It’s that time of year again – homeowners have started to receive their 2010 property tax assessments in the mail. Over the last few years, homeowners have been frustrated by their assessed value increasing, while their property value has decreased because of the economic downturn. This is due to current law that allows a home’s taxable value to increase each year by either the rate of inflation or 5%, whichever is lower. However, this tax year is particularly interesting because Michigan has a negative inflation rate. So, almost every homeowner should see a property tax decrease of at least .3%.
Download the Property Taxes Guide for REALTORS®
If you are a broker in Michigan, mark your calendar for April 27, 2010 as the day to come together with YOUR industry. MAR’s Broker Summit, being held April 27
th at the Inn at St. Johns in Plymouth, is the one place where Michigan Brokers unite to improve. This one-day event hosts nearly 200 brokers from around the state for education, networking and more.
Planned by brokers, for brokers, the Broker Summit’s schedule of events is designed to update attendees on current trends, legal issues, best practices, and tips for the future. Visit MAR’s
Web site for more event information, and to start planning your Broker Summit experience now.
Register before April 20, 2010 and receive MAR’s exclusive early registration rate of only $119!
Visit the Broker Summit Web Site Today!
Led by MAR Director, Matt Case, and under the direction of MAR, a Young Professionals Network Michigan chapter was approved by NAR. A successful kick-off networking cocktail hour was recently held in conjunction with the January Achieve meetings.
“I’ve met some really dynamic YPN members from around the country, and I’m fired up about the launch of our Michigan Chapter. We have some great young leaders in this state, and I think YPN Michigan can be one of many conduits this generation of leaders use in shaping the future of the real estate industry.” – Matt Case, MAR Director
By providing helpful tools and encouragement, the Young Professionals Network is a member-driven organization that helps young real estate professionals excel in their careers. They encourage members to become involved in four key areas: association leadership, policy and advocacy, peer networking and mentoring, and community volunteerism, both at the statewide and national levels.
Visit the Michigan YPN Web site
There seems to be plenty of incorrect information about the requirements of the HVCC floating around – so much so that in June both the Appraisal Institute and NAR released “HVCC myths and facts” flyers (Realtor.org/hvcc), and Fannie and Freddie published their own HVCC clarification.
The Highlights:
Myth: Appraisers don’t need to come from or be familiar with an area to do appraisals there.
Reality: Geographic competency is a requirement of the HVCC. According to Fannie Mae, “[W]hen an appraiser signs Fannie Mae’s residential appraisal report form, the appraiser is also certifying the following: “I have knowledge and experience in appraising this type of property in this market area.” And “I am aware of, and have access to, the necessary and appropriate public and private data sources, such as multiple listing services, tax assessment records, public land records, and other such data sources for the area in which the property is located.”
And no, that latter part doesn’t mean, “I beg the listing agent for comps.”
Myth: HVCC prohibits REALTORS® and lenders from talking to appraisers.
Reality: REALTORS® and lenders can talk to appraisers, including making requests to consider additional data or to correct errors. “That’s an ignorant appraiser who says ‘I can’t talk to REALTORS®,’” Pat Turner says, “They can talk to us and we can talk to them. How else can I get in the house if I don’t talk to the listing agent? How will I do an accurate market analysis if I don’t at least interview the agent and get their thought process on marketing the house at that price?”
Remember, the HVCC prohibits anyone from “influencing or attempting to influence the development, reporting, result, or review of an appraisal.” It doesn’t say they can’t talk to an appraiser.
“I’m hired to do an opinion of value,” Turner says, “But that comes with doing full research.”
Myth: A lender is required to use an appraisal management company to get an appraisal.
Reality: Lenders may directly retain the services of an independent appraiser, as long as its loan-production staff is not part of the selection process.
Mack Strickland: “HVCC doesn’t require lenders to use AMCs. What it boils down to is there needs to be some insulation between the loan officer and the AMC. So instead of the loan originator and the loan officer ordering the appraisal, they have someone in their office who calls to order the appraisal.”
Myth: Lenders are required to choose appraisers from a rotating roster approved by Fannie Mae or Freddie Mac.
Reality: Lenders may choose to use a rotating roster of appraisers, but are not required to do so by Freddie Mac or Fannie Mae.
Myth: Appraisals are not transferable between lenders.
Reality: Lenders can choose to transfer an appraisal; nothing in the HVCC prevents that. Lenders receiving such an appraisal are responsible for ensuring that the original appraisal met the HVCC’s requirements.
With the help of McClelland & Anderson, we are taking the most commonly asked questions from our legal hotline and putting them in E-news. We will be featuring a different question each issue.
QUESTION: A tenant is renting a house that has gone to sheriff’s sale. The redemption period will run out in one month but the tenants have three months remaining on their lease. Is their lease valid after the redemption period expires?
ANSWER: PROBABLY YES. A new federal statute provides that in certain circumstances, a lease will survive foreclosure. In the case of a “bona fide lease” and a “federally related” mortgage, the lender (or other purchaser at the foreclosure sale) must give the tenants at least 90 days to vacate the home. In addition, in these circumstances, the tenants have the right to stay beyond the 90-day period for the duration of their lease, unless the new owner intends to occupy the home.
Many years ago, MAR’s Legal Action Committee devoted substantial resources dealing with the Internal Revenue Service (“IRS”) on the issue of whether and when REALTORS® need to provide a form 1099-MISC (the “1099”) to cooperating brokers and/or agents. Ultimately, this was determined to be a national question that was not going to be resolved in Michigan. Thereafter, a number of rules were developed which continue to apply to this day. When facing the question of whether or not to provide a 1099, REALTORS® should remember the following basic rules, which are pretty straightforward.
First, if the compensation paid for services provided to a real estate licensee acting as an independent contractor is less than $600, a 1099 does not need to be provided to anyone.
Second, if the compensation is being paid in any amount to a real estate licensee who is an employee of the person making the payment, a 1099 should not be provided. The employee is to receive a W-2.
Third, if the compensation is being paid to a corporation, there is no requirement that a 1099 be filed. The requirement to provide a 1099 for compensation in the amount of $600 or more paid to an independent contractor applies to individuals.
Fourth, under Michigan law, real estate salespersons cannot accept a commission or valuable consideration for the performance of licensed activities from anyone other than the broker with whom they are affiliated. Thus, a real estate salesperson in Michigan should never receive a 1099 from anyone other than his or her broker.
Hopefully, a hypothetical will demonstrate generally how the system should work. Assume Acme Realty, Inc. has a listing for 123 Elm Street, which is being serviced by its agent, Jones. Assume further that Ace Realty, Inc., through its agent Smith, procures a buyer for 123 Elm Street.
At closing, the seller pays a total commission of $10,000, which is split evenly pursuant to Acme Realty, Inc.’s offer of compensation and cooperation through the MLS. Acme Realty, Inc. receives a check in the amount of $5,000, which it in turn splits with agent Jones on a 50/50 basis, i.e., agent Jones receives $2,500. Ace Realty, Inc. also receives a check in the amount of $5,000 from which it pays agent Smith $2,500.
The rules are fairly easy to apply in this situation. First, it is important to remember that, technically, the seller has paid $10,000 to Acme Realty, Inc., who in turn has paid $5,000 to Ace Realty, Inc. Nonetheless, Acme Realty, Inc. would not file a 1099 for the $5,000 it paid to Ace Realty, Inc., as Ace Realty, Inc. is a corporation. Acme Realty, Inc. would file a 1099 for the $2,500 it paid to its agent, Jones. Likewise, Ace Realty, Inc. would file a 1099 for the $2,500 it paid to its agent, Smith.
Sometimes in an abundance of caution, real estate brokerage firms will file 1099s for payments they have made to cooperating brokers that are organized as corporations. Often, a cooperating broker becomes concerned when it receives a copy of the 1099 which has been filed with the IRS. Typically, the cooperating broker wants to know how to respond to the filing of the 1099. REALTORS® should keep in mind that the fact that a firm is not required to provide a 1099 to a corporation does not mean that a firm is prohibited from doing so. A broker’s tax liability with respect to any income received is not contingent upon whether or not the broker has received a 1099 in connection with a particular transaction.
A question also sometimes arises as to whether sellers need to complete a 1099 for the commissions they paid at closing. The answer to this question is fairly straightforward. Sellers do not typically sell their residence during the course of their trade or business. Thus, they would have no obligation to file a 1099.
Finally, it is important to keep in mind that in our hypothetical, the reason that Acme Realty was not required to provide a 1099 to Ace Realty was that Ace Realty was a corporation. Assume that in the hypothetical “Ace Realty” was not a corporation, but, instead, was an assumed name (i.e., a “d/b/a”) for Mary Jones. (While it seems unlikely that any broker would conduct business as an individual these days, it could happen.) If this had occurred, Acme Realty would have had to obtain a completed form W-9 from Mary Jones and thereafter file a 1099 reflecting the payment of the $5,000 commission to her.
As an aside, brokers paying commissions to cooperating brokers should not assume they are dealing with a corporation or limited liability company. They should obtain a W-9 from each cooperating broker to make sure they do not have to file a 1099. There can be stiff penalties for a failure to file the appropriate 1099s. If REALTORS® follow these fairly simple rules, they should not run into trouble.
You work hard to help people find peace of mind and security when they are searching for a new home. You are well respected and loyal to your buyers when helping them make one of the most important purchases of their lives.
We understand and respect that kind of loyalty. What’s more, we think it’s time that you enjoy that peace of mind and comfort as well. That’s why Frankenmuth Insurance is offering special discounts to members of the Michigan Association of REALTORS®. Savings include a generous discount on auto and home policies. They can also be combined with other discounts available through your independent insurance agent.
To locate an independent insurance agent click on this link: http://www.fmins.com/ or call 800.682.6881 or visit the Hartland Insurance Group web site: http://www.hartlandinsurancegroup.com/.