Speaking of Real Estate
By now you’ve heard about the big changes coming to the closing table in the months ahead.
Starting October 3, the HUD-1 settlement form, the Good Faith Estimate, and the Truth in Lending Act disclosure are going away. They’ll be replaced by a new Loan Estimate and a new Closing Disclosure.
And that’s not all. The Loan Estimate will have to be given to the buyer three days after the loan application is submitted. The Closing Disclosure will have to be in the hands of the buyer three days before closing. And if certain changes are made to the Closing Disclosure after the buyer receives it, the paperwork will have to go back to the lender for approval, starting the three-day clock all over again.
These changes were developed by the Consumer Financial Protection Bureau to make the process easier for buyers to understand and also to reduce the chances of last-minute surprises—and they will affect every closing in America. And as a real estate professional, you’re the one who will be bringing everyone together, keeping things on track, and providing explanations. To help you prepare for the new rules and avoid surprises, NAR will be presenting a live webcast featuring Phil Schulman, an attorney with K&L Gates and former official with the U.S. Department of Housing and Urban Development who specializes in federal closing rules, and NAR Senior Counsel Finley Maxson. The webcast is scheduled for Thursday, July 16, at 2 p.m. Eastern time. Click here to register.
If you have a question you’d like us to address during the webcast, please let us know by leaving a comment below.
Much of the country’s attention has been on the United States Supreme Court’s rulings on marriage equality and the Affordable Care Act last week, but the nation’s highest court also handed down an important housing decision that looks at whether a public or private entity can get hit with a federal Fair Housing lawsuit even if it had no intent to discriminate. The legal concept is called disparate impact and, ever since the federal Fair Housing Act was enacted in 1968, all federal courts of appeal have interpreted the law to mean an entity can get sued for housing discrimination if its actions have a disparate impact on a protected class, regardless of intent.
In its decision last week, the Supreme Court affirmed a circuit court’s judgement, holding that disparate impact claims are cognizable under the Fair Housing Act, and are an important component to the Fair Housing Act’s role in moving the country toward a more integrated society. “Residents and policymakers have come to rely on the availability of disparate-impact claims,” the court says in its decision to the case, Texas Dept. of Housing and Community Affairs v. Inclusive Communities Project, Inc.
Importantly, the court made clear that just because an action has a disparate impact, that doesn’t mean it’s necessarily discriminatory. All the facts in the case have to be looked at, and a plaintiff must be able to point to a specific policy (or policies) of the defendant that is causing the disparity, and even then the defendant can demonstrate that the challenged policy is necessary to achieve a legitimate business interest. Only where the plaintiff can demonstrate that there is an alternative practice that would serve the defendant’s legitimate interest with a less discriminatory effect will a disparate impact claim be established.
For NAR members, since the decision upholds what’s been a longstanding legal concept, there should be little change seen on the ground. What’s more, since the decision includes extensive discussion about the many factors that should be considered when looking at a disparate impact claim, the court appears sensitive to the kinds of concerns that were identified by real estate professionals in a working group NAR created several years ago to look at the disparate impact issue.
In that group, two main concerns were identified: that real estate professionals and others not be held liable for actions if they had no reasonable way of knowing that a disparate impact would be the outcome, and that real estate professionals not be expected to do extensive research into the possible disparate impact of their actions.
“I believe there is much in the decision that reflects an understanding of the type of concerns that NAR members shared in the disparate impact working group and reflected in NAR policy,” says Fred Underwood, NAR’s director of diversity and community outreach programs.
For real estate professionals, the decision means ending housing discrimination remains a national goal and it also affirms that one doesn’t have to intend to discriminate to be the subject of a lawsuit. But it also means disparate impact claims must pass a reasonable hurdle, because the court recognized many factors go into the decisions that shape our housing markets.
Concerned that their city’s once-vibrant downtown core had fallen into decline as the furniture industry the area was long known for moved away, REALTORS® in High Point, N.C., sprang into action and played a key role in sponsoring a series of strategy sessions two years ago aimed at reversing the community’s fortunes.
Now, plans to reimagine High Point that emerged from those meetings in 2013, called charrettes, are moving ahead, as officials prepare to transform the parking lot in front of the city’s public library into a more functional and attractive space they hope will encourage people to come downtown more often—and even call it home one day. The project, set to begin during the next few months, will include play areas for children, pocket parks, trees and other features intended to make the parcel of land surrounding in front of the library a destination for people who live in the High Point region, said Mary Sizemore, director of the High Point Public Library.
“There’s a growing emphasis around the country on libraries serving as the center of communities,” and High Point is hopeful that the changes it is planning to make to the space outside its library will be a catalyst for improvement in the nearby area, she said.
The idea for the library construction project is one of a number of proposals for revitalizing High Point that came from the charrettes, which were made possible in part by the High Point Regional Association of REALTORS® (HPRAR) through a $15,000 Smart Growth Grant from the National Association of REALTORS®. The HPRAR REALTORS® Commercial Alliance contributed another $1,500.The High Point, N.C. public library and the parking lot that is set to be replaced.
Among the other ideas to bring new life to High Point produced by the charrettes was a proposal to make a stretch of Main Street, the city’s main thoroughfare, more walkable. City officials have not yet approved that suggestion, but other initiatives designed to bring visitors are under way, including a concert series at High Point’s historic train depot.
As a result of its involvement in the strategy sessions, the High Point Regional Association of REALTORS® has strengthened its ties with the local business community, said Ed Terry, executive vice president of the association. “We’re very visible now, and we have good ties with the Chamber of Commerce. They realize how important housing is to the overall success of High Point.”
In March, NAR presented HPRAR with a Community Outreach Award in recognition of its efforts to spark revitalization in High Point.
High Point jumps to life for one week every six months, when the internationally known High Point Market draws tens of thousands of people to the city of about 100,000 for the largest furniture industry trade show in the world, said Richard Wood, a retired financial adviser who serves as the volunteer director of The City Project, the nonprofit organization formed to pursue the urban renewal recommendations that stemmed from the charettes. But during the rest of the year, the city is largely quiet, because most of the furniture-manufacturing jobs that once underpinned the High Point economy have disappeared, a casualty of the shift of furniture production to overseas factories, he said.
“This is about getting back on our feet,” Wood said. “We want the real estate market to soar again in High Point,” and the changes coming to the library are a key step in that direction.
By Sam Silverstein and Erica Christoffer
The real estate sector faces a host of challenges that will require professionals in all facets of the industry to become more adaptable and agile in the coming years in order to remain relevant and competitive, according to a newly released report commissioned by the National Association of REALTORS®.
Concern about the erosion of the importance consumers place on real estate professionals in structuring and managing transactions in an era of fast-moving technology is among the top issues cited in the study, which is based on data from a national survey of approximately 7,800 REALTORS® and interviews with 74 high-level executives and other real estate industry leaders. The report also takes other real estate-related studies, reports, articles and surveys into account.
Another challenge for the industry is the arrival of companies that previously did not participate in real estate, which could disrupt established business models, according to the study, known as the D.A.N.G.E.R. Report (“Definitive Analysis of Negative Game Changers Emerging in Real Estate”). Concerns about uneven professional standards and the burdens posed by government regulations also are on people’s minds, the report says.
The report was conducted by industry analyst Stefan Swanepoel, head of the Swanepoel T3 Group, a research and consulting firm, at the direction of NAR’s Strategic Thinking Advisory Committee. It is divided into five sections that detail challenges facing agents, brokers, NAR, state and local REALTOR® associations, and Multiple Listing Services.Stefan Swanepoel speaks about the D.A.N.G.E.R. Report at the REALTORS® Legislative Meetings and Trade Expo in Washington, D.C.
“Don’t think that people don’t want to play in your sandbox. They do,” says Swanepoel, who spoke during last week’s REALTORS® Legislative Meetings and Trade Expo in Washington, D.C. “Some will play nice and some will not play nice.”
New technology is another force buffeting real estate. Brokers could find themselves overwhelmed by the cost of building the technological solutions they need to thrive, while agents worry that technology could marginalize the value they bring to buyers and sellers, according to the study. “There are a lot of products that are now being created very fast,” Swanepoel says,
The arrival of newcomers looking to introduce consolidation and new business models to real estate is another issue the industry faces, he adds.
Meanwhile, real estate firms and associations face headwinds in attracting young people to their ranks, Swanepoel says. “Real estate sales [isn’t] a first-choice career” for high school students, he says, adding, “We need to find more people who can make a longer commitment to our space.”
The D.A.N.G.E.R. Report offers no solutions to the challenges it identifies, but instead formulates a starting point for industry-wide conversations and paths for finding solutions, Swanapoel says. “It’s a summary of all the black swans that could be in the future.”
Michael Oppler, senior vice president at Prominent Properties Sotheby’s International Realty and one of the 20 at-large members of the Strategic Thinking Advisory Committee, called the report a peer-to-peer dialog tool. “When you look at this report, you can have a much more open and honest conversation in your office,” he says.
By Jessica Edgerton, NAR associate counsel
In recent months, real estate professionals have reported an upswing in a particularly insidious wire scam. A hacker will break into a licensee’s e-mail account to obtain information about upcoming real estate transactions. After monitoring the account to determine the likely timing of a close, the hacker will send an e-mail to the buyer, posing either as the title company representative or as the licensee. The fraudulent e-mail will contain new wiring instructions or routing information, and will request that the buyer send transaction-related funds accordingly. Unfortunately, some buyers have fallen for this scheme, and have lost money.
A possible red flag to be aware of, and to alert clients to, is any reference to a “SWIFT wire” transaction, a term that indicates an overseas destination for the funds. However, unlike many other e-mail-based “phishing” schemes, this particular manifestation appears to be more sophisticated and less recognizable as fraud. The communications do not contain the typical grammatical or stylistic oddities that are often present in scam e-mails. In addition, because the perpetrator has been monitoring the licensee’s e-mail account, the fraudulent communication may include detailed and accurate information pertaining to the real estate transaction, including existing wire and banking information, file numbers, and key dates, names, and addresses. Finally, the e-mails may come from what appears to be a legitimate e-mail address, either because the thief has successfully created a sham account containing a legitimate business’s name, or because he or she is sending the e-mail from a truly legitimate—albeit hacked––account.
Be aware, also, that this particular scheme is only one of many forms of online fraud being perpetrated against real estate licensees and their clients. In protecting all parties to a real estate transaction from cybercrime, real estate professionals should consider the following guidance:
The best line of defense against fraudsters is to make sure that all parties involved in a real estate transaction implement security measures before a cyberattack occurs. These measures include the following:
- Never send wire transfer information via e-mail. For that matter, never send any sensitive information via e-mail, including banking information, routing numbers, PINS, or any other financial information.
- Inform clients from day one about your email and communication practices, and alert them to the possibility of fraudulent activity. Explain that you will never send, or request that they send, sensitive information via email.
- Prior to wiring any funds, the wirer should contact the intended recipient via a verified telephone number and confirm that the wiring information is accurate. Do not rely on telephone numbers or website addresses provided within an unverified e-mail, as fraudsters often provide their own contact information and set up convincing fake websites in furtherance of their schemes.
- If a situation arises in which you have no choice but to send information about a transaction via email, make sure to use encrypted e-mail.
- Security experts often recommend “going with your gut.” Tell clients that if an e-mail or a telephone call ever seems suspicious or “off,” that they should refrain from taking any action until the communication has been independently verified as legitimate. When it comes to safety and cybersecurity, always err on the side of being overly cautious.
- If you receive a suspicious e-mail, do not open it. If you have already opened it, do not click on any links contained in the e-mail. Do not open any attachments. Do not call any numbers listed in the e-mail. Do not reply to the e-mail.
- Clean out your e-mail account on a regular basis. Your e-mails may establish patterns in your business practice over time that hackers can use against you. In addition, a longstanding backlog of e-mails may contain sensitive information from months or years past. You can always save important e-mails in a secure location on your internal system or hard drive.
- Change your usernames and passwords on a regular basis, and make sure your employees and licensees do the same.
- Never use usernames or passwords that are easy to guess. Never, ever use the password “password.”
- Make sure to implement the most up-to-date firewall and anti-virus technologies in your business.
2. Damage Control.
If you believe your e-mail or any other account has been hacked, you should take the following steps:
- Immediately change all usernames and passwords associated with any account that you believe may have been compromised or otherwise made vulnerable by the attack.
- Contact any clients or other parties who may have been exposed during the attack so that they take appropriate action. Remind them not to comply with any requests from an unverified source.
- Report any fraudulent activity to the Federal Bureau of Investigations via their Internet Crime Complaint Center. More information can be found here: http://www.fbi.gov/scams-safety/e-scams
- Brokers should report any fraudulent activity to their state or local REALTOR® association so that the associations can send out alerts or take other appropriate action, including contacting NAR.
This advice is not all-inclusive, and real estate practitioners should work with Information Technology and cybersecurity professionals to ensure that their e-mail accounts, online systems, and business practices are as secure and up-to-date as possible.
For more information on this and other cyberscams, as well as further information on cybersecurity best practices, visit these resources:
Hey, fellas, you’re not immune to danger
When the National Association of REALTORS® debuted its “Real Estate Safety Matters” course for associations and brokerages, the newest addition to the REALTOR® Safety Program, at the 2015 REALTORS® Legislative Meetings & Trade Expo in Washington, D.C., there was an obvious underlying message for the men in the room: You’re just as susceptible to being attacked as a woman.
REALTOR® safety is a topic that has gained national attention after the murder of Arkansas real estate agent Beverly Carter last September. Since then, a slew of other cases of brutality against practitioners have grabbed headlines, and in every instance, the victim was a woman. They’ve made the industry keenly aware of typical unsafe practices in the real estate business — working alone, meeting prospective clients at empty homes, revealing too much personal information in online bios — but they’ve also made it appear as though only women are vulnerable.
Tamara Suminski, GRI, ABR, a California REALTOR® who led NAR’s safety course, recalled posting to Facebook a recent news story about an attack on an agent. One commenter, a male colleague, wrote on her post: “Good thing I’m a big dude.”
“What does that mean?” Suminski said. “That you can’t be attacked?”
The truth is the mentality that women are more vulnerable to attacks than men is a fallacy. According to the Bureau of Justice Statistics’ National Crime Victimization Survey, which has been recording yearly crime data since 1973, more men have historically been victims of every type of violent crime except rape than women. When it comes to the relationship between victim and assailant, men and women are equally as likely to be attacked by someone they know, according to the survey.
In NAR’s 2015 Member Safety Report, 25 percent of male REALTORS® said they’ve experienced a situation that made them fear for their personal safety. Forty-eight percent of female REALTORS® said the same. Fifty percent of all REALTORS® indicated they first met prospective clients they did not know at a real estate office or neutral location — which means the other half are meeting them in potentially more dangerous locations. That includes a lot of men who are potentially putting themselves in harm’s way.
All of this is to say that men are fooling themselves if they think they don’t need to worry about being a target for attacks as much as women do. REALTOR® safety isn’t just for women. Everyone, no matter their gender, should take heed of the risks involved in real estate and take precautions to improve their safety. Anyone who thinks they have nothing to worry about is making themselves easier to victimize than those who are better prepared for danger.
“We’re all prone to safety concerns,” Suminski said. And nothing could be more true.
With increased media attention on crisis events, which can be anything from natural disasters to shopping-mall snipers, the drive to finger someone responsible for the resulting chaos is growing stronger. And because many crises involve compromised property, it’s the property manager that’s becoming more vulnerable to blame.
During the Property Management Forum at the REALTORS® Legislative Meetings & Trade Expo on Thursday, property managers spoke of situations that can invite scrutiny and offered tips for how to control the message during such high-stress times. Chris Mellen, CPM, vice president of property management for The Simon Companies in Boston, recalled a recent domestic violence incident in one of his properties that resulted in the victim’s death. He also contended with Boston’s most recent hellacious winter, which brought 106 inches of snow to the city over a six-week period and caused widespread property damage. Such instances can put property managers in a position to explain and defend actions they’ve taken to ensure the safety of their buildings.
“When an event happens, the media, the public, and our clients and tenants are looking for someone to hang it on,” Mellen said. “We’re never going to be perfect. We’re never going to be able to head everything off at the pass. But if we don’t do the best we can, we’re making ourselves a target for the blame.”
Randy Woodbury, CPM, president of Woodbury Corporation in Salt Lake City, said the first thing people will want to know in the aftermath is if there was a crisis plan in place at a property to deal with emergencies. It’s incumbent upon property managers, he said, to do a risk audit of their properties and know how to address potential danger. That way, when you’re questioned about your properties’ safety plan, you can outline measures you’ve taken.
“Do walkarounds at your properties and see where you’re vulnerable,” Woodbury said. Assess for things like fire hazards, elevator malfunctions, all possible places where attackers could gain access to the property, and vulnerabilities to weather conditions. Then develop a network of people you would need to call on in case of emergency, such as staffers, engineers, electricians, disaster cleanup professionals, and authorities, and consult with them on devising crisis mitigation plans for your properties. Develop strong relationships with them so you stay top-of-mind.
“When it all hits the fan, who are they going to respond to first?” said Woodbury, who spoke of successfully carrying out an evacuation plan years ago at a shopping mall his company managed when it was threatened by an active shooter. “When you need somebody’s help, are you going to be the property they come to when five other properties are calling for help?”
Mellen said property managers should also develop a plan to communicate with tenants during emergencies. His company makes a point of collecting e-mail addresses and cell phone numbers from as many new tenants as possible so the company can send them alerts.
“If there’s been a mugging in the building, we’ll do an e-blast to all the tenants who have given us their contact info,” he says. “That kind of communication is becoming more and more effective as people go mobile. We also use social media so we can tweet and post alerts to Facebook.”
If you’ve taken all of these measures, you’ll be able to use them to respond to inquiries into incidents at your properties. And you shouldn’t shy from talking to the media in such circumstances. “The media will report on an incident whether you’ve given your two cents or not,” Woodbury said. “You may as well talk to them to make sure the story is correct.”
One thing that’s important to avoid, however, is embellishing the level of security at your properties. That could come back to bite you. “I’ve seen people put up signs saying their properties are under surveillance when they’re really not,” Woodbury said. “Don’t imply you’re providing a level of security that you’re not because then you really open yourself up to scrutiny.”
Make sure there’s nothing written in lease agreements that could lead tenants to believe more security measures are in place than there are, Mellen added. “And don’t agree to apply a level of security that you’re not equipped to apply.”