Homing in on Real Estate Trends Experts and Groups Look at Proposals, Developments, New Laws in the Industry
Donovan, Deborah, Daily Herald (Arlington Heights, IL)
Byline: Deborah Donovan Daily Herald Real Estate Writer
Like many things, it boils down to money.
Dipping into escrow money is one of the biggest temptations that gets Illinois' real estate brokers in trouble, says Jack Schaffer, commissioner of the Illinois Office of Banks and Real Estate.
"Most of the things we fight over involve money," Schaffer said. "Some brokers use escrow money like their own personal piggy banks. Their little house of cards collapses, and somebody gets stiffed."
Schaffer's office, which has 286 employees, added the real estate industry in 1996 and regulates and licenses people from several other fields.
Besides Schaffer's agency, there are several organizations that assist, educate and oversee people whose job it is to help folks buy and sell homes.
These groups range from the Illinois Association of Realtors to the Illinois Real Estate Lawyers Association, which monitor trends, proposals and laws regarding the industry.
Schaffer's agency gets perhaps 5,000 complaints a year about real estate agents and mortgage lenders. A similar number of people call each year with questions.
Of these, 60 complaints each month against real estate agents require investigation, and 30 are found to require disciplinary action. That's from 78,000 licensees.
In the mortgage division, 40 to 50 brokers' licenses are revoked annually or not renewed.
Schaffer said he hopes pending legislation will soon let him issue a list of errant mortgage salespeople to warn mortgage brokers against hiring them.
"This is very frustrating to us. We have had legitimate companies call up and try to get information about specific people. The previous employer was so anxious to get rid of them they agreed not to say bad things," he said.
Of 1,200 mortgage companies licensed in Illinois, 10 generate half of all complaints, Schaffer said. A few companies do so much business it's expected they would receive many complaints, Schaffer said. But sometimes there is a "rogue loan officer."
Ironically, real estate offices get in trouble when business is slow and people are tempted to dip into the escrow accounts.
By law, that money - usually from home buyers - is supposed to be kept in a separate account so it will be available for down payments at the property's closing.
The good news is that after the brokers are called on this, "in an awful lot of cases they do make the consumer whole."
Mortgage folks are on the other side of the equation, Schaffer said. They get behind on the paperwork when business is good. This can delay closings until after mortgage rates go up.
Schaffer said he hopes investigators from the Illinois Office of Banks and Real Estate will be able to go out and talk to brokers and examine their escrow books on an "officer friendly basis."
He said his office has temporarily gotten the services of a few more investigators on loan from the Property Tax Appeal Board.
"They don't have much to do over there because people don't know they have this (appeal) option yet," Schaffer said.
All orders issued from the agency are made public on the Web site (http://www.state.il/us/obr) and in a newsletter. This process helps to warn other states about malingers, too.
Schaffer and industry groups also are involved in a project to rewrite the state's real estate licensing law.
Jim Merrion, president of the Illinois Association of Realtors, said his group is working to increase the number of hours of classes real estate agents and brokers have to take to renew their licenses.
They also would like to eliminate the provision that waives the continuing education requirement for long-term license holders.
That affects 16,000 licensees, and perhaps 5,000 of them might not bother to take the classes to keep their licenses, Schaffer said. He suggested perhaps an emeritus status could be worked out for them.
The Realtors also want fax addenda to contracts to be automatically legal and binding. And they are investigating making e-mail part of the process.
"The questions people ask you: Changing school district boundaries, taxes, use of lands around the home. You can only master these by staying current on the market," said Merrion. "The number of complaints drops with the number of transactions an agent does.
"You get better at the business and more sure of what you're doing," said Merrion, who is senior vice president and general sales manger of Baird & Warner.
However, a few changes that the Illinois Association of Realtors has proposed in the law bother the Illinois Real Estate Lawyers Association, said John G. O'Brien of Arlington Heights, founder and president.
The Realtors are negotiating with a committee of the Illinois State Bar Association.
O'Brien is concerned that Realtors would have no responsibility to disclose information about conditions off the property.
For example, if the house next door were sinking or buyers from outside the area were not aware of the controversy over extensions of Route 53, the agent might be exempted from telling a prospective buyer, he said.
Merrion counters that agents should not be responsible for transferring uncertain information about something that might or might not happen.
If people ask about sex offenders living nearby, Realtors are advised to refer them to the local police department, he said.
"We can't keep current with information we aren't privy to, and we have liability for wrong identification. There isn't liability for the police," Merrion said.
Steve Bochenek, general legal counsel for the Illinois Association of Realtors, agreed.
"Sometimes there are difficult issues that members have to address," he said.
"How far do you go? Next door? Next block? Two miles? We are trying to find a balance that is fair for the consumer and reasonable for our members," Bochenek said.
O'Brien said his organization is concerned about trends in some parts of the country where real estate salespeople and brokers become "facilitators" who just bring the parties together rather than representing buyers or sellers with specific responsibilities.
Merrion said one of the successful developments in the industry is sellers' disclosure, which became a state law in 1995.
"Water is still the number one reason when people file lawsuits," Merrion said. "But think about how many ways water can get into a house - roofs, caulk around windows, bricks that need tuckpointing and sump pumps and basements."
But O'Brien said sellers' disclosure is no substitute for home inspections.
"A lot of stupid sellers aren't aware of much," O'Brien said. That's because the disclosure form allows sellers to check a column that says they are not aware of each possible defect.
"Sellers don't realize themselves," he said. "Over the years stuff happens, and they become used to it. They don't think of it as a problem. Those hazy Thermopane windows they consider part of the charm of the house.
"Or in the '50s they had no concept of electricity. Years later somebody opens the box and says, 'Lucky this house didn't burn down.' That happened in my own house," O'Brien said.
New role for agents
Today, consumers see realty agents more as consultants, Merrion said.
"They say, 'We agree this is a good area with good schools and transportation. We have found four houses we could make work. Which is the best value?'
"For Generation X, this is not as emotional a decision. They're more business oriented. They ask questions like the history of the house and how many times it sold in the last 10 years and the prices historically," he said.
Realtors also can contribute negotiating skills and take charge of the process and documents and move things along.
One problem that Merrion sees in the industry is that the average agent is 50 years old.
"My kids don't want to do business with somebody my age. We're not recruiting enough young people."
Obviously, it's difficult for young people just out of college to enter a career without regular checks and where the first commission payment is probably months away.
O'Brien started the Illinois Real Estate Lawyers Association last year because he said he feels the traditional bar groups are too oriented toward attorneys who spend time in court.
The group began in the Northwest suburbs and now has 200 members statewide.
Besides commenting on the proposed real estate law, the group educates its members about things important to consumers.
For example, in April the FHA discontinued one-year adjustable rate mortgages, and this information was relayed to the association's members.
"It's not like big billboards go up when they do these things," said O'Brien, who is also chairman of the real estate committee of the Northwest Bar Association.
According to a recent court decision, lawyers also have to say they "disapprove" of something in the contract if they want it voided unless a change is made. Just recommending a change is not adequate.
O'Brien said attorneys should make sure that home buyers have home inspections, check for common electrical problems, gas leaks, furnace problems and carbon monoxide.
He also recommended that lawyers check that the lender does not add more costs at closing over and above those listed on the truth-in-lending statement.…
Questia, a part of Gale, Cengage Learning. www.questia.com
Publication information: Article title: Homing in on Real Estate Trends Experts and Groups Look at Proposals, Developments, New Laws in the Industry. Contributors: Donovan, Deborah - Author. Newspaper title: Daily Herald (Arlington Heights, IL). Publication date: July 10, 1998. Page number: 1. © 2009 Paddock Publications. COPYRIGHT 1998 Gale Group.
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