A New Tool

Today NAR announced a new acquisition that will create a National Database of Real Estate Information for Realtors®. The announcement was made on Realtor.org, but many already knew about this move.

Here is the opening statement from the news release:

The National Association of Realtors® has acquired technology to create a database of all properties in the U.S. so Realtors® can better assist consumers in a high-tech, fast-paced business world.

The technology acquisition includes licensed data and secured data aggregation services from LPS Real Estate Group, a wholly owned subsidiary of Lender Processing Services Inc. (NYSE:LPS), a leader in real estate technology. NAR will use the assets to develop the Realtors® Property ResourceTM, a parcel-centric information database covering all of the more than 147 million property parcels in the country as a resource for NAR members. NAR is planning to launch RPRTM in the second quarter 2010.

“Realtors® are the first, best source for real estate information, and the RPR™ is another emphatic feature to that resource. RPR™ will give Realtors® nationwide data on all properties at their fingertips so they can respond quickly to consumers interested in residential and commercial real estate. This is exciting news and a terrific NAR member benefit. NAR is committed to keep Realtors® central to the transaction and to the buying and selling experience with their clients and customers,” said NAR President Charles McMillan, broker with Coldwell Banker Residential Real Estate in Dallas-Fort Worth.

NAR CEO Dale Stinton said, “These acquisitions will allow Realtor® interests to control the program and the content. Realtors® need to respond quickly to today’s tech-savvy consumers, and the RPR™ provides a means for multiple listing services (MLS), commercial information exchanges (CIEs) and real estate brokerage business models to support the Realtor® community, rather than requiring Realtors to purchase data aggregated by third parties.”

There are a number of speculations that this will be a MLS Killer,but NAR is assuring it’s membership that this  is no more than a tool for Realtors®.  Interestingly, Dale Ross, co-founder of MRIS will be on the RPR management team. 

Also from the news release:

RPR™ is not a national MLS, and will carry no offers of cooperation and compensation, Stinton added. “It is a private, NAR members-only benefit. The assets acquired by NAR will be directed through a wholly owned subsidiary corporation, Realtors® Property Resource, LLC,” Stinton said.

We’re sure that this will be a much discussed topic at the NAR Convention and will most likely make the “Future of MLS” panel very popular.  It’ll be interesting to watch and see how this tool will impact members.  As always, it’s important for Realtors® to reach out and learn about, as well as use those tools created by your Association.

MRIS has put out a one page reference guide, denoting some of the most commonly cited complaints.  Pay special attention to the Short Sale section. Please spread around to your offices.

Today MRIS released a quick update on their website explaining the Status of Listings, as displayed in MLS.  This is one the most frustrating of the misleading practices that some practitioners use.  Many questions arise from this procedure and MRIS has given this simply explanation:

Compliance Quick Tips – Choose the Appropriate ‘Status’

08/24/2009–

Are you using the appropriate status on listings? Take our short quiz to test your knowledge of listing statuses.

Question 1:
Which listing status indicates that a property is available with no contingencies, contracts, or applications registered against it?

Answer 1:
An ACTIVE listing indicates that a property is available with no contingencies, contracts, or applications registered against it.

Question 2:
Which status is used to indicate that the property is for sale but not available for showing or when the seller is not accepting additional offers?

Answer 2:
TEMPORARILY OFF MARKET (TEMP OFF) is used to indicate that the property is for sale but not available for showing or when the seller is not accepting additional offers. Temp Off status is usually 14 days or less. If there are ongoing circumstances (such as repair work or a bank review) please contact the MRIS Compliance Department to request an extension of the TEMP OFF time frame.

Question 3:
Which status should be used to indicate that a property has one or more issues pending resolution that may or may not contain a Kick-Out (KO) clause, as specified in the sales contract?

Answer 3:
A CONTINGENCY status should be used to indicate that a property has one or more issues pending resolution that may or may not contain a Kick-Out (KO) clause, as specified in the sales contract. A kick out clause allows the seller to give the current purchaser a certain amount of time (as specified in the contract) in which to remove the contingency or decide not to purchase a property. A kick out clause is most commonly used with a home sale contingency. Third party approval is a type of contingency that usually does not have a kick out clause.

Remember to review the Listing Compliance Report available at http://www.mris.com/reports/lcr to monitor your dates and make sure that your listings remain in compliance!

To share feedback on this article, email communications@mris.net.

MRIS is a great source of information. Yesterday they emailed out the MRIS 2009 Trends in Housing Midyear Report.  It has great information in it and every agent should be well versed in what’s going on around them. 

Some features of the Report:

Mid-Year 2009 Highlights

The Washington area housing market has moved into the correction phase – the first step in recovery:

• Prices are showing renewed signs of strength: 2nd quarter prices in most jurisdictions were up from the 1st quarter, though still lower than one year ago.  Prices may experience slight declines through the end of the year, but increased demand and a lower supply of listings are helping facilitate price traction.
• Days on market are down sharply compared to both last quarter and a year ago.  Properties continue to sell quickest in the Core jurisdictions, but across the region, time on market is moving toward the region’s long term average.
• The ratio of inventory to sales (months of sales) continues to decline in all jurisdictions from one year ago.  The metro-wide ratio of 5.1 months’ worth of listings is below the normal, healthy standard of 6 months, signaling that demand is beginning to outpace supply.

What is being done to help homeowners refinance into more affordable loans? – ‘Policy Spotlight’ Page 10
The new Federal Homeowner Affordability and Stability Plan (HARP) allows borrowers to take out a mortgage of up to 125% of the home’s value. Learn about the program in the ‘Policy Spotlight’ on page 10.

How have properties in Exurban Virginia been shielded from steep declines? – ‘Regional Spotlight’ Page 17
The counties of Culpeper, Stafford and Spotsylvania as well as Fredericksburg are seeing strong interest in the lower price ranges, where unit volume is up sharply from one year ago.  Find out how properties in this area are performing in the ‘Regional Spotlight’ on page 17.

Who are the Players and what is Ratification?

Update: Much of this article is pointed to issues with Shortsales, but it seems that many REO agents are failing to update the MLS as well.  This applies to all. 

Many times in the past week or so, I’ve been asked the question: “Can we leave it as active in MLS, if the transaction is contingent on Third Party Approval?”

In order to answer this question, we have to know who the entities are that dictate the answer.  In this case we have the MRIS policy, the REALTOR® Code of Ethics, the Virginia Real Estate Legislation and your contractual agreement.  The Contractual Agreement has little to do with leaving the listing “Active” it simple dictates which policy is triggered. 

The question is really based on if you have a  ratified contract.  The Virginia Statute of Frauds requires that residential sales contracts be reduced to writing, in order to be enforceable.    Just as a reminder; the elements of a ratified contract are Offer & Acceptance, Consideration, Legally Competent Parties, Consent and Legal Purpose.  An offer is not considered ratified until the other party has been notified.  A Meeting of the Minds must occur for a contract to be ratified and then execution; which is to say that all Principals should sign and deliver copies. 

The MRIS Regional Contract defines “ratification” as “Date of Ratification means the date of final acceptance in writing of all terms of the Contract (not the date of expiration or removal of contingencies).”  <source: NVARK1321 Paragraph 29.C> and you can also reference paragraph 1 and 2 of the Virginia Jurisdictional Addendum.  The contract makes it clear, that with signatures and delivery conveying a “meeting of the minds” you have a ratified contract. 

With the exception of a very, very few agreements; acceptance by the Lender in a Shortsale is a Contingency and not a determinate of a ratified contract.  Remember that some companies are using “subject to” clauses which keep the parties from ratifying and still agree to send the offer to purchase, to the lender.  Since these contracts are not truly ratified; the buyer may keep looking for better deals at better prices and the Seller may still keep looking for better buyers.  Both Buyers and Sellers should be very clear, when deciding not to ratify, that either party may bump them from the “deal”.

So… Can we advertise the property as “Active”!?!?!

Nope.  Once ratified, the listing status needs to change in MRIS’ MLS system, to reflect actual status.  Some agents are using the CNTG/KO.  That’s fine, so long as you’ve actually used the kick-out clause addendum and are very clear that the property does have a kickout, what that means to all parties, and how it’s enforced.  You cannot have the listing as “Active” in MRIS, if you have a contract that is ratified.

Here is what MRIS has to say:

MRIS Short Sale Policy Update

"Short sales" have become the subject of great discussion and debate among practitioners, regulators, and policymakers alike.  With input and guidance from the MRIS Board of Directors, the MRIS Compliance Committee, the REALTOR^® Shareholder Associations and the MRIS subscribers, and taking into consideration the new policy changes approved by NAR at this year’s mid-year conference, MRIS is updating its policies related to Short Sales.  The goal is to provide a balanced approach that addresses issues on both the seller and buyer sides of transaction.

There are several points that MRIS subscribers will need to consider:

Definition of Short Sale.  MRIS is adopting the definition of "short sale" established by NAR: "As used in MLS rules, short sales are defined as a transaction where title transfers; where the sale price is insufficient to pay the total of all liens and costs of sale; and where the seller does not bring sufficient liquid assets to the closing to cure all deficiencies."

Definition of Potential Short Sale. A potential short sale describes a property that may reasonably be expected to become subject to a short sale.  Going forward, MRIS’s new policy is that all Potential Short Sale listings must be disclosed unless local laws require otherwise.  The potential for a short sale is considered a material fact.

Lender Approval.  Seeking lender approval is part and parcel of the typical short sale transaction.  

The bottom line:   If lender approval is to be sought in a transaction, then this fact must be disclosed to the potential buyer and buyer’s agent unless local laws require otherwise.  It is your responsibility to properly determine what your legal obligations are, and to act in accordance with these obligations.

Compensation Data Field.  Since only listings with unconditional offers of compensation may be entered in MRIS, the compensation entered in the compensation field is the compensation that any cooperating broker should expect to be paid as result of the sale.

MRIS will continue to treat commission related issues and disputes as the purview of the arbitration panel of the appropriate local Realtor^® Association.  MRIS is not a party to any short sale transaction or compensation agreement, and will not adjudicate compensation related disputes among subscribers.

Appropriate status. The status for any listing where a ratified contract is subject to a lender approval must be changed to CNTG/KO or CNTG/NO KO, indicating a third-party approval contingency.  MRIS’s perspective is that a listing broker, in such an instance, may continue to market the property and continue to accept back-up offers.  The MRIS Rules and Regulations require that the listing’s status be changed within 48 hours excluding weekends and holidays.

Please refer to the Short Sale FAQ at http://www.mris.com/compliance/faq.cfm for more information.

note: Virginia considers the pursuance of a shortsale as a confidential financial fact and thus cannot be disclosed in MLS or anywhere else without the written permission of the Sellers.

The Virginia Administrative Code also addresses this issue

3. All online listings advertised must be kept current and consistent as follows:

a. Online listing information must be consistent with the property description and actual status of the listing. The licensee shall update in a timely manner material changes to the listing status authorized by the seller or property description when the licensee controls the online site.

b. The licensee shall make timely written requests for updates reflecting material changes to the listing status or property descriptions when a third party online listing service controls the website displaying the listing information.

c. All listing information shall indicate in a readily visible manner the date that the listing information shown was last updated.

The REALTOR® Code of Ethics has this to say:

Article 12
REALTORS^® shall be honest and truthful in their real estate communications and shall present a true picture in their advertising, marketing, and other representations. REALTORS^® shall ensure that their status as real estate professionals is readily apparent in their advertising, marketing, and other representations, and that the recipients of all real estate communications are, or have been, notified that those communications are from a real estate professional. (Amended 1/08)

What if the Parties Agree?

After laying all this out to most REALTORS®, I inevitably get the follow up question, “But what if the buyer and seller agree”.  The answer is typically that their agreement about keeping it “Active” in MLS is irrelevant.  It’s not just about the buyer and seller, but about the other potential buyers.  No agents, nor buyers want to go look at a house that isn’t truly available (well, almost none) and even if they did, they should still know that the seller has previously accepted an offer.  Remember that REALTORS® carry a responsibility for Honesty and Disclosure of Material facts (like a ratified contract and conveyance of equitable title) to all clients and customers – not just their own.

Often times these listings are kept as “Active” to help generate more leads for the Listing Agent from IDX surfers.  Occasionally it’s simply accidental and more frequently the Lister doesn’t really understand what ratification is.  Regardless, the reason this has become an all too common complaint amongst agents.

Recommendations

If the Principals to the transaction agree that the Seller may solicit other offers (I have no idea why a buyer would approve of this with full disclosure) use the CNTG/KO status and express all the terms of the Kick-Out in the Contract.  If a buyer and Selling Agent really want to look for homes, and don’t care about pending contracts, they can search both “Active” and “CNTG/NO KO and KO”. 

Sources:  Real Estate Law, Fourth Edition Dearborn Publishers; Modern Real Estate Practice 17th Edition;   Fairfaxlaw.blogspot.com, NAR 2009 Code of Ethics, MRIS.com, LEG1.state.va.us, en.wikipedia.org

I’ve been very surprised lately that so few Realtors know about MRIS’ Wireless Matrix system.  If you’re a MRIS subscriber, you can access all the agent listings from your web-enabled cellphone, Blackberry, Treo or iPhone.  To get started, you need to subscribe at MRIS.  Then you can go to http://matrixwireless.mris.com on your handheld device.  Your key-fob device isn’t needed on your phone, just your login and password.

You can get the step-by-step “how-to” below:

(Blogmaster’s note: You MUST read the comments below to see clarification of the MRIS Policy regarding disclosures)

Personally, I have had a very bad experience with a “Short Sale.”  However, perhaps I should use a term which is more appropriate. That term is “Potential Short Sale.”  As a result of that bad experience, I have been avoiding them.  Today, however, a good client has asked me to show them a home that is a potential short sale.  I will comply with their request but only after having warned them of the prolonged period of time that may occur prior to settlement if they get a ratified contract (which will, of course depend on third party approval).

Technically, according to many sources, a sale is not “short” until settlement. MRIS defines “short sales” as “a transaction where title transfers; where the sales price is insufficient to pay the total of all liens and costs of sale; and where the seller does not bring sufficient liquid assets to the closing to cure all deficiencies.”

Just today I previewed a property that had a comment something like “Third party approval required.” in the remarks section.  Hopefully, the listing agent did not know that there was a field where is can be disclosed that a property is a potential short sale.  In my opinion this field should always be entered where the owner of a property is negotiating with a lender to allow a short sale.

According to MRIS “The listing broker/agent must disclose (emphasis added) the property is a potential short sale once the listing broker/agent is aware that a property reasonably might become subject to a short sale.  The reasoning is that this is a material fact; it could be determined that failure to disclose it may be misrepresentation.

Let’s make it easier on each other.  Don’t make us work any harder than we need to.  Cooperate with your fellow agents and brokers.

This month MRIS adopted new policies that will affect you. The following is a summary of the changes. If you are having problems reading the document, click box-in-box icon in the top right hand corner of the document window.

MRISChanges122008

Meeting of the Minds

First the REALTOR® needs to be aware when the contract is actually ratified. This is really no different an issue than any other. The contract is ratified when you have an expressed (in writing) meeting of the minds. When the Buyer and Seller have signed all the agreements in the contract and delivery and acceptance is made, you have a ratified contract. The third party approval is a contingency just like home inspections, finance or any other. There are some new Short Sale Addendums that help define this contingency better, but it’s important in the context of MRIS’ new changes. It’s important because knowing that the contract is actually ratified when the buyer and seller agree, means that the home can no longer be marketed as active; regardless of the status of the Lender’s Third Party Approval.

VAC 135-20-190 Section C.3

a. Online listing information must be consistent with the property description and actual status of the listing. The licensee shall update in a timely manner material changes to the listing status authorized by the seller or property description when the licensee controls the online site.

Disclosures

Lem Marshall, VAR’s General Counsel, has spoken on many occasions in regards to the fact that the Seller, who is pursuing a short sale is protected in the fact that such pursuance is a confidential financial fact. Therefore, without permission of the Seller, the agent may not disclose this fact – ever. Since it’s potentially material to the time frame of the buyer, some assert that it does have to be disclosed at the point of submission, for an offer to purchase. However, it is not material to the marketing. You can see more from Lem on this issue HERE.

Virginia’s Statutory Code Section 55-2134 says the following:

3. Maintain confidentiality of all personal and financial information received from the client during the brokerage relationship and any other information that the client requests during the brokerage relationship be maintained confidential unless otherwise provided by law or the tenant consents in writing to the release of such information;

MRIS’ New Policy

The following information was copied from the MRIS FAQ last week:

Short Sales

What is a Short Sale?

MRIS is using the NAR definition of a short sale – “As used in MLS rules, short sales are defined as a transaction where title transfers; where the sale price is insufficient to pay the total of all liens and costs of sale; and where the seller does not bring sufficient liquid assets to the closing to cure all deficiencies.”

Why does MRIS use the term potential short sale?

Since a sale of a property is not technically “short” until settlement, the term “Potential Short Sale” is used to describe a property that may be subject to a short sale.

Why must a potential short sale be disclosed?

If a seller is seeking the approval of a third-party to sell a property short, MRIS considers this a material fact. Failing to disclose a material fact may be considered misrepresentation.

Is disclosing a potential short sale a violation of my fiduciary responsibility?

Your fiduciary responsibilities and other professional obligations are between each broker/agent and his or her client. Although the listing agent does have a fiduciary responsibility to the seller, it may be argued that a disclosure of short sale does not violate the fiduciary responsibility since the fiduciary obligations may not relieve the licensee from their statutory obligations to other parties. However, MRIS does not provide any opinions or guidance on your fiduciary responsibilities and recommends you consult with your broker and the appropriate authorities regarding any such issues.

When does the property need to be disclosed as a potential short sale?

The listing broker/agent must disclose that the property is a potential short sale once the listing broker/agent is aware that a property reasonably might become subject to a short sale.

How can I indicate that a listing is a potential short sale in MRIS?

MRIS will be making changes to Keystone^® and Matrix^® to enable agents to disclose a potential short sale and the requirement for third-party approval of the contract. Until these changes are complete, listing agents must disclose a potential short sale in the General/Agent Remarks by stating “Potential Short Sale”.

When must I change the listing status while waiting for the bank to provide its approval?

The status must be changed within 48 hours once the buyer and the seller have signed the contract even if it has a contingency such as lender approval.

What should the new status be?

Once the contract is signed by all the buyer(s) and the seller(s) with a third-party approval contingency, the status must be changed to either CNTG/KO (Contingent with a Kick Out) or Contingent No Kick Out (CNTG/NO KO).

What happens if my seller wants me to keep it in ACTIVE status?

As a licensee, you have the obligation to treat all parties (buyer’s, buyer’s agents, etc.) fairly. Failing to disclose the accurate status of the property may be misrepresentation. The listing broker and seller may continue to market the listing and accept back-up offers.

Can the amount of compensation owed to cooperating brokers in a Potential Short Sale be changed?

The offer of compensation indicated in MRIS in the compensation field is unconditional. MRIS’s policy is that language in any Remarks field or any other field does not trump what is indicated in the Compensation field. Compensation may only be displayed as a percentage of the gross sales price or a specific dollar amount.

The selling broker is not precluded from electing to accept compensation other than as stated in the compensation fields. However, that issue is one to be negotiated directly among the brokers to the prospective sale.

To whom should I complain if the amount of compensation paid at settlement is not what was stated as unconditional compensation on the listing?

Issues regarding the amount of compensation paid at settlement are always referred to an Arbitration Board. Short Sales are not an exception. Your local REALTOR^® Association handles arbitration requests. MRIS does not arbitrate or adjudicate compensation disputes.

Summary

It’s important for the Practitioner to remember that MRIS serves several states, so their opinions regarding disclosure is not Virginia specific. REALTORS® are encouraged to always consult with their Brokers and Corporate Counsel in regards on how to define this policy from MRIS, if there is an unclear issue.

I did call MRIS compliance for clarification and they are, in fact, stating that if the Seller declines to disclose that they are pursuing a short sale; they may not be listed in MRIS.

Otherwise the MRIS is fairly clear on issues such as status changes and the fact that commissions cannot be defined anywhere other than in the Commission Field and such things as “commission subject to third party approval” in the ‘remarks’ area are no longer valid.