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RIAC $ at Work: Defeat of Amendment #1 a Victory for Georgia Property Owners
Last year, GAR fought hard to defeat a constitutional amendment (Amendment #1), a 100% increase in the real estate transfer tax to fund the Heritage Fund. The issue was taken to the voters in November and thanks to you and the voters, GAR was able to celebrate a victory!
Thanks to your GARPAC contributions and the many hours of personal time of our members, the voters of Georgia heard our message and voted "NO" on Amendment #1 on last November’s ballot. This was truly a victory for each and every property owner in Georgia and for our association’s basic principle of defending private property owner’s rights.
The Transfer Tax Task Force, when appointed by 1998 GAR President Raymond Morris, realized the effort before our association would be great and that funding this effort would be the key to informing our members and the general public on this vital issue. One of the Task Force’s first acts was to request the Georgia Association of Realtors® Issues Action Committee (RIAC) trustees to designate funds for the issue. We also requested funds from the National Association of Realtors® Issues Mobilization Committee. Each of these committees responded quickly and affirmatively to the Task Force’s request by contributing a combined total of $150,000.00 ($100,000.00 from GAR and $50,000.00 from NAR). This seems like a huge amount of money, but in a statewide race the Task Force realized each dollar had to be wisely spent. The trust placed in the Task Force to spend your RIAC dollars with good intent weighed heavily on each member of the Task Force. Therefore, the Task Force budget designated the majority of the money for communicating our message to the public and GAR membership.
Jan Baker, RIAC chairman, coordinated the development and distribution of over 100,000 campaign postcards. Jo Farrish, Congressional Action Committee chairman, coordinated the design and distribution of over 20,000 yard signs and Annie Parker, RIAC vice chairman, (with assistance from Rick Farrish) coordinated and developed our radio commercials with Duffy Communications. The remainder of the funds were used to support our grassroots Speakers Bureau chaired by Jim Harrington, 1998 chairman of the State and Local Government Affairs Committee, our Coalition Building efforts coordinated by Helen Garr, AE of the Fayette County Board of Realtors®, and bumper stickers distributed to the various boards and associations in our 23 "target counties" and at GAR’s Annual Convention and Trade Expo in Nashville, where we held a rally. By mid-August all funds were earmarked and the campaign was underway.
It should be pointed out that our opposition reportedly spent ten times the money we spent, but GAR had the added value of YOU - the members. The real value of this campaign was not just our member’s RIAC dollars, but the even greater asset of "sweat equity" of our dedicated members in putting out signs and bumper stickers, sending out brochures, speaking to civic groups, calling friends, family and clients, and best of all - VOTING! We’d like to thank every Realtor® member, and especially those who spent election night "poll watching." We all won this victory with real dollars and real personal commitment to doing what was right for the property owners of Georgia.
If it were not for your GARPAC contributions, this victory would not have been possible! Our GARPAC goal for 1999 is $247,344. If every GAR member would contribute just $12, we would meet this goal. Every member benefits from GARPAC as evidenced by the above victory. Why not consider making a contribution today? Call your local board/association to make your donation.
Contributions to GARPAC are not deductible for income tax purposes. The contributions are allocated between Georgia RPAC, National RPAC and Georgia RIAC (Realtors® Issues Action Committee) based upon formula percentages, which may change annually. Call GAR at (770) 451-1831 for more information.
Technology Trends: Trends that are Shaping the Way we do Business
GAREALTOR.COM
The new password protected area is now available to GAR members only at www.garealtor.com.
Go online today to garealtor.com and click on the member service icon. Once in this area, click on the password protected icon and enter your last name and license number to access the most frequently used contract forms (in pdf format) and so much more.
Wondering if anyone with a license number can access our site? The answer is NO! GAR works only from our database of members. If a non-Realtor® were to enter her name and license number, she would not be able to access the "For Members Only" area.
CALCULATORS
For years, so many Realtors® carried calculators that the public could have assumed the gadget was issued with the real estate sales licenses. Before the calculator, Relators® carried little books of amortization tables. Well, things are changing again.
Now, shareware is available that features every real estate calculation imaginable. Professional Amortizer (http://www.mlsd.com/amort/) is downloadable from the web. This site offers an income worksheet, a seller’s net worksheet, an owner carry-back worksheet, a fixed-rate loan vs. ARM worksheet, a standard calculator, a financial calculator, a monthly payment comparison, a loan amortization-bottom line, a loan amortization spreadsheet, a cap-rate and a gross-rent multiplier worksheet and a rent vs. buy worksheet.
Source: Real Estate Technology, a supplement to California Real Estate magazine.
MORE LEADS
What good is your website if it doesn’t generate leads? After all, its most important element is its ability to boost your business. Here are some tips for generating leads:
1. Follow up. Offer to follow up with free information such as relocation packages, homeselling forms, lists of available properties and financing packages.
2. Give them options. Give visitors options for receiving follow-up information. They may prefer that you mail their requested information, but be sure to offer to fax or e-mail it.
3. Respond quickly. Sophisticated electronic consumers expect speed and convenience. Not responding to their requests and inquiries will jeopardize your relationship; check your e-mail several times each day.
4. Make it easy. Use online forms to make it easy for the visitor to simply fill in the blanks to request information or services. Many people hesitate to write (e-mail or otherwise), but will fill in a form and click "Submit" without reservation.
5. Follow up personally. Many associates forget that website visitors are people and that real estate is a service business. Don’t communicate only online. A lead is a lead, and just because it originated online doesn’t mean you can forgo building a client or customer relationship and qualifying the prospect.
Source: The Real Estate Solutions Guide, a special edition of Florida Realtor®.
FREE CLIP ART
Need clip art for your web site? You can get free clip art on the web at clipart.com or NJHomeGuide.com.
ClipArt.com has a long list of available sites to visit that have clip art for free or a commercial list as well.
NJHomeGuide.com specifically targets the real estate industry. They merely ask you to include a mention and link to their website.
Source: Inman News at www.inman.com.
PROPERTY DEEDS
Georgia property deeds for many counties are now available online. On January 1, the Georgia Superior Court Clerks Cooperative Authority went live with the new statewide system.
To access the system, go online to www.gsccca.org. Click on the statewide index search button and then click on real estate. Once you’re in the real estate section, you can do a search either by name or property.
"Everything can be improved."
- C.W. Barron
The GAR Forms Committee has made a number of changes to the GAR forms to make it easier to use them. For the first time, the forms are being printed on letter-sized paper largely because the old legal-sized forms were frequently reduced and difficult to read when faxed. The inspection section (Paragraph 8) was rewritten in numbered points to make it easier for buyers and sellers to understand the inspection and repair resolution procedures. The questions in the Seller’s Property Disclosure Statement were reorganized in what is hopefully a more logical order. This article will explain the major changes to the forms.
Purchase And Sale Agreement
The Termite Letter (¶7)
The termite letter section was rewritten as follows:
Termite Letter. An Official Georgia Wood Infestation Report ("Report"), prepared by a licensed pest control operator, covering each dwelling and garage on the Property and dated within 180 days of the date of this Agreement, is attached hereto and incorporated herein. Unless otherwise noted on the Seller=s Property Disclosure Statement, to the best of Seller’s knowledge, the information contained in the Report is accurate and complete, and no other termite inspections have been performed or reports issued, the findings of which are inconsistent with the Report attached hereto. Prior to closing, Seller shall treat active infestation of termites and other wood destroying organisms, if any. At closing, Seller shall provide Buyer with a Report prepared by a licensed pest control operator dated within 45 days of the closing, stating that each dwelling and garage has been found to be free from active infestation of termites and other wood destroying organisms. This paragraph shall not limit Buyer’s right to request that Seller repair and/or replace defects resulting from termites and other wood destroying organisms if the Property is sold with the right to request repairs in accordance with the Inspection Paragraph herein.
Under the new termite letter provision, the duty to inspect for and treat active termite infestation has been separated from the duty to repair termite damage. The seller is still required to treat active termite infestation prior to closing and provide the buyer with a termite clearance letter at closing stating that any active infestation has been treated. However, the seller is no longer required to automatically repair all structural damage resulting from termite infestation. Instead, the revised contract provides that the repair of termite damage is to now be negotiated by the buyer and seller in the same manner as the repair of other defects in the property. If the property is sold with a right to request repairs, the buyer can request the seller to repair defects resulting from termite infestation. If the property is sold in "as is" condition, the seller has no obligation to repair termite damage.
The other major change to the termite paragraph relates to when the termite report is prepared. The revised paragraph states that an Official Georgia Wood Infestation Report ("Report") prepared within 180 days of the signing of the contract is attached to the GAR Purchase and Sale Agreement. This means that sellers will need to obtain a Termite Report at the time of listing so that it and a Seller’s Property Disclosure Report can be attached to any offer to purchase the property. This revision is to provide both the seller and buyer with information about termites and termite damage before the contract is signed.
Under the new termite paragraph, the seller also acknowledges that to the best of his or her knowledge, the termite report attached to the contract is accurate and complete and that no other termite reports have been issued with findings that are inconsistent with those in the attached termite report. This change is designed to discourage sellers from shopping termite inspectors or removing evidence of termite infestation noted in an earlier Report and disclosing only the Report with results that favor the seller.
The termite letter section of the GAR Contract was rewritten to try to prevent last minute surprises regarding termite damage and repairs. Under the old termite letter paragraph, buyers and sellers frequently did not learn about termite problems until shortly before the closing. Sellers then had to repair all structural damage from termites regardless of cost, something they often resented doing with anticipated sale proceeds. Some buyers second-guessed their purchase decisions when they discovered at the eleventh hour that their properties had termite problems. These types of problems are expected to get worse as some termite companies have indicated that they will soon start applying tougher treatment and repair standards. The GAR Forms Committee, after applying Professor Wiseman’s little known "second law of reality" set forth below, decided that action was necessary:
D > r = T + $ x (1/# of days)2
[Disputes between sellers, buyers, and brokers increase at a rate equal to the size of the termite problem plus the cost of corrections multiplied by one over the number of days left until closing squared.]
Let’s examine the situations to see how the new provision works:
Situation #1: Prior to making an offer, Buyer receives a copy of an Official Georgia Wood Infestation Report from Seller. The report indicates that there is no active termite infestation but there is evidence of previous infestation and some damage to the Property. What should the smart Buyer do?
Answer: First, the Buyer should include a special stipulation in the offer requiring the seller to repair the damage noted in the termite report. If the Buyer’s offer is accepted, the repair of the damaged areas will be addressed up front without the necessity of further negotiation. Second, the Buyer should make the offer conditioned on the right to request repairs. Therefore, the Buyer can have his own termite/home inspection(s) performed on the Property and can request that any additional defects in the Property caused by termites (or from any other sources) be repaired and/or replaced by the Seller. (If the Property is sold "as is," the Seller is not obligated to repair any termite damage.)
Situation #2: Buyer submits an inspection amendment to Seller requesting the repair of termite damage. Some of the damage is structural and will likely require bracing to support a termite-damaged floor joist. There is also some cosmetic damage to a couple of wall studs but the damaged studs will be hidden by new sheetrock and will still fully serve their purpose. If the Seller agrees to fix all of the termite damage except the damage to the studs, can the Buyer terminate the contract due to the Seller’s unwillingness to make the repair?
Answer: The answer to this question is likely "no." The Buyer can request that termite damage be repaired only if it rises to the level of being a "defect" as that term is defined in the Inspection section (paragraph 8). In this case, since the damaged studs will not be visible and will remain structurally sound, they likely are not defects as that term is defined. Therefore, the Buyer should not be able to use the Seller’s refusal as a basis to get out of the contract.
Situation #3: Seller receives a backup offer on the Property for a much higher price. Buyer requests in the inspection amendment that Seller repair some termite damage. Can Seller not agree to repair termite damage in hopes that the Buyer will terminate the contract?
Answer: Yes. This factual situation proves that when you solve one problem, you often create another. Since termite damage will now be treated like any other defect, the Seller may choose to make or not make repairs, leaving the Buyer to decide whether to terminate the contract or accept the property with termite damage. This means that some transactions that would have closed under the old termite letter section (because the seller was obligated to repair termite damage) may now not close. Hopefully, the benefits of giving both parties more information about termites prior to signing the contract will outweigh the loss of an occasional contract because of a seller’s refusal to make termite repairs.
Situation #4: Seller obtains an Official Georgia Wood Infestation Report at the time of listing. The property is slow to sell and is still on the market seven months later. Will the Seller need to update the Report prior to an offer being made?
Answer: Yes. The new GAR Contract stipulates that a termite report not more than 180 days old be attached to the offer to purchase. Therefore, the Seller may have to update the Report periodically if the property is slow to sell. It should be noted that termite companies generally agree to treat termite infestation only if it is discovered within 90 days of the issuance of the Report. Therefore, the initial termite report, which can be as much as 180 days old, is not intended as a guarantee against termite infestation. Instead, it is meant to provide the buyer and the seller with a snapshot of the condition of the property with respect to termites from which they can do further investigations.
Repair Resolution Period Procedures (¶8A)
Two major changes have been made to the inspection section. First, the Forms Committee added language to try to encourage buyers and sellers to negotiate the repair of defects. This was done by adding language providing that neither the buyer nor the seller can unilaterally terminate the contract without the consent of the other party during the Repair Resolution Period, due to the failure of the other party to agree to repair defects. The old provision did not specifically address the issue of whether either party had the right to terminate the contract during the Repair Resolution Period. As a result, some buyers argued that they could terminate their contracts if their sellers rejected a request to make the repairs set forth in the inspection amendment. Let’s look at the following situation to better understand this situation:
Situation #1: Buyer’s inspector finds ten defects in the property. Buyer submits an inspection amendment requesting that Seller repair all ten defects. Seller makes a counteroffer to repair only five of the requested defects. At this point, can the buyer terminate the contract?
Answer: No. Buyer cannot terminate the contract before the end of the Repair Resolution Period unless Seller agrees in writing to the termination. Buyer can submit without risk a termination and release agreement to the Seller, which if signed, will result in the contract terminating. However, if Seller does not sign the Termination and Release Agreement, the Buyer remains obligated (at least temporarily) to the terms of the contract.
The other major change to the inspection section allows sellers to accept the buyer’s original request to make repairs set forth in the inspection amendment even though the seller previously rejected that request or the parties exchanged counteroffers after the initial amendment was submitted by the buyer. This has been an area of some confusion and disagreement. The negotiations during the Repair Resolution Period are not negotiations leading to the formation of the contract but rather are limited to determining who will make repairs under an existing contract. Thus, an argument can be made that the buyer would not be negotiating in good faith if during the Repair Resolution Period, he rejects a seller’s subsequent offer to repair all of the defects previously requested by the buyer. However, some REALTORS® and attorneys have taken the position that because under general contract principles, an offer is "dead" once it has either been rejected or a counteroffer has been made to it, a seller cannot change his mind and accept the initial inspection amendment that the seller had previously rejected unless the buyer renews his offer.
The new language provides that if the seller at any time during the Repair Resolution Period notifies the buyer that he will repair or replace all of the defects submitted in the buyer’s initial inspection amendment, an agreement on the repairs is deemed to have been reached and the parties are required to execute an amendment containing the repair items in the buyer’s original inspection amendment. Let’s look at the following situation:
Situation # 2: Buyer requests in an inspection amendment that Seller repair 20 defects. Seller rejects Buyer’s offer and offers to repair 2 defects. Buyer submits a termination and release agreement to Seller and attaches a note saying that the parties are just too far apart to waste time on further negotiations. The Seller then makes a new offer during the Repair Resolution Period and agrees to repair the 20 defects. Can the Buyer now reject this offer of the Seller to repair all the requested defects?
Answer: No. The revised inspection paragraph provides that if Seller gives Buyer timely notice of a change of mind, the parties are deemed to have reached agreement on the defects to be repaired. Buyer and Seller are then required to execute a written amendment stating that they have agreed on the items to be repaired and listing those items.
Purchase Price and Method of Payment (¶2(C)(1)): This revision expands the list of closing costs to which a seller can contribute to include escrows and prepaid items but only to the extent permitted by the buyer’s lender. The new contract also clarifies that the buyer is obligated to pay for all closing costs over and above the amount contributed by the seller, including "fees" for well tests or septic clearance letters.
Exhibits and Addenda (¶13): This paragraph has been revised to indicate that where there are any conflicts between the provisions of the contract and any exhibits or addenda attached to the contract, the exhibit or addendum controls. Also, where there are any conflicts between any special stipulation and the contract, exhibits, or addenda, the special stipulation would control. Therefore, in order of priority, special stipulations control over exhibits and addenda, and exhibits and addenda control over the main body of the Agreement.
Seller’s Property Disclosure Statement
Numerous changes have been made to the Seller’s Property Disclosure Statement. The most noteworthy revisions involve fixtures and exterior siding/insulation. In addition, the lead-based paint form has been updated.
Fixtures/Items. One of the areas that most frequently causes disputes between buyers and sellers is in the area of fixtures. A fixture is an article of personal property that is attached to the property such that it becomes a part of it and passes to the buyer with the transfer of title. Predictably, buyers and sellers often disagree about which items the seller is entitled to remove from the property when the property is sold. As a general rule, unless the seller specifies that a fixture is not included in the sale of the property, the buyer is entitled to the fixture and the seller cannot remove it. Unfortunately, when disputes of this type arise, REALTORS® following the business approach of, "You sometimes have to spend money to make money," often end up bearing the cost of duplicating the fixtures to resolve the dispute.
In an effort to reduce the number of disagreements in this area and keep more commission dollars in the pockets of REALTORS®, a section explicitly dealing with fixtures and other items has been added to the Seller’s Property Disclosure Statement. A laundry list of fixtures/items is provided so sellers can check which fixtures/items are included in the sale of the property. If a fixture/item is checked as remaining with the property, each one of that particular item found on the property is required to remain. So, for example, if ceiling fan is checked as remaining with the property, all ceiling fans remain unless otherwise noted. The revised section also clarifies that fixtures/items listed in the Seller’s Property Disclosure Statement that are not checked remain the property of the seller. The section additionally provides spaces for the parties to list additional fixtures/items not found on the list that are to be included in the sale and additional fixtures/items not found on the list that are not to be included in the sale.
This new section also requires the seller to remove the fixtures that are not being conveyed either before closing or before the transfer of the property to the buyer, whichever is later. If the seller does not remove the fixtures within this time frame, he loses the right to claim the fixtures and the buyer is entitled to keep those fixtures. Also, this section imposes an obligation on the seller to use reasonable care to prevent damage to the surrounding property when fixtures are removed.
Exterior Siding/Insulation. A significant addition to the Seller’s Property Disclosure Statement is in Paragraph 4, dealing with termites. The prior form included a question about the presence of rigid board insulation in the exterior walls and foundations. However, this question has been expanded to ask specifically if the main dwelling contains any untreated wood or exterior siding, including rigid board insulation, foam plastic, synthetic stucco, hardcoat stucco, or other similar material (but excluding brick), that is below grade or within six inches of finished grade. This change was made in response to plans by some termite companies to require removal of all such materials (except brick) within six inches of finished grade as a condition to the issuance of a termite clearance letter.
Miscellaneous Changes. A new form has been added to comply with a recent change to Georgia law that prohibits real estate brokers and licensees from collecting a referral fee without first obtaining the consent of the party being referred. The counteroffer form was also revised to make it clearer and easier to understand.
The GAR Forms Committee continues to work countless hours to improve the quality of the forms available to GAR members. Look for other changes in the future designed to make your jobs easier!
Written by Seth G. Weissman, General Counsel to GAR
Sometimes clients or customers ask sales associates to supply information about the racial, ethnic, religious, or family composition of neighborhoods. How should sales associates respond?
With great care.
Such questions do not necessarily indicate an intent by the questioner to discriminate. Consider two examples. First, an elderly couple asks a sales associate whether there are small children living in a condominium development. Federal law allows discrimination if the development is intended for, and solely occupied by, persons 62 years of age or older. Second, a customer or client has made racial, ethnic, or religious comments or jokes in the presence of a sales associate and asks about the racial, ethnic, or religious composition of the neighborhood. Such a customer or client’s question may indicate an intention to discriminate based on those grounds. If a licensee answers either of these questions (and certainly the second one), the licensee’s doing so may result in a violation of the fair housing laws.
Thus, licensees should take great care in how they handle such questions. Some licensees feel that they should answer such questions by "telling the truth." That approach involves at least two pitfalls. First, what is the truth? Rumor is not truth. What may have been true yesterday, or last week, or last month, may no longer be true today. "Telling the truth" works well on the playground or in the courts. There, others have a version of "the truth." There, independent authority figures can consider those versions in light of their experience and wisdom. In a real estate transaction, when a customer or client asks about neighborhood composition, neither other versions of "the truth" nor independent authority figures are usually present. Second, even with a "truthful" answer, the sales associate may have violated (or caused a violation) of the fair housing laws if the response has the result of discrimination. The issue is not what the sales associate intends, but what happens. The fact that a person unintentionally breaks an arm does not remove the pain and suffering caused by the broken arm.
Perhaps the safest approach to such questions is to explain the requirements of the law and its effect on the actions of both you and your clients or customers. You may state simply that state and federal laws do not allow you to sell property on such grounds. Therefore, you do not gather such information to convey to customers or clients. In addition, you may want to protect the clients or customers who ask such questions by informing them that if they make a decision to sell, buy, lease, rent or exchange property based on discriminatory practices against protected groups, such an action may violate fair housing laws and subject them to substantial penalties.
Written by Charles Clark, Georgia Real Estate Commission
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