Paperless progress: Who's winning, who's losing

Paperless progress: Who's winning, who's losing

By Matt CarterInman News
Editor's note: More big companies, trade groups and entrepreneurs are investing in technology platforms, back-end systems and software to automate the real estate transaction, but most consumers are still closing deals the old-fashioned way. In this three-part series, Inman News eyes progress on the paperless front.

The paperless closing is turning out to be sort of like landing a man on the moon -- we've got the technical know-how to do it, but it's not exactly a routine event.
The complexity of the real estate transaction, although not quite as daunting as a moon shot, means there are many participants, procedures, forms and laws to contend with.
The key to making e-closing an everyday occurrence lies in standardization, regulation and adoption rates, those pushing the real estate, mortgage and settlement services industries in that direction say.
Much has been done to standardize the processes and data used in e-closings and to empower government agencies to handle the results. It's in the area of adoption where the most work remains to be done.
"The vision of the end-to-end electronic transaction is much clearer today than even a year ago," said Travis Wright, president of Stewart Transaction Solutions. "More parties from title insurance, mortgage, and notaries to county recorders are saying we've got to go electronic. We are seeing more and more isolated pockets of success in these distinct channels."
Although paper documents can be converted into electronic form to perform an e-closing, the task is simplified if the process of buying and selling homes is paperless from the get go. Transaction management applications are being designed with that goal in mind.
Walt Clark, senior vice president of transaction management solutions with Fidelity National Real Estate Solutions, said Fidelity's TransactionPoint can import MLS data, and is easy for real estate brokerages to integrate with other products agents use such as AgentOffice.
TransactionPoint is also compatible with electronic forms like ZipForm, WINForms and AutoRealty, and back-office accounting systems, which "really helps to tie from beginning to end, the whole real estate transaction cycle," Clark said.
Clark said Fidelity's largest client in Southern California, Prudential California Realty, is "now putting 100 percent of transactions through TransactionPoint," he said. "They are truly seeing the benefits of eliminating paper."
Besides cutting costs and reducing exposure to risks caused by human error, going paperless can be an effective marketing tool for an agent making a listing presentation.
"For a lot of our customers using TransactionPoint, it's become a differentiation for them," Clark said. The information collected and managed by TransactionPoint can also be made available online to prospective buyers.
"You can post your disclosure documents on there, or your latest inspection report, and they can be accessed publicly," Clark said. "It's an added value that gives the potential buyer more of a comfort level."
Wright said Stewart's SureClose transaction management software has similar capabilities.
"It's changing what I call deal documents," Wright said. After a purchase and sale agreement comes in, "There's a three- to five-day period where multiple offers start coming in. All of a sudden the fur starts flying," he said. "People start saying, 'Do you have a disclosure agreement?' There's a burst of activity where buyers and sellers are trying to negotiate an agreement and get a deal done."
Making that information available online is "great for negotiating," Wright said.
Stewart recently purchased two software companies, Formulator and Reveal Systems Inc.
Reveal System's TrueForms is used by about 85,000 real estate agents in 20 states, Wright said.
The "cool part" of Stewart's acquisition of Reveal Systems is that "the real estate transaction begins with the real estate agent and the consumer," Wright said. "We purchased TrueForms and Reveal to have access to the beginning of the process, with the Realtor."
Stewart plans to launch a proprietary e-signature application for TrueForms in the third quarter, to enable e-signed documents to be moved into the SureClose transaction folder.
While the advantages of transaction management software may be readily apparent, one past obstacle to adoption by real estate brokerages has been the concern about the need to re-key information into yet another system, Clark said.
"Having the data from point of origin to back office accounting system, there is no re-entering of information," he noted.
TransactionPoint also allows electronic service orders to be sent to lenders and title companies through the RealEC platform used by 20,000 vendors, Clark said. Jointly owned by Fidelity National Financial, Stewart Title Co. and LandAmerica Financial Group, RealEC is an online exchange that facilitates e-commerce in XML (Extensible Markup Language) formats. The company transforms XML forms used by various providers into a standard format, and routes orders between users.
Completely paperless closings remain relatively rare, as it's common for promissory notes and other mortgage documents to be "wet signed."
Since the first paperless closing was completed with much fanfare in 2005, the number completed to date probably remains in the thousands, if the number of e-notes on file with the MERS e-Registry is any indication.
The e-Registry helps lenders sell loans to investors in the secondary market instantaneously by transferring control of them electronically. Although the MERS e-Registry has more than 30 million loans on file, most were originated using paper promissory notes.
The number of eNotes on file with MERS numbers a little more than 2,400. That compares to more than 7 million home sales completed each year.
Harry Gardner, senior director of industry technology for the Mortgage Bankers Association, said that while the use of e-notes remains limited, there has been a steady rise.
The MBA's technology committee has created an eMortgage Adoption Task Force that's active in areas like investor adoption, warehouse lending and e-servings, Gardner said, and is working with the Property Records Industry Association to increase the adoption of electronic recording by lenders.
Gardner said one "very positive trend" is that some states are creating Web portals for e-recording. New Jersey, Gardner said, has not only created its own e-recording portal, but is offering the software it created to do the job free to other states.
With government mortgage repurchasers Fannie Mae and Freddie Mac handling e-mortgage applications, "Adoption by lenders is starting to ramp up," said Peggy Baker, director of strategic solutions with First American Corp.'s Enterprise Technology Group.
"We are seeing a ton of lenders request information on e-mortgages and e-closings," Baker said. "It could be because of the volumes they are doing (have fallen with the slowdown in the housing market) and people are able to focus on how they might improve their process."
Baker said getting into e-mortgage and e-closings isn't an all-or-nothing proposition.
"You can start really simply to get your feet wet," she said. "You don't have to have every single player on board to improve the process. The key player is the investor, and the lender."
First American's transaction management system, like other popular applications, allows borrowers to receive and sign disclosure statements electronically, for example, which can mean one less task to take care of on paper, if not paperless closing.
"They get an e-mail with a link and a key to type in" to acknowledge they have read and understand their loan disclosures, Baker said. "The closing becomes a much more amicable process. The borrower is not showing up saying 'I was expecting an ARM loan, not a 30-year fixed.' "
First American in March announced the expansion of its eClosing Services suite, which is designed to help lenders and settlement agents streamline the closing process. The eClosing Services suite is powered by First American Web Services, which the company says ensures compatibility with all loan types, investors, settlement technology, and business service platforms through an integrated and open architecture.
One selling point of First American's eClosing application is that it's already in use by the company's network of closing agents, Baker said, and any closing agent can register to use the system.
"You have to start somewhere, and if everyone just keeps waiting, you're never going to get to 100 percent. So let's just start," Baker urged. "We think one of our value propositions is bringing the closing agent network."
Although Baker expects all transaction management software will eventually be able to import MLS data, that capability does raise quality-control issues. The address on a listing, for example, may not be the same address used on legal documents.
"It makes it easier if the MLS listing is there," but it's important to be able to resolve such discrepancies by deciding who "owns" data and tracking changes in history logs. The ability to go to settlement services providers and bring back data helps ensure data is "clean."
"You would usually say that with an address mismatch, which source of information do you want to use, and set up a rule, saying for example, 'Title owns that,' " Baker said.
Data integrity "should be the goal of any system whether you're going to e-closing or not," Baker said. "Right now what's happening, if you have bad data on the (paper) docs, it's nobody's fault. You have the bad data -- you start doing everything else until somebody catches it."
Transaction management software not only reduces the likelihood of accidental errors, but is a tool for combating fraud.
With paperless closings, "I know that what I sent to the closing table is what got signed," Baker said. "If you're going to print out documents and white out, I'm going to know that."
Wright said Stewart's SureClose transaction management software uses an eClosing room, an encrypted space in the transaction management platform where documents are delivered and electronically signed and pushed to county recorders using Stewart's eRecording solution. An eNote may then be transferred to an eVault for safe storage.
Standards embraced
Smart documents, or intelligent PDFs, have an XML data layer that allows the information they contain to be seamlessly -- and automatically -- read by software applications.
Software applications are able to exchange data because they use common standards.
Two groups that work together on developing standards for e-closings and e-mortgage are the Property Records Industry Association (PRIA) and the Mortgage Industry Standards Maintenance Organization Inc., or MISMO, which is a subsidiary of the Mortgage Bankers Association.
MISMO has worked with the mortgage industry since 2001 on voluntary processes, transactions, and XML data standards that allow mortgage data and documents to be exchanged electronically. PRIA focuses on standardizing other electronic documents and procedures in the real estate transaction and works with MISMO and other groups to ensure compatibility.
As anyone who's ever sat down at a closing table knows, even a routine property sale may involve a formidable stack of recordable documents, including the deed, quitclaim deed, warranty deed, reconveyance, blanket assignment, power of attorney, signature affidavit, mortgage, satisfaction of mortgage, security instrument, and release of lien.
Mark Ladd, PRIA's technology coordinator, said PRIA and MISMO data standards "greatly reduce the technology friction," between applications that generate and process a wide range of documents and procedures. "We are seeing more and more interoperability all the time. Application developers know it is in their best interest to adopt national industry standards as they upgrade their product offerings."
PRIA maintains a list of counties that have enabled e-recording, which as of April 25 numbered more than 240 counties in 25 states.
"As far as county recorders are concerned, the early adopters are onboard and the technology is proven," Ladd said. "We are well past the pilot testing phase."
Ladd said counties that are still sitting on the sidelines are watching the volume of electronic documents the early adopters process to judge when to implement e-recording in their operations.
"For counties it's not a matter of if e-recording is a useful tool -- it's a matter of when to deploy," he said.
Skip Strause, an attorney, closing officer and founder of electronic closing services provider ecloz.com, said his company plans to be operating in 30 counties by the end of the year, and in even more if states move quickly to adopt the Uniform Property Electronic Recording Act, or URPERA.
"The county recorders are great, they're very progressive" about embracing e-closings, Strause said. "Closing agents and attorneys are ready because they want to use the technology. The mortgage lenders are interested but they are not ready to transform their entire operations."
Ladd said there are two predominant models of e-recording: a hybrid in which scanned images of paper documents are combined with XML data, and "native" documents that begin life in electronic form.
The "vast majority" of e-recordings today fall into the hybrid category, with counties adopting the approach seeing up to 75 percent of documents submitted electronically, Ladd said.
"Ultimately we'd like to be working with natively electronic documents," Ladd said. "However, the hybrid approach is allowing the industry to migrate toward the paperless process in a manner that educates consumers and closing agents in a 'walk-before-we-run' approach."
Regulatory acceptance
On the legal and regulatory front, 46 states and the District of Columbia have now adopted the Uniform Electronic Transactions Act (UETA), which removes barriers to paperless transactions by establishing electronic records and signatures as legal equivalents to printed documents and handwritten signatures.
UETA, approved in 1999 by the National Conference of Commissioners on Uniform State Laws (NCCUSL), allows basic real estate real estate transactions to be conducted electronically, including sale contracts, mortgage instruments and promissory notes. States that haven't adopted their own version of UETA have other laws on the books that allow paperless contracts and agreements. Congress has enacted similar legislation at the federal level, the Electronic Signatures in Global and National Commerce Act (E-Sign).
UETA and E-Sign don't explicitly address the issue of recording documents related to each real estate transaction at the county level, which are also governed by state law. So NCCUSL developed the Uniform Property Electronic Recording Act, or URPERA, which goes a step further in giving county clerks and recorders the legal authority to accept and store real property records and mortgages in electronic form.
URPERA allows electronic documents and signatures to be considered "original" documents suitable for recording as public records, establishes the standards recording officers will follow in accepting and making those documents available to the public, and establishes a board that sets uniform standards to be implemented statewide. That's not as easy as it sounds, since the laws for conducting and recording real estate transactions vary from state to state.
"Inserting URPERA in the law of a state requires careful scrutiny of its real estate law. If paper documents are effective … when they are time-stamped when delivered to a recording office, when should electronic documents that may be delivered electronically when an office is closed be considered effective?" NCCUSL notes on the group's Web site. "Answers to questions like this one will take some work and some complex decisions as URPERA is considered for enactment in any state."
In 2005, Arizona became the first state to enact URPERA, which by the end of 2006 had been adopted by 11 states, including Texas, Arizona, Virginia and Wisconsin, according to NCCUSL. Lawmakers in 11 other states introduced legislation to implement URPERA in 2007, including Florida, Washington, Illinois, Massachusetts and Nevada.
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Real estate plays catch-up with e-signatures

Paperless progress: Who's winning, who's losing
By Glenn Roberts Jr.Inman News

Editor's note: More big companies, trade groups and entrepreneurs are investing in technology platforms, back-end systems and software to automate the real estate transaction, but most consumers are still closing deals the old-fashioned way. In this three-part series, Inman News eyes progress on the paperless front.

The pen may be mightier than the sword, but the mouse is a mighty force, too. Take e-signature technology: you can electronically sign the documents to close a deal on a house with your mouse, even if you're in Taos or Laos.
The technology is typically noninvasive -- it doesn't require X-rays, thermal imagery, a retinal scan, or a sci-fi-esque genetic test to confirm your identity and conform with state and federal laws. Digital signatures are still new and scary for some real estate professionals and consumers alike, and adoption is more of a trickle than mainstream.
"I never trusted faxes," said Leigh Brown, broker-owner for RE/MAX Signature Properties in Charlotte, N.C. Faxing and re-faxing can degrade the readability of real estate documents, and verifying the identify of the fax sender or recipient is far from an exact science.
Brown began to use an e-signature system called DocuSign about six months ago and has gradually increased her usage. "My clients could not be more ecstatic with the ease of the transaction. Even with people who are not the most technology-savvy ... realize what a time savings that is," she said. "I use it with a lot of out-of-state clients. It makes it so easy for me, it saves paper -- it is very environmentally friendly."
A traditional non-electronic signing process could require mailing, re-mailing and gas costs, and an agent's time and effort throughout this signature-gathering process.
When it is not possible to physically meet with clients to explain documents, Brown said she speaks with clients on the phone as they view the electronic documents.
"I'll wager my guess that by this time next year at least half of the transactions we see are going to have more e-signatures," she said. There is a better "paper" trail for e-signatures because there is a digital time and date stamp associated with every signature, she said, and digital signature technology is more secure than faxed documents.
Some agents associated with other companies sometimes question the legality of the signatures, and Brown says she explains that the e-signatures are legally binding.
In 2000, the U.S. Congress enacted federal Electronic Signatures in Global and National Commerce Act, or ESIGN legislation that establishes criteria for legally binding electronic signatures. California passed its own law, the Uniform Electronic Transactions Act, earlier that year.
DocuSign boasts at its Web site that the company's e-signature process is "100 percent legally binding," and ZipForm, the official real estate forms software for the National Association of Realtors, offers an Esign tool in partnership with DocuSign. There are other companies, too, that offer e-signature systems, such as EchoSign.com and VREO.
While the technology is readily available for e-signatures, Peter Hickey, broker-owner for Windermere Real Estate Northeast in Kirkland, Wash., said that his company prefers in-person meetings with clients when signing transaction documents.
"I believe in face-to-face where possible. For first-time home buyers I would not recommend a non-face-to-face meeting," he said.
But his office has used e-signature technology to complete deals that were complicated by out-of-town clients and conflicting work schedules.
In one e-signature deal, Hickey said he had a client who worked at a county jail. "It was prohibitive for me to get to my clients. It was very difficult to get documents in and out to her" because of the complications in physically getting access to his client's workplace, he said.
"So I gained her permission to do this via DocuSign. I simply presented the offers to her over the phone. She chose the offer she wanted to go with. I scanned the offer, turned it into an (Adobe Acrobat) PDF and then processed it using DocuSign," he said. The technology allows users to electronically specify on the electronic document where a signature is required.
"She was able to review the contract with me on the phone, agree to it, click where DocuSign would insert her signatures ... and it came back to me." His client had formally accepted the offer.
"If people are separated by bars or geography, it's just a phenomenal way to do (a transaction)," he said, adding that he views e-signature as useful for documents that would traditionally be faxed but not for "high-value, high-important documents that need to be notarized. I think it's a great tool that should supplement our business but not replace going face-to-face when possible."
Hickey said he would not be comfortable using e-signature technology unless he had met a client in person, recognized their voice over the phone, or "have had enough of an online or telephone relationship with them to feel comfortable that they are who they say they are."
Tom Gonser, executive vice president of product strategy for DocuSign, said the company has perhaps 1,200 to 1,300 accounts related to the real estate industry, and the company serves a broad range of industries. The real estate industry's adoption of DocuSign is moving beyond the tire-kicking stage, Gonser said.
"Some of the (accounts) it looks like they use it for everything," he said, with about 20-25 percent using it for many transactions, while other accounts are using the e-signature platform on a limited basis.
The adoption curve is normal, he said, as real estate professionals realize that e-signature technology is not intended to eliminate them but rather to free up their time to focus on other services for their clients. "This isn't going to replace you as a Realtor -- it's going to make you more effective as a Realtor," he said.
Kevin Boer, a Realtor for 3 Oceans Real Estate in California's Silicon Valley who uses DocuSign technology for most of his transactions, said he earlier planned to purchase digital signature pads similar to the ones used at some retail stores. His plan was to loan those devices out to clients for use during the transaction process.
That solution, he said, "would have been very cumbersome. It wasn't adding a lot of convenience to the process." He discovered DocuSign as he was weighing his options and decided to go with that system. Boer employs an assistant who prepares electronic documents for signature by his clients, and he reviews the placement of those electronic signature stamps before sending the signature version to his clients, he said.
Also, he sends a non-signature version of the documents to clients prior to the final version to give them time to review and digest the documents, he said.
In the past two years, "I have yet to have a client use a piece of paper and a pen or a fax machine while doing a transaction. The only exception to that is mortgage documents at the closing table, which by California law still has to be signed by ink," Boer said.
For agents on the other side of the deal, Boer said he gives them a courtesy call in advance to explain the electronic signature process. He said he was surprised the technology hasn't caught on with more agents. "Adoption has been very slow. I'm very surprised. I've been preaching the gospel of electronic signatures in my office for two years now." Adoption may come in stages, he said, adding that he believes the industry will move toward broader adoption. He noted that most disclosure documents are now available online.
The technology is not a concern for his clients, he said -- he works in a very tech-savvy market and his clients seem comfortable with the concept.
That is not the case in every market area, though.
Janet D. Patrick, a Realtor for Crystel Patrick Realty in Norcross, Ga., said she is still weighing her options with e-signature technology and hasn't tried it out with her clients yet.
"I have clients who do not use e-mail -- (e-signature) would be pointless" for those clients, she said. "I deal with so many agents who still to this day don't have Web sites. For people who are intimidated by technology it might create a problem. I always have to have a pen -- I have to have that in a back pocket."
Some people still express fears, she said, about the "Big Brother" aspect of digital technologies, whether it is real or imagined.
But she believes more agents will warm up to e-signature technology, as it can cut down on the legwork associated with transaction paperwork. "Everybody could benefit from it," she said.

Seller tactics get top dollar for real estate

Quiz agent about marketing plan, sales commission, references
By Robert J. Bruss Inman News

Spring is traditionally the best time of year to sell your house or condominium. The reason is that March through June is the peak home sales season when the largest numbers of prospective buyers are in the market place.
But 2006 started out differently. For some unexplained reason, the numbers of houses and condos listed for sale in most communities took a sudden jump in January and February, far earlier than usual. Maybe these home sellers just wanted to get a head start on what promises to be an excellent sales season with mortgage interest rates still very affordable for buyers.

HOW TO SELL YOUR HOME FOR TOP DOLLAR. If you are thinking about selling your house or condo, this is the best time of year to do so. However, a successful home sale requires preparation and planning.
The first step is to get your residence into near "model home" condition. That means cleaning, repairing and painting. But don't go overboard with renovations. Let your buyers remodel to their taste. Most home improvements rarely bring in as much in additional sales price as they cost.
However, modest-cost cosmetic improvements usually pay off. Profitable examples include fresh paint inside and outside (paint is the most profitable dollar-for-dollar improvement you can make), new light fixtures, new floor coverings (if needed) such as wall-to-wall carpets, and outdoor landscaping spruce-up.

THE BEST WAYS TO DETERMINE YOUR HOME'S MARKET VALUE. Home sales prices depend on recent sales prices of nearby comparable residences within the last few months. A good place to start is on the Internet to determine your home's approximate market value.
A brand-new Internet Web site that provides free "guesstimates" of home values is www.Zillow.com. When I checked my home, I was amazed to see an aerial photo of my house, including the lot boundaries. The Zillow estimate of my home's market value was remarkably accurate. However, this remarkable new Web site doesn't yet cover the entire nation.
Other free Internet home-value-estimate Web sites include www.HomeGain.com, www.HouseValues.com, www.OurHomesPrice.com, www.Domania.com and www.PriceAHomeOneline.com. These Web sites will often refer you to a local realty agent.
After you have had fun with the Internet estimates of your home's market value, if you are a serious home seller, the best way to obtain a more accurate market value estimate is to interview at least three successful local real estate sales agents.
Even if you are thinking about selling your home alone (known as "for sale by owner" or "fizzbo") the agents you interview won't mind giving you their listing presentations. The reason is they know most "for sale by owners" give up and list with a professional agent within 30 to 60 days.

KEY QUESTIONS TO ASK EACH LISTING AGENT YOU INTERVIEW. The reason it is so important to interview at least three local agents is to compare their sales abilities and their CMAs (comparative market analysis) of your home's market value.
Each interview, including the agent's inspection of your home, should take about an hour. These will be the three most profitable hours you ever spend.
The reason is each agent should prepare a written CMA showing the agent's estimate of your home's market value. The CMA will include recent sales prices of comparable nearby homes, the asking prices of neighborhood homes now listed for sale (your competition), a list of recently expired nearby listings which didn't sell, and the agent's estimate of your home's market value.
In addition to receiving each interviewed agent's CMA, here is a list of key questions to ask each agent (the best agents anticipate these questions as part of their listing presentations):
1.) What are the names, addresses, and phones of your five most recent home sales listings?
Before you decide to list with one of the agents interviewed, be sure to phone those recent sellers to ask, "Were you in any way unhappy with your listing agent?" and, "Would you list another home for sale with the same agent?"
2.) How long have you been selling homes in this area? Do you sell real estate full-time? What professional courses and designations have you completed?
Some agents will resent these questions, realizing you are a well-educated home seller. But the best agents will have anticipated these important questions.
Occasionally, you will find a successful part-time agent who comes highly recommended by recent home sellers. Or you might encounter a promising new licensee who has lots of time to devote to selling your home listing.
3.) What is your minimum listing term? The best answer is 90 days so you won't tie up your home for a long time with a lazy or ineffective agent. However, some agents insist on 180-day listings.
They usually justify such a long term by saying, "The average number of days on the market for homes in this area is 150 days (or whatever)." But your reply should be, "I don't want just an average agent. I want an outstanding agent who has confidence in his or her ability to get my home sold within three months for top dollar."
If the agent you think is best still insists on a six-month listing, after checking his or her references, an acceptable alternative is a 180-day listing with an unconditional cancellation clause after 90 days written into the listing contract. Then, just in case you chose a "bad agent" you won't be stuck more than 90 days.
4.) What is your marketing plan for my home? The best agents will have anticipated this question by providing a written marketing plan as part of their listing presentation.
Each written marketing plan should include at a minimum a) a weekday open house tour for all MLS (multiple listing service) member local agents, b) Internet promotion on the agent's personal Web site and at www.Realtor.com (where 70 percent of today's home buyers begin their search), c) weekend open houses once or twice a month, d) newspaper ads at least once every week, e) brochures (ask to see samples of the agent's past brochures for other listings), and e) depending on the sales price, advertising in additional publications.
5.) How many listings do you have now? What are their addresses? Do you have an office assistant? What percentage of your listings didn't sell last year? What day of the week do you take off and who covers for you when you are gone? Are you planning any vacations during the next three months?
If the agent you are considering has too many listings, he or she might not be able to devote enough time to your home sale. Watch out for "numbers agents" who take many listings, have several assistants, but sell a low percentage of their listings. However, consider it a bonus if two agents work as a "team" to handle a large percentage of their listings.
Having an office assistant is another bonus to free the agent's time for sales while the assistant handles the details such as arranging inspections, appraisals, and sales closings.
6.) What sales commission do you charge for a home like mine?
You should be aware, according to a recent survey by Real Trends, the average home sales commission is 5.1 percent. However, many agents try to get the traditional 6 percent sales commission, especially for homes priced below $500,000.
If the listing commission is competitive, this is not the time to cut the agent's commission and incentive to get your home sold. Presuming the agent's references and success record are satisfactory, a sales commission up to 6 percent is acceptable.
However, if the listing agent produces a low purchase offer, that is the time to say, "Well, since you didn't produce a purchase offer at your recommended asking price, if you will lower your sales commission, maybe I can accept this low purchase offer."
The most important part of the sales commission is the portion that will go to the buyer's agent. To illustrate, if your home sale listing offers only a 2 percent commission to the buyer's agent, but other local listings offer a 3 percent commission, agents representing buyers are likely to show those homes before yours.
In addition to the sales commission, at the time of listing be sure to ask if there are any additional fees for you or your buyer. Some brokerages try to charge "transaction" or "administration" fees in addition to the sales commission.

SUMMARY: Spring is the best time of year to sell your house or condo to earn top dollar. But before listing your home for sale with the best agent for your situation, be sure to interview at least three successful local agents before selecting the best agent.

http://www.LagretRealEstate.com

Investment in Italy

Investor gets bad news about tax strategy

No profit doesn't mean no taxes


By Robert J. Bruss
Inman News

DEAR BOB: I bought a rental property in 1991, which I sold for $450,000. To avoid capital gain tax, I used an Internal Revenue Code 1031 tax-deferred exchange to buy another rental property for $450,000. After renting it for 12 months, I moved in and have lived in it for 24 months. If I sell this property at the same $450,000 price, will I owe any capital gain tax since I made no profit? Is this a good way to avoid capital gain tax? --Sim Y.

DEAR SIM: Nice try! But Uncle Sam is way ahead of you.

Your adjusted-cost basis for the $450,000 rental house you acquired in the Internal Revenue Code 1031 tax-deferred exchange was not $450,000.

Instead, it was your $450,000 purchase price minus the deferred capital gain on your old rental property minus the depreciation you deducted on the acquired property during the 12-month rental period before you moved in to make it your principal residence.

Although you owned and occupied the acquired property as your principal residence for the last 24 months, if you wish to claim the Internal Revenue Code 121 tax exemption up to $250,000 (up to $500,000 for a married couple filing jointly) you must own the acquired property at least 60 months before sale.

I hate to break the bad news, but the depreciation you deducted will be taxed at the special 25 percent federal "depreciation recapture" tax rate when you sell your current property. For full details, please consult your tax adviser.

HOME SELLER RENT-BACK MUST BE REPORTED ON TAX RETURNS

DEAR BOB: We recently bought a house and let the sellers rent it back for a month for which they paid us rent. Does this rent-back count as rental income on our income tax return? Does having them live in our house affect deducting mortgage interest for that month? --Robert R.

DEAR ROBERT: Your mortgage interest and property taxes are always tax-deductible.

However, the rent you received, because the rental term exceeded 14 days, must be reported on Schedule E of your federal income tax return where you can also deduct the applicable expenses for the rental period. Your tax adviser can give you more details.

LIFE ESTATE DOESN'T HAVE MUCH VALUE

DEAR BOB: My husband died about two years ago. He left me a life estate in his house. I am 68, but I want to move to Georgia to be near my children and grandkids. A neighbor offered me $1,000 for my life estate. Isn't it worth much more than that since I am in excellent health and my family members live into their 80s and 90s? --Maida T.

DEAR MAIDA: Please read the exact terms of your life estate. Some life estates specify that if the life tenant permanently moves out, the life estate terminates. That means your life estate becomes worthless when you move out of the house.

However, if your life estate doesn't terminate until you die, you can sell your life estate interest to the neighbor so he can rent or occupy the house. But that buyer shouldn't pay very much because when you die, the life estate terminates.

Although you say your family members live into their 80s and 90s, you could get hit by a truck while crossing the street, thus terminating your life estate in the house. For full details, please consult a local real estate attorney.

Who's been living in my rental unit?

Landlord seeks recourse against illegal subtenant
Robert GriswoldInman News

Question: I have owned a two-unit apartment building for the last four years. I have month-to-month tenants in one of the units that started renting there after I bought the building. They have a clearly written agreement that states they are the only two tenants and no subletting or other tenants are permitted. However, we are about 90 percent sure that someone else has moved in for the last nine months. He never comes or goes and yet he's there day and night, seven days a week. How do we prove it and what recourse do we have?

James McKinley, an attorney for landlords, replies:

You don't say if your original two tenants are still living in the unit. If they are, you should start by asking your tenants if they have moved in a roommate. If someone else has moved in, you could have him fill out a rental application, and, if he meets the rental criteria, sign a new rental agreement with all tenants; or you could serve a legal notice to perform covenant or quit, followed up by an eviction action if your tenants do not comply by removing the occupant not on the lease. If you feel you cannot prove that there is an illegal subtenant, you always have the option of serving a notice of termination of tenancy.

Question: Many times I have arrived home to a smoked-filled apartment caused by my neighbor who barbeques on his fire escape. I called the fire department, who advised me to shut my windows. This is a health hazard for me. Also, the fire escape is full of debris. Shouldn't fire escapes be free of any items?

Landlord attorney McKinley replies:

Fire escapes are most often found on multiple-story residential buildings, such as apartment buildings. At one time, they were a very important aspect of fire safety for all new construction in urban areas; more recently, however, they have fallen out of common use. Fire escapes are designed for emergency use only, and should not be used for recreation, or cooking, and should not be cluttered with debris. You should speak to your landlord to make him aware of the problem. I doubt your landlord wants any tenants barbequing or otherwise using the fire escape for anything but its intended purpose. The landlord should fit the door or window that accesses the fire escape with a fire alarm to prevent unauthorized use of the fire escape. As many fire escapes were built before the advent of electronic fire alarms, fire escapes in older buildings have often needed to be retrofitted with alarms for this purpose. If your landlord does not respond to your request, you should make a complaint to your city's code-enforcement department.

Steven Kellman, an attorney for tenants, replies:

Smoke, whether from outdoor cooking or cigarettes, is a chemical released into the air, many times treated like noise or odors. It is something that can intrude on or disturb a neighbor, and therefore may be improper and restricted if excessive. Closing one's window to block out a neighbor's barbeque smoke is hardly fair since closing the window also deprives the tenant of the right to have full access to the use of the unit including the fresh air around it. Fire escapes are designed for emergency use to escape fires and not to have barbeque fires set on them. Using fire escapes for recreational use (i.e. as if it were a balcony) is not only an improper use of the safety device, but it may also be dangerous because it was not designed for such use. It may not hold the sustained weight of a barbeque event or it may present other hazards. The accumulation of debris on the fire escape will also impair the intended use -- which is to escape fires -- and perhaps cause more injuries than it was designed to prevent. James is right when he advises to seek some assistance and intervention from the landlord, and if no help is forthcoming, to contact the city.

This column on issues confronting tenants and landlords is written by property manager Robert Griswold, author of "Property Management for Dummies" and co-author of "Real Estate Investing for Dummies," and San Diego attorneys Steven R. Kellman, director of the Tenant's Legal Center, and James McKinley, principal in a law firm representing landlords.

5 questions home buyers use to their advantage

How to get a 'good deal' through curiosity, negotiation
By Robert J. BrussInman News

Editor's note: Robert Bruss is temporarily away. The following column from Bruss' "Best of" collection first appeared Sunday, March 26, 2006.

Thanks to abnormally low mortgage interest rates, home sellers had an extremely favorable "seller's market" for the last few years. That means there were more qualified home buyers in the market than there were homes available for sale.
Homes often sold in just a few days or weeks. Typical home sale prices appreciated 10 percent or more annually for the last few years in many communities. Since 2000, the average U.S. home has doubled in market value, according to the National Association of Realtors.

But the 2006 home sales market pace has rapidly slowed down in most communities, mostly due to rising mortgage interest rates, according to home industry economists. The volume of home sales is down. But home sales prices are holding steady in most communities.
The result for this year's peak spring home sales season appears to be a "buyer's market." That means there are more houses and condominiums available for sale than there are qualified home buyers.
As a result, home buyers can be more selective and negotiate harder even though mortgage interest rates remain remarkably affordable in the 6 percent interest range. To help home buyers negotiate their best possible sales price and terms, here are the five key questions home sellers and their real estate agents hope buyers don't ask:

1.) WHY ARE YOU SELLING THIS LOVELY HOME?
Having bought and sold dozens of houses and condominiums for both personal use and as investments, this is my favorite and most revealing question to ask of home sellers and their listing agents.
Even if the home is run-down and shabby, I always try to use that word "lovely" to see if the seller and/or the listing agent have a sense of humor.
The primary reasons the home buyer needs to know why the seller is selling are to (1) tailor a purchase offer that will meet the seller's needs, and (2) determine if the seller is highly motivated to sell.
To illustrate, if you learn the sellers are moving to a retirement residence, perhaps they will carry back a first or second mortgage, thus creating superb secured income earning around 6 percent for them and easy financing for you as the buyer. Or, maybe you learn the sellers are in foreclosure so the buyer needs to act fast to close the purchase before the foreclosure auction.
Unless the buyer asks, the listing agent is unlikely to volunteer the reason for selling. Occasionally, the buyer will be rebuffed.
For example, I recall I once asked this key question and the nasty listing agent said, "It's none of your business." Later, I learned the sellers were retiring to move to Palm Springs, Calif., and they would have been perfect candidates for a seller-financed mortgage.

2.) HOW MUCH DID THE SELLER PAY FOR THIS HOME?
In most communities, this information is a public record, which the buyer's agent can easily obtain. The reason smart home buyers insist on knowing this vital information is it shows how much negotiation room the seller has.
A key follow-up question is, "What is the current mortgage balance and are there any other liens against the home, such as a second mortgage or home equity loan, judgment liens, and mechanics' liens?"
The answer from the seller or the listing agent shows how much cash the seller absolutely must receive. If you learn the home is free and clear with no encumbrances, you just struck gold because the seller can then be flexible as to price and terms.
As a seller, when a home buyer asks me what I paid for the property, I politely reply, "I got a bargain purchase price when this was a run-down shack before I renovated it so my purchase price is irrelevant to today's market value."
If a smart home buyer, and his or her buyer's agent, discover the seller paid a low purchase price many years ago, that means the seller has lots of room to negotiate. However, if you find out the seller bought the house in the last year or two with a large mortgage or two, the seller might not have much negotiation flexibility.

3.) WHAT DEFECTS DOES THE HOME HAVE AND HAVE THERE BEEN ANY RECENT PROFESSIONAL HOME INSPECTIONS?
In most states, home sellers must now provide buyers with written home sale disclosures revealing any material facts that affect the home's market value or desirability.
Smart listing agents obtain the seller's written disclosures at the time of listing and have it easily available to prospective buyers. Then buyers won't be surprised later by discovering the home has major problems that were already disclosed by the seller.
Home sellers, at the suggestion of their listing agents, often have customary professional inspections completed before the home is put on the market. Then the seller can either have any defects repaired, or at least can make the buyer aware of them before the purchase offer is made.
Of course, after the seller accepts the buyer's purchase offer in writing, the buyer should always hire his or her own professional inspector just to double-check the seller's inspector. If the buyer's inspector discovers any undisclosed defects, then negotiations can be reopened if the buyer included a professional inspection contingency clause in the sales contract.
A good source of quality home inspectors is the American Society of Home Inspectors. To find local ASHI members, go to www.ashi.org or phone 1-800-743-2744.

4.) WHAT PROBLEMS HAVE YOU HAD WITH THIS HOME?
An open-end question like this will remind the home seller of any problems that, hopefully, have been corrected.
For example, when I first moved to my current home I quickly discovered I couldn't have a decent garden because the deer would eat virtually everything. So I constructed fences to solve that problem. A few years later, the wood shingle roof began to leak but new leaks kept reappearing after a roofer made repairs. About 20 years ago, I had a new metal "lifetime" roof installed and I have had no further roof problems.
In most states, court decisions and statutes do not require home sellers to reveal past problems that have been corrected. But it is still important for buyers to know if those past problems might again become future problems.

5.) WHAT IS THE QUALITY OF THE PUBLIC SCHOOLS?
If you don't have school-age children, it's easy to forget this important question. But top quality schools contribute to home values and future market value appreciation. Families prefer to buy in communities with superb public schools and are willing to pay extra for the privilege.
However, in many big cities where the public schools are poor quality, families who buy a house or condo there realize the low school quality contributes little or nothing toward residence values.
Because most home sellers do not have accurate information on public school quality, the buyer's agent should provide their home buyer with the latest school quality statistics, usually based on standard test scores and high school graduation rates.
Most real estate brokerages have access to the Internet resource www.schoolmatch.com, which tracks over 14,000 public school districts. Over 7 million parents accessed School Match services last year. A related Internet resource is www.houseappreciation.com, which rates the top 32 percent of communities based on their school quality and home value appreciation since 1994.

Go to www.LagretRealEstate.com

The tenant's fix-it request list

Major items your landlord should know about

By Helene Lesel
Inman News

Maintaining a good relationship between tenants and landlords can be maddening. How to avoid walking the tension high wire? By noticing maintenance issues that crop up and reporting them before serious damage or danger takes root. Communicating clearly to the landlord about repairs in writing is always a good idea. What types of problems should tenants typically watch for?

1. Start with your smoke alarms. Is yours chirping? Don't just yank the offending noisemaker from the ceiling or remove the batteries to quiet things down. Smoke alarms often make a chirping sound every few minutes as they get closer to their last draw of power. Some models make noise more persistently as the problem gets worse. Noisy alarms are a sign of trouble and letting the landlord know is vital.

2. Something smelly in the air? Strange odors are always a cause for concern. Odors can be caused by anything from a backed-up sewer to a deceased varmint behind a wall. If you smell something out of the ordinary, don't go hunting for the source. Let the landlord or his or her crew work on the problem.

3. Wall or ceiling discoloration is also a concern. A variety of conditions can cause paint changes, including mold, mildew and water seepage. Always report peeling paint to the owner and avoid tampering with the loose pieces. Peeling paint is caused by a variety of reasons, ranging from excess moisture in the room to poor paint preparation. Ceiling leaks are often caused by roof problems, which should be called in to the landlord immediately.

4. Electrical. Never overload light fixtures with high-wattage bulbs, such as 100-watt bulbs in 60-watt fixtures. Most fixtures are stamped with the maximum wattage rating, and should be strictly adhered to in order to avoid fire or fixture damage. Previous wattage errors are easy to spot; the base may be melted or a black area may surround the fixture. Don't play roulette if the fixture is damaged and report promptly.

5. Plumbing. Because every rental has some sort of running water in the place, it's the most common source of problems. Dripping faucets are to be noted, and avoid over hand-tightening when faucets start to drip. An overly tightened faucet can strip the underlying cartridge and cause more damage than a simple rubber change out. A toilet making nonstop running-water sounds may seem like a small problem, but the amount of water wasted is vast.

6. Clogged drains should be reported quickly, too. Left unreported, clogs get worse and can run up higher plumbing costs as the clog gets tighter and deeper into the plumbing line. Garbage disposals left unused or with standing water can rust out and require replacement. Using drain cleaners may seem like a quick fix, but they can corrode and damage the plumbing system, causing more trouble. Replacing pipes may not be your problem, but the hassle, noise and inconvenience of fixing them may be laid at your doorstep if the system needs inordinate attention.

7. Appliances. Has the shelf cracked on the refrigerator or the knob popped off the stove? If it's your fault, you may want to browse online and find a replacement part. If professional help is needed, offer to split the cost.

8. Doors and windows that stick. Sometimes doors and windows swell more severely when the weather changes patterns, leaving you out in the cold. If the door is always sticking, rain or shine, that may be a job for Super Sander. Let the landlord call in the hero.

Sliding doors often accumulate dust and debris in the tracks, making them sluggish and risking breakage when the door gets pulled one way and the mirror goes another. Regular vacuuming or sweeping should keep you on track. If the door continues to stick, don't ignore it, especially with heavier mirrored doors.

9. Wobbly locks. Lock screws are usually on the inside portion of the lock and tightening the loose screw just takes a minute; getting locked out when the lock falls on the floor is a bit more time consuming. Shaky locks are easy to fix, but let the landlord know if you want to do it yourself.

Whatever the situation, be sure to identify and explain the problem thoroughly, giving a visual explanation, such as "the left side of the master bedroom by the window has a brown, dinner-plate-sized roof discoloration." If you write "ceiling has a stain" the landlord may dismiss the problem without investigating. Notifying the landlord or manager in writing can avoid hassles and possible danger for both of you in the future.

Go to www.LagretRealEstate.com

Buy your next home for nothing down

Good things come to well-qualified buyers


By Robert J. Bruss
Inman News

Are you old enough to remember Robert G. Allen's bestseller real estate book "Nothing Down" from the early 1980s?

I'm showing my age, but I vividly remember that book because a) it explained dozens of creative real estate finance methods, and b) I actually used several of those techniques to buy profitable property for nothing down.

Most of those methods are still viable. But for the majority of today's home purchases, there is no longer a need to use creative seller financing and other innovative methods.

Today's mortgage lenders have become very savvy about the profitability of making low- and no-down-payment home loans, even to borrowers with poor credit. Last year, according to the National Association of Realtors, over 30 percent of home sales involved 100 percent financing in one form or another.

THE DEFINITION OF "NOTHING DOWN."

In real estate "nothing down" means zero cash from the buyer's pocket. However, it doesn't mean the seller won't receive 100 percent cash for the home. Personally, I bought several zero-down-payment houses where the sellers walked away with all cash.

Nothing down really means the buyer is borrowing the entire purchase price.

To illustrate, when you read in the newspaper that a commercial property sold for $50 million, do you think the buyer paid $50 million cash from his savings account? Of course not. Using a combination of a first mortgage, perhaps a second mortgage, plus a bank credit line, the investor-buyer probably didn't even pay the closing costs from his pocket. The same procedures apply to home purchases.

BUYING A HOME FOR NOTHING DOWN IS EASY.

If you are in the market to buy your personal residence but you are a little "cash-challenged," don't let that stop you from purchasing for zero cash from your pocket, just like the real estate tycoons.

Although not every mortgage lender offers zero-down-payment mortgages, a savvy mortgage broker can arrange your no-cash home purchase. Especially if you are a first-time home buyer (defined as not owning a house or condo within the last two years), most mortgage lenders offer extra-easy home finance plans.

But there's a catch. You will need 1) a reliable source of income, and 2) a good credit score. Many lenders now offer "stated income" mortgages where, with good credit, you don't even have to prove your income, such as with W-2s or tax returns.

If you qualify, and many home buyers can, lenders will gladly finance 100 percent, sometimes even up to 125 percent, of your purchase price. But you will probably pay an above-market interest rate, often including PMI (private mortgage insurance) premiums. In other words, "nothing down" isn't cheap.


HOW TO DETERMINE IF YOU ARE A "WELL-QUALIFIED BUYER."

If you pay attention to those "no cash required" radio and newspaper ads for some new houses and condos, in the disclaimer you will usually spot the words "well-qualified buyer." That means you must have good income and good credit.

To check your credit reports from all three national credit bureaus, and determine your FICO (Fair Isaac Corporation) score which most lenders use to rate you as a "well-qualified buyer," just go to www.myfico.com.

For $44.85 you will receive your three credit reports, and your FICO credit score. Each credit report will be different, so take time to compare them and follow the instructions to correct any errors.

Or, at no cost, you can obtain all three of your credit reports at 1-877-322-8228 or www.annualcreditreport.com. However, you will not receive your very important FICO score at this free source.

After checking your credit reports and FICO score, the next step is to get written preapproval for a no-down-payment mortgage. Most major mortgage lenders offer this service, or a mortgage broker can obtain a lender's preapproval written mortgage commitment at a low or zero up-front cost. To obtain a zero-down-payment mortgage, most lenders require a FICO score of at least 680.

Armed with your lender's written preapproval mortgage promise (subject to reasonable conditions, such as appraisal of the home you decide to buy), then you can shop with confidence knowing the maximum mortgage you can obtain.

But don't settle for a lender's worthless "pre-qualification" letter, which just means, "We think you can qualify for a mortgage but we really haven't checked you out yet."

HOW TO BUY A HOME WITH 100 PERCENT FINANCING.

However, if you can't qualify for a no-down-payment mortgage, don't give up. There are many alternatives. For example, many buyers' real estate agents recommend 80-20, 80-10-10, or 80-15-5 mortgage choices. The 80 means the lender makes an 80 percent first mortgage, and a 20 percent, 10 percent or 15 percent second mortgage, often in the form of a home equity loan.

If you can make a 5 percent to 10 percent cash down payment, that makes obtaining financing even easier. A special advantage of keeping the first mortgage at 80 percent or less of the home purchase price is you will avoid the dreaded PMI (private mortgage insurance) premiums.

However, in the right circumstances, "seller financing" might be your best and least expensive choice.

Large real estate fortunes have been earned with this method. For example, real estate tycoon, John Schaub, reports in his recent bestseller book, "Building Wealth One House at a Time," he never obtains bank mortgages when buying.

Another example is small-town realty mogul, Jay DeCima, who explains in his bestselling book, "Start Small, Profit Big in Real Estate," why he buys ugly run-down houses, which no mortgage lender, except the seller, will finance.

LEVERAGE ADVANTAGES OF NOTHING DOWN.

Another name for buying real estate with little or no cash is "high leverage." It simply means the borrower controls the entire property with a small amount of cash.

The big leverage benefit is usually a high percentage profit-per-dollar invested if the property goes up in market value due to capital improvements or sales price appreciation.

For example, suppose you buy a house or condo for $200,000 with nothing down. Because of your good income and good credit, the mortgage lender approves a $200,000 mortgage. Suppose that house appreciates in market value by 5 percent annually, or $10,000 in the next 12 months. What percentage return is that on your investment? The correct answer is "infinite," because your only out-of-pocket expense was probably for closing costs.

However, suppose instead you paid $200,000 cash for that same home and it appreciates the same 5 percent in market value ($10,000) during the next 12 months. Now your return on investment is a mere 5 percent. Of course, you avoided the tax-deductible mortgage payments, so those savings should be added to your return.

As the years go by, the advantages of high leverage on your home usually become greater each year. Of course, there is also risk, especially if you have to sell the home within the first five or 10 years when you don't have much equity.

SUMMARY: There are many advantages, and a few disadvantages, of buying a home for nothing down. But the pros usually outweigh the cons. However, as Allen often said in his "Nothing Down" lectures, "Buying real estate for nothing down is easy; the hard part is making the monthly payments."

Go to www.LagretRealEstate.com

How probate, tax issues could have been avoided

By Robert J. Bruss
Inman News

DEAR BOB: In 1993, my wife's father died. He left everything to her in his will. There are no siblings or other close relatives. Knowing she inherited the house, we moved our family in and have been living in the house and paying its mortgage ever since. Now that our kids are grown and on their own, we want to sell the house and "downsize" for our retirement years ahead. However, when we talked with a Realtor about listing the house for sale, she said we can't sell it until my father-in-law's estate is probated and the house title is transferred to my wife. Is there any way to avoid probate? --Jerome W.

DEAR JEROME: No. However, many states have speedy small estate probate procedures for situations like the one you describe. Because your late father-in-law willed his house, probate court proceedings are usually required.

Probate could have been completely avoided if he held title in his revocable living trust, specifying that after his death the house should go to your wife. However, it's now too late for that.

I suggest that your wife consult a local experienced probate attorney to probate the will. He or she can often expedite uncontested probate matters in less than the six to 12 months usually required.

But your wife has another problem to consider. When she receives the title, she will receive a new stepped-up basis to market value in 1993. Since then, the house has probably greatly appreciated in market value.

However, you and she can't qualify for the Internal Revenue Code 121 principal-residence-sale tax exemption up to $500,000 because she hasn't owned the house at least 24 months (although you both clearly meet the 24-month occupancy test). Consultation with your tax adviser is strongly suggested.

IS HEIR LIABLE FOR PROPERTY TAX ON WORTHLESS LAND?

DEAR BOB: About five years ago, my aunt died. She left everything to me, including a worthless lot. I consulted several nearby Realtors and they wouldn't even list it for sale as it is only worth around $5,000. However, the county keeps sending me the property tax bills, which I haven't paid. They have tried to sell the property at a tax sale but nobody will buy it even for the amount of unpaid property taxes. Now the county reported to the credit bureaus that I owe the unpaid taxes and this is hurting my credit rating. What can I do? --Ralph R.

DEAR RALPH: It is very unfair for counties to report unpaid property taxes to the credit bureaus, especially when you inherited worthless property you don't want.

Perhaps you can contact the county tax collector to see if he will accept your quitclaim deed in return for canceling the property taxes. Then you can tell the credit bureaus the property taxes have been cancelled so the adverse information can be removed from your credit reports.

go to www.LagretRealEstate.com

Attorneys and kickbacks

Referring client to real estate agent falls under RESPA law
By Ilyce R. Glink
and Samuel J. Tamkin

Q: Is it illegal to reward attorneys in the state of Washington for referring clients that end up doing a transaction? I have checked with several people (real estate brokers included) and am getting various opinions. I do not want to violate the RESPA statute.

A: RESPA is the acronym for the Real Estate Settlement Procedures Act. This law was passed about 30 years ago to prevent parties to a real estate transaction from getting money solely for steering buyers or sellers to a particular company that would provide services in a real estate closing.

To answer your question, at a real estate closing in which the loan used to purchase the property will be governed by the RESPA statute, it would be illegal for any party to that transaction to get a kickback for the referral.

Therefore, a real estate broker can't be paid a referral fee from a mortgage broker for sending a client to the mortgage broker. An attorney can't pay a referral fee to a real estate salesperson for referring a client his or her way. And a title company can't pay a referral fee to a third party for referring business to the title company.

In simple terms, if you are a real estate agent and get a referral from an attorney to assist a buyer in the purchase or sale of a home, it would be improper to give the attorney a fee for that referral.

For more information, you can go to www.hud.gov and see some examples of violations of the RESPA statute along with some useful information regarding referral fees.

Q: My brother and I own some rental property in Florida and have set up a limited liability company (LLC). We need to do a quitclaim deed transferring our personal interest into the LLC.

I have a blank quitclaim deed form but have no idea how to fill it out properly so that it's legal, and I haven't found an attorney in Florida who will do it for us. Is there someplace I can go to see an example of a properly written quitclaim deed?

A: it's surprising that you can't find an attorney to help you out. But you're right: While the form itself isn't that difficult, you want to make sure you get it right.

Sam Tamkin
If you had an attorney help you set up the LLC, you can ask her for some advice. If you did it yourself and still can't find an attorney to help you, you should call a local title company and see if a title officer can offer a referral to a local real estate attorney.

Another question you might want to ask the title company is about your title insurance. Be aware that transferring title to the LLC, you may lose any coverage you had on the title insurance policy you received when you purchased the property.

Your conveyance of title using a quitclaim deed may eliminate any coverage under the title insurance policy. The new LLC will be considered a new buyer not covered under your existing policy.

So you might want to consider transferring title to the new LLC and have the title company issue a new policy to cover the LLC as the owner of the property. Along the way, the title company may also offer to help out in finding somebody to complete the documentation for you.

Q: I read your column in the Tampa Tribune every week, and find the information helpful when advising my (tax) clients. However, I want to comment on a recent column on limited liability companies (LLC) for rental properties.

You seem to suggest that all LLCs are, or should be, corporations. This is not necessarily true. LLCs owned by one individual can be ignored for tax purposes, and the rental profit and loss can still be reported on Schedule E of the 1040 federal income tax return. Hence, there should be no additional return preparation expense or accounting fees for using the LLCs.

Would using this single-member LLC approach may make it easier to re-title the mortgages? Who knows! I'm only a tax guy!

A: Thanks for your comment. While it may be true that LLCs can be treated either as a corporation or partnership for federal tax purposes, an LLC is never a true corporation.

An LLC is a distinct type of entity that is neither a partnership nor a corporation. Instead, it is a company structure that allows owners to have limited liability in case the company has difficulties.

Unlike a corporation, an LLC does not have shareholders, but rather it has members. Unlike a partnership, where the partners may be equally and completely liable for the debts of the partnership but the profit and losses for income tax purposes flow directly to the partners, the LLC structure gives its members liability protection and also allows profits and losses to flow to its members.

Thanks for pointing out that a unique benefit to an LLC that has a single member is that the IRS will disregard the LLC for income tax purposes. That is a great benefit from an accounting perspective and to keep things simple.

Thanks for adding to the discussion.

Go to www.LagretReaEstate.com

$5 Ideas for Making a House More Appealing

Real estate professionals in Sacramento, Calif., say it only takes a $5 investment to do some quick makeovers to attract potential buyers. Here are five under $5 ideas:

Give the trim around the front door a fresh coat of paint, covering up fingerprints and dings.

Fertilize the grass so it looks bright green.

Hang a small flag that says “Welcome.”

Place a big pot of yellow marigolds in the foyer — yellow makes people feel comfortable.

Dribble a few drops of vanilla on the oven door and turn it to low (it’ll smell just like cookies are baking).

What other tips do you know? You could comment here.

7 Rules for Making a Great First Impression

Making a good first impression is priceless, says communication coach Carmine Gallo, who writes a weekly column for BusinessWeek Online. Here are seven steps Gallo says will ensure you are remembered positively:

Respond within 24 hours. Answering an e-mail or phone call within 24 hours shows you care.
Greet people with enthusiasm, in person or on the phone. Sounding too busy to talk is a turn off.
Make eye contact. People feel like you value them when you give them your fullest attention.
Leave smart voice messages. Repeat your phone number, and don’t leave long rambling messages on voicemail. The listener may never get to the end.
Respect your contacts. If someone gives you a business card, it’s an invitation to open a dialog, not permission to bombard him with sales material.
Keep e-mail concise. Use a short subject line and keep correspondence to two or three short paragraphs.
Small things count. A handwritten note or other personal message that isn’t focused on sales makes the recipient feel valued as a person.

Dealing with real estate lowballers - Secrets of powerful negotiation

By Bernice Ross
Inman News


Powerful negotiators know how to survive in any market. Do you have the necessary skills to cope with today's shifting market?

Parts one and two of this series looked at many of the common mistakes that poor negotiators make. The next two weeks will be devoted to identifying the language that can undermine your negotiation success.

4. Don't ever describe any buyer or seller in derogatory terms

This seems obvious, but it's common for agents to refer to buyers who make low offers as "lowballers," "bottom-feeders," "chiselers" and other unflattering terms. It's also common for agents to refer to sellers as being "greedy" or "stupid" when the sellers insist on overpricing their property. Making these types of remarks about your client or another agent's client only reflects badly on you. It also sets up a difficult negotiation situation because once you place a negative label on a client, you have to overcome the negative label as well. For example, if your buyers purchase a property where you called the seller "greedy" and the seller refuses to do some of the unreasonable repairs that the buyers may request, then your buyers are much more likely to become angry. Furthermore, you can be confident that your buyers will parrot back to you how greedy the sellers are by not responding to their request. In fact, it could cost you the transaction. Remember, when it comes to negotiation, your mother was right. "If you can't say something nice, don't say anything at all."

5. Substitute factual descriptions for emotionally charged words

One of the greatest challenges you will face in a slowing market is to decide how you will approach sellers when you have a low offer. The following script is one that works almost every time:

Mr. and Mrs. Seller, I would have liked nothing better than to have brought you a full-price offer. That would make my job very easy. Instead, my clients have elected to make an offer that is substantially below your asking price. About 50 percent of the time, we can put these offers together. I would like to ask that you give me a counteroffer in order to determine whether this offer will be part of the 50 percent that will actually sell.

6. Don't get mad -- get even!

Every so often, sellers may become so angry at a low offer that they are ready to cancel your listing, even if you aren't responsible for the low offer. If the sellers are so irate that there is no way they will do a transaction with the buyer, here's a script that normally defuses the situation.

Mr. and Mrs. Seller, there are three ways to handle this situation. You can elect not to make a counteroffer or you can counter at full price. If you are so angry that you don't want to have anything to do with this buyer, however, you could write a counteroffer over asking price.

I have used this script many times and had two sellers who did counter over asking price. What began as a very volatile situation became something that gave the sellers a sense of power. "We sure showed those buyers!" Furthermore, instead of feeling frustrated over not selling, the sellers actually were laughing. It had never occurred to them that if someone was unrealistically low they could make a counteroffer that was unrealistically high.

7. Shift from "I" language to "you" language

When you use the word "I," the focus is on you. An important shift to make is to eliminate "I" language wherever possible. For example, if you say, "I think you should counter at $375,000," the emphasis is on you rather than on what the seller wants. In contrast, when you use the word "you," the emphasis falls upon your client. "It's your house and it's your decision. Where would you like to make your counteroffer?" Another word to avoid is "we." When "we list your house," when "we get an offer," and when we "close the transaction," "we" end up having to pay when things go wrong.

Do you want more tips on the language that can undermine your negotiation success?

Marketing Ideas

1. Video on YouTube
2. A blog just for the home listing
3. Promotion on MySpace
4. Post on Twitter
5. Sending to your network on LinkedIn
6. Upload to Google Earth, Zillow, HomeGain, Trulia, et. al.
7. Upload to vFlyer

Get the idea? What are your tricks?