Transcript 2008 Legislative Update - Kansas City Regional Association

2009 Legislative Update
Missouri & Kansas Government Affairs Committee
January 16, 2009
Bottom Line: How Does Governmental
Affairs and RPAC Help You?
▪ RPAC protects your profitability by keeping the real
estate industry and your individual business healthy!
▪ We interact with elected officials and defeat unfriendly
proposals so you can focus on what you do best – provide
quality service to your customers and clients and make
money!
Update on Federal Issues
RESPA Reform
▪ On November 13, HUD issued a final rule containing several
important reforms to RESPA.
▪ Starting on January 1, 2010, this rule will require a new three-page
good faith estimate (GFE) and a three-page HUD-1/HUD1A that
will provide more information to consumers on closing and
mortgage loan costs.
▪ The original proposal would have mandated that closing agents and
REALTORS® read a 45-minute script to all customers at closing.
In response to our concerns, this requirement was eliminated.
▪ This rule also prohibits the actual charges at closing from exceeding
the estimated amounts included in the binding GFE. This will help
prevent a “bait-and-switch” approach to settlement service fees.
Economic Stabilization
▪ This legislation provides the Treasury Department with
$700 billion to purchase equity stakes in financial
institutions, purchase mortgage-backed securities and
inject liquidity into the financial markets.
▪ While this legislation was unpopular, the real estate
industry would have been significantly harmed had it
failed!
Fannie Mae and Freddie Mac Reform
▪ Passed legislation that includes reforms to strengthen
the stability and oversight of Fannie Mae and Freddie
Mac.
▪ Fannie Mae and Freddie Mac guarantee nearly 70% of
the residential mortgages issued in this country.
▪ If these entities were allowed to fail, financing for
residential mortgages would disappear overnight!
▪ These reforms will ensure that Fannie Mae and Freddie
Mac have the ability to continue to purchase a large
amount of residential mortgages on the secondary
market.
First-Time Homebuyer Tax Credit
▪ Passed legislation that created a new, temporary tax
credit to provide an incentive for first-time homebuyers
to purchase a home in the next year.
▪ The $7,500 credit will be available to all first-time
homebuyers who purchase a home between April 9,
2008 and July 1, 2009.
▪ There are income restrictions and the credit must be
repaid over the course of fifteen years (or when the
home is sold if that occurs before fifteen years).
Form 5405
First-Time Homebuyer Credit
Housing Stimulus 4 Point Plan
▪ Expand the $7,500 first-time homebuyer tax credit to all buyers of
a new and existing home. Eliminate the repayment requirement for
the $7,500 homebuyer tax credit.
▪ Make the 2008 FHA, Fannie Mae & Freddie Mac limits
permanent.
▪ Target more funds to mortgage relief efforts and increase efforts
to mitigate foreclosures.
▪ Make permanent the prohibition against banks entering real estate.
Seller-Financed Downpayment
Assistance Programs
▪ As part of the housing stimulus legislation, Congress
enacted legislation that prohibited seller-financed
downpayment assistance programs.
▪ In prohibiting these programs, HUD had presented
evidence showing that mortgages originated in
connection with these programs experienced a default
rate that was three times higher than normal.
▪ NAR supports legislation to reverse this prohibition, but
it includes numerous reforms to the old system that will
make it harder to qualify for these programs.
Affordable Health Insurance
▪ Introduced legislation to create a new program to
provide affordable health insurance to small business
employees and self-employed individuals.
▪ This program would provide a tax credit of up to $1,800
per individual or $3,600 per family for self-employed
individuals (like REALTORS®) to purchase health
insurance on the private market.
▪ 25% of REALTORS® do not have health insurance and
cost is the main reason cited for a failure to purchase
health insurance coverage. This legislation could reduce
monthly premiums by up to 40%.
Legislation Passed by KAR
During the 2008 Legislative
Session
HB 2315 - Regulation of the Home
Inspection Industry
▪ Requires all home inspectors to register with a new, independent
home inspection board. The board will require all home
inspectors to meet certain standards to become registered under
this act.
▪ Starting on July 1, 2008, prohibits all home inspectors from
limiting their liability for errors and omissions to less than
$10,000. In the past, nothing prevented a home inspector from
including a provision in a home inspection contract that limited
their liability for errors and omissions to the price of the home
inspection ($250 to $350).

In counties with greater than 60,000 in population, all home
inspectors will need to register under this act by July 1, 2009, and
under 60,000 by July 1, 2011.
Additional Legislation Passed
During the 2008 KAR Legislative
Session
SB 577 – New Language on Radon Gas in
Every Residential Real Estate Contract
▪ In order to defeat the other radon-related requirements in SB 577,
KAR was forced to agree to the addition of new language in the
residential real estate contract on radon gas.
▪ After July 1, 2009, every residential real estate contract shall be
required to contain the following language on radon gas:
‘‘Every buyer of residential real property is notified that the property may present
exposure to dangerous concentrations of indoor radon gas that may place occupants at
risk of developing radon-induced lung cancer. Radon, a class-A human carcinogen, is
the leading cause of lung cancer in non-smokers and the second leading cause
overall. Kansas law requires sellers to disclose any information known to the seller that
shows elevated concentrations of radon gas in residential real property. The Kansas
department of health and environment recommends all homebuyers have an indoor
radon test performed prior to purchasing or taking occupancy of residential real
property. All testing for radon should be conducted by a radon measurement
technician. Elevated radon concentrations can be easily reduced by a radon mitigation
technician. For more information, please go to http://www.kansasradonprogram.org.”
HB 2746 – Various Changes to the Real
Estate License Act
▪ Introduced by the Kansas Real Estate Commission, HB 2746
increased fines for violations of the real estate license law, created a
new class of violations with a higher maximum fine, and added
new violations into the real estate license law concerning
unprofessional conduct by real estate licensees.
▪ Increased the maximum fine for basic violations of the license law
and BRRETA from $500 to $1,000.
▪ Creates a new class of violations concerning mortgage fraud,
forgery and intentional non-disclosure of adverse material defects
with a maximum fine of $5,000 per violation.
▪ Provides the Commission with new authority to punish real estate
licensees for various acts of unprofessional conduct.
HB 2772 – Mandatory Licensure for
Real Estate Appraisers
▪ Requires real estate appraisals in Kansas to be conducted by licensed
real estate appraisers.
▪ Previous law allowed unlicensed individuals to conduct appraisals
when a property has a fair market value less than $250,000 and
when that mortgage will not be sold on the secondary market.
▪ KAR was able to secure an exemption to ensure that REALTORS®
are still able to provide brokers’ price opinion and comparative
market analyses to customers, clients and third parties for
compensation.
Legislation Defeated by KAR
During the 2008 Legislative
Session
SB 331 – Increased Mortgage Registration Taxes
SB 605 – Increased Document Recording Fees on
Real Estate Transactions
▪ Under current law, the average homebuyer in Kansas pays an additional $315 in
closing costs on the purchase of a home because of the mortgage registration
tax.
▪ This legislation would have increased the existing mortgage registration tax by
up to an additional $50 per transaction to finance various programs unrelated to
housing. This would have resulted in an increase of nearly $4.5 million in
closing costs for homebuyers in Kansas.
▪ Under current law, homebuyers in Kansas pay an average of $85 in closing costs
on the purchase of a home due to fees to record the real estate-related
documents.
▪ This legislation would have increased these fees by approximately $15 per
transaction to finance various programs unrelated to housing. This would have
resulted in an increase of nearly $2.5 million in closing costs for homebuyers in
Kansas.
HB 2147 – Increased Excise Taxes on Real
Estate Development
▪ Would have imposed a new 1.5% excise tax on the fair market value
of any agricultural land that was rezoned for new residential and
commercial real estate development.
▪ For example, assume that a developer has purchased a plot of
agricultural property valued at $1.0 million to build a new
residential subdivision. When the developer sought to rezone that
land for residential use, an excise tax of $15,000 would have been
required before the land would be rezoned.
▪ Even though excise taxes are paid by the developer, the cost is
rolled into the cost of the property and increases the purchase
price for the eventual buyer.
SB 274 – Major Increases in Premiums for
Homeowners’ Insurance
▪ Would have allowed insurance companies to increase the cost of
homeowners’ insurance premiums without review by the Kansas
Insurance Department.
▪ Under current law, insurance companies are required to file
premium rates with the Kansas Insurance Department. The
department has the authority to review these rates and reduce the
proposed premiums if they are excessive.
▪ The passage of this legislation would have removed this oversight
authority from the department and could have increased
homeowners’ insurance premiums by up to 40% in the next few
years.
SB 577 – Require a Test for Radon Gas in
Every Real Estate Transaction
▪ Would have required a mandatory test for radon gas in every
residential real estate transaction.
▪ Also would have required REALTORS® to complete a separate
disclosure form for radon gas that is similar to the lead-based paint
disclosure form.
▪ If the mandatory test for radon gas was not conducted or the
disclosure form was not properly completed, sellers and
REALTORS® could have been fined up to $10,000 per violation.
Legislation Passed by MAR
During the 2008 Legislative
Session
SB 907 – Prohibition of Private Transfer
Fee Covenants
▪ Instrument which “encumbers an owners property with the
obligation for all future buyers of the property to pay a 1%
“transfer fee” for the next 99 years,”
▪ MAR pro-actively outlawed these payments, often required to be
paid to home builders or developers by all subsequent property
owners, before the trend spread to Missouri.
▪ The potential for damage to the real estate economy over the long
term from these instruments is significant.
SB 788 – Commercial License
Portability
▪ Establishes a system for out of state licensees to affiliate with a
Missouri real estate broker to participate in a commercial
transaction.
▪ Requires out-of-state licensee to have executed a brokerage
agreement with a Missouri broker, consented to jurisdiction of
Missouri and the commission, consented to certain disciplinary
procedures, and appointed the Missouri real estate commission as
his or her agent for service of process.
▪ Important fix to allow Missouri commercial brokers to legally
operate in global commercial real estate market.
HB 2188 – Civil and Criminal Penalties for
Mortgage Fraud
▪ Authorizes a civil penalty of up to $5,000 for any violation of
current MO mortgage fraud laws
▪ Specifies that licensed real estate brokers, salespersons,
and appraisers can be brought before the Administrative Hearing
Commission and lose their license for committing mortgage fraud.
A licensee who is criminally convicted of mortgage fraud will
automatically have his or her license revoked
▪ Specifies that any person committing mortgage fraud will be
guilty of a class C felony.
Legislation Defeated by MAR
During the 2008 Legislative
Session
Increased Document Recording Fees on
Real Estate Transactions
▪ Multiple bills filed to increase the document recording fees, most to
increase funding for the Missouri Housing Trust Fund.
▪ Various bills proposed anywhere from a $3 to $12 increase in
document recording fees.
▪ An ongoing effort from social welfare agencies across the state that
will continue in 2009.
HB 2112- Sales Tax
on Services
▪ “Fair Tax” bill introduced in Missouri House this session.
▪ The concept is to do away with all income taxes and impose a state
consumption tax (sales tax) on everything, including professional
services provided by, among others, Realtors.
Looking Ahead –
The 2009 Legislative Session
In Topeka (closing the budget gap)
▪ Sales Tax on Services – Repeal exemption on sales tax on
services. The average local sales tax rate is 7.3%. Imagine
a 6% commission on the sale of a $200,000 home. Before
you even subtract the brokerage fees and cooperating
share, you would be required to pay an $876 sales tax to
the state.
▪ Transfer tax on real estate - 37 states already impose. In
Pennsylvania, sellers pay a 4.0% tax to the state on the sale
or transfer of any property. Imagine you have sold a
$200,000 home. At closing, the seller must pay an $8,000
sales tax to the state out of the proceeds (if any).
In Topeka
▪ Private transfer fees are hidden fees that are concealed
deep within the fine print of real estate deed covenants
that require the parties to the transaction to pay a fixedpercentage of the sales price to a third party.
▪ Because of their concealed nature, many homebuyers and
REALTORS® are unaware of these fees when they make
a decision to purchase a home and are unable to consider
the implication of these fees before closing.
▪ KAR will introduce a bill to prohibit this in Kansas.
In Jefferson City
▪ BUDGET
▪ Establish Regulation and/or Licensure of Home
Inspectors, identified by our Missouri Governmental
Affairs Committee as the #1 State Legislative Priority,
▪ Oppose mandatory sunset of statewide development tax
credits.
▪ Continue to push for increased regulations and penalties
for cases of mortgage fraud and predatory lending.
▪ Continue to oppose increases to document recording fees.
▪ Continue to oppose attempts to enact sales taxes on
services.
Update on Regulatory Issues
New Restrictions on Advertising by
Salespersons and Teams
▪ All advertising must prominently display the name of the
supervising brokerage.
▪ Terms “real estate” and “realty” cannot be used in trade
names for salesperson and team advertising.
▪ Commission will start issuing substantial fines for
violating these requirements starting on July 1, 2009.
All Compensation for BPOs and CMAs Must
Be Funneled Through the Supervising Broker
▪ Associate brokers and salespersons are prohibited from
accepting compensation for real estate-related activities
from sources other than the supervising broker.
▪ BPOs and CMAs are a real estate-related activity and
compensation for those activities must be funneled
through the supervising broker.
▪ The supervising broker must maintain all records relating
to BPOs and CMAs for a period of three years under
K.A.R. 86-3-10.
Short Sales are a Material Defect That Must
Be Disclosed in the Real Estate Transaction
▪ Short sales are adverse material defects under the
Brokerage Relationships in Real Estate Act (BRRETA).
▪ As a result, a real estate licensee must disclose to all
parties in the real estate transaction when they have
actual knowledge that a short sale situation exists.
▪ If the real estate licensee had actual knowledge and did
not make this disclosure, they may be disciplined by the
Commission for failure to disclose an adverse material
defect.
Licensees Must Disclose When They
Have an Interest in Property Subject to the Real
Estate Transaction
▪ The Commission has revised the regulation (K.A.R. 86-319) that requires real estate licensees to disclose when
they have an interest in the property subject to the real
estate transaction.
▪ As a result, a real estate licensee must make a disclosure in
the real estate contract when they (or an immediate family
member) has an “interest” in the property.
▪ “Interest” means any type of ownership or service as an
officer, member, partner or shareholder in any entity that
owns the property.
Local Issues in MO and KS
Local Issues MO & KS
▪ Local Sign Ordinances
▪ Annexation
▪ Rental Property/Vacant Property Regulations
▪ Property Taxes
▪ Foreclosure issues
▪ Transportation Issues
▪ Zoning Ordinance Revisions
▪ Upcoming Municipal Elections
How Can You Help Us Spread the
Word About Our Industry?
Participate in the Calls for Action
▪ On major issues, NAR, KAR. And MAR will issue
Calls for Action to members.
▪ It literally takes only two clicks of your mouse and less
than 10 seconds to participate in a Call for Action and
generate support for our vital issues at the state and
federal level!
▪ This is the easiest way to generate support for our
issues. Legislators pay attention and will listen when
they cast a vote on our issues.
The First Key to Unlock the Housing Crisis
The keys to unlock the housing crisis are in the hands of Congress. REALTORS have spent
the last three months educating Congress on NAR's Four Point Housing Stimulus Plan to grow
our economy, spur home buying, encourage lending and curb foreclosures. Today we need
your help in handing Congress the first key -- the $7500 Homebuyer Tax Credit.
Over the next week, the critical work in forging one key component of the new stimulus bill
will begin in Committees that govern economic and financial matters
.
As a constituent of the select few Congressmen who serve on one of these powerful
committees, you are being called upon to help ensure the Homebuyer Tax Credit
is included in the larger economic stimulus bill on behalf of all REALTORS. Please
don't let them down. Let your elected official hear from you today on how important
this is to unlock the housing market.
Send a letter your elected official that serves on one of the following committee(s):
House Committee on Ways and Means
Senate Committee on Finance
Below is the sample letter:
Subject: Include Housing in the Recovery and Reinvestment Act
Dear [decision maker name automatically inserted here],
Congress did a good thing in 2008 when it enacted the $7500 first-time homebuyer tax
credit. Unfortunately, the tax credit is not generating the stimulus that either Realtors or
legislators had expected. In our area, we are finding that prospective homebuyers simply see
no incentive effect in a tax benefit that will have to be paid back over time. At a time when
people are trying to minimize their debt loads, the tax credit is perceived as simply adding to
their debt, not as providing a benefit.
A further challenge with the repayment feature is that there is literally no one who can
explain the mechanics of how the credit will be paid back. No other tax credit available to
individuals must be paid back. Thus, there is no precedent that would suggest a model for
how taxpayers would make the payment. As the repayments will not commence until 2010,
the IRS has not yet provided guidance. Thus, Realtors can provide no explanation to
prospective purchasers who are reluctant to undertake a tax obligation they don't
understand.
Contribute to RPAC
▪ Our goal is to simply ask each members to invest $25 and
brokers $100 in RPAC each year.
▪ In return for this small contribution, you allow us to
continue to have the political power that is needed to
defend the real estate industry from these negative
attacks and harmful proposals.
Just because you do not take
an interest in politics doesn’t
mean politics won’t take
an interest in you!
Contact Info
Derek Ramsay
Vice President for Missouri Governmental Affairs
Office: 913-266-5910
Cell Phone: 816-721-4823
Email: [email protected]
Cindy Green
Vice President for Kansas Governmental Affairs
Office: 913-266-5916
Cell Phone: 913-206-7304
Email: [email protected]