Event Lists
March 26th
Real Estate Profit Navigator™ is a powerful web-based tool designed to assist brokers and managers plan the survival of their brokerage. Easily input your financial data to instantly display data-rich, comparative reports detailing your brokerage’s or office’s financial health and help you identify strategies for survival. Quickly and easily create multiple “what if” scenarios to instantly forecast how to improve your bottom line. This software is offered as a FREE member benefit. Attend a one-hour class and learn how to quickly use this web-based analysis tool.
Register by email to Lisa or call (303) 300-8500.
Click here to login and retrieve Profit Navigator.
Click here for an instructional video on how to properly retrieve Profit Navigator.
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Brokers Cautioned on How to Characterize Compensation
In light of a recent federal district court ruling against a brokerage's administrative fee as a RESPA violation, brokers should take precautions in how they characterize their compensation, NAR General Counsel Laurie Janik says in a memo on the court's decision. Section 8(b) of the Real Estate Settlement Procedures Act (RESPA) prohibits charging a fee that's not tied specifically to a service. As interpreted by the court decision, an administrative fee to help offset operating and other costs is unearned because it connects to no specific service. NAR's position is that this misconstrues the RESPA provision and the association has asked HUD for clarification, but that clarification is still pending. Janik says the ruling is likely to be appealed once other proceedings in the case are completed. In the meantime, brokers should clearly indicate that any flat fee in addition to a percentage-based commission they charge represents payment for services provided by the brokerage. These combined amounts should be disclosed in the 700 section of the HUD-1 as the broker's compensation. NAR regulatory staff are also preparing an analysis of the court decision.
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REBarCamp is an ad-hoc gathering born from the desire for people to share and learn in an open environment. It is an intense event with discussions, demos and interaction from participants. REBarCamp welcomes real estate industry related people to include real estate brokers, lenders, inspectors, home-stagers, title reps, coaches, geeks, non-geeks, geek wannabes and anyone who is interested in learning and sharing knowledge in a freely collaborative environment. Come if you believe the whole is greater than the sum of its parts.
When: May 22nd from 9 am.- 4 p.m. Add to my calendar.
Where: DPPA Event Center (2105 Decatur Street, Denver)
Cost: Free!
RSVP: Click here.
To get additional event details and to see who has registered to date, click here.
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Enjoy lunch with City Council Members from your District
May 28th from 11:30 a.m.-1:00 p.m. at the Denver Country Club
We are please to present this year’s City Council Luncheon. Join us for lunch and time to mingle with City Council Members from across the City. Event space is limited so we encourage you to make your reservation early. (Entry will be restricted to the first 100 registered.)
When: May 28th from 11:30 a.m.-1:00 p.m.
Add to my calendar.
Where: Denver Country Club,
1700 East 1st Avenue
Cost: $35 per person or $250 for a table of 8
Includes: Presentations by Denver’s City Council Members
Lunch at the Denver Country Club
Time to meet and socialize with City
Council Members and their Aides
Register: Click on Member Login or call (303) 300-8500.
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Conservation Easement News from the Division of Real Estate
Due to the importance to the conservation community of the recent Federal Tax Court decision Hughes v. Commissioner of Internal Revenue issued on May 6, 2009, the Division feels it is important to comment on the case. We at DORA and the Division of Real Estate are committed to consumer protection. We are and will continue to vigorously pursue appraisers and promoters of conservation easements who engage in abusive practices. These practices erode the tax base and cause harm not only to taxpayers but also to land owners who believe in conserving private lands for the benefit of all citizens.
We were encouraged by the judicial recognition in the Hughes case of what we here at the Division have always believed. Conservation easements by their nature impact property value. Put another way, conservation easements have inherent value from a land protection perspective.
In this particular case, the IRS asserted that even though the properties in question had conservation easements on them, the property value in question was reduced by 0-10%, meaning the easement itself was essentially worth nothing. Citing an earlier tax court opinion, the judge observed that it would be "hard to imagine a prospective purchaser (of a large parcel of land) who would not have considered the restriction of the open space easement in determining price."
Importantly, the court recognized that although there might be little demand for converting agricultural land to residential development at the time an easement is granted, this may be a realistic possibility in the future and should have been considered by the IRS. Since a future buyer is precluded from placing an easement on the property because conservation easements run with the land forever, the overall market value of the land is worth less.
The court also referred to a so called "matrix" the IRS created to assist their staff in valuing Colorado land. The court said this matrix included general information that did not have a specific connection to the subject property, should not have been used and was accordingly given little weight.
Creating a significant new justification to support the value of the Colorado conservation easement program, the court observed that by granting a conservation easement in Colorado, the value of state income tax credits must be considered. Once the original taxpayer seeks a tax credit, future purchasers are precluded from granting a conservation easement and therefore from receiving the benefits of the tax credit. The court found the IRS should have considered this factor in determining the encumbered lands reduced value due to the easement.
The court also rejected the IRS’ argument that the market was not yet sophisticated enough to recognize the potential value of these credits and factor them into a fair market value. The court noted that most market value definitions assume that buyers and sellers have reasonable knowledge of relevant facts.
Under Colorado law, only certified general appraisers may value conservation easement properties. As noted by the court, the IRS expert in this (and many other cases) was not a certified general appraiser. Indeed, the IRS has informally requested such licensure and the federal Appraisal Subcommittee has refused to allow our office to license the IRS experts unless they can show compliance with the standards applicable to all other certified general appraisers. Those standards are contained in the Uniform Standards of Professional Appraisal Practice. Without imputing a lack of competence or integrity to these experts, they are not subject to the same high standards as licensees. To become a general appraiser in this state requires the completion of rigorous and demanding coursework, successfully passing the exams and demonstrating a high level of competence and experience in appraisal practice. It would be comforting if all persons claiming expert status in appraisal practices were subject to the same requirements to ensure fairness and greater consumer protection.
In summary, the Hughes case is an important decision in favor of land conservation and protection of Colorado’s conservation easement program.
Thank you,
The Colorado Division of Real Estate
Please do not reply to this email as it has been automatically generated.
For more information, please visit the Division web site http://www.dora.state.co.us/real-estate/.
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Enjoy hors d’oeuvres, spirits, live music, door prizes and more
July 23rd from 5 - 9 p.m. at the Denver Athletic Club – rooftop terrace
We are please to present this year’s PSF fundraiser event. Enjoy a summer evening on the rooftop with live music. Join us for hors d’oeuvres, cocktails, door prizes and a silent auction of jerseys, pucks and hockey sticks from your favorite Colorado Avalanche players.
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When: |
July 23rd from 5 - 9 p.m. Add to my calendar. |
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Where: |
Denver Athletic Club – rooftop terrace
(1325 Glenarm Place) |
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Cost: | $10 per person |
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Includes: | One free drink ticket
Free appetizers
Live music
Free parking
Entry in multiple door prize drawings |
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RSVP: | Click on Member Login or call (303) 300-8500. |
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Special REALTOR® Presentation of Zoning Code Update by City Planners
Join us for a metro-wide REALTOR® Association presentation by the Community Planning and Development Department and the City and County Planning Board.
Come by to: learn about the Zoning Code Update, better understand the Draft Code, prepare for how the new Code will impact property transactions and ask questions.
When: June 2nd from 2 p.m. – 5 p.m. Add to my calendar.
Where: The Denver Board of REALTORS® (4300 E. Warren Ave.)
Cost: Free; refreshments provided
For more information on the Zoning Code Update visit newcodedenver.org.
For a brief history of the Code, a map outlining the 7 contexts considered in the new plan and next steps by the City, click here.
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In his speech at the National Association of REALTORS® Housing Summit on May 12, 2009, US Department of Housing and Urban Development (HUD) Secretary Shaun Donovan announced a program that allows borrowers to use the first-time homebuyer tax credit for a down payment or closing costs on a FHA-insured mortgage. The Secretary said “We think the policy is a real win for everyone, ensuring that borrowers can tap into the numerous organizations that are already part of the FHA network to receive this additional benefit.”
The details of the program were announced today in Mortgagee Letter 2009-15. Government entities and instrumentalities of government may provide a second mortgage. Currently, 10 state housing finance agencies offer a product buyers can use that will effectively monetize the tax credit for down payment purposes. These states are Colorado, Delaware, Idaho, Kentucky, Missouri, New Jersey, New Mexico, Ohio, Pennsylvania, and Tennessee. State Associations are encouraged to work with their respective housing finance agency to implement similar programs. The 3.5 percent down payment may also be a gift from a family member, employer or nonprofit, charitable organization.
The original guidance permitted lenders and HUD-approved nonprofits and lenders to offer bridge loans via second lien financing or short term loans. Guidance released today allows lenders to offer the monetized tax credit for down payments in excess of 3.5 percent, closing costs and interest rate buy downs. Mortgage industry leaders have indicated that this type of product may not be immediately available to consumers. Lenders will need some time to develop documentation for what will effectively be personal loans to the home buyer.
Read the HUD Mortgagee Letter
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Laurie Janik, NAR General Counsel
April 29, 2009
A federal district court recently ruled in Busby v. JRHBW Realty, Inc. d/b/a RealtySouth that an administrative brokerage fee (“ABC Fee”) of $149.00 paid by a home buyer to the brokerage firm that represented her was not sufficiently related to any specific settlement service performed for her benefit, resulting in a violation of Section 8(b) of the Real Estate Settlement Procedures Act (“RESPA”). Section 8(b) prohibits charging for “real estate settlement services” unless the fee charged is for “services actually performed.” Click here to read a summary of the court's decision.
The court found that the ABC Fee represented an additional charge to the buyer to defray the overall costs of the brokerage services she received, including the broker’s overhead and administrative costs. However, because the ABC Fee was separately itemized on the settlement statement from the percentage brokerage commission, and not specifically justified as compensation for other discrete “real estate settlement services” provided, the court viewed it as a duplication of the percentage commission charges, thereby rendering it an unearned fee in violation of RESPA.
In my view, this unfortunate holding is incorrect because the court’s analysis of RESPA is flawed and because the court misapplied the mandate previously handed down in this case by the 11th Circuit Court of Appeals. It is undisputed that RESPA is not a fee-setting statute. Since a brokerage may charge a percentage based commission or a flat rate for its services, there is no principled basis to construe RESPA to prohibit charging a percentage plus a flat rate.
The court’s confusion likely stemmed from the fact that the total compensation was shown in two places on the settlement form, with each bearing a separate label (percentage commission and ABC Fee). These two factors caused the court to reject the brokerage firm’s explanation that the ABC Fee represented nothing more than a price increase being charged for the firm’s brokerage services. Believing the firm had already been paid for the brokerage services by the percentage commission, the court was looking for a different, specific service or set of services of benefit to the buyer in return for the ABC Fee. Finding none, it concluded that no settlement services were provided for the ABC Fee.
This case had previously been certified as a class action.
In light of this decision, brokers should review how they characterize their compensation. Placing separate labels on what is all compensation to the brokerage firm exposes the firm to the same claims asserted against the defendant here. It allows the conclusion that each separately labeled charge represents a fee for a separate service. Likewise, disclosing separate components of the broker’s compensation in different parts of the contract with the consumer or on different lines of the settlement statements creates risk. Disclosure of the brokerage firm’s compensation should clearly indicate that both the commission- based component and the flat fee component represent payment for services provided by the brokerage. These combined amounts should be disclosed in the 700 section of the HUD-1 as the broker’s compensation. Finally, do not create the impression that any particular fee is for a separate service if that is not the case.
The final chapter in this case has not yet been written. An appeal is likely after other proceedings in the case are completed, and certainly warranted in order to reverse this most unfortunate decision. A clarification from HUD on this issue was requested by NAR months ago and is long overdue. In the meantime, be cautious and protect your hard-earned compensation.
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