovery
period fade, the REALTORS® Association’s research
indicates state residents are gradually becoming more
optimistic about the state of affairs throughout Wisconsin.
Despite the strengthening job and income picture in the
state however, residents are mindful about the need
for local government to remain involved in economic
development efforts to maintain the overall quality of life.
25
Property Owners
Score Major Victory
Wisconsin Court of Appeals Issues Landmark Decision in Nonconforming Structure Case
I
n Hillis v. Village of Fox Point (No. 04-1787), the
Wisconsin Court of Appeals issued a landmark
decision for property owners by declaring that
homes in violation of a setback requirement are not
“nonconforming uses” and therefore are not subject to
the 50 percent rule outlined in the state statutes.
BY TOM LARSON
Background
The McGees purchased a home in the Village of Fox Point
in 1995. The house was originally built in 1927 and violates
a bluff setback line that was established approximately 30
years after the home was built. The home is located in an
area zoned for residential uses.
The McGees applied for a building permit to construct
an addition to the side of the home, away from the bluff.
The proposed addition would not violate any ordinances
related to use (residential), setbacks (front or side), or area
(ratio of floor of house to lot size). However, the next-door
neighbors (Hillis) objected to the addition, maintaining
that it would violate the village’s ordinance, which limits
the expansion of nonconforming uses to 50 percent of the
value of the structure.
The village rejected the Hillis’ claim and refused to apply
the nonconforming use provision to the expansion of the
McGees’ home on the basis that the home was located on
a lot properly zoned for residential uses and thus was not
a nonconforming use. The circuit court agreed.
26
Court’s Decision
The Court of Appeals also rejected Hillis’ claim that the
McGees’ home was a nonconforming use and affirmed the
lower court’s decision. In doing so, the Court of Appeals
noted that the village’s zoning ordinance was based
upon state statute. Wis. Stat. § 62.23 authorizes cities and
villages to limit the repairs and improvements that can be
made to a structure if the structure is used in a manner that
does not conform to uses permitted by applicable zoning
codes, such as a factory in a residential neighborhood.
The statutory limit on repairs and improvements is 50
percent of the structure’s assessed value – the “50 percent
rule.” (Note: a different statute grants similar authority to
counties.)
The Court reasoned that the purpose of the statutory
provision is to “force the phase-out of uses that do not
conform with the zoning plan (e.g., a tavern in a residential
area) by limiting the repairs and structural modifications
permitted to buildings in which the nonconforming use is
taking place.” However, a home located in an area zoned for
residential use is not a nonconforming use simply because
it violates a bluff setback requirement. In rejecting the claim
that this home is somehow a nonconforming use, the Court
stated that the home “was a residence when it was built,
it was a residence when the bluff setback ordinance was
adopted, and it remains a residence today in a geographic
continued on page 28
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continued from page 26
area that was and is zoned for residential
subject to similar conditions in counties
use.”
and in shore land areas, which is where
Why This Case is Important
This case is significant because it rejects
the notion that homes in violation of a
setback or other dimensional requirement
are considered “nonconforming uses”
and may be subject to the 50 percent rule.
For years, the Department of Natural
Resources and local zoning administrators
have misinterpreted the nonconforming
use statutes in this manner. Although this
case involved a home in violation of a local
bluff setback requirement, the Court’s
declaration that the nonconforming use
statute applicable to cities, villages and
towns with village powers do not apply
to homes located in areas properly zoned
for residential uses seems applicable
elsewhere as well (e.g., homes or structures
Miller Land & Livestock
most of the controversy is found).
While the case represents a major victory
for property owners, it is important to
note the limitation of the Court’s holding.
The Court did not declare that local
units of government have no authority
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to regulate homes or structures that
do not conform to a setback or other
dimensional requirement (referred to
as “nonconforming structures”). While
this authority may exist, the Court stated
that such authority is not found in the
nonconforming use statutes.
For more information, please contact Tom
Larson ([email protected]) at (608) 2408254 or visit the Wisconsin
REALTORS®
Association Web site at www.wra.org.
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Real Estate Broker to manage
office North of Green Bay.
Bookkeeping skills a plus.
Ownership possibilities.
Send resume to:
Northern Realty & Land LLC
13435 Weller Road
Mountain, WI 54149
Appraisers
Appraisal
Services
Specializing in Log & Manufactured Homes
Single Family • Farm & Ranch • Commercial
Recreational • Raw Land
Competitive Rates • Quick Turnaround
Full Service On-line Appraisal Ordering Automatic
Report Status Updates
Primary & Secondary Mortgages
Estate Planning • Divorce Settlement
W3410 Dore Rd.
Lyndon Station, WI 53944
Phone: (608) 524-0365
e-mail: [email protected]
Miller Land
& LiveStock Co.
Slow Moving Properties?
Sellers Anxious?
Use the auction method
to sell property!
For rates and additional
information contact Ray Miller.
www.raymiller.ws
28
W3410 Dore Rd., Suite A
Lyndon Station, WI 53844
(608) 588-3200 or (608) 524-0365
www.raymiller.ws
[email protected]
auction company 265-053 Auctioneer 2070-052
Appraiser 1520-004
As a seasoned real estate professional,
you know the rewards of a successful business affiliation.
That’s one of the reasons you began a real estate career
in the first place. Do you feel you’re maximizing
your full potential? Are you ready to take your career
to the next level? Consider a business affiliation with
the CENTURY 21® System. With more than 6,600
independently owned and operated real estate offices
and over 110,000 sales professionals in 30 countries
and territories, the CENTURY 21 System is part of the
largest real estate referral network in the world.
Affiliating with the CENTURY 21 System makes you a
part of one of the most recognized names in real estate.1
And with the CENTURY 21 System, you’ll have access
to advanced business management tools, comprehensive
training programs, national marketing support,
exclusive service pledges, innovative technology,
specialty market expertise and rewarding recognition
for your achievements.
the CENTURY 21 System helps you rise to the occasion...and shine.
For more information about the CENTURY 21 SYSTEM
and franchising opportunities, contact one of our local
great north offices, log on to www.century21careers.com
or call 1-888-21career.
This is not an offer to purchase a CENTURY 21® LLC Franchise. Offers made only upon delivery of the current CENTURY 21 LLC Franchise
Offering Circular which contains all relevant information concerning the costs, expense, and commitments involved in purchasing a franchise.
©2005 Century 21 Real Estate LLC. ® is a licensed trademark to Century 21 Real Estate LLC. Each Office Independently Owned and Operated. Equal Opportunity Company. Equal Housing Opportunity. There is no guarantee
that positions are available in your local area and submitted information does not necessarily mean you are qualified for any positions. All employment decisions will be made by CENTURY 21 franchised offices and not by
Century 21 Real Estate LLC.
1
Source: 2003 Ad Tracking Study. The survey results are based on 1085 telephone interviews (via computer assisted program) with a national random sample of adults (ages 25-54) who have either bought or sold a home
within the past two years or plan to purchase or sell a home within the next two years. The sample size for questions referring to future consideration is based on 618 respondents who plan on buying/selling a home within
the next two years with a margin of error of +/- 3% at 90% confidence level. Brand and Advertising awareness questions are based on a sample of 1085 respondents with a margin of error of +/-2% at 90% confidence level.
The study was conducted between February 2nd-August 9th, 2003 by Millward Brown, a leading global market research organization.
HOME Plus Loan
THINK YOU
need a
down payment
TO PURCHASE YOUR
first home?
Think
again.
Check out WHEDA
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Call 1-800-334-6873 or go to www.wheda.com

Mortgage Lending and Ancillary Services

Transcription

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