Real Estate News and Commentary

June 12, 2008November 23, 2021

Realtors Unknowingly Practice Law

Do you expect your real estate agent to be the real estate legal expert and provide you with the best real estate legal advice on the sale or purchase of your home? If you do, you’re not alone. Even though licensed real estate agents in Maryland are required to take continuing education on new and/or changed real estate related legislation, the fact remains that providing legal advice goes beyond the scope of practice for a licensed real estate agent.

Consumers often ask about the scope of practice for a licensed real estate agent. After all, the agent facilitates real estate contracts as well as facing legal issues every day. Does a licensed real estate agent have the ability to advise clients on real estate legal matters? When should a real estate agent draw the line and tell their client to seek the advice of an attorney?

To be clear, a license to practice real estate is NOT a license to practice law (however, there are agents who are licensed attorneys). In fact, the Code of Maryland (09.11.05.03 ) offers guidance in supervising licensees indicating that “(C) Written procedures and policies which provide clear guidance in the following areas:(x) The unauthorized practice of law by a licensee;”

Additionally, Article 13 of the National Association of Realtors code of ethics states (Realtor.org), “REALTORS® shall not engage in activities that constitute the unauthorized practice of law and shall recommend that legal counsel be obtained when the interest of any party to the transaction requires it.”

Given the strong positions of regulatory bodies, it should be clear that a real estate agent cannot act as a legal advisor or provide legal advice. Some lines are well defined and should not be crossed; however other lines are gray and sometimes confuse real estate agents and consumers alike as to the legal implications and consequences.

For example, some agents feel that it is necessary to alter a listing or sales contract to fit the needs of the transaction. Rather than having an attorney review the contract and make any necessary changes, some agents will eliminate or add wording to a contract on their own. This may sound harmless, however many agree that this can be the unauthorized practice of law.

Recent market trends provide this timely example: As many home owners are facing legal and financial challenges, some real estate agents are advising home owners to undergo the short sale process. Unfortunately, they do not consider the consequences as well as other available options. Again, many agree that giving such advice may be construed as the unauthorized practice of law.

Besides being resourceful and knowledgeable, real estate agents are trained to be experts in the marketing and selling of homes. Real estate agents are not attorneys nor should they pretend to act like one. In real estate transactions, sometimes the consequences to seemingly obvious solutions can turn into legal nightmares. So, don’t be offended the next time your real estate agent suggests you talk to your attorney; always consult your attorney whenever you seek guidance on your legal responsibilities to any real estate transaction.

Original published at https://dankrell.com/blog/2008/06/12/do-realtors-unknowingly-practice-law/

By Dan Krell
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June 3, 2008November 23, 2021

Signs of Recovery or Anomalous Blips of Activity?

by Dan Krell
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As President Bush officially proclaimed the month of June as National Home Ownership Month this year, many wondered about the future of the housing market. As the national media continues to portray the housing market as a financial black hole by telling stories of dread and dismay, it is a wonder if any of the industry initiatives have actually helped to stimulate the market. Generally the bad news is that the market continues to be slow; however the good news is there are signs of recovery.

National real estate sales numbers continue to slide, as reported by the National Association of Realtors (Realtor.org). The recent report indicated that home sales were down again for the month of April 2008 (as compared to sales from the same time the previous year). Additionally, the NAR reports that the national median home price for all types of housing fell to $202,300 (from $219,900 the same time a year ago).

However, the NAR reported positive news about localized markets, such as Greenville, SC and Springfield, MO, where strong home value increases are attributed to healthy local economies. Additionally, markets in areas such as San Diego, CA and Fort Meyers, FL have experienced increased home sales after significant price reductions, which is an indication that these localized markets have found their equilibrium.

Locally, there are micro markets rebounding as well. Sales statistics compiled and reported by the local MLS (Metropolitan Regional Information Systems, Inc.; MRIS.com) indicate that there are localized market increases even though Montgomery County, as a whole, continues to post decreased sales numbers. And even though the county average sales price has lowered to $575,513 (as reported by the Greater Capital Area Association of Realtors; GCAAR.com), sales statistics within specific zip codes (such as 20814, 20815, 20816, 20854, 20852, 20833, 20878, 20882) indicate increases in sales prices as compared to the same time last year. Some of these areas had slight sales price increases, while others had moderate gains; the average sale price for the zip code 20854 (Potomac, MD) increased over 30% in April 2008 as compared to the same time last year!

Along with these signs of recovery, a March 2008 announcement by the Office of Federal Housing Enterprise Oversight, Fannie Mae and Freddie Mac indicated that there will be an increase of $200B to increase the liquidity of the mortgage industry. Analysts explain that the liquidity will reduce restrictions on high loan-to-vale mortgage programs. Restrictions on these loans were imposed to minimize further losses to Fannie and Freddie after foreclosure related losses increased as the housing market declined.

As much of the secondary mortgage market has all but shriveled and died, the importance of Fannie Mae and Freddie Mac is now underscored. With an additional $200B, Fannie and Freddie have committed to increase the availability of low down payment mortgage programs that have been the center of home ownership programs for years.

While many housing and economic indicators are down, there are many signals that the economy as well as the housing market is seeking its equilibrium. While some economists feel these signs are anomalous, others remain optimistic that stronger economic growth in the second half of 2008 will assist in stabilizing the housing market.

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of June 2, 2008. Copyright © 2008 Dan Krell.

May 28, 2008November 23, 2021

If Cheap isn’t Selling, What is?

by Dan Krell
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“Home buyers want location, quality, and value.”

Everyone has been talking about bargain real estate for many months now. However, are these bargain homes really selling? If you look on the local MLS, there are presently twenty four single family homes listed in the county priced under $250,000. Of these twenty four homes, approximately 16 of these homes are short sales, 6 are bank owned, and 2 are being sold by the resident. It sounds as if there are a lot of great bargains available, but if you take the time to read the MLS listing and walk through the homes, you realize that these homes may be cheap, but they are no bargain.

Although a short sale (when a home owner sells for less than what they owe their lender) could be a great opportunity to get a bargain home, the obstacles are many and the purchase can be needlessly complicated by the real estate agent who does not know how to manage this type of transaction. Buying a bank owned home (foreclosure) could also represent a home buying bargain; however once inside the home you may realize that the cost of acquiring and repairing the home can exceed the purchase price of neighborhood homes for sale that are in move in condition. The many bank owned home auction events (many of these foreclosures are unsold MLS listings) are an indication that most home buyers feel that a cheap home does not represent a bargain.

So if “cheap” isn’t selling, what is? Unlike the recent the seller’s market when a “tear down” rambler next to the train tracks attracted a bidding war, today’s home buyers are back to basics. Home buyers are looking for a combination of location, quality, and value.

Location, location, location. Yes, the clichéd saying always had meaning, but for various reasons (including gas prices) a home’s location is more important than ever. Whether it’s the local amenities, proximity to Metro, or both- some neighborhoods always seem to be in demand.

When you compare your home to other neighborhood homes, does your home have a superior or inferior location (consider physical location and proximity to amenities)? If your home has a lesser desired location, you might consider making an adjustment in the listing price.

Don’t under estimate the home buyer. Home buyers are savvy and they desire quality and value for their money. Often times, renovations and updates that are completed cheaply repel potential home buyers- mostly because of poor craftsmanship. Needless to say, uncompleted do-it-yourself projects have the same effect. New appliances and carpet make any home look better, except when you choose to buy the cheapest available. Thinking that home buyers won’t know the difference in quality is erroneous. If you look at the recent neighborhood home sales, many are likely to have had quality updates and renovations. If you decide to make updates to your home prior to listing, do it tastefully with a mind for quality. If you cannot, then consider not making updates but adjusting the listing price.

Although price is always at issue, it’s not always the “cheap” home that sells. Some home buyers may make sacrifices in location and quality; but the reality is that home buyers want value for their money.

May 20, 2008November 23, 2021

Lack of Permits Can Create Future Problems

by Dan Krell
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If you have ever tried to make improvements to your home, you may know about the permitting process. Unfortunately, do-it-yourselfers and some contractors often feel that it is unnecessary to obtain the necessary permits (including but not limited to building, mechanical, and electrical permits). Excuses given for not obtaining the proper permits range from the silly to the paranoid.

The purpose for the permitting process is to assure that buildings, land and home improvements adhere to the building and zoning codes within the county. The purpose for building and zoning codes are to ensure that our houses are safe, structurally sound, and help maintain health standards.

Although you may perceive that you can save time and money by not going through the permitting process, however, you may find that the shortcut will cost more time and money in the long term. It is not uncommon for improvements that did not go through the permitting process to be required to meet current building and zoning codes, or even be demolished. Decks, fences, and outbuildings are common violations because they can encroach on a neighbor’s property as well as being easily seen because they are not concealed indoors.

If the permitting process is not followed correctly, or (worse yet) if there were no permits for your improvements- there may be future consequences to you, the home owner.

First, it is not uncommon for insurance companies to deny claims related to home improvements that were not completed to meet local building code requirements. Having the necessary permits for home improvements as well as communicating with your insurance agent about them will save you heartache if there is a future claim related to those improvements. For example, if your new deck collapses and injures a guest, your insurance company may deny any claims if it is found that the deck was not built up to building code standards.

A second consideration is that you may run into an obstacle or two when you plan to sell your home. Having improvements that were not permitted by the Department of Permitting Services and passed by the building inspectors could have serious repercussions on your sale. For example, one home seller had the appraised value of his home reduced by the home buyer’s lender because the owner never obtained a permit to construct the large addition he added the year before. Additionally, a home buyer may require a seller to have such improvements be inspected by the county.

If you did not go through the permitting process for your home improvements and you decide to “come clean” (either voluntarily or because someone required you to do so), the county will have your improvements examined by an inspector. If you are lucky, you could get away with paying local and state fines. However, to meet building code, the inspector could require you to make minor repairs; sometimes, the improvements are ordered to be demolished.

As a home buyer, you should be concerned about a home’s permit history for the reasons stated above. You can check a home’s permit history by contacting the Department of Permitting Services (permittingservices.montgomerycountymd.gov).

May 13, 2008November 23, 2021

Renewable Energy at Home

by Dan Krell
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The debate over the use of renewable and green energies in the home has been fought for many years. However, recent spikes in energy costs combined with the imminent sharp increases from local power companies have made a case for the use of renewable energies such as solar power. Many real estate analysts agree that as solar photovoltaic technology advances and becomes more affordable, solar energy sources in the home will not only become accepted – but expected from home buyers.

Today, many people are ill informed about solar energy and its uses in the home; when asked, they might describe solar energy as using a large bulky panel sprouting from the roof to heat hot water. Solar collectors from thirty years ago were limited in the amount of energy they could convert, as well as being cost prohibitive for the majority of home owners. However, solar photovoltaic technology and engineering have come a long way since then such that the materials used are more efficient in converting light into electricity as well as being more affordable.

Technological improvements, lower costs and government incentives have prompted worried home owners to take another look at solar energy. Advancements in new materials (such as thin film) have created solar collectors that are smaller, more reliable, and more efficient than their counter parts of thirty years ago. The new technology has allowed new Building Incorporated Photovoltaic systems to incorporate the use of solar collectors in wall and roof components such as shingles, tiles and other building materials, which not only makes the use of solar collectors more feasible but aesthetically pleasing as well.

The cost (usually measured in Watts) to install solar photovoltaic cells is still not cheap. Depending on the type of system installed and the contractor used, the cost for a residential installation can be as little as $5,500 and cost as much as $22,500 (SouthFace.org). However, with Federal, state and local incentives, combined with the long term benefit of reduced energy costs, the cost does become more acceptable. Federal tax credits can be up to $2,000 on the installation of an acceptable and approved solar energy system (EnergyStar.gov). Montgomery County offers the Clean Energy Rewards program; the program pays consumers one cent per kilowatt-hour for eligible energy consumed (www.montgomerycountymd.gov). Additionally if your system is connected to the local energy grid, you can sell any excess energy to your local power company!

If you live in a homeowners association, however, you may have opposition to your solar panel installation. Many homeowners associations prohibit the installation of solar panels because of their appearance and the concern over lack of uniformity within the neighborhood. However, to encourage the use of solar panels as a green energy source, some states have already fought back by disallowing HOA bans on solar panels.

Installation of solar photovoltaic systems in your home is an exact task because of the engineering considerations and electrical components used. When choosing a contractor to install your system, make sure they are locally licensed as well as certified by the North American Board of Certified Energy Practitioners (NABCEP.org). The NABCEP provides certification to those who specialize in solar photovoltaic installation.