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NAR Meeting Update and Pre-Opened Escrows – MAR Monday Memo – 05/19/14

Good morning MAR members!

Greetings from the nation’s capitol in Washington DC, where Kay Moore, Andy Fegley and I spent most of this week at the NAR mid-year meetings, which were recently renamed the REALTOR Party Convention.  Hot and muggy conditions greeted us to start the trip, followed up by torrential rains on Thursday night…complete with flash flood warnings.  It’s Friday afternoon and I’m starting this draft at the airport, waiting on the tarmac to take off, sitting in the airplane in runway jail and delayed for another 90 minutes…connecting thru Philadelphia, where last night’s weather has travelled…hopefully I’ve made it home by the time you read this.  And hoping that I don’t get to spend the night on the cold hard floor of the Philly airport.

Last week, we had a great MAR General Membership meeting, with featured speakers Sara Sutachan of CAR and MAR member Steve Dickason giving us timely market updates on Marin, California and the nation at large.  It seems that low inventory continues to be the state of affairs…everywhere.  Steve showed that there is still a less-than-two-months supply of homes in Marin, so it’s still tight.  2014 appears to be trending more in line with 2012 than with 2013.

What I’m seeing inventory-wise is the mad rush to get into homes has given our buyers much less time to make an informed decisions on the homes on which they are writing offers.  As a result, there seem to be a few more properties falling out of escrow than feels normal.  The oft-used “back on market, no fault of property, buyers didn’t do inspections” which translates to “cold feet”.  It’s tough to make people wait, as agents are beating the doors down trying to get their clients into the property.

I stumbled onto an issue last week that many were quietly grumbling about:  the pre-opened escrow phenomenon.  Quite unexpectedly, this was the most-commented-on issue I’ve written about all year.  It totally caught me off guard…I was just venting, and many of you chimed in.  I got about 30 feedback comments from members, with 29 completely appalled by the process and one outlier defending the practice.  I even had a few of our title company biz dev reps thank me for bringing it up.

It’s become something of a fevered pitch, an “arms race” of sorts, with many agents commenting that whenever they now put a property on the MLS they are getting several calls from title reps wanting to pre-open an escrow.  People, this is not productive.  The comments came from across the agent spectrum market-wise, but most came from seasoned, veteran agents, all of whom are listing agents themselves.

Now, on to NAR and the REALTOR Party Convention. What a week in Washington DC!  It’s amazing to see 4,000 REALTORS come together and advocate for the industry and private property rights.  On Thursday, our team from California District 2 visited the office of Congressman Jared Huffman to brief his staff on our industry’s position on many important national real estate policy issues.

I had the opportunity to speak on the importance of preserving the current real estate tax code.  On the table in congress right now is the “Tax Reform Discussion Draft” where many of the fundamental  tax statutes seem to be on the table, including the mortgage interest deduction, the ability to deduct state and local property taxes on your federal tax return, and also like-kind (1031) tax-deferred exchanges for investment property.  The mortgage interest and property tax deductions have been part of the tax code for over 100 years.  They are the foundation of public policy that encourages home ownership, and allow families of modest income to afford homes of their own.

NAR strongly supports retaining the current tax code as it relates to the mortgage interest deduction and property tax deduction.  Were the congress to eliminate the mortgage interest deduction, it’s estimated that property values would drop 15%.  If the property tax deduction were eliminated, double-taxation would be the result and you would be paying your property taxes with already-taxed money.  Finally, the like-kind 1031 tax-deferred exchange policy creates liquidity in an inherently illiquid investment property market.  Were 1031 exchanges to go away, the flow of capital in this segment of the market would slow considerably.  People would sit on their properties, redevelopment would slow, and the jobs that result from redevelopment would be lost.

Kathy Hayes of the North Bay Association of Realtors (NorBAR) spoke on the ongoing need to not tax the phantom “gain” for people who have lost their homes to a short sale or foreclosure.  The government’s waiver of that taxable “gain” expired at the beginning of this year, and this ongoing issue is still being debated.

Sally Crain of NorBAR  spoke about the importance of preserving the current loan limits of the FHA program…which look like they will be preserved at this point.  NorBAR’s Terri Ann McGowan spoke about the importance of retaining the role of the Government Sponsored Enterprises (GSE’s…Fannie Mae and Freddie Mac).  Both of these agencies have paid all of the money back to the federal government that was needed during the financial crises…and even though the federal government is actually MAKING money off that investment, there is a strong possibility in Washington that these agencies will be unwound.  We need these agencies.  NAR strongly supports retaining the GSE’s to ensure the affordable availability of capital for people of modest means to finance a home purchase.

In addition to the legislative advocacy on Capitol Hill, there were lots of great meetings and roundtables.  I had the opportunity to participate in the Association Presidents’ Roundtable on Friday morning.  What a terrific experience, meeting with hundreds of Association presidents from around the country, and comparing notes on a variety of topics.  MAR shares many of the same challenges with associations across the country.  We were split up so large, medium and small associations sat with one another.  We’re classified as “medium”.  We rotated tables every 25 minutes and sat with moderators on a variety of subjects, with different mixes of presidents each time.  Among others, I chose to sit in on Syndication and IDX feeds (to Zillow/Trulia and the like), and also the “What do you do for your members other than provide access to the MLS?”

The IDX/syndication session was sort of refreshing because of the democracy of the subject; meaning, presidents from all over the country were grumbling about inaccuracy of data, other agents’ pictures next to their listings, and the inevitable loss of control of what happens with our data.  That was contrasted with the obvious consumer desire for robust access to data and sellers’ desire to have their listings in front of as many eyeballs as possible.

Regarding providing member services other than the MLS…well, we don’t have our own MLS…  The discussion was a great roundtable of what associations similar in size to ours, all around the country, are doing to provide value and relevance to membership.  This sort of thing is always racing through my mind, and it’s been the subject of spirited discussions in our MAR board room since the day I got there.

Whew, I’m exhausted!  All in all, a super-productive week for MAR…a super-productive month so far that started at CAR in Sacramento on April 29th.

I’m finishing this at 30,000 feet somewhere over the middle of America, and my mind is still racing.  The good kind of racing.  I made my connection in Philly, running from one concourse to another, getting to my gate 5 minutes before they closed the door.

Really looking forward to getting back to our lovely Marin.

I wish you safe and prosperous week!