Real Estate Licensee Update

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Real EstateLicensee UpdateChristine Gregoire, GovernorVolume II, Issue 1Elizabeth Luce, DirectorSpring/Summer 2009Agents for Distressed Homeowners Get a BreakThe Distressed Property Act of 2008 has been revised to exclude qualifying realestate agents from being considered distressed home consultants.Many homeowners are facingfinancial difficulties arisingfrom declining homevalues, increasingmortgage payments,and a worseningemploymentsituation. Indesperation, some ofthese homeowners areturning to businessesand individuals thatclaim to repurchasemortgages in order toallow the homeownersto remain in theirhomes (albeit underless than favorablefinancing). Some ofthese foreclosurerescue businesses arelegitimate and providea useful service to homeowners;however, with little regulation, manydesperate homeowners have beenexploited. Washington Legislaturepassed the Distressed Property Actof 2008 in an attempt to protecthomeowners from these scams.The DistressedProperty Act of 2008focused on regulatingthe activities ofhome consultantswho claim to helpstop a foreclosurefor a fee. The actalso provided legalrights to home sellersthrough distressedproperty protectionsand distressed homeconsultant provisions.Under the originalconditions of this law,real estate agentsassisting in thesale of a potentiallydistressed home, ora home within 20 days of foreclosure,were classified as distressed homeconsultants. All qualifying consultantsin these transactions had a fiduciaryThe Federal Trade Commissionis currently investigating instancesof businesses using false affiliationsto federal mortgage assistanceprograms. Additional informationabout mortgage modificationand foreclosure rescue scams isavailable on the FTC’s websitelisted below.www.ftc.govThe Washington Department ofFinancial Institutions has issued anInterpretive Statement that providersof loan modification services toWashington residents involvingtheir Washington property must belicensed under the Mortgage BrokerPractices Act (19.146 RCW) or theConsumer Loan Act (31.04 RCW)unless explicitly exempt underthose Acts.continued on page 3Inside this Issue:Commissioner Corner . 2Revised Real Estate Seller Disclosure Requirements. 3Relationships with Home Inspectors . 4Real Estate Roundup .4Clarification for Title Insurance Industry . 6Disciplinary Actions . 7The Department of Licensing has a policy ofproviding equal access to its services. If youneed special accommodtaion, please call(360) 902-3600 or TTY (360) 664-8885.

Commissioner CornerJeff ThompsonOn January 22, 2009, Governor ChristineGregoire announced the appointment of JeffThompson of the Tri-Cities as the newestmember of the Washington Real EstateCommission. Jeff’s term on the Commissionexpires on August 14, 2014.Jeff Thompson first entered into the realestate industry in 1990 after being in thesales/management division of Kraft Foods.His passion and expertise lies in trainingand coaching for real estate agents/brokers.He worked for Century 21 from Septemberof 1990 until November of 1996 when hepartnered with Windermere Real Estate/TriCities. In addition to his real estate business,Jeff is active with the Tri-City Association of REALTORS , serving aspresident in 2003. He was chairman of the Tri-City Regional Chamberof Commerce in 2007 and is currently on the board of directors.Jeff’s focus is on the professionalism and training of real estatelicensees. He demonstrates this passion through involvement withRealEstateCoach.com, a real estate agent coaching company. Hereare some of Jeff’s thoughts as he embarks on his term as a real estateCommissioner:“My drive to become part of the Real Estate Commissioner team forthe State of Washington is quite simple. The real estate industry hasoften been viewed as an industry that is rather unprofessional. In orderto raise the professionalism of the industry I believe we need to doseveral things:1. Increase the initial clock hour requirements for new agents.2. Initiate training for new agents and for new managers/brokers.3. Raise the bar on the educational classes and experiences that areoffered.I feel certain that the more training an agent is given makesthem stronger partners for the clients and fellow agents. The moretransactions an agent has throughout the year leaves him or her betterequipped with more experience and stronger negotiation skills than theagent who sells only a few properties a year. Education and stepped upinitial requirements is the first step to improving the industry overall.I am excited by the opportunities presented as a member of the realestate commission, and look forward to beginning my service as amember of the Commission’s Education Subcommittee.”Real Estate Licensee UpdateVolume II, No. 1 Spring/Summer 2009The Real Estate Licensee Update is produced semiannually. The information in this update is beingmade available to you as an educational serviceby the Washington Real Estate Commission anddoes not constitute legal or professional advice.The commission, nor any agency, officer, oremployee of the state of Washington, warrantsthe accuracy, reliability, or timeliness of anyinformation in this publication. Any opinionsexpressed in the articles are those of each author.It is the responsibility of each licensee to know,and comply with the laws relating to real estate.Real Estate Commission Contact Information:2000 W 4th Ave PO Box 9015Olympia, WA 98507 (360) 664-6526Real Estate Commission Chair:Ralph Osgood, asst. director, DOLReal Estate Commission Members:Suki Bazan, SeattlePaul Chiles, SeattleCate Moyé, SpokaneDan Murphy, SeatacGeorge Pilant, TacomaJeff Thompson, KennewickReal Estate Unit StaffLee Malott, administratorJerry McDonald, asst. administratorArt Abrahamson, audit managerRalph Birkedahl, appraiser managerDolores Casitas, education managerJohn Guthrie, timeshare and camp resort managerKaren Jarvis, regulatory and enforcement managerRhonda Myers, home inspector managerSandra Spencer, investigation managerCheryl Strobert, legal support managerDebbie Wright, licensing managerProduction and Circulation Staff:Stay Current with the DOLThe DOL Real Estate ListServ lets you know when eventsimpact your business. From the main DOL Real Estatepage, click on “Join mailing list.”www.dol.wa.gov/business/realestate2Lee Malott, administratorJerry McDonald, asst. administratorDolores Casitas, editorKaren Jarvis, editorRhonda Myers, editorChris Waterman, publishing/editorDebbie Wright, editorWashington Center for Real Estate Researchstaff at WSU, copy/designReal Estate Licensee Update

Revised Real Estate Seller Disclosure RequirementsSeveral small changes were madeduring the 2009 legislative sessionto the seller disclosure laws forimproved and unimproved property(with or without structures) underRCW 64.06. Real estate agentswill see slight clarifications in thewording throughout the disclosureforms for both improved andunimproved land. The new wordingfrom House Bill 1420 is outlinedbelow. Changes are effective July 26,2009.RCW 64.06.015 Seller’s duty for unimprovedresidential property.provide financial statements, minutes,by-laws, and other information notpublicly available must be disclosed. Transmission poles or electrical equipment located on the propertythat do not provide service to propertymust be identified.Buyer may expressly waivereceipt of the disclosurestatement. However, if theanswer to any question in theEnvironmental section wouldbe “yes,” the buyer may notwaive receipt of that section. Identification of flooding issues and fill material are now located underthe Environmental section. Wording for substances that may be environmental concerns now must be identified if theyare in or on a subject property. For properties subject to a homeowners’ or common interest association, the name of theassociation and contact information for an officer,director, employee or other authorized agent who canRCW 64.06.020 Seller’s duty for improvedresidential property in addition to the abovechanges. Defectsin the pipes or operationof a subject home’s water system mustbe identified. the roof of a subject home has Ifleaked in the last five years, it must bedisclosed. Thepresence and type of any woodburning appliance must be disclosedRCW 64.06.040 Seller’s duty after delivery of a disclosurestatement. Theseller must notify the buyer if they learn ofany additional information from a source other thanthe buyer or others acting on the buyer’s behalf, suchas an inspector. “Distressed Homeowners” continued from page 1duty to the homeowner and consequently faced liabilitywhen working on behalf of a distressed home seller.“Many real estate brokerages across the state had policiesto not get involved with distressed sales due to the potentialliability,” said Greg Wright, President of WashingtonREALTORS .The Distressed Property Act has been revised to fix someof the unintended consequences of the 2008 legislation. OnMarch 25, 2009 Governor Gregoire signed amendmentsto the Distressed Property Act that no longer includesreal estate agents as distressed home consultants whenrepresenting a client in a qualifying transaction. Thosechanges were implemented immediately.Mr. Wright added, “The changes to the 2008 lawmaintains protection for people trying to keep their homes,but also allows people to seek the assistance of real estateprofessionals to sell their homes.”Before this fix, the increased legal obligation tohomeowners facing foreclosure reduced the number ofqualified agents willing to complete distressed home sales.Volume II, Issue 1With the amendment to the 2008 law, homeowners whorisk foreclosure will find it easier to find agents willing tosell their homes before they are put up for auction.Changes to the 2008 law include:1. Sellers must now be represented by an attorney or realestate agent for a buyers’ agent to be excluded frombeing a distressed home consultant within 20 days offoreclosure.2. The agent or buyer must not be participating in adistressed home conveyance.3. The agent or buyer is not a distressed home consultantif the seller of the home is allowed to remain in thehome for a maximum 20 day transitional period orsigned an agreement to remain in the home as a lesseeor tenant.4. A homeowner is now defined as a person who occupiedthe home within 180 days of the conveyance.5. Dwelling now includes condominiums, manufacturedhomes, and residential planned unit developments. 3

Relationships with Home InspectorsAs of January 30, 2009, the WashingtonAdministrative Code requires real estate salespersonsand brokers to disclose relationships with homeinspectors to clients when providing referrals. When abuyers’ or sellers’ agent refers an inspector, the agentmust provide written notice to the client of any priorbusiness or familial relationship. This disclosure mustoccur before a referred inspector provides any services.The Changing Business Practices Subcommittee ofthe Washington Real Estate Commission finalizedwording for the rule throughout 2008.The Legislature reacted to allegations that homeinspectors colluded with agents to overlook problems.In these cases, a buyer would receive a clean reportfrom a home inspector only to later find structuraldamage or significant omissions in the inspection.Real Estate Market RoundupIn some instances, agents would not recommendquality home inspectors and instead recommend orcompel clients to choose from their approved list ofinspectors. Complaints were not frequent but they hadthe potential to harm the credibility of the majority ofagents who make honest referrals to their clients.“The new regulation is designed to make surethere is disclosure if a prior business relationshipexists between an agent and an inspector,” said CateMoyé, Chair of the Changing Business PracticesSubcommittee, Owner of Windermere Valley, Inc.and Liberty Lake, Inc.A familial relationship exists if the agent andinspector are related in any way. The term businessrelationship applies if the agent and inspector havedone business together, such as an inspection ofby Glenn E. Crellin, Director, Washington Center for Real Estate ResearchExisting home sales and building permits for new housingconstruction continued to slide during the early monthsof 2009. For the first quarter of the year the seasonallyadjusted annual rate of existing home sales in Washingtonstood at 67,070 units. This is the lowest sales rate sinceWCRER began tracking the market in 1994, and representsclosed sales 30.6 percent below the sales rate during thefirst quarter of 2008.Although seasonally adjusted annual rate statistics area common way to report economic activity, especially insectors like home sales which are widely known to havestrong seasonal patterns, the interpretation of the datais challenging to the general public. The number does notrepresent the number of homes actually sold during thequarter (that number was 13,200). It does not represent aforecast. Each quarter is estimated independently of priorquarters. The seasonally adjusted annual rate should bethought of as an estimate of how many homes would be soldduring the course of a year if the same relative pace wereto continue for an entire year. Since the January throughMarch period is always a slow sales period, the estimate ishigher than simply multiplying the number actually soldby four. During the second and third quarters the seasonalfactors are smaller, because sales activity is typically muchgreater. Because of this seasonal adjustment, data can becompared across quarters in a meaningful way (sales in thefirst quarter were 8.6 percent below the sales rate in theclosing quarter of 2008).New home construction data is received from the CensusBureau as building permit data. It would be better toreport statistics on housing starts, but the Census Bureauonly reports that data for the US and the four CensusRegions, while the permit data can be aggregated by countyand by state. Single-family building permits from the 324counties (and cities within those counties) which reportdata monthly totaled 1,806 units during the first quarter(not seasonally adjusted). Single-family permits throughoutWashington during the quarter were 50.1 percent below thefirst part of last year.The slow rate of sales, large inventories of homesavailable for sale and increasing numbers of Washingtonmortgages which are seriously delinquent or in foreclosurehave combined to put a great deal of downward pressureon selling prices. The median price home sold during thefirst three months of 2009 was 253,500 – 13.7 percentbelow a year earlier. This brought prevailing prices downto the 2004 level. The degree to which foreclosures andshort sales are causing significantly reduced prices on somehomes, and how this is influencing aggregate statistics,is difficult to judge. It should be remembered that themedian price represents a level at which half the salesare more expensive, and half are less. Average prices aretypically 15-20 percent above medians. Price changes varysignificantly by market, as illustrated on the accompanyingmap.Federal efforts to stabilize the housing market havebeen concentrated in two areas, encouraging modificationto existing loan terms in an effort to prevent some homefrom being foreclosed and using monetary policy to keepall interest rates low to encourage consumers to makesignificant purchases. The result was an average mortgagerate during the first quarter, including fees and charges,of 5.16 percent. This was the lowest quarterly averageeffective mortgage rate reported by the Federal HousingFinance Agency (and its predecessors) since they beganreporting mortgage rate data in 1963. Those low ratescombined with lower home prices and income estimateswhich have not yet shown impacts from the recessionReal Estate Licensee Update

the agent’s own home, or worked together in anybusiness. A previous referral or inclusion on a listof recommendations does not constitute a businessrelationship. Agents must also continue to facilitate aclient’s legal right to select their own home inspector.The intent of the new regulation is not to discourageagents from referring inspectors they believe will doa good job, but to promote honesty and full disclosurefor clients.The latest regulation also requires thatbrokers create a written office policy outliningthe requirements for referring an inspector to ahomebuyer or seller. Each office policy must preventcollusion between licensees and inspectors, and mustaddress the customer’s right to choose their own homeinspector.to produce significantly improved measures of housingaffordability. According to WCRER calculations theHousing Affordability Index for the first quarter was 125.5,meaning the median income family in Washington had25.5 percent more income than the minimum required toAs of July 1, 2009, an additional state law requireshome inspectors to be licensed in Washington. TheBill was signed into law by Governor Gregoire andcreates a board for professional conduct standardsand definitions for home inspector duties. The newlicensing process consists of 160 hours of combinedclassroom and field training in addition to a writtenexamination. The Department of Licensing is alsoreviewing WAC rules implementing RCW 18.280 thatwould increase education requirements, disciplinaryaction, and ethical standards for home inspectors.The real estate licensee disclosure regulation canbe found in WAC 308-124C-050. Home inspectorlicensing requirements are detailed in RCW 18.280,and the current home inspector rules under revieware WAC 308-408 through 408C. qualify to purchase the median price home (assuming a 20percent downpayment). Meanwhile, the first-time buyeraffordability index improved to 73.3 (compared to a low of48.2 in the third quarter of 2007). This still represents anincome deficiency of 26.7 percent in terms of the ability ofcontinued on page 6Median Price Changes--2009:Q1WhatcomSan JuanPend gMasonGrays YakimaPacificFranklinBentonWahkiakumWalla ckitat% change year ago-100.0% to -15.0%-14.9% to -10.0%-9.0% to 0.0%0.0% to 15.0%15.1% to 200.5%No dataVolume II, Issue 15

Clarification for Title Insurance IndustryTitle insurance is something that most people donot think about until purchasing a home. Since fewhomebuyers have knowledge of title insurers, theyoften look to their real estate agents for advice.Title insurance companies recognize this patternof referrals, and it is common practice for thesebusinesses to develop working relationships withlocal real estate agents. To build those relationshipstitle companies often sponsored company activities,donated educational programs or made other gifts/promotions available to real estate licensees, theirfirms or associations. Washington State law regulatesthe nature of these gifts and donations between titleinsurers and agents. This is done to ensure thathomebuyers receive unbiased recommendationsfrom their real estate agents and overhead expensesare kept to a minimum. On March 21, 2009, revisedrules under the Washington State AdministrativeCode (WAC) took effect to clarify what constitutesan appropriate gift and to set specific monetarylimitations for title insurance companies.Beyond providing an added layer of security inreal estate transactions, title insurers are extremelyvaluable supporters of the real estate community.The new regulati

strong 2 /strong Real Estate Licensee Update Real Estate Licensee Update strong Volume /strong II, No. 1 Spring/ strong Summer /strong 2009 The Real Estate Licensee Update is produced semi-annually. The information in this update is being made available to you as an educational service by the Washington Real Estate Commission and does not constitute legal or professional advice.