No easy tax

REALTORS^® battle hard against tax threats as states look for ways to put their budgets into the black.

On a dusty road called Dull Knife near Buffalo, Wyo.,you can get a log home on a three-acre lot for about $100,000. Because Wyoming is a nondisclosure state, no one but the principals and their real estate agents need to know the price tag. There’s no transfer tax paid on the deal, either, which is the way Bob Snowden likes it.

But 300 miles to the south in Cheyenne, the state capital, lawmakers are wondering whether it’s time to add the state to the 35 others that impose a real estate transfer tax.

As states go, Wyoming is in relatively good shape. It’s one of only seven states in fiscal 2002 not to run a budget deficit. But like virtually every state, its budget is the tightest it has been in years, and lawmakers there are scrambling to generate revenue for new infrastructure in Teton County, where Jackson Hole sits at the base of the Grand Teton mountains.

“They need to upgrade what they have there, and lawmakers from the county feel they can make more money off a transfer tax than from a lodging tax, which is the other option they’ve looked at,” says Snowden, GRI, president of the Wyoming Association of REALTORS^® and associate broker with Coldwell Banker, The Smith Brokerage, in Buffalo.

Across the country, the sale of homes remains one of the key bright spots in states facing an otherwise dull economic picture. Lawmakers are eyeing real estate as a rich source for refilling their depleted budgets—in the form of new taxes or cuts to existing programs.

“Most states are facing financial crises this year,” says Rob Broome of the Ingram Group, a consulting firm that lobbied on behalf of the Tennessee Association of REALTORS^® in its battle to defeat a bill to boost state revenues by creating a comprehensive tax on services, including those rendered in real estate transactions. “In one fell swoop, the cost of doing business for a real estate associate would have increased by nearly 7 percent,” says Broome.

The story in Tennessee had a happy ending, with business interests joining the REALTORS^®to defeat the proposal. But in many other states, the battle continues.

As of mid-September, REALTORS^® in at least six states were fighting proposals to either impose or increase the rate on real estate transfer taxes. In at least four states, REALTORS^® were challenging proposals for new taxes on services or an increase in property taxes.

Lawmakers aren’t looking just at taxes. In Hawaii, the governor wants to shore up the state’s budget by draining money from an insurance fund for homebuyers in hurricane-prone areas. And in Illinois, legislators have already passed measures to take money from a handful of real estate–related sources, including funds for administering the state’s real estate license and appraisal agencies. “The hit could have been much worse,” says Greg St. Aubin, government affairs director at the Illinois Association of REALTORS^®.

For many states, REALTORS^®’ success in pushing back an immediate tax threat rests on the November elections, because many state candidates see targeted taxes, such as the transfer tax and tax on services, as the least painful way of fixing budgets. “REALTORS^® need to be concerned, because these kinds of taxes are viewed as easy,” says Glenn Dorfman, executive officer of the Minnesota Association of REALTORS^®. “They don’t hit everybody, just users, and in the case of real estate, infrequent users.”

In Minnesota, REALTORS^® earlier this year fought back a proposal to create a tax on services. But Dorfman expects the plan to resurface after the November elections, because there will be a new governor, many new legislators, and a lot of budget-related campaign promises to keep. “It’s still on the board,” he says.

Oklahoma REALTORS^® face a similar situation. They, too, helped defeat a proposed tax on services earlier this year. But with tax reform shaping up as a key campaign issue in the state, the victory is only temporary. “Many candidates are interested in a tax on services,” says Charla Bruce, a spokesperson for the Oklahoma Association of REALTORS^®.

As tough as the battles get, though, REALTORS^® are confident lawmakers will listen to sound argument and that sensible policies will prevail.

“These taxes increase the cost of getting into a home without bringing intrinsic value to the transaction,” says Scott Kidner, president of C.S. Kidner Associates in Dover, Del., who lobbied on behalf of the Delaware Association of REALTORS^® to fight a proposed state transfer tax increase earlier this year. “Lawmakers understand that.”

Snowden’s counting on Kidner’s argument to hold true. “We expect the transfer tax to be on the table again in January, but we don’t expect it to get far.”

For NAR resources on transfer taxes and property tax increases, click here.

FRONT LINES: At Convention

Board to set VOW rules

What rules should govern the use of MLS listing data on virtual office Web sites (VOWs)? NAR’s Board of Directors will consider the question at its Nov. 11 meeting during the 2002 REALTORS^® Conference & Expo in New Orleans.

A number of brokers have begun to operate VOWs to post local MLS listings to their Web site, asserting that a VOW is the equivalent of an online office presence.

You may have also heard of Internet Data Exchange (IDX). NAR’s IDX policy permits MLS participants to post MLS data at their Web site as a marketing tool, provided they allow their listings to be posted by other participants, too. The policy limits the data fields brokers can show publicly and allows MLS participants to opt out.

Some brokers say VOWs are simply a form of advertising, and should be subject to the same rules as IDX sites. Others argue that VOWs are more than a marketing tool and should be permitted to make more MLS data fields available to consumers online. They also argue that because VOWs use online MLS data to serve clients and customers, other MLS participants shouldn’t have the right to opt out.

Still, proponents agree VOWs should be subject to special rules, such as requiring access passwords for consumers, to protect the MLS against piracy and misuse.

ONLINE EXCLUSIVE
For the MLS Electronic Data Display Policy, click here.

FRONT LINES: REALTOR^® Patronage

NAR leaders were on hand when the Smithsonian Institution dedicated its new exhibition, “September 11: Bearing Witness to History.” Among those speaking at the Sept. 10 dedication were, from left, Marc Pachter, acting head of the Smithsonian’s National Museum of American History; Secretary of State Colin Powell; and First Lady Laura Bush. NAR and Long & Foster Real Estate of Fairfax, Va., provided support for the exhibition, which is open daily in the NMAH’s Behring Center, Washington, D.C., until Jan. 12, 2003. To view items in the collection, visit the Current Links at REALTOR.org/realtormag.

FRONT LINES: Who’s inspecting?

Half the states now regulate homeinspectors—but program scope is often limited.

If you practice in Connecticut or Mississippi, you can be fairly sure that home inspectors you work with have met licensing standards that the American Society of Home Inspectors would love.

Those two states received perfect scores—96 out of 96 possible points—on an ASHI review that grades state regulations on how well they match up to the association’s model regulatory program.

Five years ago, only a handful of states had any kind of program for regulating home inspectors. Now 25 states do, but many of the programs are far from comprehensive, ASHI says. For instance, 21 states set licensing criteria for applicants, but only seven offer criteria as robust as what ASHI calls for.

To be effective, states should require licensees to adhere to a code of ethics and standards of practice that identify what inspectors should and shouldn’t do when they’re walking around a house probing appliances and performing other duties.

In all, ASHI says, state regulatory programs should set standards in a dozen areas, including governing boards, licensing criteria, and definitions of key terms.

ONLINE EXCLUSIVE
For ASHI’s position statement on state regulatory programs and its full rankings of states with standards, click here.