Welcome to The Melanie Group

Industry Buzz

The buzz that I’m putting on the website now is mainly “Notes from PAR Winter Business Meetings”, which my husband, Jim, and I attended in Harrisburg PA Jan. 14-15. Jim wrote the notes about MLS and Resorts and Second Homes, as he attended those meetings, and I did not.

MLS Roundtable/Forum

            Facilitated by staff member Marty Manion

Several topics were addressed, as noted below.  Since it was a roundtable format, while pros and cons of the issues were presented, unless otherwise noted, no specific recommendations were provided.

A)  Should an MLS provide street addresses of listed properties for IDX purposes, due to liability concerns?

If the subject property is vacant and is noted as such on an IDX website, and if the house is broken into and robbed or damaged, is the Realtor® or their Broker liable?  The argument was presented that withholding the street address would offer some line of legal defense, as opposed to a situation where the Realtor® included the address in the MLS listing, knowing or expecting that information to be “scraped” by Realtor.com, Homes.com, Google, Yahoo, etc.

Before you say, “That’s a ridiculous lawsuit”, one member present related that she had to defend herself against a complaint filed with the PA Real Estate Commission for false advertising, filed by a client who found that his listing on Homes.com did not reflect two price reductions that he had authorized.  His position was that he was harmed because the advertising on Homes.com did not accurately reflect the correct price.  The defendant took the position that she did not know, nor did she have any control over the IDX advertising on Homes.com.  She did not reveal the outcome of the hearing, but even if she was found innocent of false advertising, she spent time and effort in defending herself.  She expressed the opinion that Brokers are ultimately liable for all of their Agents’ listings on whatever forum they are displayed, including IDX websites. 

My call to the PAR Legal Hotline leads me to believe that an Agent’s affirmative duty, and hence the potential liability for their Broker, is limited to following the local MLS guidelines unless the Agent posted the listing on a national website themselves.  In that case, it may be considered advertising under the control of the Agent and hence carry with it some liability if it’s not kept current.

B)  Can MLS Spec sheets be protected by copyright?

Here the definite answer was “No”.  An MLS can copyright their Input Forms, and copyright their website’s data sheet layout, but the actual “data” (number of rooms, square footage, etc) cannot be copyrighted.  Among other reasons is that as many as 8 different stakeholders may claim ownership of some or all of the data. 

Trying to copyright data to protect it from unauthorized use by an IDX is futile.  As an aside, the NAR website points out that whereas the courts have ruled that data” cannot be copyrighted, “content” can be.  It therefore behooves an MLS to consider the information being provided to be content, not data.

C)  NAR MLS PAG

At the NAR convention in November, 2007, a Presidential Advisory Group (PAG) that had been formed earlier, requested $2 million in the 2008 budget to fund an initiative to develop a database of information of all real property in the US .  This is somewhat similar to the database currently owned and operated by Zillow.com.

Although not stated as such, this initiative is thought to be the first step towards creating a national MLS.  Subsequent discussion indicated a move to  RETS (real estate transaction standard), which would establish standards to allow MLS data to flow seamlessly across different MLS data vendor platforms.

D)  Required refreshing of MLS data.

There was a very brief discussion that current PA Real Estate Commission regulations require that an MLS listing be “refreshed” (at a minimum) at least once every 7 days. 

My call to the PAR Legal Hotline contradicts this, as the person I spoke with consulted other attorneys and they unanimously agreed that there is no such PA Real Estate Commission regulation.  They opined that it may be a local MLS bylaw, but other than that, you only have to refresh your listings when data changes and must do so within the time prescribed by MLS bylaws.

Resorts and Second Homes Roundtable/Forum

            Discussion led by Jerry Romanik, Pocono Mountain Association of Realtors

A brief discussion of “Nagging Issues that Confront Resort & 2^nd Home Specialists”, which were defined as problems unique to Realtors and deals in the resort/second home market that may (in rare cases) stop a deal form happening, but more often than not are problematic, requiring extra effort and skill by the Realtors involved to keep a deal on track.

The four specific issues that were discussed were Financing, Appraisals, Insurance and Miscellaneous.  Most of the discussion involved various participants sharing war stories in these categories, and time expired before any solutions were offered.  Future meetings of this roundtable will (hopefully) offer some creative solutions to the most common problems.

All participants were encouraged to consider and submit ideas for future meetings, such as topics of interest, speakers, handout, networking ideas, requests for assistance from PAR, etc.

Economic Forecast by Austin Jaffe

Both Jim and I got to hear this presentation. Dr. Jaffe is with the Smeal School of Business at Penn State University , and is a consulting economist to PAR. Among other things, Dr. Jaffe reviewed his predictions from 2007, noting that he was right 40% of the time, which was still better than many others.  Dr. Jaffe predicted for 2008, that although our local market is still better than the national market, that we will ‘catch up’, as financing is the same everywhere. He noted that PA often lags behind the national trends. He is predicting a return to “normal market conditions” by 2009.  He quoted Moody’s as saying that the median home price is expected to drop 13% through early 2009.  He also referred to a Yale economist, Bob Schiller, noting he was ‘sharp’ and his predictions are worth listening to. Schiller says if we go into a recession the decline in median prices could be as deep as 25%.

House Price Changes

Jaffe said that house prices declined about 6% in 2007 in PA; he predicts that they will fall in 2008 from 10%  to 15% (no recession) or 25% to 30% (if we have a recession).

Negative Equity

To me, this was one of the scariest things Jaffe reported. Nationwide, about 11% of home owners have negative equity—they owe more against their homes than the current value of the homes are. Another 5% have equity of less than 5%.  In my opinion, these folks are our next crop of foreclosures; there is no financial incentive for them to keep on making payments.

Home Sale Figures

2007 was a record breaking year—for the lowest number of transactions in 12 years. New construction was down 40%; Realty Trac reports that 2.8 million homeowners are expected to default (go into foreclosure) in 2008-2009—and it could be more.

Investment Losses:

Jaffe did an interesting thing here for us old timers, who remember the S & L debacle in the early 1980’s. He told us the losses then, in today’s dollars, were around $300 Billion; this sub-prime debacle is expected to have losses of around $400 to $500 billion, with a reduction in value of real estate of 2.6 trillion (yes, that is trillion with a ‘t’).

How long & how bad?

Jaffe says home prices will fall until equilibrium is restored. He also had some very interesting data. Between 2001-2006, home prices rose 74%, yet household income only rose 15%.  You don’t have to be an economist to see that those two numbers are incompatible; the rise in prices shut buyers out of the market; some decided that sub-prime loans were a way in,  and counted on those prices to continue to increase to bail them out.

Jaffe also shared with us that for a very long period—1960 through 1995, the ratio between the average rent and the average house price remained steady at 5 to 5.25%; by 1996, it had dropped to 3.48%.

Can we fix this?

Jaffe says lower interest rates won’t solve the problem; rates this month are at a two year low. Among other woes it caused, the sub-prime debacle has put thousands of people out of work. So, lower interest rates are not helping.

The next problem is inventory. The overload of inventory makes prices very vulnerable. Inventory is not expected to stop growing until 2009 or later.

Foreclosure in PA: Jaffe gave us stats that again indicate how localized markets are. The foreclosure rates across the state, per Jaffe are: In the Scranton-Wilkes Barre area, 1 in 286;  in the Philadelphia area, 1 in 360;  in the Pittsburgh area, 1 in 432, and in the Lehigh Valley area, 1 in 1493.

In conclusion, Jaffe said: “This isn’t the end of the world, and it isn’t the end of real estate, but it is the end of an era.” I say: “And the strong will survive”.

Michael Tchong from Ubercool and Ubertrends:

This guy was engaging, entertaining, and highly informative. He spoke about trends across the globe, most of them connected to technology and social media, and how they affect all businesses, including real estate.  One of his amusing/scary stats: DWT (Driving While Texting) is the new DUI. He noted that the social networking site, myspace, has 218 million members (more than many developed countries have in population). Domino’s pizza reported in January of 2008 that they anticipate that within 3 years, text orders for pizza will be as common as phone call orders for pizza. Tchong also noted that 68% of Americans spend more time with their computer that they do with their spouse or significant other.  One of the ubertrends noted was the time compression or the acceleration of life. In 1920, the average person slept 8.8 hours per night; in 2005 it was 6.9 hours per night. People multi-task constantly, causing fragmented attention spans.  Most people surveyed by Yankleovich said a lack of time was a greater problem than a lack of money.  In housing, this is causing a demand for ‘calming rooms’ or yoga studios as part of a house.  In real estate, (my words, not Tchong’s) you need to think about how you can save the consumer time and make the transaction fast and painless. Also understand that they don’t have time to pay attention to details—so that is your job.

CRB Meeting: I was the featured speaker at the CRB Meeting, showing attendees “How to Blog”. I did a hands-on session, and people were blogging by the end of the 45 minutes. If you want my step-by-step directions, email me at: melanie@themelaniegroup.com and I’ll send them to you.

Short Sales and Foreclosures: There was a panel discussion, moderated by Jim Goldsmith, Esq., of counsel to PAR about short sales and foreclosures.  The speakers included real estate agents, a CPA, and lenders, with Commerce Bank providing the lenders.  Short sales are up (no surprise there) and agents need to be careful about many issues. Among them are the confidentiality of the seller’s financial information. The direction we received is that if a third party approval is required on a contract, this needs to be disclosed to the buyer. Attorney Goldsmith cautioned us that if the seller is ‘upside down’ in his house, but has funds to bring to closing to make up the deficit, then his financial condition should remain confidential. The agents on the panel stressed that many times home owners are not forthright with listing agents about their financial situation; agents should ask probing questions and get solid answers. PAR plans to develop some forms to use with short sales; this was discussed at the Standard Forms Forum as well. One form would be an informational one, given to sellers at time of listing; the other two would be addenda to listing and sales contracts giving, among other things, authority to the agent to negotiate with the lender.  Not surprisingly, the lenders stated that they seek to pay less commission  when doing a short sale (they want to share the pain with agents!). Agents are cautioned that a short sale can be twice as much work for much less pay.  It was also noted that the cost of foreclosure can range from $10,000 to $35,000. Either way, it is a lose/lose proposition for both the homeowner and the lender. However, the CPA noted that new federal legislation, found in the Mortgage Forgiveness Debt Relief Act of 2007 provides temporary (through Dec. 31, 2009) relief of debt cancellation income. In the past, if a lender ‘forgave’ a portion of the debt, the lender then sent a 1099 form to the borrower, indicating the debt forgiveness was miscellaneous income. The borrower then had to pay federal income tax on this income. For persons who had been through foreclosure, this was an additional hardship. Please note this act only covers a person’s principal residence (no second homes or investments) up to $2 million.

Legislative Update: Our guest speakers at the legislative meeting were Liz Hersh and Cindy Daley, from the Housing Alliance of PA. The housing alliance is seeking the establishment of a Statewide Housing Trust Fund to provide assistance with low income housing. Bob Hay, our new PAR President, reported at the PAR meetings that some police officers in his area drive 50 miles one way to work, because they cannot afford to live where they work. PAR approved the concept of the fund (which 38 other states already have), with the details of funding to be ironed out later.  There are several pieces of legislation being proposed; the most interesting presentation we heard in this area was the Legal & Regulatory Forum on Property Tax Reform, with representatives David Levdansky (D) and Samuel Rohrer (R) each giving us their proposals. Rohrer wants to have a constitutional amendment to outlaw the use of property taxes for schools in PA; Levdansky proposes keeping property taxes, but scaling them down in steps.  Their presentation, moderated by Melissa Sieg, PAR Past President was lively and informative. Most REALTORS® we heard talking prefer eliminating school property taxes completely; the sentiment we heard most often was: “If you keep the door open, they’ll come back through it again with higher taxes”. Obviously, the slots revenue hasn’t solved the problem.

The Appraisal Committee meeting was short but informative. If you are a PA appraiser, you need to get the latest ‘green book’ from the board, which contains all the changes passed this summer. They include:

Ø      New “appraiser trainee” certification

Ø      Appraiser trainees must be registered with the board (this used to be voluntary; it is now mandatory)

Ø      After either 300 hours of experience, or when the supervisory appraiser deems the trainee is ready (but it has to be the minimum of 300 hours), a trainee can inspect properties without the supervisory appraiser coming along

Ø      Broker/appraisers cannot train anyone to be an appraiser

Ø      Michelle Bradley also noted that PA is unique with the classification of broker appraiser, which no other states have; some states have licensed appraisers. It was noted that some lenders are utilizing broker appraisers to do appraisals for lending purposes; this is a violation of the Code in PA;  lenders will continue to make these assignments because they don’t have an appraisal license to lose

Ø      Civil penalty increases to $10,000 per civil penalty, versus $1000

Ø      Michelle Bradley noted that most appraisers in PA still forget that they are required to put the words: “Pennsylvania Certified Residential/General (obviously, use whichever adjective applies to your certification) Appraiser” after their name where they sign the appraisal. If your software does not allow you to do this, include in an addendum a statement to the effect: “Everywhere my signature appears in this report, it should be accompanied by the phrase: ‘Pennsylvania Certified Appraiser’. Because the software program I use does not allow the insertion of that phrase, this addenda is being used to indicate my knowledge and compliance with this.”

Ø      It was noted that FHA is no longer requiring that appraisers take and pass an examination, but appraisers are reminded that the obligation to comply with FHA standards remains.

Ø      It was noted that Rural Housing has dropped the thermal standards on houses.

Ø      For appraisal trainees, 50% of experience has to be in properties that the trainee physically inspected