The difference between Customer and Client

You already know there are listing agents and selling agents in real estate. Listing agents focus their attention on adding inventory, usually posting their properties in the Multiple Listing Service, exposing the property to all other members. A selling agent is the one who actually brings the offer to purchase. Often, these are called buyers agents. The distinction is so relevant that the State of Idaho requires that an informative brochure detailing “Agency Law” is presented to all parties of a real estate transaction, “at the first substantial business contact”.

The brochure lays out the types of agency relationships as defined by Idaho Code under Title 54. The brochure you receive will state, in a highlighted box, “Remember! Unless you enter a written agreement for Agency Representation you will NOT be represented at all.”

Sellers almost always sign a formal agreement for representation. This listing agreement outlines the broker’s role in representing the property’s owner and details how the broker will be paid, as well as what the broker agrees to pay to a “cooperating” broker. That is to say, the share of the commission to be paid to the selling brokerage. Agents are not allowed to list properties without the broker being the responsible party. Agents may represent the broker, as is usually the case, but the liability for performance is always with the broker.

Many buyers will search for property without a written agreement. The State considers those persons as “Customers”. Under the law a customer may expect a “non-agent” representing their broker to;
Perform necessary and customary acts to assist you in the purchase or sale of real estate.
Perform these acts in good faith and with honesty and reasonable care.
Properly account for money or other property you place in the licensee’s care.
Disclose “adverse material facts” to you which are, or should be, within the licensee’s knowledge.
In bold text the brochure states: “As a Customer, your brokerage will not act as your Agent and is not required to promote your best interests or keep your bargaining information confidential. If you use the services of a brokerage without a written agreement, you will remain a Customer.” So, if you would like to have your bargaining information kept confidential, you probably want a representation agreement which then makes you a “Client” under the law. The duties to a client are broader. Most notably the agent is required to, “Maintain the confidentiality of some client information, including bargaining information, even after the representation has ended.”

In addition to making you a client, your “Buyers Representation Agreement” will also enumerate the types of real estate your agent will show you, the geography where that real estate may be found and how the broker will be compensated. A broker may agree to only the compensation offered through the listing agreement, or they may require a retainer, hourly rate, or a commission in addition to that offered by the listing brokerage. Your agent may also be willing to seek out, “For Sale by Owner” properties. Your agreement will address how the brokerage will be paid for these efforts as well.

If you go directly to a listing agent to buy a property, remember that the broker’s first loyalty is to the seller, with whom they have a written agreement (contract). As a buyer with the seller’s brokerage you have a right to be represented as well. There are two options under “Limited Dual Agency”:
Limited Dual Agency without Assigned Agents: As a Limited Dual Agent, the brokerage and its licensees cannot advocate on behalf of one client over the other. The licensees cannot disclose confidential client information.

Limited Dual Agency with Assigned Agents: If your brokerage has obtained consent to represent both parties as a Limited Dual Agent, it may assign individual licensees (“Assigned Agents”) to act solely on behalf of each party.

No matter which way you decide to go, a buyer’s agent from a brokerage different from the seller, or under a limited dual agency relationship, make sure you are protected by getting an agreement in writing that memorializes how you and your brokerage are going to work together. To read the entire brochure, contact your agent or go to: http://irec.idaho.gov/publcs/agency-disclosure-brochure.pdf

Choosing the right agent

In a vibrant market many career seekers will take real estate licensing courses, pass the State exam, select a broker and get their real estate license. A percentage will go on to be successful through hard work, integrity and adherence to the Realtor Code of Ethics. A larger percentage will not. There are roughly 1,000 members of the Coeur d’Alene Association of Realtors. The sheer number of agents may be overwhelming but you should be encouraged that the broad field gives you plenty of options to find the right agent for you.

Just as when hiring any contractor you should take care to interview your prospective agent. Asking friends and family for recommendations is always good but if you are new to the area you may not have that luxury. Here is a portion of a letter from a reader who asks to remain anonymous that illustrates the problem: “When we decided to put our house up for sale, we did not know any Realtors and didn’t know anyone to ask for a referral. As many people do, we called a real estate office and the agent we talked to agreed to come look at the house, and list it.
“The agent arrived, liked the house, and asked us what we wanted for it. The only thing that would give us close to a clue was a cost replacement done for insurance purposes. The house was listed for that amount and four months later, there had not been a showing, the agent did not return calls and the contract ran out.
“We had forgotten one important thing when we first listed the house. A real estate agent works for us. When you have a business of your own, and you need help, the process is to request resumes, interview people and find the one best suited to your needs.The second time, we were referred to an agent by someone we knew. Their experience had been a good one, so we contacted the agent.
“When this agent arrived, the first news was not what we wanted to hear, but the house was listed too high. Showing us comparables and information on the market at the time, it was easy for us to realize the price needed to be reduced. Unfortunately, this would not be the first time we had this conversation with our agent, but there was always information available to help us make the best decision.
“Calls and e mails were returned promptly. After almost a year, our house finally sold. Our agent was there to present the offer, give us an opinion, follow through with a counter offer and even attended the closing. Remember, if you need a real estate agent, they are going to be your employee. Ask others if you can, interview several, just as though you were hiring them to work for you, because that is exactly what you are doing. You want to be sure you have the right one before you sign a contract.”
So just as you will perform some due diligence regarding the property you will buy or sell, you need to check out your agent. The Idaho Real Estate Commission website (irec.idaho.gov) will tell you what education your agent has, how long they have been licensed and whether there have been disciplinary actions taken against them. All of this is of little interest though if you do not trust, like or communicate well during the interview. Your property is a huge investment. Use caution when choosing who will represent you in buying or selling.

No license does not mean no liability

It appears we got the attention of some folks with the illumination of Idaho’s lack of license requirements in last week’s column. Perhaps we should have mentioned that contractors are at least required to register with the state so they can be held accountable for shoddy work.

The Idaho statute we discovered outlines a process for pursuing contractors who perform substandard work and damage the party that hired them. Of course we are Realtors and not attorneys so you may want to check with a lawyer before pursuing a lawsuit but Idaho Statute. Title 6: “Actions in particular cases” does make provisions to file a claim against a contractor. Chapter 25 is titled the “Notice and opportunity to repair act”.

6-2503 states: “Prior to commencing an action against a construction professional for a construction defect, the claimant shall serve written notice of claim on the construction professional. The notice of claim shall state that the claimant asserts a construction defect claim against the construction professional and shall describe the claim in reasonable detail sufficient to determine the general nature of the defect. Any action commenced by a claimant prior to compliance with the requirements of this section shall be dismissed by the court without prejudice and may not be recommenced until the claimant has complied with the requirements of this section. If a written notice of claim is served under this section within the time prescribed for the filing of an action under this chapter, the statute of limitations for construction-related claims is tolled until sixty (60) days after the period of time during which the filing of an action is barred.”

So, before attempting to recover damages you must provide the offending contractor an opportunity to fix the problem. This opportunity must be in writing. A phone call to the Kootenai County Civil Court affirms that sending your written claim by certified mail is one acceptable method of serving notice. Once received by the contractor, this statute gives them 21 days to reply: “ Within twenty-one (21) days after service of the notice of claim, the construction professional shall serve a written response on the claimant.”

This response should establish a reasonable time frame for the contractor to revisit their work and inspect the claims of the dissatisfied customer: “The proposal shall include the statement that the construction professional shall, based on the inspection, offer to remedy the defect, compromise by payment, or dispute the claim.”

“Within fourteen (14) days following completion of the inspection, the construction professional shall serve on the claimant:
A written offer to remedy the construction defect at no cost to the claimant, including a report of the scope of the inspection, the findings and results of the inspection, a description of the additional construction necessary to remedy the defect described in the claim and a timetable for the completion of such construction; A written offer to compromise and settle the claim by monetary payment pursuant to subsection (2)(b) of this section; or A written statement that the construction professional will not proceed further to remedy the defect.”

If the contractor fails to take this action you now have the right to pursue the matter in Court. So you see, the lack of licensing requirements does not mean there is no accountability. You can find the entire Statute at www.Idaho.gov.

Beware of shady contractors

With every strong housing market related services flourish as well. As more houses are built more contractors register to build them, or at least to perform some of the work. In Idaho contractors are merely required to register with the State. Most are not required to have licenses or prove proficiency. According to the State Department of Building Safety; “Persons who perform electrical, HVAC or plumbing work without a required state-issued license or who violate other applicable codes or rules are subject to civil penalties.”

So other skilled trades do not need a license except for Public Works: “It is unlawful to engage in public works contracting without first having acquired an Idaho Public Works Contractor License of the proper class. The Division of Building Safety may impose substantial administrative assessments for contractor violations.”

With housing inventory low we see more and more people opting to purchase homes for their location, with the intent of remodeling or renovating an existing home to suit them. This puts a homeowner then at some level of risk as they begin to hire unlicensed individuals or companies to facilitate the reconstruction of their home. A little caution can go a long way. The Idaho Attorney General’s office has printed a great brochure to help you minimize the risk of hiring shoddy or even shady contractors. It is available online at the AG’s website.

Even though no license is required there are some State requirements of contractors: “In Idaho, the general contractor must give the homeowner or residential real property purchaser a disclosure statement before entering into a contract with a homeowner or a residential real property purchaser, if the contract exceeds $2,000. The disclosure statement must inform the homeowner or residential real property purchaser that the homeowner has the right to:
• require the general contractor to obtain lien waivers from any subcontractors working with the general contractor (at the expense of the general contractor);
• ask the general contractor for proof of general liability insurance and workers compensation insurance;
• purchase an extended policy of title insurance covering liens; and
• require a surety bond in an amount up to the value of the construction project.
The general contractor must provide a list of all subcontractors, material men, and rental equipment providers directly hired or working for the contractor. The list should include business names, addresses, and phone numbers. The list must be given to the homeowner before the closing of the sales agreement or before the homeowner provides final payment to the general contractor. “

The AG’s office also encourages getting references from friends and family. If you can’t do that ask the contractor to provide some references and contact them. Check to make sure they have registered and verify their business name and contact information. The AG warns that a Post Office Box is not sufficient. You can also check with the Better Business Bureau and the County Courthouse to see if there have been complaints filed and if so, how they may have been resolved.

Your home is likely your largest investment. You have to take responsibility to make sure the improvements you intend to make will be good ones.

Steady as she goes

It looks as though 2015 will end as one of the most predictable and stable real estate markets of recent history. Throughout the year we have consistently posted increases in sales volume and price improvement. November is no different and with mortgage interest rates dropping last week for the third consecutive week December looks to be strong as well.

One challenge facing home buyers however is not new. Our current available single family inventory is running 15 percent below what was available at this time last year. Folks in the market for homes in certain price ranges are finding it exceedingly challenging as they compete over a dwindling number of suitable homes. A drive around the area will quickly reveal a large number of remodeling projects underway as people opt for location and create their space by customizing an existing home.

At the end of November here is how the residential market looks for northern Idaho;

From the entire geography governed by the Coeur d’Alene Multiple Listing Service we see an increase in the number of homes sold on lots less than two acres in size that is 18 percent greater than last year at this time. Our average price is 11 percent higher than at the end of November 2014.

The Coeur d’Alene/Dalton area is up18 percent over last year too in the number of homes sold. Their average price is up 12 percent at $239,251. For nearby Hayden and Hayden Lake the number of homes sold exceeded 2014 by only 5 percent at the end of November with an average price of $278,952 which is 7 percent higher than last year.

Post Falls jumped ahead of last year’s number of sales by 24 percent. This huge increase though was not met by a similar price increase as their average of $204,413 reflects only a 5 percent increase over the previous year’s average. Rathdrum however, combined with Twin Lakes and Hauser showed not only a 26 percent increase in number of home sales but a respectable 18 percent increase in average price to $209,171.

It appears that the long awaited recovery has found solid ground in Bonner and Boundary Counties too with sales exceeding 2015 by 17 percent year-to-date at an average price 29 percent higher than last year at $232,395. Growth to the north was also seen in north Kootenai County where our number of homes on less than two acre lots increased by 31 sales (62 percent). The price adjustments there pale compared to Bonner and Boundary with an average price of $181,304 just 2 percent higher than last year. In south Kootenai County where we find a mix of waterfront and secondary waterfront homes there were a total of 44 sales which is 19 percent more than last year. Their average price is $784,931 – 10 percent higher than at November’s end in 2014.

This year homes over $300,000 make up more than 45 percent of our total home sales where last year that price range accounted for less than 19 percent of our totals. As of the end of November we have sold more than three times the million dollar plus homes that we sold last year. Still those sales account for less than 7 percent of our total but it may signal a return of the luxury home market.

Condo sales get a boost

Changes in how the Federal Housing Authority views loans on condominiums may provide a boost to local real estate. Our condo sales this year have been strong outpacing 2014 by 37 percent but it has been challenging for buyers to get financing. The rule changes early this month though will remove some of the roadblocks faced by would be buyers and should bolster the selling prices somewhat.

The recession hit some condominium projects hard. As owners struggled to pay mortgages many turned to renters as a source to keep their loans current. Subsequently many of these projects soon exceeded the ratio set by the FHA and so were denied loan underwriting. For condo buyers to get an FHA loan on a condo, the entire condominium development had to qualify under strict rules. These rules had to do with the number of units that were owner-occupied, the type of insurance the condo Home Owner’s Association carried and the number of condos in foreclosure. Many developments were unable to meet FHA approval so anyone trying to sell a condo in an unapproved project was prevented from selling to a huge portion of potential buyers. That has all changed now. The certification process required of the HOA is less intimidating and is easier to qualify under.

The FHA loosened the definition of owner-occupied units to include second homes that are not investor-owned. In North Idaho that’s a big deal because many condo owners are snowbirds who flock to southern climates during the winter. The change means more buildings qualify for the required ratio of owner-occupied units.
The changes also streamlined the condo recertification process to include less paperwork. Buildings will only have to submit paperwork on “substantive changes” since the project’s last approval rather than documents for the entire approval. That not only reduces the hassles of assembling all that paperwork but could mean more buildings become certified because it’s simpler for, say, a new homeowners association president unfamiliar with the process who might just let certification lapse.

Under the new policies, the FHA can approve loan applications for condos in projects that have as much as half of their space devoted to commercial use, up from 25 percent before the change. That’s an especially important shift for mixed-use projects like Riverstone in Coeur d’Alene which devote ground-floor space to stores and restaurants and upper floors to residences.
The new provisions will expire in a year, giving the FHA time to implement a more comprehensive condo rule change. For now at least it will be a better market for sellers who had to rely on cash buyers prior to the changes.

Nothing scary about October sales

The results are in and sales in October continued to show improvement over previous years. In fact this is the sixth straight year of gains for home sales in the Coeur d’Alene Multiple Listing Service.

For the Coeur d’Alene and Dalton Gardens market we see a 20 percent increase in the number of homes sold this year as compared to last. So far 1035 homes have sold in that geography at an average price that is 11 percent higher than in 2014 at $237,935.

Post Falls, with 764 sales outpaced last year by 22 percent. The average price for a home there is now $203,286 or 5 percent higher than last year. Hayden home prices increased by 6 percent to an average of $276,367. At the end of October the number of home sales there had increased 8 percent over last year.

Agents in the Silver Valley maintained the pace established last year selling exactly the same number of homes as in 2014 so far this year. Silver Valley sellers though were happy to have received an average of $86,157 for a single family home on a lot less than two acres in size. That is an increase of 3 percent over last year’s average price.

The star performer continues to be Rathdrum, Hauser and Twin Lakes. Sales there increased a whopping 29 percent compared to last year. The $209,579 average price represents an 18 percent improvement over last year’s average price there. Bonner and Boundary Counties came on strong later in the year than Kootenai County but have now posted several months of marked improvement. October showed a 15 percent Year-to-Date increase over 2014 sales with an average price of $230,942 or an increase of 27 percent.

Sales of newly constructed homes account for 16 percent of our total sales which is an improvement over last year when those houses were 15 percent of our totals. Sales of foreclosed properties fell from 237 in 2014 to 190 as of October 31, 2015. Short sales are less than half what were sold in 2014 with just 47 this year compared to 97 in that year.

As for dollar volume of all residential real estate, we have exceeded last year’s performance by over $200 million. The average length of time a home stayed on the market was 118 days.

Commercial and investment property sales increased by 25 percent over the prior year although the total dollar volume of those sales decreased by about 3.5 percent. Not all commercial real estate brokerages are members of the Coeur d’Alene Multiple listing Service and therefore do not report their activity there.

Vacant land sales for parcels of all sizes are up with increases in every category with the exception of master subdivisions. In that category there have been zero sales this year as the construction market continues to improve.

All in all the market appears robust and we see nothing to fear on the horizon.

Help us keep it clean

We have discussed here before the damage that can be done by alienating buyers who are expecting to see property advertised as one thing that turns out to be another. While some ads may contain honest mistakes others are obvious attempts to mislead. The Idaho Real Estate Commission is in charge of enforcing the laws which govern this advertising. At a meeting recently they indicated they would be stepping up enforcement. This should serve as a warning to sellers agents that stretching the truth could lead to penalties if the Commission should catch wind. Offended parties, buyers and their agents should do their part by reporting egregious behavior.

Distorted photos aside, some statements made in listings are simply not true and mislead whether intentional or not. In the past month we have seen listings claiming that additional dwellings could be built when that was not the case and another declared as a two bedroom when the home did not contain a single room that meets the legal definition of a bedroom. Here is what the law says about deception in advertising real estate; “No advertising shall provide any information to the public or to prospective customers or clients which is misleading in nature. Information is misleading if, when taken as a whole, there is a distinct probability that such information will deceive the persons whom it is intended to influence.” (Idaho Real Estate License Laws & Rules 54-2053. Advertising. p4)

That makes it pretty clear that agents should stick to the facts when advertising property. Nothing in the law prohibits flowery language or “puffing” as it is called, but actual deception could and should lead to enforcement action that will demonstrate the Commission is taking a serious approach to discipline for errant behavior.

Advertising regulations and guidelines not only cover what may be stated within a property description but also cover how agents market themselves. No doubt you have noticed a team or family photo that accompanies an agent’s advertisement. When those photos include non-licensed individuals they are out of compliance with real estate law in Idaho. In Guideline 2, paragraph 5 IREC states, “A person, including an individual or entity that is not licensed in Idaho, may market and advertise Idaho real property, provided the statute’s advertising requirements are met, including: every broker or salesperson named in the advertising holds an Idaho license; the licensed business name of the Idaho broker is included in the advertisement and; the advertisement is not otherwise misleading”

The statute also addresses internet advertising. Those ads on Craigslist that appear to be for sale by owner but have actually been placed there by an agent must meet requirements as stated above. Guideline #12 regarding internet and social media advertising states: “Licensees can use the Internet in multiple ways to contact customers about real estate services and to advertise properties or their services. Licensees should be aware that all statutes and rules respecting advertising apply equally to the Internet. This includes websites, e-mail, and any other potential “on-line” identification, representation, promotion, or solicitation to the public that is related to licensed real estate activity.”

We Realtors also cover truth in advertising in our Code of Ethics which all Realtors have sworn to abide by. So, in addition to IREC, offending parties should also be reported to the Coeur d’Alene Association of Realtors where we provide enforcement of the Code.

Sales up 19 percent

Even with all the smoke in the air that subdued traffic this past several weeks, our local real estate market continued its solid growth. With August figures tallied the Coeur d’Alene Multiple Listing Service reports a service area average increase of 19 percent in the number of single family homes on less than two acres sold. Here is how the communities within our MLS fared:

Coeur d’Alene/Dalton showed a 21 percent increase in number of sales over the same period in 2014. The average price there is just 8 percent higher than last year. Post Falls showed a 20 percent increase in volume with an average price that is 4 percent higher than last year’s average. Hayden was a bit less dramatic increasing their number of sales 10 percent above last year at an average price 7 percent higher.

Rathdrum, Hauser and Twin Lakes continues to post dramatic increases selling 36 percent more homes at an average price that is 25 percent higher than last year. Much of their performance is in new construction. Even so, new construction only accounts for 15 percent of our total sales which indicates existing home sales are brisk as well. Last year at this time new construction accounted for 16 percent of our total.

Our Silver Valley members continue at a steady pace with a 4 percent increase in units sold and an average price that is 6 percent higher than last year. The members to the North, in Bonner and Boundary Counties showed some nice improvement with a 24 percent increase in number of homes sold at an average price that is 32 percent higher than 2014’s average. Benewah County performed similarly increasing their sales by 22 percent at an average price that is also 32 percent higher than the previous year.

Sales of distressed properties continue to be a shrinking market sector with short sales making up just 2 percent of our total – half of last year – and bank owned properties accounting for just 6 percent of our sales, down from 9 percent last year. Once again all price categories outperformed last year with the exception of homes below $100,000 given the dearth of inventory in that sector.

Sales of manufactured homes are up, whether on their own land or in parks. Condominium sales are up 33 percent. Townhouse sales are up slightly. Sales of waterfront and secondary waterfront homes are showing continued improvement with both categories up better than 25 percent over last year.

Commercial buildings with land are up for the third consecutive year with a 20 percent improvement over 2014. It is important to note that not all commercial sales in the marketplace are reported to the MLS so the actual change may differ somewhat from the statistics reported here.

Vacant land sales whether building lots or acreage parcels are all out performing last year’s sales. If you want to know more about a particular category, county, or neighborhood contact your Realtor. They have access to all MLS data and can run the numbers for you.

Realtors vigilant regarding property rights

As Kootenai County continues to develop a Comprehensive Plan the Coeur d’Alene Association of Realtors is taking an active role. Many of you will remember the last attempt to adopt a comp plan. Consultants were hired at tremendous expense to the County and Realtors hired a land use law firm to poke holes in the ill fated plan which was later scrapped.

This time it is different. Your local Realtors have hired Rand Wichman who was Kootenai County’s Building and Planning Director for some fifteen years. Now a private planning consultant he is monitoring the progress as drafts of the plan are completed and submitting commentary to the County for changes before the plan is presented at public meetings. It is our hope that by being proactive during the process that an equitable plan can be agreed upon by the citizens of this county.

So far, Wichman has discovered a number of inconsistencies and changes in language that are sure to rile some County residents. Many are thought to be editing issues that if taken at face value may change the intent of the plan. Says Wichman. “Overall, the County is moving in the right direction with this effort. There are many good, useful changes being made in this process that will make their code easier to understand and live with. There’s more work to be done by the County, however, before it accomplishes their goals.”

Many of the changes are innocuous but some are cause for concern. For example one section addresses parcels and lots and how they are created. It is substantially revised from the current requirements. “Subsection 8.4.1101 A.2. does not recognize parcels that were created outside of the subdivision process that have water access only. Numerous such lots were created in the 1970’s and 1980’s and have been previously recognized as eligible for permits. This code should recognize that practice, and not turn parcels that have been considered eligible for permits in the past into unbuildable parcels.”

Another observation made by Mr. Wichman; “In Subsection 0 of 8.2.109 (Uses Requiring a Conditional Use Permit), “Churches, grange halls, lodges, and other nonprofit public or private community facility” has been replaced with a new use titled “Places of Worship or Assembly”. The definitions of “Place of Worship” and Place of Assembly” are narrower than that of a “Nonprofit community facility,” the definition of which is still in the draft code, although it has been eliminated as a potential conditional use in any of the zones. It is unclear if
this change is deliberate or unintentional. Nonprofit public or private community facilities should not be
eliminated in this and other zones where they are currently allowed through the conditional use permit
process.

One requirement changes how private roads may be contructed; “ Most existing
private roads do not meet the Highway District standard and under the current code are only required
to meet the Fire Code standards – essentially the same standards as a common driveway. When
combined with the requirement of Subsection 8.4.1101 D., a lot owner on a private road would not be
eligible to receive a building permit unless and until the private road was improved to Highway District
standards. In many cases, such improvements would cost millions of dollars, and could be impossible
due to easement or right of way limitations. These sections need to be modified to leave the current
standards and practices in place for private roads.”

This comp plan review is an important exercise paid for by the members of the Coeur d’Alene Association of Realtors. To read more of Rand Wichman’s observations and recommendations please visit our website; www.cdarealtors.com to view the entire 13 page document. There is a link on the home page.