Speaking of Real Estate
Most of us — really, all of us, but I’m saving room for the diehard skeptics — can agree that environmental changes are having a large-scale impact on our planet. But “environmental issues” isn’t a phrase easily uttered in the real estate community without hue and cry. Many practitioners react negatively to topics of environmental significance, and it’s somewhat understandable. Environmental interests can potentially derail real estate projects and transactions as our society becomes more conscious of how development affects the Earth’s well-being. But even if there’s conflict between the two, they’re also intertwined: The environment can have huge implications for how desirable a property is to buyers. So shouldn’t you, as a person who sells property, care about the environment?
I recently profiled three real estate professionals for the July/August issue of REALTOR® Magazine (hitting your mailbox this Friday) who are contending with environmental problems in their regions. The point of the story isn’t to judge whether practitioners have an obligation to acknowledge and respond to real estate’s impact on the environment. It’s an examination of cases in which some have felt a calling to help clients persevere in the face of environmental challenges, from California’s historic drought to Vermont flooding and the proliferation of fracking in Texas. This reporting got me thinking about an interview I did with David Wluka, who sat on the National Association of REALTORS®’ Land Use, Property Rights & Environment Committee for many years. During NAR’s Legislative Meetings & Trade Expo in Washington, D.C., in May, Wluka and I pondered this question: When should property rights take a backseat to the environment?
In case you think you’re about to be lectured on saving the planet, I should add that Wluka is no environmental fundamentalist. He worked as a land planner helping developers build out prime projects in the Boston area before becoming broker-owner of Wluka Real Estate Corp. in Sharon, Mass., and he’s seen firsthand how environmentalists have held back real estate. He recalled a 600-acre project he worked on in the early 2000s that drew the ire of nearby neighbors. The development process was already well underway when someone found a turtle on the property one day.
“Three years later, we lost 70 percent of this land to this turtle,” Wluka said. The Massachusetts Department of Environmental Protection fought for the land to be preserved for native turtles, and the developers couldn’t prove that the turtles weren’t there. The developer had to scale down the project to single-family homes built on 30 percent of the original parcel. “He’ll do OK, but he wanted to have a long-term business there,” Wluka said. “[Environmentalists will] argue that we’re losing priority habitat land, but it also affects the local economy unnecessarily. Towns can end up shooting themselves in the foot. When it comes to creatures and people, sometimes people need to win.”
But these types of issues shouldn’t prevent practitioners from acknowledging the importance of balance with regard to property rights and the government’s role in fostering a healthy environment. Many inherently get this: Thirty-nine percent of REALTORS® say they believe the federal and state governments’ involvement occurs at an “appropriate” level with at least some environmental regulations, according to a recent REALTOR® Magazine survey of nearly 2,000 members. This finding aligns with Wluka’s assertion that real estate practitioners are environmentalists if only because it is their job to protect the important features that make their communities attractive to buyers, which include the environment. “We’re not botanists, we’re not horticulturists,” he said. “But I think practitioners in general are environmentalists because quality of life needs an environment that is attractive. … When we sell a lifestyle, that means being an environmentalist.”
He’s not suggesting that real estate pros take a political stance on the environment or get involved in movements, but he thinks agents and brokers have a responsibility to make their clients aware of how their properties could affect the environment. That starts with not backing away from hard conversations with clients about how to address their properties’ environmental impact, even if it stands to make the transaction more complicated, he says. “Practitioners should advise clients to get an attorney to help sort out environmental issues, and tell them to get an engineer when dealing with wetlands and floodplains.” (One of the agents I spoke to for the REALTOR® Magazine story advised her clients in flood-prone Vermont to do the same.) “You don’t have to be the environmental expert, but you sure better know to tell the owner that they need an expert. You’re responsible for things like that that are knowable.”
Wluka, in essence, is telling you to look at the environment from a business angle — which is less contradictory than it may sound. The state of the local environment can deeply affect your ability to sell property. So foster open discussions with clients, but try to leave the politics out of it. Remember that being an advocate for your community means championing a healthy environment for all.
So are you an environmentalist?
By now you’ve heard about the big changes coming to the closing table in the months ahead.
Starting soon, 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.