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Know Your Issues: 10 issues every association and member should understand.

January 1, 2007

Across the country, Realtor® organizations are shaping the outcomes of legislation and regulation on a wide variety of issues.

So what hot topics should set off your e-mail campaigns to legislators and get you to mobilize members? Here are 10 important issues you should know and what some associations are doing about them.


Taxes on Real Estate Commissions
Dozens of state associations continue to fight off lawmakers’ efforts to tax real estate commissions.

In response to a Maryland bill introduced earlier this year that proposed an expansion of the state sales tax to a variety of services, including brokerage services, the Maryland Association of Realtors® bused roughly 500 members to the state Capitol on the day of the bill hearing.

“We had so many members show up to demonstrate against the bill that the halls of the House Office Building were clogged and the security checkpoint to get into the building had a line that snaked down the street,” said Mark Feinroth, director of the association’s regulatory affairs. The bill was defeated.


Private Transfer Fees
Developers and homeowners’ associations at private communities have jumped on the real estate transfer tax bandwagon and are imposing private transfer fees on homes sold in their developments.

The fees, which generally are based on a percentage of the sale price of each home, are being written into the deeds. A planned community in Prince William, Va., recently amended its bylaws by homeowner vote to include a $500 private transfer fee. Communities that levy such fees typically present them as ways to fund community-owned amenities and provide more open space. However, there generally are no requirements that the funds be spent in any specific way, opening up the possibility of abuse.

The California Association of Realtors® sponsored a state bill that would have prevented the imposition of private, point-of-sale transfer fees by developers, but the bill was defeated in May. Although the loophole in state government allowing developers and other nongovernment entities to impose transfer fees on homes each time they are sold is not new, some developers now are taxing to the tune of 1.75 percent, that’s almost $10,000 on a median-priced home of $567,690. The association is working to oppose a state bill that would make the loophole permanent.


Community Revitalization & Redevelopment
Realtor® associations across the country are working hard to keep their cities and towns attractive, livable, and functioning well. Their efforts include everything from partnering with local governments to plan redevelopment to holding conferences to educate local policy makers on how overcrowded schools and jammed expressways take away from a community’s vitality.

The Realtors® Association of York and Adams Counties in Pennsylvania, for example, has used NAR Smart Growth Action Grants to fund a continuing effort to refine zoning codes to permit mixed-use, higher-density development in downtown areas. They also have a local designation called York City Savvy that teaches Realtors® the benefits of living downtown so they can enlighten clients considering a downtown home purchase.
NAR has provided state and local Realtor® associations with more than $170,000 in grants to sponsor community revitalization and redevelopment through its smart growth program. Dozens of these initiatives are detailed on REALTOR.org (www.REALTOR.org/smart_growth.nsf/pages/grantrecipients).


Small-Business Health Coverage
About a quarter of Realtors®—more than 350,000 individuals—are without health insurance. For more than three years, NAR has been advocating for the creation of small business health plans as part of efforts to address members’ health insurance needs. Small-business health plans would allow Realtors® to band together through their trade association affiliations, such as NAR, and negotiate for health insurance coverage.
Several state and local associations are not only rallying their members to pressure congressional representatives to address the issue, but also have played a part in creating state legislation that would ease the health insurance burden for the self-employed in their state.

Massachusetts passed and enacted legislation last year to establish universal health coverage in the state, which is currently being implemented. Meanwhile, several other states are working on adapting the Massachusetts plan to their own states, including California, Pennsylvania, Illinois, Oregon, and Vermont.


Responsible Lending
Predatory or abusive lending practices are a serious and growing problem nationwide that has been blamed for everything from skyrocketing foreclosure rates to increased vacancy rates and lower home values. In these types of scenarios, the lenders take advantage of vulnerable borrowers by charging extremely high interest rates and loan fees, using aggressive sales tactics to steer consumers into unnecessarily expensive loan products, and advertising very low “teaser rates” that steeply increase after two or three years.
Most state legislatures are debating how to resolve this issue in a number of ways, not all of which are healthy for the real estate market.

On the federal level, one resolution that NAR supports is legislation and regulation that prevents predatory lending while keeping fair and affordable subprime loans available. In May, NAR submitted comments on the federal bank regulators’ proposed Statement on Subprime Lending, which is designed to improve underwriting, risk management, and consumer education by federally insured banks, thrifts, and credit unions.


Restrictions on “For Sale” signs
Of all the major issues facing Realtors®, restrictions on “for sale” signs is one that nearly every association is likely to face at some point. The community debate restricting these signs for a wide variety of reasons has gone on for decades and continues to be a challenge.

In a typical case, the Greater Capital Area Association of Realtors® helped reverse a local law in Montgomery County, Md., that required homeowners to buy a permit to place a “for sale” sign on their property.


State and Local Transfer Taxes and Fees
As local governments of all sizes look for new revenue sources, real estate transfer tax hikes often are proposed.

In Pennsylvania, the Lehigh Valley Association of Realtors® recently conducted intensive media campaigns and rallied members to defeat two local transfer tax hikes.
Defeating both proposals was a success in and of itself, says the association’s Government Affairs Director, Ryan T. Conrad. “Perhaps more important was that by getting our members involved in an intensive coordinated grassroots campaign, we established Realtors® as a potent political force in the public policy-making process.”


Sex Offender Notification (Megan’s Law)
Megan’s Law, an amendment to the federal Violent Crime Control and Law Enforcement Act of 1996, requires that communities be notified when a convicted sex offender moves into a neighborhood, but lets states determine how to provide that notification.
In Washington state, Bryan Wahl, government affairs director of the Washington Realtors® Association, has worked diligently to pass several amendments to the state’s Megan’s Law. Most recently, the association supported legislation that notifies potential homebuyers that they may contact local law enforcement for information about the possible presence of registered sex offenders in the neighborhood. “It protects agents and sellers from lawsuits, while reminding buyers to investigate the neighborhood prior to purchase,” says Wahl.


Development Impact Fees
Impact fees, or development fees, are expenditures that developers are required to make as a precondition to their project. The fees are generally used to finance roads, schools, affordable housing, transit systems, and other projects and services.
To ensure fairness, many state laws stipulate that impact fees can be assessed only for improvements that are a direct consequence of a new development and in an amount not to exceed the proportionate share required to serve the new development. Yet it doesn’t always work out that way.

Realtor® associations across the country have worked tirelessly on this issue to ensure the impact fees are fair and do not impede a development by putting an undue financial burden on developers.

In Montana, for example, Glen Oppel, government affairs director of the Montana Association of Realtors®, brokered a delicate compromise among local government interests, smart growth advocates, builders, and Realtors® to create one of the strictest impact fee enabling acts in the U.S. The law defines impact fees and establishes a formula for calculating impact fees that must be directly related to impact caused by the development. “We fought back several bills to soften the enabling act this last 2007 session,” says Oppel.


Taxes and Public Finance
Whether they’re to fund projects that promote quality of life in communities or to create revenue for other local or state budget items, virtually no community in the country has escaped the property tax hike issue. But tax hikes, as it turns out, aren’t always bad and Realtor® associations have been strong advocates for fairness when it comes to property and non-property tax hikes.

In Wisconsin, state Government Affairs Director Michael Theo is keeping a close eye on the debates surrounding a proposed $1.7 billion in tax and fee increases. Among the tax hikes is a proposal to allow local governments to raise their property tax levies by 4 percent this year, double the limit of the past two years.