Wisconsin REALTORS® Association - Legal Hotline Hottips
Legal Hottips - April 7,
2008 ALERT: REPORTING SALES CONCESSIONS REALTORS® often express concern over property values that appear to be artificially inflated through creative financing techniques. Properties frequently sell above the price originally agreed upon by the parties, with seller concessions netting the seller the original price. Higher purchase prices may permit buyers to obtain more favorable financing, but the buyers are left with higher assessed values, higher property taxes, potentially higher insurance costs and higher mortgage payments. When appraisers and assessors use the sales data from these transactions as comparables to establish values for other properties, there may be a domino effect resulting in the overvaluation of other properties. This will stop if the assessors and appraisers are alerted that the sales price may involve concessions or other creative financing. The Uniform Standards of Professional Appraisal Practice (USPAP), in Standards Rules 1-2(c), requires appraisers to clearly identify sales or financing concessions and analyze their impact on value. In addition, some groups, such as Fannie Mae, specify how sales or financing concessions are to be addressed with the use of comparables in the appraisal. The Fannie Mae/Freddie Mac appraisal report forms, for instance, direct that, "Adjustments to comparables must be made for special or creative financing or sales concessions." Appraisers are often frustrated because information regarding sales concessions is very hard to find. One potential source is the Wisconsin Department of Revenue (DOR) Real Estate Transfer Return (RETR). The RETR Instructions (PE-500a R. 7-07), found at www.dor.state.wi.us/ust/pe-500a.pdf, require that the total actual consideration paid be reported as the value, but also requires that a box be checked if there is any type of seller financing such as a credit, gift, donation to nonprofit/charity, second mortgage, land contract, etc. This will alert assessors and appraisers accessing DOR data to investigate further to see if concessions or creative financing had an affect on the sales price instead of just accepting the price on its face. One source of additional sales concession information is the MLS sold data. Some MLSs have various fields for reporting sales concessions. Appraisers who are alerted by the RETR or MLS sold data that a sales concession was involved will, as required by USPAP and Fannie Mae standards, search for further transaction information so that the price may be appropriately analyzed and adjusted before using it as a comp for an appraisal. They often will ask the brokers from the transaction for sales concession or financing information. Unfortunately, many brokers do not provide this assistance due to confidentiality or authorization concerns. REALTORS® have the duty to preserve confidential information under Wis. Stat. § 452.133(1)(d) and Standard of Practice 1-9 of the REALTOR® Code of Ethics. Confidentiality is not a concern if the parties authorize the release of sales concession information. While the state-approved offers to purchase currently authorize licensees to give a copy of the offer to appraisers for purposes of the transaction, they do not authorize the post-closing release of sales concession information to appraisers researching comps for subsequent transactions. The WRA will strongly advocate that such a provision be inserted in the DRL-approved offer to purchase forms as they are revised.
This removes the need for brokers to determine whether
or not this concessions information is confidential and helps
appraisers set fair values. The intent is not to share Social Security
numbers, party names or other identifying information other than the
property address and the items and amounts that were used to reach the
final sales price.
Making creative financing information available to
appraisers will help maintain accurate property values for the benefit
of Wisconsin consumers, lenders and REALTORS® alike. 1.) Offer to Purchase - Secondary Offers QUESTION: The seller has an accepted offer to purchase with a short sale addendum, which indicates approval needs to come from the seller's lender. If a second offer comes in, does it need to be treated as a secondary offer or can it be treated as a primary offer because they don't have an acceptance of the short sale? ANSWER: The safest practice from the seller's standpoint is to make subsequent offers secondary offers - each also subject to the approval of the seller's lender for a short sale. The seller can submit each offer to the lender for the lender's consideration with respect to the seller's request for a short sale approval. SHORT SALES FORMS NOW AVAILABLE . Short Sale Checklist 2.) Landlord/Tenants - Showing Rental Properties QUESTION: A Nigerian friend was refused a two-bedroom apartment she wanted to rent - in fact she was not even shown the unit even though she specifically asked to see it. Instead, the apart¬ment manager indicated the unit was too small for the woman and her three children and that is was too far away from the elementary school and the Boys and Girls Club. Can the friend sue the apartment manager? ANSWER: The rental agent unfortunately made assumptions about where and how the friend wanted to live and in the process apparently violated fair hous¬ings laws by pre-judging the unit as being too small for the family. While the rental agent may have been ignorant, biased or even well inten¬tioned, all that matters in the end is that the agent steered the woman away from a unit she may very well have been perfectly qualified for. In addition to the assumption about the size of the unit, the rental agent also concluded that the friend's chil¬dren frequented the Boys and Girls Club, an assumption that might have been ethnically or racially grounded. The friend may wish to look for a local tenant or fair housing agency or orga¬nization to assist her with this situa¬tion. It will likely be a case of one word against the other unless additional evi¬dence or confirmation can be found. READ MORE ABOUT IT:
APRIL IS FAIR HOUSING MONTH: NEW Hmong Fair
Housing Poster! This poster is designed in the bright colors that are part of traditional Hmong heritage. The English translation of the poster is:
Thank you to Char Glocke and the La Crosse Area REALTORS® Association for bringing this to the WRA Equal Opportunities in Housing Committee!! Other Posters
WISCONSIN FAIR HOUSING NETWORK ANNOUNCES INFORMATION SESSION Noon - 2:00 Luncheon Program and Awards
Presentations For registration information visit: http://www.wra.org/Education/Events/Fair_Housing/FairHousing.htm This Wisconsin REALTORS® Association Best of the Legal Hotline service is provided for you by the WRA's Legal Affairs Department. The service should be considered a general statement of applicable legal principles. Given this format, it is impossible to fully address all potential legal issues which might apply in any particular situation. A determination of any individual's legal rights in a transaction can only be obtained after complete analysis of the law and its applicability to the particular fact situation. Please contact the WRA Legal Hotline if additional information is needed, or private counsel, if legal advice is needed. Thank you for using the Wisconsin REALTORS® Association Best of the Legal Hotline service. Debbi Conrad |