24 July 2009 ? As a result of the efforts of Charles McMillan, the 2009 President of National Association of Realtors (NAR) and its members, Freddie Mac and Fannie Mae this week issued new guidance to all lenders on the Home Valuation Code of Conduct (HVCC). The letter issued on July 22, 2009 by the Federal Housing Finance Agency (FHFA) clarifies two very important points that we raised by the Realtors® in recent meetings with officials. First, it states that lenders should use appraisers who have clear experience in the geographic area. Second, it clarifies that appraisers are not prohibited from talking to real estate agents. In a statement released by Charles McMillian, he stated ?NAR has asked Congress and the FHFA to immediately implement an 18-month moratorium on the new HVCC rules to further address unintended consequences of this new rule. We will continue to push for this, but are pleased that this first step was taken today.?

Agent? Broker? Brokerage? Associate Broker? Managing Broker? REALTOR®?

One of the most common questions I get from people (or at least I get a quizzical look) is what?s the difference between an agent, a broker, and a REALTOR®. This usually happens when they realize I?m using the words differently. For example, ?The agent?s broker told her she had to be a Realtor® in order to keep her license with the brokerage.? Huh?

It?s not that hard. The differences come from both state license law and a registered trademark. Here?s a few brief explanations that don?t get into too much of the legal finery:

What?s a Real Estate Agent?

A real estate agent is a person who has met the requirements set by state law to act as an agent in real estate transactions. In Illinois, the Illinois Department of Financial & Professional Regulation (IDFPR) is the agency that deals with this law and makes sure everyone follows the rules.

It isn?t very hard to become an agent. You have to be 21 years old and have a high school diploma. You take a 45-hour course from an IDFPR-approved school and pass the school?s test. You then have to pass the state?s test and pay your fees to the state to get your license. Every two years you have to take continuing education from an approved school and pay for a new license. Most people find these courses and test quite easy.

An important point is agents can?t work for themselves. An agent can?t use that license unless they ?park? their license with a real estate broker. They are somewhat like an apprentice. Basically, agents have to have a boss who is a broker. Brokers act as agents? bosses and are legally responsible for what agents do.

What?s a Real Estate Broker?

Becoming a broker takes more classes and more tests. Before you can become a broker you have to have taken and passed the agent classes and exam. You then have to take another 75 hours of class from an IDFPR-approved school, pass the school?s test, and then pass the state?s test. You then apply to the state for your broker?s license.

Only brokers are allowed to charge for their services?agents are not. This is one of the reasons an agent must work for a broker. Also, only brokers can enter into contracts?again, agents can?t. This is why when you list your home with an agent, they don?t sign the contract, their broker does.

What?s a Managing Broker?

Unlike agents, brokers can work for themselves; they don?t have to have a boss. They can ?hold their own license? and don?t have to park it under anyone else. They also have the right to have agents work for them. If they do have agents working for them, they are called a managing broker. Every real estate office has to have one managing broker who is legally responsible for nearly all the actions of the agents in that office. If those agents get into trouble, it?s the managing broker who ultimately is responsible for the problems.

What?s an Associate Broker?

A lot of agents decide they want the additional prestige of the broker title, so they go through the courses and take the tests. However, they don?t want to be managing brokers; they don?t want to be the boss. They simply want the additional education and the title, but to act as an agent but have the broker title. These people are often called associate brokers by their brokerage.

What?s a Brokerage?

A brokerage is a company that has a broker?s license. Basically for a company to have a broker?s license, the owners have to be brokers and then apply for the company to get a broker?s license.

What?s a REALTOR®?

Have you noticed that there?s a ® every time I use the word REALTOR®? Have you noticed that the word is in all caps? That?s because it?s a registered trade mark of the National Association of REALTORS® (NAR) and that?s how they require it be used. I suspect you, like most non-REALTORS®, thought that the word was just a word. However, like Kleenex®, it?s a brand name. And, like Kleenex®, NAR is very protective of their trademark for fear that it will be taken away from them because of its ubiquity.

REALTORS® must be either a licensed agent or a broker and they must join the National Association of REALTORS®. Furthermore, REALTORS® have to agree to a strict code of ethics, which often holds them to a higher standards than the state law. In nearly all places in the US (including Chicago), an agent needs to be a REALTOR® in order to have access to the Multiple Listing Service (MLS), which is the database of properties that have been and are on the market.

So, that?s it, all you ever wanted to know about the lingo of the real estate world.

We’d like to thank Chris Griffith for kindly sharing today’s photo via the Creative Commons License. Thank you Chris!

Are the Clouds Over Chicago Gathering or Parting?

The Illinois Association of Realtors® (IAR) announced yesterday that both home prices and home sales were down in Chicago when comparing December 2008 to December 2007. They are also down when comparing all of 2008 to 2007.

Chicago Home Sales Figures

In December a total of 1,215 homes were sold in Chicago. This is down 23.0 percent from the 1,578 homes sold in December 2007. IAR also announced numbers for Chicagoland (defined as Cook, DeKalb, DuPage, Grundy, Kane, Kendall, Lake, McHenry and Will counties), where there were 4,232 home sales in December 2008 compared to 5,033 in December 2007. This is a drop of 15.9%.

In Chicago, for the whole of 2008, there were  20,589 home sales compared to 27,503 in 2007, a drop of  25.1 percent from 27,503 sales in 2007. In Chicagoland there were 68,676 home sales in 2008, which is a drop of 25.9 percent from 92,657 sales in 2007.

Chicago Home Prices Down

In the city of Chicago, the median price for a home was $235,000 in December 2008 compared to $287,450 in December  2007, a drop of 18.2 percent. The numbers weren’t as bad for the whole of Chicagoland where The 2008 median price was $290,000, down 0.5 percent from $291,500.

David Hanna, president of the Chicago Association of Realtors® said, “A lack of consumer confidence and financing continue to prevent the Chicago housing market from maintaining any recovery momentum. Low interest rates and flexible pricing are bringing buyers into the market, the continual lack of reasonable financing requirements and lender adversity to lend to the average consumer thwart our best efforts to see the housing market rebound. Lending conditions must change or the real estate market will not recover.”

Didn’t NAR Say Sales Were Up?

It’s important to note that these numbers are a different than the national numbers widely reported by the National Association of Realtors®; the jump NAR reported yesterday was comparing November and December of 2008. The numbers above are comparing year-on-year December numbers. In the their report NAR did show a 3.5 percent drop in national home sales in December 2008 compared to December 2007 sales.

So, when we take into account the national numbers from yesterday and the Chicago numbers today, what do we learn? It is looking like December 2008 was a better month than November 2008. It looks like some momentum is building and buyers are returning to the market. However, today’s Chicago numbers temper that optimism by comparing 2008 with 2007; when you do that, the numbers are most definitely down.

I was listening to an economist yesterday on the radio. He said that layoffs continue to happen?and even reach a peak?after the bottom of the recession has hit. This is because no one knows that the bottom has been reached. All they know is that revenues are down and they have to cut expenses. He pointed out that yesterday’s huge job cuts could, COULD be a wacky indicator that the bottom has hit.

Could the increase in November vs. December sales signal a bottom despite the bad 2008 vs. 2007 numbers? If you know the answer, you’re going to be a very rich person!

Photo by Katie/OnlyMayDays

They're Wrapped Up Pretty...and They're Moving

We probably should have seen this coming, with reports from agents saying they were seeing an unusual increase in buyers wanting to do something. Today The National Association of Realtors® (NAR) released a report stating the seasonally adjusted annual rate of sales of existing homes in December went up to 4.47 million units in December. That is a 6.5 percent increase over the November number, but 3.5 percent behind the December 2007 numbers.

Of course, none of this says anything about prices of homes. However, NAR chief economist Lawrence Yun did say home prices are continuing downward. He also pointed out that total housing inventory feel 11.7 percent at the end of December?down to 3.68 million homes for sale. These numbers mean there is about a 9.3-month supply on the market right now.

All these numbers are national. NAR didn’t release their data, so we aren’t able to look at Illinois or Chicago. A quick check of the Illinois Assocation of Realtors® and The Chicago Assoication of Realtors® sites didn’t have any additional local data. Hopefully that will be coming shortly.

Midwest Numbers

What NAR did give us was “Midwest” numbers, and they were up as well. There was a 4.0 percent increase in existing-home sales in December to 1.04 million homes. This is 10.3 percent below the December 2007 number. They also reported that the median home price in the Midwest is now $140,800, which is down 11.4 percent compared to the same number last year.

It’s Good to Be a Buyer

All this, of course, means that if you are a buyer with a good job and a preapproval letter, you are in a very good place. You will likely have a lot of homes to choose from at amazing prices. To top all this off, Freddie Mac reported the rate on a 30-year fixed mortage was 5.2%. Maybe the January numbers will be even better.