The Weekly Membership Newsletter of the Tennessee Assn. of REALTORS
Editor: Pug Scoville

1. Mixed Reports on Tax-Credit Loans
2. “Redefaults” Continue…
3. TAR Education Survey (Please respond!)
4. HOT LINE: Commission Based on Net Selling Price?
5. HOT LINE: A Transfer of Listings?
6. Upcoming Courses & Events!
7. Rates Dropped Last Week

Publication was delayed by one day this week in observance of Memorial Day.

1. Mixed Reports on Tax-Credit Loans

We reported last week that HUD Secretary Shaun Donovan told the National Association of REALTORS that the First-Time Homebuyers Tax Credit could be “monetized” and used as a down payment under forthcoming HUD guidelines.

Since then, there have been a variety of news reports — some confirming and others denying that this would in fact happen. Some sources have claimed that the government was backing away from this proposal for a variety of reasons. In a May 21 news story, however, NAR reaffirmed the original plan:

News reports that the federal government is backing away from its plan to permit eligible borrowers to monetize the first-time homebuyer tax credit are off the mark, a spokesperson for the U.S. Department of Housing and Urban Development says.

“The technical details are still being finalized and will soon be published in a mortgagee letter and posted on our Web site,” Lemar Wooley, a HUD spokesperson, told REALTOR magazine Wednesday afternoon.

Under the guidance that’s under development, state agencies and other HUD-approved entities would be able to provide short-term bridge loans that households could use to help with their downpayment. The loans would be repaid with the proceeds from the households’ federal tax credit.
*** END QUOTE ***

[SOURCE: REALTOR Magazine Online]

2. “Redefaults” Continue…

Fitch Ratings is slated to release a report this week showing that 65 percent to 75 percent of modified subprime loans will still fall behind by 60 days or more within one year of the loan change. Although some experts believe that reducing the principal amount owed is the best way to keep distressed borrowers in their homes, Fitch found that 30 percent to 40 percent of loans that had lowered principal amounts were still redefaulting after 12 months. Borrowers are redefaulting at a high rate because home prices continue to fall, unemployment is rising, and because of public pressure to help homeowners — even those who are still likely to default even after receiving assistance.

[SOURCES: Wall Street Journal; Information, Inc.]

3. TAR Education Survey

The Tennessee Association of REALTORS (TAR) and the Tennessee Real Estate Educational Foundation (TREEF) work together to deliver quality education and educational services to TAR members. We’ve posted a simple, SIX-QUESTION survey to help us deliver those services more effectively. PLEASE take just a couple of minutes to give us your opinions. Thank you in advance for your help!

This TAR Education Survey will close soon, so please respond no later than 12 Noon, on Tuesday, June 2. To take the survey, just go HERE.

4. HOT LINE: Commission Based on Net Selling Price?

QUESTION: I have a transaction wherein the listing broker is trying to pay my commission based on the sales price minus closing costs. This was not disclosed up front. Is this legal?

ANSWER: The MLS Rules indicate that the commission is to be paid on the gross selling price. See Note 1 to Policy 7.23:

The compensation specified on listings filed with the multiple listing service by the participants of the service shall appear in one of two forms. The essential and appropriate requirement by a multiple listing service is that the information to be published shall clearly inform the participants as to the compensation they will receive in cooperative transactions unless advised otherwise by the listing broker in writing in advance of their producing an offer to purchase. The compensation specified on listings published by the MLS shall be shown in one of the following forms:
1. by showing a percentage of the gross selling price
2. by showing a definite dollar amount (Revised 11/95)

Therefore, the commission is to be paid on the gross sales price (i.e., BEFORE the closing costs are deducted). The only exception to that is:

7.2 (g) In the event that the gross commission established in the listing contract is subject to court approval or lender approval, and may be reduced by a court or by a lender, the fact that the gross commission is subject to court or to lender approval and either the potential reduction in compensation payable to cooperating brokers or the method by which the potential reduction in compensation will be calculated must be clearly communicated to potential cooperating brokers prior to the time they produce an offer that ultimately results in a successful transaction.

You are welcome to file a grievance with the local board for a hearing to determine the entire commission amount owed to you.

[SOURCE: TAR’s Legal & Ethics Hot Line Attorneys]

5. HOT LINE: A Transfer of Listings?

QUESTION: I left another firm and had several listings. My clients had signed withdrawal forms, and I turned those in to my previous broker. The broker said she wouldn’t withdraw them but transfer them and retain a referral fee. My clients have also sent letters to the previous broker asking for the withdrawal. Is the previous broker required to sign these withdrawals?

ANSWER: You should not discuss this issue with the sellers at all. These are clients of your former broker. Therefore, if you are discussing this issue with them, you could be accused of interference with a contract, and such interference is in violation of the Broker’s Act and the NAR Code of Ethics. This could result in a lawsuit, a complaint with TREC and/or a complaint with the local board.

Another important thing to understand is that the listings belong to the firm. The principal broker can transfer them to you, but that is completely up to the principal broker. In addition, the principal does not have to agree to the seller’s request to terminate the listing.

[SOURCE: TAR’s Legal & Ethics Hot Line Attorneys]

6. Upcoming TAR Courses & Events!

June 11: TAR Forms 101 (Nashville, TAR Office), 4 hours CE. For more information, go HERE.

June 11: TransactionDesk Basic Course (Nashville, TAR Office), 3 hours CE. For more information, go HERE.

A Special Event for Educators & Instructors: On July 28-29, TREEF will host its Educators Conference 2009, an annual event with sessions and workshops for instructors and association staff. For more information, go HERE.

Instructor-Training: On August 27-28, we will hold another offering of our popular two-day instructor-training workshop, “The Learning-Centered Instructor”, at the TAR Office in Nashville, accredited for 16 hours of CE. For more information, go HERE.

Watch each week’s TAR DIGEST for schedule changes and additions!

7. Rates Dropped Last Week

Freddie Mac reports a drop in the 30-year fixed mortgage rate to 4.82 percent during the week ended May 21 from 4.86 percent the prior week, while the 15-year fixed mortgage rate dipped to 4.5 percent. The Federal Reserve is working to hold down rates by purchasing upwards of $1.25 trillion in mortgage-backed securities and $300 billion in Treasuries. Mortgage rate premiums have declined substantially over the last couple of months even as Treasury yields climbed.

[SOURCES: Freddie Mac; Information, Inc.]

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