2016 BROKER CONFERENCE #CABrokers Don’t miss your chance to register for this exclusive event at the California REALTOR® EXPO
This one-day conference features content for brokers by brokers designed to inspire you, empower you, and engage you in the conversation. Learn how to “Start Me Up” everything you wanted (and didn’t want) to know about starting up your own firm, what marketing to the next generation consumer looks like, how power brokers (large and small) make it in today’s environment, and listen to strategies on how to grow your firm. At this year’s Broker Conference, C.A.R.’s Chief Economist Leslie Appleton-Young will sit down for a unique one-on-one interview with Better Homes & Gardens CEO Sherry Chris! C.A.R. CEO Joel Singer will give a thought provoking and forward thinking keynote address that will not disappoint. Cocktail reception included.
WHO’S YOUR REALTOR®? 2016 EXPO The WHO’S YOUR REALTOR®? 2016 EXPO is two weeks away! As an industry leader, you’ll want to attend key sessions to learn new skills to maximize your profits and grow your business, network with other industry leaders, join in on thought-provoking and strategic discussions, and see what the future holds for the real estate industry. EXPO highlights you won’t want to miss: • Tech Tuesday: Learn about new tech tools and trends and get hands-on training you can implement to increase your business and make yourself more visible • Keynote luncheons: Get inspired, motivated, and educated on important issues during lunch with tech expert David Pogue, Captain Mark Kelly, and C.A.R.Chief Economist Leslie Appleton-Young. Register for all three to save with bundle pricing • Urbanism for the Rest of Us: Urbanism for the Rest of Us: C.A.R. CEO Joel Singer and author Joel Kotkin will discuss global, economic, political, and social trends on urban development and how housing, residential neighborhoods, and cities should provide diverse options to meet the changing needs of people in future years to come • 2016 Econ Panel-What is the Next Housing Story in California?: Leslie Appleton-Young, C.A.R. Chief Economist, will discuss what lies ahead for California real estate markets in 2017 and will discuss with four top economists the future outlook of the housing market, the economy, and the lending environment • EXPO Keynotes: Master Trainer Tom Ferry and HGTV Host Egypt Sherrod will be giving powerful keynote speeches on the EXPO floor that will give you the tools to grow your business and build a brand all about you
For a full list of sessions, special offers, giveaways and prizes, book signings, Club C.A.R., and more, visit expo.car.org. We can’t wait to see you Sept. 27-29 in Long Beach!
The Economist Letter to Editor C.A.R. President Pat “Ziggy” Zicarelli recently submitted a Letter to the Editor of The Economist to rebut an article arguing that the U.S. hasn’t done enough to reform Fannie Mae and Freddie Mac and that the GSEs should play by the same rules as banks. Zicarelli writes, “You argued that America has in effect nationalised its housing market (“Comradely capitalism,” August 20). But the government has been supporting home financing and incentives for the past 80 years, whether through the mortgage-interest deduction or programmes that ensure affordable mortgage capital. Washington’s inability to press forward with reform has caused uncertainty and restricted credit for homebuyers.
Results Summit Promotional Discount for C.A.R. Members C.A.R. members are still able to get the Early Bird pricing that expired a few weeks ago. This means special pricing of only $149 for C.A.R. members, which includes everything:
Pre-conference intensive sessions, General session and all keynotes, welcome cocktail reception on Monday 9/19, continental breakfast and lunch & learn session on 9/20, Summit After Party at Encore XS nightclub.
Evicted: Poverty and Profit in the American City by Matthew Desmond It’s the rare writer who can capture a social ill with a clear-eyed, nonjudgmental tone and still allow the messiness of real people its due. Matthew Desmond does just that with Evicted as he explores the stories of tenants and landlords in the poorest areas of Milwaukee during 2008 and 2009. It’s almost always a compliment to say that a nonfiction book reads like a novel and this one does – mostly because Desmond gets very close to the “characters,” relating their words and thoughts and layering on enough vibrant details to make every rented property or trailer come alive.
Latest Market Statistics
Existing Single-Family Home Sales decreased 5.1 percent year-to-year in July to a seasonally adjusted rate of 415,840 on an annualized basis.
Median Price of an existing single-family home increased 3.9 percent in July 2016 to $509,830, compared with July 2015 and a 1.8 percent decrease from June 2016.
Unsold Inventory Index in July was 3.6 months, up 9.2 percent from a year ago and well below the long-run average of about 7 months.
County Market Update - Download Updates This all- in- one page is your county’s housing trends at a glance. Indicators provided are sales, median prices, inventory indicators, and so much more! Share this information with your agents so they can establish themselves as the market expert with hard facts to explain market conditions to their clients.
Housing Matters Blog - Read Blog Research and Economics shares the most up-to-date information about the California’s housing market in our blog. We also give insights on the general economic conditions and how the overall picture affects the real estate industry and its consumers.
Real Estate Professionals Must Materially Participate in Their Rental Activities in Order to Deduct Rental Losses In the case of Gragg v. United States of America; Internal Revenue Service Commissioner, the Ninth Circuit Court of Appeals held that real estate professionals must materially participate in their rental activities in order to deduct rental losses.
The facts involved taxpayers, one of whom held a real estate license, who claimed losses related to rental properties they owned. The IRS requested a log of the licensee's activities related to the properties and ultimately denied the deductions, concluding that, even though holding a real estate license, the taxpayers had to show that they materially participated in the rental property activity. In this case, two undated one-page notes of activity submitted by the taxpayers were not sufficient for the IRS to allow the deduction.
In general "passive activity" losses are not deductible under IRC § 469. However the taxpayers argued that the history of amendments to IRC § 469 meant that being a real estate professional rendered all rental losses non-passive and thus deductible. The Ninth Circuit judges thought otherwise, and ruled that § 469's text and case law "all point in one direction" such that real estate professionals "must show material participation in rental activities before deducting rental losses."
The Bottom Line - Holding a real estate license does not automatically entitle you to deduct your rental losses. If you wish to deduct your rental losses, be active in the management of your rental activities and document, document, document.
Additionally, the law treats each rental interest separately as to the taxpayer's material participation, unless the taxpayer makes an election during that tax year to treat all interests as a single real estate activity. So consider whether you wish to file an election regarding multiple properties to be treated as a single activity. As with any tax questions, we recommend that you consult with an accountant or tax specialist.
Two 9th Circuit Cases Regarding Arbitration and Class Action Waivers The 9th Circuit Rules that Employers Cannot Require Job Applicants to Waive Class Actions in Arbitration Agreements as a Condition of Employment - In Morris v. Ernst & Young, LLP, the U.S. Court of Appeals for the 9th Circuit (which includes California) struck down a class action waiver in an arbitration agreement. This decision directly conflicts with opinions by other federal appellate courts as well as those of the California State Supreme Court. In Morris, despite having signed a class action waiver, the plaintiffs filed a class and collective action in federal court alleging that Ernst & Young had misclassified them and similarly situated employees in violation of the Fair Labor Standards Act ("FLSA") as well as state law. The trial court compelled the case to arbitration on an individual basis, and plaintiffs appealed. On appeal, the plaintiffs argued that the provision requiring them to bring individual actions individually violated their right to engage in "concerted activities for the purpose of collective bargaining and other mutual aid or protection" under the National Labor Relations Act, the Norris-LaGuardia Act, and the FLSA. The 9th Circuit Court agreed.
9th Circuit Panel Upholds Authority of Arbitrator Alone to Decide if a Class Action Waiver in an Arbitration Agreement is Enforceable as long as Such Waiver is Clear and Unmistakable - In a second case, Mohamed, et al. v. Uber Technologies, Inc., a 9th Circuit panel also ruled that issues involving an arbitration agreement, which included class action waivers, must be decided by an arbitrator, as opposed to a court or judge, upholding the plain language of the arbitration agreement. The case involved Uber drivers who had effectively been terminated from Uber when negative information appeared on their consumer credit report. The substance of their claims related to violations of credit reporting laws, although one of the plaintiffs also alleged that he had been misclassified as an independent contractor rather than an employee. Uber attempted to compel arbitration.
The case is complicated by the fact that there were two different arbitration agreements at issue, as well as two different plaintiffs both claiming to represent a class but only one claiming the right to bring a private attorney general action (PAGA). However, the 9th Circuit panel read both agreements closely and allowed the agreements to be enforced as written. The Court concluded that one of the arbitration agreements clearly and unmistakably delegated the question of arbitrability to the arbitrator under all circumstances and the other did so, too, except as for class action, collective action and representative claims (PAGA). Additionally, neither agreement was unconscionable. Thus the court concluded that all of the challenges to the enforceability of the arbitration agreement should have been adjudicated in the first instance by an arbitrator and not in court with the exception of one of the plaintiff’s claims relating to PAGA.
Welcomed by many, the Act reduces the FHA condo owner occupancy ratio to 35%, unless FHA takes action within 90 days; directs FHA to streamline the condo recertification process; provides more flexibility for mixed use buildings; and mirrors the Federal Housing Finance Agency's rules regarding private transfer fees for FHA financing.
Ninth Circuit Halts DOJ Proscecution of Medial Cannabis Shops that Follow State Rules The Ninth Circuit Court of Appeals has affirmed a Congressional mandate and barred the Department of Justice from bringing cases against medical cannabis shops that are legitimately operating under state laws. United States of America v. Steve McIntosh No. 15-10117, July 16, 2016 (a consolidation on appeal of ten cases).
In 2014 and 2015 Congress passed bills that prohibited DOJ from spending funds to prevent states from implementing their medical marijuana laws. Despite that ban, DOJ continued prosecutions. The unanimous decision sent the cases back to district courts where the operators could demonstrate they should not face further charges because they had complied with state law. However, the opinion also makes it clear that it does not "legalize" marijuana or provide immunity from all federal prosecution, rather the defunding "temporarily" blocks the spending of federal funds to prosecute such cases. The court cautions that Congress or a new administration could easily shift priorities in the future.
CFBP Expands Foreclosure Protections Earlier this month, the Consumer Financial Protection Bureau (CFPB) finalized measures that should help struggling borrowers. The new rule, most of which takes effect 12 months from publication (some parts in 18 months), expands foreclosure protections and clarifies mortgage servicing rules as follows: - Requires servicers to provide a borrower with foreclosure protections more than once during the life of the loan - Ensures that surviving family members and others who inherit properties generally have the same protections under the CFPB's mortgage servicing rules as the original borrower - Clarifies borrower protections when loan servicing is transferred - Requires notification to borrowers when loss mitigation applications are complete - Clarifies servicers' obligations to avoid dual tracking and prevent wrongful foreclosures - Clarifies when a borrower becomes delinquent - Requires servicers to provide important loan information to borrowers in bankruptcy
AB 1381 (Weber), a California Bureau of Real Estate (CalBRE) licensure exemption bill, was amended to address C.A.R.’s concerns. This bill would exempt from CalBRE licensing those involved with the purchase, sale or leasing of property for the siting of billboards. C.A.R. was able to amend AB 1381 only minutes before the bill's scheduled hearing in the Senate. The amendments preserve the existing "principals' exemption"; in other words, a corporation can use its own employees to work on its own transactions without having to have them licensed. Any agency or brokerage on behalf of a third party would require a licensee. With these amendments, C.A.R. has removed its opposition to the measure. AB 1650 (Frazier), C.A.R.’s uniform advertising standards bill, was signed into law by the Governor. Existing law varies greatly depending on the type of advertisement (i.e., “for sale” signs, print and electronic media, business cards, brochures, etc.) and the name being used by the licensee (i.e., given name, nickname, team name, etc.). This bill will require a licensee conducting advertising of ANY kind to also include their CalBRE license number and responsible broker’s identity. Company “for sale,” lease or rent signs would only be required to contain the responsible broker's identity. “Open house” and directional signs without a reference to agent name would be exempt from this requirement. This bill also includes a one-year delayed effective date for implementation. AB 1750 (Dodd), C.A.R.’s landlord/tenant environmental hazards booklet bill, was signed into law by the Governor. This bill would clarify that environmental hazard booklet liability protections applied to sellers of real property apply equally to lessors of real property. Current law does not clearly apply the rule to landlords and property managers. Use of the guide to common environmental hazards will remain voluntary. AB 1807 (Bonta), C.A.R.’s disciplinary action notice bill, was approved by the Legislature and sent to the Governor for signature. Current law requires that a discipline notice against a licensee's name in the California Bureau of Real Estate’s online database be reported indefinitely, even if the licensee has been rehabilitated and the license penalty (i.e., suspension or restriction) has been removed. This bill creates a process by which a licensee, upon written request accompanied by a specified fee, may request removal of a disciplinary action from the licensee's online profile. 10 years after the posting of the violation, and upon the demonstration (evidence) of rehabilitation, CalBRE can remove the violation from their online database. All violations would continue to be maintained offline on the licensee’s permanent record. AB 2330 (Ridley-Thomas), C.A.R.’s broker associates bill, was approved by the Legislature and sent to the Governor for signature. While the terms "Broker" and "Real Estate Salesperson" have been defined in statute, “Broker Associate” is a term of art used in practice but not currently defined in law. This bill, among other things, would statutorily define "Broker Associates,” and require “Broker Associates” to be searchable in the California Bureau of Real Estate’s database.
AB 2476 (Daly) C.A.R.’s parcel tax vote notification bill, was signed into law by the Governor. Under current law, resident property owners receive notice of proposed parcel taxes with receipt of their ballot pamphlet while non-resident property owners do not receive any notice whatsoever. This bill requires notice of a parcel tax to be given to non-resident property owners after it has been approved.
AB 2502 (Mullin and Chiu), a rent control bill opposed by C.A.R., failed passage. Under the 1995 C.A.R.-sponsored Costa-Hawkins Act, new construction is exempt from rent control. AB 2502 would effectively repeal the new construction exemption by allowing local governments to impose inclusionary zoning as a condition of development. This would require a new housing developer to include "below market" residential units in their development plans and eliminate any incentive for local government officials to negotiate new construction requirements with representatives of housing developers.
AB 2693 (Dababneh), C.A.R.’s Property Assessed Clean Energy (PACE) loans bill, was approved by the Legislature and sent to the Governor for signature. Existing law requires home loans to be accompanied by the Truth in lending RESPA Integrated Disclosure (TRID), which is intended to allow an "apples to apples" comparison shopping of various loan products. However, PACE transactions are technically not loans and are not required to be accompanied by a TRID disclosure. Current law gives delinquent PACE assessments “super-priority” status, as part of the tax bill, over other recorded obligations; lenders require these “super liens” to be paid off before any new financing can be obtained. This measure will require a TRID-like disclosure be provided to a property owner participating in a PACE program, a 3 day right of rescission, and a notice that the property owner may not be able to refinance or sell without paying off the PACE "loan.”
SB 710 (Galgiani), C.A.R.’s team advertising cleanup bill, was signed into law by the Governor. Existing law establishes clear advertising standards for real estate licensees using “team names” and defines “responsible broker’s identity” (i.e., company name) for advertising purposes. SB 710 will correct a drafting error that required the listing of a company name and a responsible broker’s license number on all “team” advertising. To correct that error, this bill requires the company name or both the company name and number to be listed.
SB 1053 (Leno), a mandatory Section 8 bill opposed by C.A.R., failed passage. This bill expands the state’s “source of income” definition in the Unruh Civil Rights Act (California’s version of the Fair Housing Act) to include all federal, state and local housing subsidy and assistance programs, effectively making Section 8 and other housing and public assistance programs mandatory imposing onerous and expensive inspection standards on rental property owners.
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