COLORADO ASSOCIATION OF REALTORS® | APRIL 2011
Legislative Mid-Session FIRPTA Withholding Recent census data says
Update for 2011 Rules – What you need Colorado has grown -
to know. see by how much
P6 P10 P16
a publication of the
NAR President Ron Phipps
with CAR President Randy
Reynolds at the NAR Home
Ownership Matters Tour in
Denver. Click the image to
view a short video.
TABLE OF CONTENTS
CAR Director Video Message .......................................................... 3
The COLORADO REALTOR® is published by:
Colorado Association of REALTORS®
CARHOF Raffle ............................................................................... 3
309 Inverness Way South Housings Stats ................................................................................ 4
Englewood, CO 80112
The Truth About RPR ..................................................................... 5
(303) 790-7099 or 1-800-944-6550
FAX (303) 790-7299 or 1-800-317-3689 2011 Legislative Update ................................................................ 6
What is CYPN ................................................................................ 7
EDITOR: Tyrone Adams
Commercial Contract ....................................................................... 8
DESIGN: Monica Panczer Creative, LLC. Fair Housing .................................................................................. 9
firstname.lastname@example.org FIRPTA Withholding Rules ............................................................10
The Colorado Association of REALTORS®
assumes no responsibility for return of Calendar of Events .......................................................................13
unsolicited manuscripts, photographs or art. What has PSF Done for Me Lately? ...............................................14
The acceptance of advertising by the Colorado
REALTOR® does not indicate approval or
Event Pics ......................................................................................14
endorsement of the advertiser or his product Census Data ..................................................................................16
by the Colorado Association of REALTORS®. Join the Team MS150 ...................................................................17
The Colorado Association of REALTORS® makes
no warranties and assumes no responsibility
CREC Positions ....................................................................... 18-19
for the accuracy or completeness of the REALTOR® Advantage Partners ......................................................20
information contained herein. The opinions
Private Transfer Fees.....................................................................21
expressed in articles are not necessarily the
opinions of the Colorado Association of How REALTORS® View Colorado Market ........................................21
REALTORS®. Important for Brokers Working on Short Sales ....................... 22-23
This is a copyrighted issue. Permission to
reprint or quote any material from this issue
is hereby granted provided the Colorado
REALTOR® is given proper credit in all articles
or commentaries, and the Colorado Association WHAT DO MY REALTOR® DUES PAY FOR?
of REALTORS® is given proper credit with two
copies of any reprints.
The term “REALTOR®” is a national registered
trademark for members of the National
Association of REALTORS®. The term denotes
both business competence and a pledge to
observe and abide by a strict Code of Ethics. To
reach a CAR director who represents you, call Did you know that CAR has a legal service that Broker/Owners and one
your local association/board. other designated person in a REALTOR® office only can access to receive
experienced and free legal advice concerning your real estate issues?
Being a REALTOR® has its advantages! The average cost for real estate
legal advice ranges from $250 - $1500 an hour.
Click here to get the REALTOR® advantage.
page 2 | www.ColoradoREALTORS.com
ASSOcIATIOn nEWS | EVEnTS | FOREcASTIng
LEgISLATIVE | LEgAL | SALES/MARKETIng | TEcHnOLOgY
A Video Message from
Randy Reynolds, CAR
President and A Video Message from Your CAR
Bob Golden, CAR CEO Directors!
To view a short video about important association news, please click the box below.
cOnTAcT US WITH YOUR cOMMEnTS OR TO LEARn MORE AT
PHOnE 303.790.7099 800.944.6550 WWW.cOLORADOREALTORS.cOM
You can win up to CARHOF Statewide Raffle!
$25,000 The CARHOF Raffle is back. You can win up to $25,000 cash for just purchasing a
ticket for $20! Fifty percent of the proceeds will go to local associations CARHOF
funds with the purpose of helping provide safe, clean and affordable housing in their
communities. Fifty percent will be used for a Grand Prize and for smaller regional
prizes based upon ticket sales in that region.
Here are the details about the raffle:
• Raffle tickets go on sale at the CAR Spring Business meetings on April 27th
• Participants can purchase one ticket for $20 and six tickets for $100
• Tickets can be purchased online at www.CARHOF.org or through representatives
at your local association
• Tickets sales will end June 15th
• The drawings will take place on June 29th at CAR at noon and will be available to
view via webcast.
• Visit www.CARHOF.org for more details.
In 2010, CARHOF donated more than $400,000 to support affordable housing in
Colorado. Help CARHOF continue to keep Colorado communities safe, clean and
affordable by purchasing one or more CARHOF raffle tickets, after all your investment
could make you an even bigger winner!
page 3 | www.ColoradoREALTORS.com
Single Family Housing Statistics – February 2011
Area 2010 2011 % Change % Change
Units Sold Median Units Sold Median Units Sold Media
Metro District 1960 $224,207 1793 $223,031 -8.5% -0.5%
Aspen 10 $1,000,000 15 $3,250,000 50.0% 225.0%
Glenwood Springs 19 $291,667 31 $185,000 63.2% -36.6%
Grand County 7 $275,000 9 $287,500 28.6% 4.5%
Gunnison 8 $500,000 5 $275,000 -37.5% -45.0%
Telluride 6 $2,000,000 2 $900,000 -66.7% -55.0%
Boulder County 132 $354,545 137 $369,048 3.8% 4.1%
Estes Park 7 $291,667 11 $287,500 57.1% -1.4%
Fort Collins 142 $243,750 108 $246,296 -23.9% 1.0%
Greeley 158 $161,905 160 $164,000 1.3% 1.3%
Logan 9 $85,000 8 $50,000 -11.1% -41.2%
Loveland 81 $197,500 77 $209,722 -4.9% 6.2%
Morgan County 17 $105,000 13 $75,000 -23.5% -28.6%
Craig 3 $212,500 3 $130,000 0.0% -38.8%
Delta County 7 $170,000 22 $152,000 214.3% -10.6%
Grand Junction 123 $191,333 128 $165,000 4.1% -13.8%
Montrose 19 $212,500 25 $152,857 31.6% -28.1%
Chaffee 21 $175,000 22 $258,333 4.8% 47.6%
Pikes Peak 572 $182,712 447 $193,056 -21.9% 5.7%
Pueblo 107 $113,000 92 $128,333 -14.0% 13.6%
Royal Gorge NA NA 30 $124,000 NA NA
Four Corners 14 $172,000 9 $135,000 -35.7% -21.5%
Durango 23 $275,000 20 $333,333 -13.0% 21.2%
Pagosa Springs 16 $333,333 18 $250,000 12.5% -25.0%
State 3461 $212,500 3185 $201,389 -8.0% -5.2%
This information is provided by various MLSs in Colorado
and is deemed accurate, but is not guaranteed.
Get your daily dose of information on
economic data, real estate trends and market
conditions in NAR’s new Economists’ Outlook
Blog. Go to:
GET MORE STATS AT www.COLORADOREALTORS.COM
page 4 | www.ColoradoREALTORS.com
oday’s consumers want detailed information about their “RPR has the ability to enhance our productivity and enhance
potential purchases yesterday! Consumers looking for our sales and listing presentations, says Zadel.”
property to buy and sell are no different. REALTORS® As good as RPR sounds not everyone is jumping on board.
Property Resource otherwise known as RPR was created by Why?
the National Association of REALTORS® to give REALTORS®
more resources and the confidence to respond to their con- Some comments that have been heard and seen floating
sumer’s expectation for detailed information quick. around on blog sites about RPR are- “this is just an attempt to
make a nationwide MLS,” “it’s going to encourage REALTORS®
“This really is a powerful free member benefit. We have to sell properties outside of their normal market areas,” and
already used RPR in our office on numerous occasions and it “this is going to be just another database that we are going to
gave us the information our clients wanted right away,” said be forced to use.”
Greg Zadel Broker/Owner with Zadel Realty. “It definitely
validated their perception that we have the resources to com- “There’s a lot of bad information out there about RPR,” says
plete their transaction.” Zadel. “RPR helps makes us more efficient, gives us the ability
to give our consumers the detailed information they want and
RPR is an online real estate database with enhanced search helps sets us apart from non-members,” says Zadel.
capabilities, tools and features that can increase REALTORS®
efficiency and provide market to market comparisons--all as a When is RPR going live? It went live in September 2010 in
member benefit. Eventually RPR will provide detailed infor- various areas whose MLS has an agreement in place with NAR.
mation on every parcel of property in the United States. NAR They expect to launch in more areas as new agreements are
currently has over 147 million parcels of property live on their executed through the third quarter of next year. The process
system. takes about four weeks before they make it live and they
give you access. The only MLS in Colorado that currently has
“RPR is one more tool that gives REALTORS® the opportunity access is Metrolist. Chaffee County Board of REALTORS® and
to be the go-to source for property seeking consumers,” said Gunnison Country Association of REALTORS® have agree-
Zadel. ments in place and are waiting to be scheduled to go live
What exactly can REALTORS® expect to get out of RPR now? according to RPR. You can view the MLS Partners Map at
• public record and assessment information http://blog.narpr.com/rpr-partners.
• details of prior transactions and sales history During the fourth quarter of this year, NAR will launch RPR to
• zoning, permits, mortgage and lien data REALTORS® who do not have access to the system via their
• neighborhood demographics and schools MLS on a state by state basis. By the end of 2011, their goal is
• Unique maps to give all 1.1 million plus REALTORS® the ability to enjoy this
• Plat maps valuable free resource for REALTORS® only.
• Flood Zones
• Branded Seller, Buyer and Market reports You can check out the demonstrations of the power of RPR for
You don’t have to imagine any more about a system that pro- yourself at http://blog.narrpr.com/info if you don’t currently
vides the information you need- when you need it- all in one have access to it.
place. You can even access this information easily from your
page 5 | www.ColoradoREALTORS.com
2011 Legislative Mid-Session Update
CAR has also played a critical role in defeating several bills that had potentially negative effects on
Colorado home buyers and REALTORS®, as well as the housing market.
Seventy-three days have passed in the HB 1113 Impact Fees Transparency SB 68 Increase Consumer Protection
2011 Legislative Session and 47 remain. – SUPPORT – by Rep. Chris Holbert (R- Enforcement – OPPOSE – introduced by
To-date, 430 bills have been introduced. Parker) and Sen. Joyce Foster (D-Denver) Sen. Morgan Carroll (D-Aurora) and Rep.
CAR has tracked 36 of them and taken a was signed into law on March 9th. This bill Judy Solano (D-Brighton) died in the House
position on 22. requires local governments to maintain Committee on State, Veterans, and Military
We have enjoyed much early success transparency by publishing on their offi- Affairs. The bill stated that a person shall
with the passage of bills that are beneficial cial web site certain information regarding not engage in a deceptive or unfair trade
to Colorado’s housing industry. CAR has the collection and disbursement of land practice. The bill would have also created
also played a critical role in defeating development impact fees. a rebuttable presumption that a signifi-
several bills that had potentially negative cant public impact has occurred when a
effects on Colorado home buyers and HB 1132 On-bill Financing for Energy plaintiff offers evidence that a defendant
REALTORS®, as well as the housing market. Efficiency Improvements – OPPOSE – engaged in a deceptive trade practice.
Some of those bills include: by Rep. Pete Lee (D-Colorado Springs) Judicial precedence has traditionally re-
HB 1022 Seller Financing of Real Prop- was postponed indefinitely by the House quired plaintiffs to establish that a defen-
erty – SUPPORT – by Rep. Rep. Ray Scott Transportation Committee. This bill would dant’s actions caused a significant public
(R-Grand Junction) and Sen. John Morse have allowed a public utility to finance impact. Shifting the burden of proof on to
(D-Colorado Springs) - was signed into the up-front costs of making one or more defendants would have induced plaintiffs
law the first week of March. The new law, energy efficiency improvements to real to bring unsupported claims.
proposed by CAR, will now allow a seller property and to have the property owner Are you receiving the weekly Capitol
up to three transactions in any twelve repay the financing over time through Connection? Sign up now to begin receiv-
month period before they are required to direct charges on the owner’s utility bills. ing CAR updates on legislative activity af-
be licensed as a mortgage loan originator. The bill did not take into account a cus- fecting our industry. Please let CAR staff
Click here for Talking Points. tomer’s credit worthiness and created a know if you have additional questions
lien on real property that automatically with regard to recent legislation.
transferred upon conveyance. Click here
for Talking Points.
page 6 | www.ColoradoREALTORS.com
What is CYPN and
Where Do I Sign Up?
By: Amanda DiVito Parle, 2011 Chairperson
You may have heard about the Colorado Young Professionals Network
(CYPN) in conjunction with the Colorado Association of REALTORS®
(CAR) and may have been wondering who we are and what we are
trying to accomplish. CYPN was created for career minded young
REALTORS® to become more active in leadership at the local, state
and national levels and to provide networking opportunities which
engage, educate and enrich the X and Y demographic.
CYPN has some exciting goals in mind for 2011 which include:
increasing our membership and outreach at the local associations,
increase younger professionals knowledge of the Political Survival
Funds including why it’s so important for all to support what supports
us in this business, and to engage new networking
and philanthropic opportunities in every corner of
our beautiful state. We plan to accomplish this by
appointing a young professional as the “point person”
at each of the local associations as well as strong
BACK TO THE LAND!
district leadership involvement. Our young leadership
advisory board made up of 13 YPNers throughout the
state is highly involved and dedicated to growing this
grassroots effort which has caught fire from NAR down!
Join RLI and earn
The membership of the CYPN is a diversified group
made up of REALTORS® and Affiliate members under the ALC.
the age of 40. Members must be current with their
dues and must be a member of YPN through the Learn from
National Association of REALTORS®. There is no cost
for REALTOR® YPN or CYPN membership and a minimal
our top rated
$100/year cost for Affiliate membership. education
Young professionals may join our group by visiting our courses!
Facebook Page at Colorado Association of REALTORS®
(CAR) YPN, by visiting www.ColoradoREALTORS.com or
Find us at:
page 7 | www.ColoradoREALTORS.com
By: Jon Goodman &
State Approved Commercial
Colorado has returned to having a State approved real estate purchase contract
designed for commercial transactions.
This article identifies differences between estate community as having a conceptual flaw. The more common
practice in commercial transactions is for the buyer to have fewer
the new Colorado Real Estate Commission
and broader contingencies than in residential deals. Contracts in
(CREC) approved commercial and commercial transactions are often drafted to include only a single, all-
residential forms, a conceptual flaw in the encompassing “free-look” due diligence contingency. This practice
commercial form, and a partial solution to differs significantly from the custom in residential transactions where
different categories of due diligence have their own contingency.
the flaw. Most of the important comments For several years, for example, residential contracts have typically
on the commercial contract also apply to segregated contingencies for financing, appraisal, common interest
the new “Income-Residential” form. community documents, title, “off-record” matters, survey matters,
insurability, and the condition of the property.
Compared to the residential form, the new commercial Rather than conforming to the custom in commercial real
form omits sections that are typically not relevant in estate of having fewer and broader contingencies, however, the
commercial transactions, including clauses addressing: new CREC-approved commercial form has added contingencies
FHA and VA financing; sources of potable water; carbon for environmental and ADA evaluations, and tenant estoppel
monoxide alarms; lead based paint; methamphetamine; statements, as well as a new contingency included in all the new,
and the Colorado Foreclosure Protection Act. The 2011 forms regarding the buyer’s satisfaction with “Due Diligence
commercial form adds provisions addressing trade fixtures, Documents.” Depending upon how one counts, the commercial
environmental inspections, Americans With Disabilities contract has eleven separate, subjective buyer contingencies. In
Act (ADA) evaluations and tenant estoppel statements, addition to fighting custom, the overlapping nature of many of
including separate contingencies for the environmental the eleven separate contingencies in the commercial form, and the
inspections, ADA evaluation and tenant estoppel differing consequences associated with some of those contingencies,
statements. potentially creates problems.
CONCEPTUAL FLAw Consider, for example, a situation involving a neighboring property
owner’s retaining wall that encroaches onto the property under
While the attempt to create a practical, CREC-approved contract. Several of the contingency provisions of the commercial
commercial contract form is welcomed, the new form form might apply to such an encroachment. If the buyer learns of
is likely to be perceived by many in the commercial real the encroachment through its own investigations, §8.2 appears to
continued on next page
page 8 | www.ColoradoREALTORS.com
Commercial Contract from page 8
apply. If a previous survey provided by the seller discloses the encroachment, then
either §8.2 or §10.8 (through §10.7.10) would seem to apply, depending on when
the seller delivered that survey. If the buyer learns of the encroachment from a new
Survey obtained pursuant to §7.3, then the §8.3.2 contingency seems to apply; and
if the title company includes or adds an exception to its commitment based on any
is a Year Long
such new or previous survey, the §8.1 contingency could apply to that exception. Commitment
If the buyer learns of the encroachment both from a previous survey delivered
by the seller and the buyer’s new Survey, if the §8.2 Off-Record Matters Objection
Deadline is earlier than the §8.3.2 Survey Objection Deadline, and if the buyer fails to
send a “notice to terminate” under § 8.2 based on that encroachment, can the buyer
still validly terminate under the later §8.3.2 Survey Objection Deadline based on that
same encroachment? (Consider the last sentence of §8.2, which indicates the buyer
“accepts title subject to such rights, if any, of third parties of which Buyer has actual
knowledge.”) Lawyers can make arguments on both sides of that question.
Other potential problems stem from the differing consequences associated with
those overlapping contingency provisions. A notice to terminate given under §8.3.2
or §10.8, for example, results in the automatic termination of the contract. A “notice to pril has been designated as Fair Housing
terminate” under §8.2 or §8.1, however, does not result in the automatic termination Month, but the truth is it should be
of the contract. The provisions of §8.5 set forth both a qualified obligation on the practiced every day of the year. Much has
seller’s part to try to cure an unsatisfactory matter objected to under §8.1 or §8.2, changed since the Fair Housing Act became law in
and a right for the buyer to waive those objections and proceed with the contract. 1968. Our country is more diverse than it’s ever
Consider the situation described above where both the seller’s and buyer’s survey been and new technology opens the door to new
disclose the neighbor’s encroaching retaining wall. Assume timely notice by buyer ways to promote, market and communicate.
under any provision. What follows if the buyer sends a notice to terminate based
on that encroachment? Does the contract automatically terminate, or does the Even though these changes have brought new
seller have the obligation and the right to seek to cure the encroachment (with the challenges as inequality in housing continues to
corresponding right of the buyer to waive its objection if the encroachment is not be addressed there is one constant-
cured by the time of closing)? Does the buyer have the right to dictate the result by
“The Fair Housing Act makes it unlawful to
specifying the particular contingency provision under which the buyer’s notice is
discriminate in housing transactions based on
race, color, national origin, religion, gender,
The “off-record” and survey situation described above is but one illustration of the disability, or family status.”
overlapping contingency provisions of the new contract form, and the associated
Don’t find out the hard way that you made a
problems that might arise from such overlapping contingencies.
mistake. It will cost you. Make sure you brush up
PARTIAL SOLUTION TO FLAw on the Fair Housing Laws at every level- federally,
and at the state and local level.
One way of making the CREC’s commercial contract more like customary commercial
contracts is to use one unified deadline for all the contingencies. While this would For more information about the Fair Housing
help solve potential problems with timing or sequencing the contingencies, it would Act, including summaries of recent housing
not eliminate potential problems associated with the different consequences for discrimination cases, go to www.hud.gov/
different contingencies. One of the reasons the commercial real estate industry fairhousing.
may have evolved the custom of fewer but broader contingencies is to avoid these
Disclaimer -- Content is general information only. Information is not provided
as advice for a specific matter, nor does its publication create an attorney-client
relationship. Laws vary from one state to another. For legal advice on a specific
matter, consult an attorney.
page 9 | www.ColoradoREALTORS.com
By Scott R. Saunders
of REALTORS® reported working with an
international client last year. Click here
“UNDERSTANDING THE REQUIREMENTS AND THE EXCEPTIONS”
to read more from the NAR research.
Congress enacted the Foreign Investment in Real Property Tax Act of 1980 (“FIRPTA”) to
impose a tax on foreign persons when they sold a U.S. real property interest. A foreign
person includes a nonresident alien or foreign partnership, trust, estate or corporation 3. The third exception is for transactions
that has not elected to be treated as a domestic corporation under IRC §897(i). For U.S. in which the IRS has issued a withholding
property dispositions subject to FIRPTA, the transferee (purchaser) is required to with- certificate (“Withholding Certificate”) to
hold and remit to the IRS 10% of the gross sales price to ensure that any taxable gain the foreign seller. The amount that must
realized by the seller is actually paid. The withholding rate is computed differently for be withheld by a buyer can be reduced or
other foreign entities, such as foreign corporations and trusts, which are required to eliminated pursuant to the Withholding
withhold 35% of the capital gain realized on the sale. For more information on FIRPTA, Certificate. The transferee, the transferee’s
visit: www.irs.gov and download Publication 515: Withholding of Tax on Nonresident agent or the transferor may request a
Aliens and Foreign Entities. Withholding Certificate. The IRS will gen-
erally grant or deny an application for a
THREE EXCEPTIONS TO FIRPTA Withholding Certificate within 90 days
after its receipt of a completed Form
1. Sale of a personal residence. Individual non-resident alien sellers, can exclude the 8288-B application.
gain on the sale of a personal residence under Section 121 just as U.S. citizens can.
Section 1445 (b)(5) provides an exemption for property acquired by a transferee that IMPACT ON SIMULTANEOUS
will be used as the transferees personal residence if the property value is $300,000 or EXCHANGES
less. To qualify for the exemption, a closer will generally require the transferee to sign
an affidavit stating that they intend to use the property as their personal residence. In Under the foregoing rules, a buyer of
addition, where the sale of property exceeds $300,000, a foreign seller’s notice of non- U.S. property from a foreign person can
recognition of gain based on Section 121 may not be relied upon and an IRS withhold- rely on a 1031 Declaration and Notice
ing certificate is required even though the exclusion may reduce or even eliminate only if the foreign person exchanges U.S.
the amount to be withheld under Section 1445. This exception for a residence is not property for other U.S. property in a swap
available for the disposition of an investment property owned by a foreign person. in which the foreign person receives
no cash or mortgage boot. Since many
2. The second exception to the FIRPTA withholding requirements is in the case of a exchanges can involve payment of some
simultaneous 1031 exchange and the transferee is not required to withhold if the “[t] cash or debt reduction, the utility of a
he transferor gives written notice that no recognition of any gain or loss on the trans- 1031 Withholding Certificate is substan-
fer is required because of a non-recognition provision in the Internal Revenue Code tially reduced.
or a provision in a U.S. tax treaty.” Such a notice is called a “Declaration and Notice to
Complete an Exchange” (“1031 Declaration and Notice”). continued on next page
page 10 | www.ColoradoREALTORS.com
FIRPTA from page 12
IMPACT ON DELAYED EXCHANGES D. The next step is to apply for a Withholding Certificate from
To the extent that the 1031 exchange is not simultaneous, or if the IRS.
any cash or mortgage will be received by a foreign person with - File IRS From 8288-B, Application for Withholding Certificate
respect to the disposition of U.S. property, the buyer can only for Dispositions by Foreign Persons of U.S. Real Property
rely on a Withholding Certificate issued by the IRS to a foreign Interests. See the instructions to Form 8288 as it may be
person. As a result, foreign persons desiring to engage in a possible to attach Form 8288-B to Form W-7 when applying
delayed 1031 exchange should consult with a tax advisor and for both a TIN and a Withholding Certificate.
apply for an International Tax Identification Number (ITIN) and a
1031 Withholding Certificate well in advance of the anticipated E. Notify the buyer of your relinquished property that you have
disposition of U.S. property holdings. applied for a Withholding Certificate.
STEPS INVOLVED IN COMPLYING wITH FIRPTA IN AN F. Prior to closing on the sale of a relinquished property contact
EXCHANGE a Qualified Intermediary to have all exchange documenta-
A. First, consult with your tax advisor and analyze if FIRPTA tion prepared and forwarded to the closing officer/attorney
applies to you and your transaction and determine if you so the transaction can be closed as a 1031 exchange.
are considered a “Foreign Person” who is selling a U.S. real
property interest. G. The exchange begins when the relinquished property clos-
es. The buyer must file IRS Forms 8288 and 8288-A to report
B. Next, explore if any exceptions to the FIRPTA withholding and pay the amount withheld to the IRS by the 20th day
apply to your situation. after the date of the relinquished property closing.
C. If you are a Foreign Person, then you must obtain a U.S. Scott Saunders is a Senior Vice President for Asset Preservation, a
Taxpayer Identification Number (“TIN”) from the IRS as fol- leading national 1031 exchange Qualified Intermediary. He can be
lows: reached at email@example.com or 800-282-1031.
- Individuals: To request a TIN, file IRS Form W-7, Application
for IRS Individual Identification Number.
- Businesses: Obtain an Employer Identification Number
(“EIN”) by filing IRS Form SS-4, Application for Employer
Thank you FirstBank for your generous $8,000
donation to CARHOF and to Metro Brokers for their
$1,000 donation! Your donations help improve our
page 11 | www.ColoradoREALTORS.com
HOw BIG OF A DOwN PAYMENT wILL have also opposed the budget you can expect are:
BE ENOUGH? proposal. If you have not sent your • Many current informative education
That is what the Securities and letter in to oppose changes to the MID sessions with great speakers
Exchange Commission proposed do so now and make sure congress • Broker/Owner Summit
Rulemaking (“NPR”) for Section 941 doesn’t make the mistake of devaluing • Commercial Breakfast Forum
of the Dodd-Frank Act will address. the benefits of homeownership. Click • Improved networking opportunities
According the HUD Secretary Shaun here and take action now! • Fun Events
Donovan the rule seeks to define o Cosmic Bowling
qualified residential mortgages - the o REALTORS® Got Talent
loans that would not be subject to o Golf Tournament at the Sanctuary
the risk retention requirements. Much • Community Service Day and more!
debate will center on the size of down Pre-registration will open on April 27th
payments. The proposal is now open at the CAR Spring Business Meetings.
for public comment until June 10. You can register then at
PRESERVE, PROTECT AND DEFEND
THE MORTGAGE INTEREST 2011 CAR CONVENTION MOVES TO BRUSH UP ON THE DO NOT CALL
DEDUCTION SHERATON DENVER DOwNTOwN RULES
Warning signs have appeared on Mark your calendars to attend the 2011 Did you know that telemarketers and
Capitol Hill about mortgage interest CAR State Convention on October sellers (including REALTORS®) are
deductibility and homeowners have 2-4 at our new location the Sheraton required to search the registry at least
already taken hits the last few years. Denver Downtown Hotel. The State once every 31 days and drop from
Send your representative a letter to Convention taskforce is looking their call lists the phone numbers of
co-sponsor H.R. 25 a bi-partisan House forward to delivering an enlightening consumers who have registered? Click
resolution that affirms the value and and memorable experience to all who here and brush up on the “Do Not Call”
importance of the mortgage interest attends. More details will be available rules today.
deduction. Most members of Congress in the near future. Some of the things
Bring in the gold!
SIGN UP FOR TEAM COLORADO
This could be your ad REALTORS® MS-150 RIDE
call 303-790-7099 Register today and join Team Colorado
REALTORS® as we ride our bikes,
volunteer and raise funds for the Bike
MS: Colorado’s Ride 2011-June 25-26!
This well organized event helps the
National MS Society fund research and
advocate for a better quality of life for
families and friends with MS. Click here
to join the team!
page 12 | www.ColoradoREALTORS.com
NATIONwIDE OPEN HOUSE DRIVES to Jan. 1 of each year, they must be
BUYERS ATTENTION TO HOMES FOR Leading Edge achievers or higher and
SALE involved with industry trade groups and
The 2011 community initiatives. calendar of
Nationwide HUD TO OFFER GRANTS TO FIX events
Open House HOUSING-RELATED HEALTH
will be HAZARDS
held on the Funding to protect children and CAR
weekend of, June 4–5, 2011. This event, other vulnerable residents from lead REALTOR® Nationwide Open House:
which began on a local level a few years poisoning and other housing related June 4-5
ago, is a weekend when REALTORS® health hazards CAR Leadership Election: June 9, CAR
across the country are invited to hold The U.S. Department of Housing and Office/Virtual
open houses in their area. It is designed Urban Development announced that 2011 CAR State Convention: October 2-4,
to drive buyers’ attention and interest to it is making grants available to help Sheraton Hotel Denver
homes for sale and offers opportunities eliminate lead-based paint and other
to educate the public about the benefits housing related health hazards from NAR
of home ownership. lower income homes. The funding Midyear Governance Meetings & Trade
Ask your local association for details and will help protect young children as Expo: May 9-13, Washington D.C.
information on how you can participate well as other vulnerable populations. REALTORS® Conference & Expo:
in this year’s REALTOR® Nationwide Prospective grantees will be able to November 11- 14, Anaheim, CA
Open House. apply for supplementary funding to
promote and develop a local Healthy Get details about these events at
KANEMOTO HONORED AS A RISING Housing initiative, building on their www.ColoradoREALTOR.com under
STAR lead hazard control program, to address the “events” tab.
Keith Kanemoto, multiple housing-related health hazards
a commercial in accordance with best practices HUD
broker for has identified.
Prudential HUD is making these grants available
Rocky Mountain through its Lead-Based Paint Hazard
REALTORS® Control, Lead Hazard Reduction
in Longmont, Demonstration, Healthy Homes
Colorado, was honored as its first Rising Production and Asthma Interventions in
Star Award recipient at the Prudential
Real Estate Sales Convention.
Public and Assisted Multifamily Housing
Kanemoto is currently in the NAR HUD requires prospective grantees to ads are
2011 Leadership Academy class and
is serving his second term on the
submit their applications electronically
via www.grants.gov. Any changes to
NAR Equal Opportunity and Diversity HUD-published funding notices will be in this publication.
Committee. He also serves on NAR’s made available to the public through
Young Professionals Network Advisory a Federal Register publication and
Committee, among other appointments. published on Grants.gov. Applicants Call 303.790.7099
The Rising Star Award is presented
annually to a sales professional or team
are urged to sign up for Grants.gov’s
notification service to receive periodic
for commitment to their company, updates or changes to this grant
community and profession. Honorees offering.
must be 35 years old or younger prior
page 13 | www.ColoradoREALTORS.com
What has PSF Done for Me Lately? Ron Phipps and
Your best investment in real estate...
2011 STATE LEGISLATIVE SUCCESSES
• CAR passed legislation that will now allow a seller up to three transactions in any
twelve month period before they are required to be licensed as a mortgage loan
operator. Previously, state law permitted seller financing only if the property being
conveyed serves as the seller’s residence.
• CAR successfully contributed to the defeat of legislation that would have allowed a
public utility to finance the up-front costs of making one or more energy efficiency
improvements to real property. REALTORS® opposes the absence of credit risk hwaite
protection; as well as home buyers being forced to pay the previous owner’s energy
efficiency improvement costs.
• CAR played a crucial role in the defeat of SB-68 Consumer Protection Enforcement. This
legislation claimed to eliminate additional burdens on consumers bringing complaints,
but it did not provide any added protections for consumers that bring legitimate claims
concerning deceptive trade practices. REALTORS® opposed shifting the burden of proof
on to defendants, thus inducing plaintiffs to bring unsupported claims.
RECENT FEDERAL LEGISLATIVE ACCOMPLISHMENTS
• Title XIV of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
focuses on the reformation of mortgage lending, specifically lending activities that were
deemed predatory. NAR worked with Congress to reduce the bill’s impact on seller- gan, Amanda
, Duane Dug
Kati Harken and Joe DiV
financing and ensure that consumers would have this tool at their disposal. DiVito Parle
• NAR successfully raised the profile of the challenges that face the self-employed and
small employers, including REALTORS®, throughout the 111th Congress’ debate over
health care reform.
• NAR worked with Congress and the Obama Administration to strengthen FHA and
maintain its continued viability. These changes ensured the financial stability of FHA
while protecting consumers by keeping the program affordable.
• Successfully concluded an eight year long battle by permanently preventing national
banking conglomerates from entering the real estate brokerage and property
management businesses. State Rep. C
indy Acree an
Invest Directly Online at: www.ColoradoPSF.org
page 14 | www.ColoradoREALTORS.com
Idyllwilde in Parker Watercolor in Castle Rock The Crossings in Castle Pines Observatory Village in Fort Collins Granby Ranch in Granby
We pay 3% on the whole home.
It’s simple – sell a beautiful brand new Village home and receive a 3% commission. That’s
a 3% commission on the entire purchase price. Every feature. Every upgrade. Everything
that makes a Village home your client’s dream home.
When you sell a brand new Village home, your client gets more too. The things that
matter most to them like Energy Star features and construction practices resulting in
significantly lower utility bills, a comprehensive 10-year warranty and thorough building
inspections by an independent third party expert.
You can count on 3% with Village Homes and be confident that your client is buying
the perfect home from the Colorado builder recognized for its steadfast commitment
to quality craftsmanship and unrivaled value.
Tuesday thru Sunday 10:00 – 6:00
Monday 12:00 – 6:00
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page 15 | www.ColoradoREALTORS.com
Colorado’s Changing Population
The 2010 Colorado Census Data is in and it says Colorado has grown by 16 percent overall
and is continuing to become more ethnically and racially diverse. The increase in diversity
occurred throughout the state, not just in the metro areas. Take a look at some figures that
shows how Colorado’s landscape is changing.
Colorado’s population growth profile from Seventeen of Colorado’s 64 counties (26 per-
2000 to 2010: cent) showed population declines. The larg-
1. Hispanic population (largest minority est declines were in:
group) increased by over 300,000 or 41 per- 1. Prowers (-1,932)
cent 2. Otero (-1,480)
2. African Americans grew by 19 percent 3. Huerfano (-1,151)
3. Asians by 45 percent The counties that show the fastest growth in
4. White non-Hispanic by 9.9 percent percentage terms are a little more diverse.
Colorado’s counties with the largest increase • Douglas was again the fastest growing
in the minority population: county in Colorado growing at 62.4 percent
1. Arapahoe compared to the state as a whole growing by
• Other fast growing counties include:
3. El Paso
o Weld (39.7 percent)
4. Eastern Plains counties of Yuma, Kit Carson,
and Morgan o Garfield (28.7 percent)
5. Western Slope counties of Moffat, Garfield, o Mesa (26.2 percent)
Eagle and Mesa o Eagle (25.3 percent)
Colorado’s most populous counties are:
1. El Paso County (622,263) • The five largest cities
2. Denver (600,158) 1. Denver (600,158)
3. Arapahoe (572,003) 2. Colorado Springs (416,427)
4. Jefferson (534,543) 3. Aurora (325,078)
4. Fort Collins (143,986)
Counties with the largest increase in popula- 5. Lakewood (142,980)
1. Douglas County gaining 109,699 The census data are used by state officials to
2. El Paso County gaining 105,334 realign congressional and state legislative dis-
3. Arapahoe (83,107) tricts in their states, taking into account popula-
tion shifts since the 2000 Census. To access the
4. Adams (77,746) detailed data from the Census Bureau, visit their
5. Weld (71,889) website at: http://2010.census.gov/2010census/
data/ or through the American Fact finder at:
page 16 | www.ColoradoREALTORS.com
Join the Team!
TEAM COLORADO REALTORS® & BIKE MS
JUNE 25-26, 2011
150 Mile Two-day Ride, or 25 Mile One-day Ride
• $65 to register, must raise $400 prior to race to participate
• 150 mile ride is from Westminster to Fort Collins and back.
• 25 or 40 mile ride option is Saturday, June 25 in Fort Collins
• Dorm lodging from $43-$78 per rider. Call 970-491-7501
• Fee includes: clearly marked and well-planned routes, T-shirt, six
catered meals, fully-stocked rest stops, bike mechanics, medical staﬀ,
police support, SAG wagons, entertainment, Beer Garden, and more!
To register and learn more go to www.ColoradoREALTORS.com
and select “Events” and then Bike MS Ride.
page 17 | www.ColoradoREALTORS.com
R U L E S & R E G U L AT I O N S
CREC takes Positions–Affiliated Business
Arrangements, Lease Options and Broker Teams
CP-38 Commission Position on Disclosure transaction and all parties are expected to sign the disclosure
of Affiliated Business Arrangements and form. The Commission recommends that real estate brokers
disclose their affiliated business arrangements to the party
Conflicts of Interest (4-5-2011) with whom they are working early in their relationship, i.e.
This statement supplements Rule E-46 Affiliated Business at the time brokerage relationships are disclosed or when
Arrangements. §12-61-113.2, C.R.S. the listing contract or buyer broker agreement is negotiated.
In those transactions where the broker does not deal with
Affiliated Business Arrangements was enacted in Colorado
another party until the time of contracting written disclosure
to provide transparency, accountability, and consumer
should be made to all parties at the time the purchase
protection through disclosure and consistency concerning
contract is fully executed.
affiliated business arrangements. Affiliated business
arrangements have also been regulated for many years Additionally, real estate brokers are required to make certain
by the Real Estate Settlement Procedures Act (RESPA). disclosures to the Division of Real Estate regarding their
RESPA was precipitated by significant reforms identified by affiliated business arrangements. Colorado law requires
Congress as necessary to ensure that consumers did not every licensee to disclose to the Commission when they
pay disproportionately high settlement costs as the result of enter into or change an affiliated business arrangement.
certain deleterious business practices by settlement service All affiliated business arrangements to which the licensee is
providers. RESPA is applicable to any residential mortgage a party must be disclosed.
transaction involving a federally related mortgage loan.
Disclosure is required at the time of a new application for
However, Colorado law requires disclosure of affiliated
licensure or at the time of activation of an inactive license.
business arrangements to consumers even if the transaction
The disclosure must include the physical location of the
does not involve a federally related residential mortgage
Employing brokers are required to disclose the names of all
Colorado law C.R.S. 12-61-113.2(1)(a) defines an “affiliated
affiliated business arrangements to which the employing
business arrangement” as an arrangement in which:
broker is a party on an annual basis, at the least. The
“A provider of settlement services or an associate of a provider disclosure must include the physical location of the affiliated
of settlement services has either an affiliate relationship with or businesses. The Commission has determined that these
a direct beneficial ownership interest of more than one percent disclosures shall be made electronically through the Division
in another provider of settlement services;” and the provider of Real Estate’s website.
directly or indirectly refers business to the other provider or
It is the Commission’s position that Rule E-25 Continuing
affirmatively influences the selection of another provider of
duty to disclose conflict of interest and license status, applies
to all licensees including real estate brokers who perform
It is the Commission’s position that real estate brokers must licensed property management services and are affiliated
disclose affiliated business arrangements to consumers in all with businesses or vendors that provide services applicable
transactions intended to result in the transfer of title from to lease transactions. For example, a real estate broker
one party to another. RESPA requires that affiliated business acting on behalf of a landlord is required to disclose to the
arrangements be disclosed before or at the time a referral landlord that the real estate broker has partial ownership of
is made to a provider of settlement services. Colorado the maintenance company that the real estate broker utilizes
law requires a licensee to disclose any affiliated business for the landlord’s property repairs. The Commission strongly
arrangement when an offer to purchase real property is recommends that this type of information be disclosed to
fully executed. In Colorado, the disclosure is required to be the principal early in the business relationship, i.e. at the time
in writing, must be given to both agents and transaction brokerage relationships are disclosed or when the listing
brokers, must comply with RESPA and Colorado law, and must contract is negotiated. Additionally, this disclosure should
be made using the Federal RESPA disclosure form. Colorado be made in writing.
law requires real estate brokers to disclose their affiliated
continued on next page
business arrangements to all parties to the real estate
page 18 | www.ColoradoREALTORS.com
CREC from page 10
to ensure that they do not advertise in a manner that misleads
CP-39 Commission Position on Lease Options, Lease the public as to the identity of the brokers’ licensed brokerage.
Purchase Agreements and Installment Land Contracts Real estate brokers that function as teams should not advertise
(4-5-2011) teams using the terms “realty”, “real estate”, “company”,
“corporation”, “corp.”, “inc.”, “LLC” or other similar language that
The Commission recognizes that in order to maintain the would indicate a company other than the employing brokerage
resilience of the real estate market during times when firm. Advertising includes, but is not limited to, websites,
conventional lending requirements are rigorous, alternative signage, property flyers, mailings, business cards, letterhead
funding practices are utilized to sustain the market conditions and contracts. The advertising of team names should never
of supply and demand. The Commission has received and give the impression that the team is an entity separate from the
investigated numerous complaints pertaining to lease options, licensed real estate brokerage. If the identity of the employing
lease purchase agreements and installment land contracts. broker or the brokerage firm is difficult for the public or the
Although the Commission does not have the authority to Commission to ascertain, the team may be in violation of Rule
prohibit the types of real estate transactions that real estate E-8 Advertising.
brokers participate in, the Commission strongly cautions real
estate brokers to utilize the services of an attorney licensed Supervision:
to practice law within the State of Colorado. It has been the In addition to the supervision requirements set forth in Rules
Commission’s observation, based on complaints received, that E-31 and E-32, Rule E-30 Employing broker responsibilities
lease option and lease purchase transactions are complex requires that the broker designated to act as the broker for any
and generally contain provisions with significant financial risk partnership, limited liability company or corporation, i.e. the
posed to the prospective buyer and seller. Installment land employing broker, fulfill the following duties:
contracts and the other transactions mentioned in this position 1) Maintain all trust accounts and trust account records;
statement afford buyers the opportunity to take possession of
the real property and make installment payments to the seller. 2) Maintain all transaction records;
There is a significant potential for harm to the seller, buyer 3) Develop an office policy manual and periodically review
or assignee if the installment land contract is not properly office policies with all employees;
drafted. In all of the above transactions, the seller retains legal 4) Provide for a high level of supervision for newly licensed
title to the property while the buyer may acquire equitable persons pursuant to Rule-32;
title. The Commission does not have an approved contract
form necessary to memorialize the terms and nuances related 5) Provide for a reasonable level of supervision for
to these complex transactions, or any jurisdictional regulations experienced licensees pursuant to Rule E-31;
that may be germane. Pursuant to Rule F, the appropriate 6) Take reasonable steps to ensure that violations of statutes,
provisions of the license law and the brokerage relationship rules and office policies do not occur or reoccur;
act (§§12-61-113, 12-61-804, 805 and 807, C.R.S.), real estate
7) Provide for adequate supervision of all offices operated by
brokers are prohibited from drafting a contract document
the broker, whether managed by licensed or unlicensed
that would reflect the terms of such a transaction as it would
exceed their level of competency and is a matter requiring
the expertise and advice of an attorney. Additionally, such Pursuant to §12-61-118, C.R.S. and Rule E-29, employing
behavior may be construed as the unauthorized practice of brokers are also responsible for providing supervision over
law by the real estate broker and subject to civil penalties. The such activities with reference to the licensing statutes and
contracts for these transactions should not be prepared by a Commission rules for all brokerage employees, including but
real estate broker; rather, the documents should be drafted by a not limited to administrative assistants, bookkeepers and
licensed Colorado attorney-at-law engaged for each particular personal assistants of licensed employees. Thus, employing
transaction. brokers are responsible for the actions of unlicensed persons
who perform functions within the real estate broker team.
CP-40 Commission Position on Teams (4-5-2011)
Employing brokers need to ensure that any unlicensed person
The Commission recognizes that there are benefits to both real acting within the team is not engaged in practices that require
estate brokers and consumers in the usage of real estate broker a real estate broker’s license. Employing brokers also need to
teams. Teams may be formed within a licensed brokerage firm establish that the compensation paid to an unlicensed person
with the approval of the employing broker. Real estate brokers for services provided is not in the form of a commission.
operating as teams need to ensure that they are compliant Compensation paid to an unlicensed person is not required
with Commission rules regarding advertising, name usage and to be paid solely by the employing broker. However, §12-61-
supervision. 117, C.R.S. requires that all licensee compensation or valuable
Advertising and name usage: consideration for the performance of any acts requiring a
broker’s license is paid solely by the employing broker.
While there is no prohibition of teams, real estate brokers need
page 19 | www.ColoradoREALTORS.com
REALTOR® Advantage Partners
The Colorado Association of REALTORS® provides multiple networking opportunities, programs,
services and business strategies to enhance your careers. In addition to general functions of an association
such as communications, administration, etc, your membership entitles you to the following discounts:
American Furniture warehouse: Looking for the perfect REALTORS® Carbon Monoxide Alarm Program: Bulk
closing or thank you gift for your buyer or seller? AFW is offering discounts on Carbon Monoxide detectors. To order, visit www.
5% or 10% off any size gift card purchased by CAR Members. logisticsupply.com and use Login:119008 and Password: 7099.
No limits on the dollar amount of the gift card. Go to the CAR Learn more at the CAR website.
website to learn more or call (720)-873-8640.
UPS Overnight: With UPS and your membership benefits,
United Car Care: CDV provides mechanical repair protection you can take advantage of special discounts on shipping. The
insurance, commonly known as “extended warranties”. As more you ship, the more you save.There are no enrollment fees,
REALTORS®, you depend on your vehicles. Given the challenges contracts to sign, or minimum usage requirements. Go to the
of today’s real estate market, we’re offering $400 savings to CAR website to enroll or call (800) 325-7000, and mention code
REALTORS®. Protect your vehicle for hundreds less than if #WSR055.
purchased through a retail dealership. Call 303-306-0502 or go
to the CAR website. Mail List Rental: Mailing lists may be purchased at a discount
for CAR members. Contact Trudy Hammond at CAR for details at
iHOUSEweb: The leader in real estate marketing solutions, 303-790-7099. Email addresses of our members are not for sale.
offers affordable, easy-to-use online lead generation tools for
over 30,000 real estate professionals. CAR Members get half off FREE STUFF
the startup fee on any of our products, included ELITE Websites, Colorado Drug Card: Gain access to a FREE Prescription
IDXPro, and more! Take a Free, No Obligation Test Drive of any of Discount Drug Card program called Colorado Drug Card. Sign
our products at www.ihouseweb.com! up on the CAR website or www.coloradodrugcard.com
Nationwide®: REALTORS® can receive a special discount on MongoFAX: MongoFAX enables you to scan and send hardcopy
auto insurance from Nationwide®. Contact agent Chris Boyers, documents from any standard fax machine to any email address
Nationwide Insurance & Financial Services, phone: 303-466- in the world, with no additional hardware or software. All you
5544 x123 firstname.lastname@example.org. need is your designated MongoFAX Cover Page. Go to the CAR
website for details.
RMD Signs: CAR members receive on sign merchandise. Please
call for the current special at 303-573-5500.
DORA Forms: Easily store, generate, email, and print all your
Colorado Real Estate Commission forms online. No long-term Visit www.ColoradoREALTORS.com to learn more!
committments or contracts. Get started now with your special
CAR member discount and be generating forms in minutes. For
more information go to www.doraforms.com
page 20 | www.ColoradoREALTORS.com
Broad Coalition Encourages
The Everitt Real Estate Center (EREC) State Legislature to Restrict
Private Transfer Fees
began working with the Colorado
Association of REALTORS® (CAR),
Colorado Mortgage Lenders Association
(CMLA), and the Colorado Association of
Home Builders (CAHB) in January 2011 to Colorado legislators have introduced a new bill that will protect Colorado
coordinate the development of inaugural homeowners by restricting private transfer fees. As of July 1, 2011, Senate Bill
surveys of their respective memberships 11-234 will ban private transfer fees, a relatively new financial scheme that steals
to provide a comprehensive view of home equity, lowers home resale values and adds another layer of difficulty to
the residential market in the state of selling a home.
The bill is supported by a variety of organizations, including the Land Title
The following is the summary of the
Association of Colorado, the Colorado Bar Association, the Community
Associations Institute, the Colorado Mortgage Lenders Association, and the
• CAR respondents are generally more
Colorado Association of REALTORS®.
optimistic in terms of economic
issues than CAHB or CMLA “It is great to see legislators standing up for homeowners by protecting
respondents consumers from these predatory fees,” said Chris Payne, a member of the Real
• More transactions, short sales, and Estate Section of the Colorado Bar Association. “This bill will be an important
regulations in 2011 step in safeguarding our already fragile real estate market from abuse.”
o No significant change in days on
market 2011 expectations over Manhattan-based Freehold Capitol Partners is leading the push to add these
2010 private transfer fee covenants to home purchase transactions. The fees require
• Buyer confidence and qualifications that a percentage of the sale price of a home be paid to a private 3rd party every
remain top barriers to sales time the property is sold, typically for 99 years. Freehold is attempting to bundle
• Distressed sales, appraisals, and seller and securitize these fees, and sell them to Wall Street investors.
perceptions impacting residential Homeowner association fees are not restricted by S.B. 11-234. HOA fees,
valuations paid by homeowners in many Colorado cities and towns for services such as
• Lack of confidence in proposed maintenance of common areas in their developments, provide a direct benefit
changes with Fannie Mae and to the community in which a home is located.
• Medical Marijuana Dispensaries have The bill is the latest in a series of government actions to limit private transfer
negative impact on neighboring fees. Arizona, Arkansas, California, Delaware, Florida, Hawaii, Illinois, Idaho, Iowa,
home values Kansas, Louisiana, Maryland, Minnesota, Mississippi, Missouri, Nebraska, New
Jersey, North Carolina, Ohio, Oregon, South Dakota, Texas, Utah and Virginia
Click here to view the survey results in its have all passed legislation to restrict the dangerous fees. Colorado is one of
entirety. many states with pending legislation.
page 21 | www.ColoradoREALTORS.com
MARS and What it
Means to Me
Important information for brokers working on short sale transactions
The Federal Trade Commission (“FTC”) ees. The FTC addressed NAR’s comments
has issued a final rule that may impact in the following footnote:
real estate professionals who represent The Commission concludes that an
clients involved in a short sale trans- exemption for real estate agents is not
action. Depending on certain factors, necessary. Real estate agents customar-
the rules may require real estate profes- ily assist consumers in selling or buying
sionals to make certain disclosures to homes and perform functions such as to short sale sellers or sellers in fore-
consumers if they negotiate a short sale listing homes for sale, showing homes, closure:
with a lender, advertise short sales expe- and finding desirable homes for con- a. “(Name of company) is not associ-
rience, or take upfront fees from short sumers. The Commission is aware that ated with the government, and our
sale sellers. real estate agents may perform these service is not approved by the gov-
In November 2010, the FTC published functions when properties are bought ernment or your lender.”
the final Mortgage Assistance Relief or sold through a short sale transaction,
b. “Even if you accept this offer to use
Services final rule (“MARS”). MARS is pri- but does not consider these services to
our services, your lender may not
marily directed at companies that offer be MARS.
agree to change your loan.”
loan modification services to consum- The MARS rules took full effect on
ers. When a company is marketing these 3. Consumer-Specific Disclosure. The
January 31, 2011. While the footnote
types of services to consumers, MARS following disclosures must be in all
indicates the FTC does not consider
requires that the service provider make seller-specific communications:
these services to be MARS, the language
certain disclosures to consumers. In in the rule would indicate otherwise. a. “You may stop doing business with
addition, MARS bars advance fees paid Thus, the confusion that’s been created us at any time. You may accept or
to a service provider, prohibit certain by MARS. reject the offer of mortgage assis-
representations, and imposes record tance we obtain from your lender
keeping requirements (must retain for MARS defines “mortgage assistance relief
(or servicer). If you reject the offer,
2 years all MARS advertisements, sales service” to include: “negotiating, obtain-
you do not have to pay us. If you
records for covered transactions, cus- ing or arranging a short sale of a dwell-
accept the offer, you will have to
tomer communications, and customer ing.” Unlike the Colorado Foreclosure
pay us (insert amount or method
contracts). MARS providers can only Protection Act, there is no exception in
for calculating the amount) for our
receive payment if the consumer’s loan MARS for real estate brokers. This means
is modified by the lender. real estate brokers working with short
sale sellers or any seller in foreclosure b. “(Name of company) is not associ-
The FTC and state attorney generals need to understand and comply with ated with the government, and our
have actively prosecuted foreclosure MARS. service is not approved by the gov-
rescue companies, based on evidence ernment or your lender.”
that consumers received very little ben- While we encourage you to review the
entire rule, the essential elements are as c. “Even if you accept this offer and
efit for these services. The prosecutions
follows: use our service, your lender may not
took place under unfair trade practices
agree to change your loan.”
laws, although some states did enact 1. Prohibition of Upfront Fees. MARS
laws specifically regulating this business makes it illegal for real estate brokers 4. Additional Disclosure. While real
model. The FTC itself has brought 40 to charge sellers an upfront fee or estate brokers should never advise
cases and FTC staff told NAR that none of to pass along a short sale coordina- sellers to temporarily or permanently
these cases involved real estate profes- tor’s fee on any short sale transaction discontinue making payments, if they
sionals acting in their licensed capacity. prior to receiving a short sale accep- do, they need to provide the written
tance signed by the seller. disclosure: “If you stop paying your
The FTC began its rulemaking process
mortgage, you could lose your home
in 2009. NAR submitted comments and 2. General Advertisements. The follow-
and damage your credit rating.”
testimony during the rulemaking seek- ing disclosures must be in all general
ing an exemption for real estate licens- advertisements and communications 5. Disclosure Requirements. All disclo-
page 22 | www.ColoradoREALTORS.com
sures must be clear and prominent is affiliated, endorsed or approved by be sure the services they are offering to
and: the seller’s lender, seller’s servicer, short sale sellers or sellers in foreclosure
a. Textual advertisements must have government, a nonprofit organiza- comply with MARS.
the heading “IMPORTANT NOTICE” tion or any other entity or person. STAY TUNED: NAR seeking clarification
in bold face font in two point-type e. Misrepresent the seller’s obligation As a result of MARS, NAR has been active
larger than the disclosure. under the seller’s loan. in meeting with the FTC to create an
b. Audible advertisements must be f. Misrepresent terms and conditions exemption for real estate brokers. Below
preceded with the statement “Before of any refund, cancellation or repur- is a recent email from NAR Legal Counsel
using this service, consider the fol- chase policy for the broker’s services. Finley Maxson regarding MARS.
lowing information.” g. Misrepresent that the broker has “We met yesterday with the FTC, and
6. Short Sale Acceptance. Upon receipt completed the broker’s services. we have good news. While the FTC still
of the seller’s lender’s short sale h. Misrepresent that the seller will believes that a real estate professional is
acceptance, real estate brokers must receive legal representation. covered by the Rule if he/she negotiates
disclose, in writing: or arranges negotiations of a short sale
i. Misrepresent any alternatives to the on behalf of a consumer, the FTC also
i. This is an offer of mortgage assistance broker’s services.
we obtained from your lender (or ser- realizes that the current Rule require-
vicer). You may accept or reject the j. Misrepresent the amount of money or ments do not make sense in a real estate
offer. If you reject the offer, you do the percentage of debt the seller may brokerage context and the FTC is working
not have to pay us. If you accept the save by using the broker’s service. with NAR to develop new guidance. We
offer, you will have to pay us (same k. Misrepresent the total cost to pur- hope to have the information completed
amount as disclosed in #2.a. above). chase the broker’s service. in the future. In the interim, please direct
all questions to NAR Legal Counsel Finley
ii. Also, the real estate broker must pass l. Misrepresent the terms of the seller’s Maxson at email@example.com.
along all notices received from the lender’s offer for relief.
seller’s lender. m. Misrepresentations about the ben-
7. Prohibited Representations. Brokers efits of the broker’s service. [Special thanks to Steve Morgan, Damian
are prohibited from making the fol- Cox, Dick Clark and NAR for their assis-
This is a brief overview and not intended tance to CAR in preparing this Article.]
lowing statements/representations to to be an all inclusive analysis of MARS.
sellers: Real estate brokers should review MARS
a. The seller should not contact or com- and consult with their own attorney to
municate with the seller’s lender or
servicer. MARS may be viewed at:
b. Misrepresent the likelihood of suc-
cess for the service provided. MARS Business Compliance Guide:
c. Misrepresent the amount of time it
will take to accomplish the broker’s
NAR MARS Summary:
d. Misrepresent that the broker’s service
page 23 | www.ColoradoREALTORS.com