New MCE Legal and Ethics Course

As you may know ALL current TREC legal and ethics courses expire 12/31/07. TREC is in the process of approving providers with the new course as we speak. However, in conversations with TREC I have been told many providers have not even submitted their application to offer the new course. We just received approval of a 6 hour legal and ethics course 06-06-129-6503. We submitted our course early November and Texas Tech University CPD (#143) just now received the approval letter. If you are a broker you might want to inform your agents not to procrastinate if they expire in January. Agents should also confirm that any legal or ethics course taken after 12/31/07 is the new course. One way to check is the course number. The third set of numbers is the expiration date of the course. As an example in the course number above the expiration date is "129" or 12/31/09. If you are any of your agents have a question about their MCE please have them give us or TREC a call.

TREC Commissioners Tackles A Hot Button Issue At Monday's Meeting.

The E&O Insurance for Inspectors has been addressed. See the TREC web site for more details.

On Monday October 8, 2007 I knew something was up when I arrived 30 minutes early for the TREC meeting and the parking lot was almost full. The hot button issue was the new statutory requirement that Inspectors carry insurance. The hubbub was the Legislature was not clear on the type of insurance. What type of insurance does the law require Inspectors to carry; business liability or E&O? One thing you can say about the Inspector community they know how to Rally Their Troops. There were long lines at the podium for speakers.

Hopefully this insurance question will be resolved when the Attorney General renders his opinion on what the statute means. He could rule that:

• Inspectors are required to carry E&O
• Inspectors are required to carry business liability insurance
• Inspectors are required to carry both
• The statute is unenforceable
• or Something entirely different.

You can enroll yourself on an e-mail list at http://www.oag.state.tx.us/ and receive an e-mail alert when the Attorney General releases his opinions.

TREC has a new Administrator, Mr. Tim Irvine, and this was his first meeting so welcome and yes it is too late to change your mind. Mr. Irvine and Chairperson Walton, kept the meeting moving and respectful.

Other items from the meeting:
The Inspector's Advisory Committee was created.
Two new members of the Broker Lawyer Committee we appointed.
Minor changes in the New Home Contracts along with the Third Party Financing Addendum. Also a new Notice Addendum was presented 43-0 and they changed form 34-3 Addendum for Property Located Seaward of the Gulf Intracoastal Waterway. Watch the TREC web site for the new forms.
Several new rules regarding fees and procedures were also passed. These were related to new changes from the last legislative session.

So much was addressed in this meeting giving you all the details here would be too time consuming and my purpose is to give a summary not a blow by blow retrospect of the meeting. Check the TREC web site and the minutes of the meeting will be posted at a later date. I have been attending these meetings for many years and you should try to attend from time to time, especially if they are discussing a policy that effects your profession.

All information is deemed to be correct but is not guaranteed. Posts are for eduction purposes only and are not intended to replace professional advice.

Are Flat Screen TVs Going To Be The Next Artificial Fireplace Logs?

Over the years as building concepts and technical innovations occur the contract forms needed to keep up. Many years ago people in rural areas only access to cable type channels was using a satellite dish. Not these small dishes we see today but huge 10-12 foot monsters. At one time the satellite dish was added to paragraph 2. The intent was the seller would leave a functional satellite system. In reality the seller left that huge dish cemented into the ground but took all the electronics in the house. So, the form was changed adding "satellite dish systems and equipment".

A similar situation happened with artificial fireplace logs. These needed to be added a short time ago to clarify that these did in fact stay unless the seller reserved them.

Now with very expensive plasma or flat screen televisions mounted to the wall we are seeing the same confusion. If you have a home with these televisions mounted on the wall it would be a good idea to list them in the final contract that the seller will remove them. However, the belief is that any mounting hardware attached to the wall would remain. Stating that the seller is going to remove the televisions in the listing agreement is not enough. This reservation must be listed in the contract and the acceptable place would be paragraph 2. In the past who would have thought that a TV would be considered real property, so it was not addressed. With new technology some televisions are attached to the wall and MIGHT be considered part of the property.

All information is deemed to be correct but is not guaranteed. Posts are for eduction purposes only and are not intended to replace professional advice.

Educators & Regulators Meet In Austin Discussing New Regulations And Market Conditions.

August 24, several educators and regulators from Texas and surrounding states met at the OMNI Hotel. What is unique about these meetings is that the information comes from some of the most knowledgeable sources in real estate.

Here are just some of the tidbits from the meeting.

There has been a drop in the number of agents who renew after their first year.

September 2005 - June 2006 73.3% renewed their license.
September 2006 - June 2007 68.7% renewed their license.

Two possible reasons were discussed.

1. The increase to the 60 core hour renewal requirement. This might dissuade those who are leaving the business from keeping their license in either active or inactive status.

2. If new agents were not given a reasonable expectation of what the job requires. I've seen several ads that give new agents misleading impression of earning potential. One ad is "Earn $150,000 a year in real estate". Another was an education provider advertising that getting a license and taking their class can make you rich. Many agents enter this profession with images of an easy path to wealth and prosperity.

However there is a positive trend. The renewal rate for the second years is around 75%.

Mortgage Fraud

We all know this is going on but you may not know to what extent. It is reported that real estate is responsible for 23% of America's GNP. The Federal Government and State Governments are taking this very seriously. In all major cities there are FBI agents dedicated to mortgage fraud. Starting very soon there will be a new Government Task Force dedicated to finding mortgage fraud. Looks like the statute of limitations on mortgage fraud will be increased to 10 years.

One new requirement falls on the borrower.

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NOTICE OF PENALTIES FOR MAKING FALSE OR MISLEADING STATEMENT

Effective September 1, 2007 and pursuant to Section 1. Subchapter B, Chapter 343, Section 343.105 of the Texas Finance Code, each mortgage lender, mortgage banker or licensed mortgage broker/loan officer shall provide to each applicant for a home loan this written notice at closing for full verification and execution by each loan applicant.

WARNING:
Intentionally or knowingly making a materially false or misleading statement to obtain property or credit, including a mortgage loan, is a violation of Section 32.32, of the Texas Penal Code, and, depending on the amount of the loan or value of the property, is punishable by imprisonment for a term of 2 years to 99 years and a fine not to exceed $10,000.

If a person determines or reasonably suspects that fraudulent activity has been committed or is about to be committed, the law requires that person to report the information to an authorized governmental agency.

Texas Department of Savings and Mortgage Lending
2601 North Lamar Blvd., Ste. 201
Austin, Texas 78705
Toll Free Consumer Hotline: (877) 276-5550
Main Number: (512) 475-1350
Email: smlinfo@sml.state.tx.us Website: http://www.sml.state.tx.us/

I/we, the undersigned home loan applicant(s), represent that I/we have received, read, and understand this notice of penalties for making a materially false or misleading written statement to obtain a home loan.

I/we represent that all statements and representations contained in my/our written home loan application, including statements or representations regarding my/our identity, employment, annual income, and intent to occupy the residential real property secured by the home loan, are true and correct as of the date of loan closing.

_____________________________________ ____________
Applicant .......................................................................... Date
_____________________________________ ____________
Co-Applicant(s) ............................................................... Date
Fraudulent activity has been defined as any act that constitutes a violation of a penal law and is part of an attempt or scheme to defraud any person. If a person determines or reasonably suspects that fraudulent activity has been committed or is about to be committed, the person shall report the information to an authorized governmental agency, namely:

The Texas Attorney General,

A local or state law enforcement agency of this state or a federal law enforcement agency, or

A U.S. Prosecuting attorney or prosecuting attorney of a county or judicial district of this state, or one or more of the following agencies:

The Texas Department of Savings and Mortgage Lending (TDSML),

The Texas Department of Public Safety (DPS),

The Texas Department of Insurance (TDI),

The Office of Consumer Credit Commissioner (OCCC),

The Texas Real Estate Commission (TREC),

The Texas Credit Union Department (TCUD),

The Texas Department of Banking (DOB), or

The Texas Appraiser Licensing and Certification Board (TALCB).Effective September 1, 2007 and pursuant to Section 1. Subchapter B, Chapter 343, Section 343.105 of the Texas Finance Code, each mortgage lender, mortgage banker or licensed mortgage broker/loan officer shall provide to each applicant for a home loan this written notice at closing for full verification and execution by each loan applicant.

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This is intended for people doing stated income loans who state an income to get the loan not what they actually earn. Can you see how that last paragraph will apply to agents? So if the agent knows the borrower is not telling the truth the agent is required to "RAT OUT" the borrower. To answer the question "HOW WILL THEY EVER FIND OUT?". Simple it will be in the secondary market review or if the loan goes into default. You can check out more changes at:

http://www.sml.state.tx.us/Website%20Proposal%20for%2080th%20Legislature%20Activity.htm

There is also a provision similar to the drug laws. We all know if the drug dealer gets caught the governments will seize their assets. Well looks like the same rules will apply regarding mortgage fraud.

One twist on identity theft is a rash of identity theft of appraisers. This is where flippers get the identity of a certified appraiser to create bogus appraisals to inflate the values.

Short Sales

Remember when a lender forgives a portion of the loan to do a Short Sale don't be surprised when that 1099 shows up as taxable income for the portion the bank forgave.

This was the most surprising of all.

TREC has between 140,000 and 150,000 licensees that they regulate. In fiscal year 2006 there were 5,391 complaints. Of those 2,020 were from the public. The rest were administrative complaints for things like not completing MCE, hot checks paid to the TREC etc. Of those 2,020 complaints from outside TREC only 12.1% were ruled that a valid violation of TREC rules or laws was committed. Run those numbers real fast and it looks like overall Texas has a majority of licensees following the rules. However there were several complaints that did not violate the law but were filed because the consumer felt the agent did not meet their expectations. A 1998 study published in the REEA Journal supported by a similar study out of Ohio establishes the contention that States with stringent pre-licensing education requirements have fewer consumer complaints filed with the licensing agency.

Not the happiest news but information you need to know in your real estate practice.

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SCEG speakers included:

Dr. Wayne Thorburn, Jerry Rutledge, Chuck Jacobus, John Stovall, Joe McClary, Carmel Streater and Connie Miller.

All information is deemed to be correct but is not guaranteed. Posts are for eduction purposes only and are not intended to replace professional advice.

Is The Sky Falling?

It seems that every time I turn on the news there is bad news about real estate. However, there should be an * about Texas. As of now Texas and Central Texas in particular seems to be bucking the bad news trend. Yes there is a change in the market but not on the level reported on the national news.

Even if there is a down turn locally I doubt it will be anything like the 1980's. Let's take a trip down memory lane and look at what was going on in Austin, Texas in the mid to late 1980's.

• Interest rates went as high as 20% plus.
• Foreclosures were in the thousands each month on a regular basis.
• Armed Federal Marshals were doing SWAT like raids on Saving and Loan offices.
• Financial Institutions executive officers were being taken out of their offices in handcuffs.
• Lenders could not lock in interest rates because by the time the borrower signed the loan application and the lender dialed the number to lock the rate, the interest rates had already jumped.
• If you took a listing for less than a year it was too short.
• HUD was selling homes for $10,000 with a 30 year loan and a 3% down payment.
• Entire streets of duplexes were being sold in a block.
• Investment property was being sold where the lender would count anticipated rents towards qualifying for the loan.

It was real estate Armageddon.

So when you hear the news put it in perspective. Also ask yourself this question. If the real estate market changed today what do I need to do so I can take advantage of the change?

A good agent knows they need to plan for future changes in the market.

All information is deemed to be correct but is not guaranteed. Posts are for eduction purposes only and are not intended to replace professional advice.

New Laws Starting September 1, 2007

At the last Texas Real Estate Commission meeting Monday 8/6/07 several TREC rules were passed to comply with the new statute.

Here are some of the changes effective September 1, 2007.If you take an online MCE course you cannot complete the course in less than 24 hours. So if you wait until the last day of your renewal and you only need 1 more hour of MCE you will not be able to get credit for 24 hours after you have started the ONLINE course. It is my understanding that this 24-hour rule only applies to ONLINE classes not classroom or correspondence MCE courses.

TREC took action to replace the Real Estate Inspectors Committee with a new advisory group established in the statute. There were several discussions on the new requirement for Inspectors to carry E&O coverage. Some inspectors asked for guidance on what the E&O needed to cover.

In the past TREC could not order a licensee to issue a refund. As of September 1, 2007 that will change.

If you have a complaint filed against you and hearing is held it will no longer be with a TREC administrative hearings officer. Cases will now be assigned the State Office of Administrative Hearings.

If you do a late renewal be prepared to pay higher fees. The late fees depends on how long you have let your license go inactive.

Some of these rules were passed on an emergency measure. This will allow TREC to have rules in place 9/1/07 but also allow them to create more permanent rules later.

Some of the new laws do not become effective until January 1, 2008.

If you apply for a broker's license on or after 1/1/08 you will need 30 CORE hours in a Real Estate Brokerage courses. This course will have a TREC number in the 700's. Such as our Real Estate Brokerage 0712 course. The total number of hours did not increase. This Brokerage course will be part of the required 270 CORE hours.

Fingerprinting and more extensive criminal background checks will be required for new applicants and current licensee renewals.

TREC also took action to approve a new TREC Seller's Disclosure. This is NOT a mandatory Promulgated TREC form. It can be used by any agent or seller who may not have access to a TAR or local board's Seller Disclosure form.

All information is deemed to be correct but is not guaranteed. Posts are for eduction purposes only and are not intended to replace professional advice.