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August 26, 2010

New Real Estate Pre-Licensure Requirements to Take Effect in June 2011

Governor Patrick has signed into law industry-supported legislation to raise the pre-licensing requirements for real estate agents and brokers in the Bay State.  The intent of the bill, which was filed at the request of the REALTOR® organization in late 2009, is to increase the level of knowledge and professionalism among all real estate practitioners.  Provisions of the new law are set to take effect on June 1, 2011.

Specifically, the law provides for a 16-hour increase in the classroom instruction time required to sit for the salesperson’s license exam.  Currently, individuals must complete 24 hours of classroom training, but as of next June 40 hours of classroom instruction will be required.  Real estate salespersons interested in obtaining a broker’s license also will need to complete 40 hours of classroom instruction as of June 1, 2011, up from the current 30-hour requirement.  In addition, under the new law licensees will be required to have three years experience as a practicing salesperson (compared to one year as presently mandated) in order to sit for the broker’s exam.

Notably, the existing pre-licensing requirements were enacted more than 30 years ago in 1978, and the practice of real estate has become significantly more complex over the past quarter decade.  Furthermore, Massachusetts currently has the second lowest requirements for salesperson pre-license education in the U.S., so elevating the standards for entry into the real estate profession is an opportunity to better protect consumers and provide improved service to the home buying and selling public, notes GBAR President Mel Martocchia in praising the legislation’s passage.

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Mass. AG Targets Housing Discrimination

Massachusetts Attorney General Martha Coakley’s Office is showing no signs of relenting in efforts to enforce the state’s lead paint and fair housing laws.  Earlier this month, the AG’s office filed lawsuits against multiple real estate firms and their agents for violating the state’s anti-discrimination, lead paint, and consumer protection laws as detailed in this news release

This follows earlier action in which a consent judgment was obtained against two Arlington Landlords in a similar housing discrimination and lead paint case as noted in this press release from the AG.

Remember, refusing to show potential tenants a rental unit based on the unit having lead paint is a fair housing violation.  Further, if a property owner informs you that they do not want children in the unit because it has lead paint, and you decide to work with that landlord with those instructions, you have now conspired to violate Fair Housing laws.  No amount of a commission is worth being the focus of a government inquiry into your behavior and fair housing laws.

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Homeowners, Tenants Get Additional Protections Under New Foreclosure Law 

In response to the steady increase in foreclosures over the past several years, the Massachusetts Legislature has approved a new law protecting residential tenants in foreclosed properties from being evicted except for “just cause.”  In addition, the legislation temporarily extends a defaulting mortgagor’s (owners of residential property with 4 units or fewer) 90-day “right-to-cure” to 150 days through 2015 which is intended to give homeowners and their lenders additional time to negotiate new terms to a mortgage to help avoid a foreclosure.  Finally, the measure criminalizes residential mortgage fraud.

The new law, signed by Gov. Patrick on August 7, applies exclusively to foreclosing lenders and prohibits banks and mortgage lenders from issuing wholesale eviction notices to tenants in foreclosed buildings.  Specifically, it states that the foreclosing lender/mortgagee of residential rental property (any number of units) may not evict an existing legal tenant except on one of the following two conditions: (1) the foreclosing owner has signed a binding Purchase & Sale Agreement with a bona fide, arm’s length buyer; or (2) the tenant has given “just cause” to be evicted (i.e. failure to pay rent, nuisance, illegal use of premise, locking out the owner, etc.). 

Importantly, foreclosing lenders must give notice (posted in the building, via US mail AND “slid under the door of each unit”) of the foreclosure, with contact/rent payment information and disclosure of the right to a court hearing before eviction.  Also, a foreclosing lender must allow 30 days following this notice to evict, even if for “just cause,” unless that “just cause” is nuisance, illegal use of premise, or owner lock-out, in which case eviction is available immediately following notice.

Notably, none of these new restrictions apply to subsequent buyers of the foreclosed property, and properties purchased at foreclosure auction are not subject to the law’s provisions.  Furthermore, it’s worth noting that the Greater Boston Real Estate Board was successful in pushing back on other aspects of the bill, including reducing the time period a tenant can cure a lease breach from 60 days to 30 days, removing the requirement that a tenant be convicted of a crime before they can be evicted, clarifying the definition of tenant, and allowing owners to contest the amount of rent in court.  Throughout the debate, GBREB supported the sale and rapid return of foreclosed properties to productive use, urging lawmakers to avoid any new restrictions that would make this process more difficult.  

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Gr. Boston Home Prices Continue to Strengthen, But Sales of Homes and Condos Slide in July

Home values in metropolitan Boston continued to rebound last month as an increase in trade-up buyers in the market this spring, along with a decline in distressed property sales, and limited inventory in certain price ranges and communities have helped lift median selling prices.  Sales activity did not keep pace however, as the number of home and condo sales both declined on an annual basis for the first time in 11 months in July.

In the detached single-family home market, the median selling price rose 8.2 percent in July from the same month last year to $513,750.  It’s the fifth consecutive month – and eighth time in the last 10 months – that the monthly median price for single-family homes has risen on an annual basis.  In addition, the median selling price for condos has risen 7.4 percent over the past 12 months to $372,000 this July, which equals the all-time high monthly median selling price for condos first set in July 2007.  The median selling price for condominiums has now risen in seven of the last eight months dating back to December 2009.

Unfortunately, the sales numbers were not nearly as positive.  Sales of detached single-family homes fell 24 percent in July from the comparable month a year ago, while condominium sales declined 36 percent  compared to July 2009 volume.  On a historical basis, last month’s single-family home sales volume of 882 homes sold is the lowest July sales total in 14 years, dating back to July 1996 when 830 homes sold in Greater Boston.  Last month’s sales volume of 685 condos sold is the weakest July sales total since July 2001, when 671 condominiums were sold in the GBAR/GBREB jurisdiction. 

Despite the steep drop, the decrease in single-family home and condo sales was not unexpected given that many of those in the market to buy a home this spring were enticed by the federal tax credit available to first-time and repeat buyers and were motivated to close by the June 30 deadline initially set by the government (since extended to September 30, 2010).  For more data and analysis on the housing market in greater Boston, visit the Monthly Housing Reports page on gbar.org.  Also available online is the latest edition of GBAR’s quarterly Real Estate Rewind report for the 2010 second quarter, which includes data by city/town.

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FHA Urged to Retain Seller Concessions

The National Association of REALTORS® is calling upon the Federal Housing Administration (FHA) to keep its current rules for seller concessions in place and says a proposal by the agency to reduce seller concessions will have a detrimental effect on the recovery underway in the housing market.  At present, the FHA permits seller concessions of up to 6 percent, but a new proposed rule would reduce seller concessions to 3 percent. 

NAR officials have cautioned the FHA against making any revisions, especially as use of FHA mortgage products has expanded in recent years.  “In states where closing costs are high our members report that seller concessions are often higher than 3 percent and are critical to allowing borrowers to purchase their home without depleting their savings,” observed NAR President Vicki Cox-Golder.  The change in FHA rules could be especially impactful in Massachusetts, which recently placed 11th nationally in a Bankrate’s 2010 Closing Costs Survey, with an average fee of $4,025 to close on a home ($1,548 in origination fees and $2,477 in titles and closing costs) in the Bay State.  Just one year ago Massachusetts ranked 18th nationally.

In addition, to recommending that seller concessions be retained at present levels, the leadership of NAR also has written to FHA Commissioner David Stevens urging the agency to lower the proposed credit floor exemption for all FHA-insured borrowers seeking to refinance, and to ensure that borrowers with non-traditional credit scores are not unduly burdened by manual underwriting.

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Efforts Underway to Amend Burdensome New IRS 1099 Reporting Requirement

The National Association of REALTORS®, in conjunction with several other business associations, is actively working with Congress to pursue an amendment to soften the impact of a burdensome new tax reporting requirement for small businesses that is scheduled to take effect in 2012.  The requirement, which was passed as part of the landmark federal health care legislation passed earlier this year, stipulates that all businesses must provide IRS 1099 information returns to any vendor (and to the IRS) when the business makes payments of more than $600 to the vendor in any calendar year.

In practical terms, this means all owners of rental property would be required to provide an IRS Form 1099 to all contractors with whom they do business and pay $600 or more in a calendar year for services rendered.  This requirement would apply even to the smallest landlord who owns a single property and hires a plumber or  electrician to perform repairs or renovation work, and require filing 1099 forms whenever applicable.  Furthermore, real estate brokerage firms which frequently work with a variety of industry-related vendors to assist with advertising and marketing campaigns, property sales and management, legal and risk management services, sales agent training and more, could be dramatically affected.

In an effort to lessen the impact on small business, legislation (HR 5297) has been introduced that is expected to be taken up when Congress reconvenes the week of September 13.  The bill proposes a two-part amendment related to the 1099 tax requirement.  This first part is a provision that would completely repeal the 1099 requirement, while a second provision would limit application of the 1099 reporting requirement to employers with more than 25 employees, and further stipulate that only payments of more than $5,000 would have to be reported.  While the repeal effort is expected to fail, there is optimism that the second amendment will pass.  If that occurs, it would provide substantial relief to a large segment of the REALTOR® membership, note NAR officials, since real estate agents are independent contractors and thus would not be counted as employees by their company broker-owners.

HR 5297 passed the U.S. House of Representatives earlier this summer, so should one of the two amendments pass the U.S. Senate, the bill will need to go back to the House for consideration.  The House could pass the Senate version of the legislation and send it to President Obama, or may request a conference committee be created to reconcile the different versions of the bill.  We will keep you updated on any progress made on this important tax issue.

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Watertown REALTORS® Named Finalists for REALTOR® Magazine’s Good Neighbor Award

GBAR members Wendy and John Rocca, both of whom are agents at Century 21 Commonwealth in Watertown, have been named as finalists for this year’s REALTOR® Magazine Good Neighbor Awards.  In 2003, the Roccas created Operation American Solider to support military service personnel overseas. To date, they have spent more than $15,000 of their own money and donated countless hours of volunteer time to send letters of support and “cheer” packages filled with over 30,000 lbs. of snacks, beverages, toiletries, books, magazines and other items to lift soldiers spirits and let them know they are cared about.

The Roccas, who were previously named recipients of Good Neighbor Awards from GBAR and the Massachusetts Association of REALTORS®, are one of 10 finalists for the 2010 REALTOR® Magazine Good Neighbor Award.  As such their charity, Operation American Solider, is assured of receiving a grant of at least $2,500 and could earn up to $10,000 in funding should they be named one of five Good Neighbor Award winners to be announced at the National Association of REALTORS® Convention in November.

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GBAR Past President to Receive National Award from CRS

The Council of Residential Specialists (CRS) will present its Medallion Award for 2010 to Robert Imperato, the broker-owner of Boston Realty Associates in Boston, at the Council’s Inaugural & Awards Dinner to be held on November 6 during the National Association of REALTORS® Convention in New Orleans.  The prestigious Medallion Award recognizes CRS designees who have excelled in their real estate careers and also have volunteered their time and expertise to serve the Council and its members.  A REALTOR® since 1981, Imperato served as president of the Greater Boston Association of REALTORS® in 1994 and is also a past director of the Greater Boston Real Estate Board.  He also served as president of the Massachusetts Chapter of CRS in 1996, and has earned the professional designations Certified Residential Specialist (CRS), Certified Real Estate Brokerage Manager (CRB), and Graduate, REALTOR® Institute (GRI).

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