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District 99 Schubb – Nov 2023

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David Schubb photo

November 2023
From the desk of:

David Schubb

PRESIDENT, DISTRICT 99 LIAISON
EMAIL: [email protected]  |  TEL: (925) 765-5055

Dear Friend and Fellow-Member,

Greetings from CCAR! Many of you have been asking questions about the recent Burnett v. NAR verdict, so we’ve pulled together some information to help give you some clarity on the issue and provide tools you can use to educate your clients. Also note that C.A.R. has scheduled two additional live sessions this week to answer your legal questions pertaining to the case. Simply register below.  

We would also like to welcome in the holiday season by inviting you to save the dates to attend all the upcoming events slated for the coming weeks.

Feel free to contact me directly if you have questions, or want to chat (contact information listed above).

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NAR to Appeal Burnett Verdict

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After an 11-day trial in the case of Burnett v. NAR et al, the eight-person jury in a Kansas City, Mo., federal courtroom, came back Tuesday and found NAR and other corporate defendants liable in the case.

This matter is not close to being final. NAR will appeal the liability finding, standing by the fact that its rules serve the best interests of consumers, support market-driven pricing and advance business competition.

“We remain optimistic we will ultimately prevail. In the interim, we will ask the court to reduce the damages awarded by the jury,” said NAR President Tracy Kasper.

In court, NAR presented evidence that consumers are better off and business competition is able to thrive because of NAR rules and how well local MLS broker marketplaces function. In fact, the NAR cooperative compensation rule for local MLS broker marketplaces ensures efficient, transparent and equitable marketplaces where sellers can sell their home for more and have their home seen by more buyers while buyers have more choices of homes and can afford representation. NAR also presented that REALTORS® are everyday working Americans who are experts at helping consumers navigate the complexities of home purchases and advocates for fair housing and wealth building for all.

NAR was formed 100 years ago because there was a need for a higher level of ethical practice. We should all be proud that REALTORS® continue to serve in that role. I know our mission to advocate for homeownership and always put our client interests first is unwavering. The Association recognizes its legal team and outside counsel have worked tirelessly on this case and it will likely be several years before we reach a conclusion.

“I am grateful to our NAR staff and our 1.5 million members who work to serve their clients every day. We have an important shared purpose for consumers, and we could not achieve that without all that each of us do,” added Kasper.

Below are some key questions people may have that you can share. We will continue to keep you informed of any notable litigation milestones, and in the meantime, I encourage you to continue to refer to the Competition.Realtor website, which provides a comprehensive overview of and many resources for how REALTORS® and local MLS broker marketplaces benefit consumers. The need for each of us and every member to continue to express our value every day in as many ways as we can remains an imperative.

BURNETT QUESTIONS ANSWERED

In the case of Burnett v. NAR et al, on Tuesday, Oct. 31, the jury found NAR and the co-defendants liable. The plaintiffs claimed real estate commission rates are too high, buyer brokers are being paid too much and that NAR rules and corporate defendants’ practices lead to set pricing.

The reality is that NAR rules prioritize consumers, support market-driven pricing and promote business competition. We stand by the fact that NAR’s guidance for local MLS broker marketplaces ensures consumers get comprehensive, equitable, transparent and reliable home information and that brokerages of any size, service or pricing model get a fair shot at competing.

Following are answers to questions you might have.

1. What are next steps legally and the timing? This matter is not close to being final as we will appeal the jury’s verdict, and we remain confident we will ultimately prevail. In the interim, we will ask the court to reduce the damages awarded by the jury. Due to the nature of appeals, this case likely will not be concluded for several years.

2. What will be the basis for NAR’s appeal? We can’t speak to the specifics of that until we file our appeal, but we can say that we have a very strong legal basis for appeal.

3. Is there anything REALTORS®, brokers, state/local associations or MLSs need to do differently because of this verdict? Not because of this verdict. But NAR has emphasized for many years two important things. One is the use of buyer representation agreements, which maximize transparency by putting all agreements in writing to ensure clarity and understanding, as all members are obligated to do pursuant to the NAR Code of Ethics. These agreements formalize the professional working relationship with clients and detail what services consumers are entitled to and what the buyer agent expects from their client in return. Second, it’s also an imperative for members to continue to express that commissions are negotiable and set between brokers and their clients; explain how local MLS broker marketplaces promote equity, transparency and market-driven pricing for consumers; and persistently communicate the incredible value agents who are REALTORS® provide.

4. What does the future of buyer representation look like as a result of the verdict? This verdict does not require a change in our rules, but if class action attorneys had it their way, buyer representation would be very much at risk because many first-time home buyers, among others, couldn’t afford to pay for representation out of pocket. It’s important that members take every opportunity to express how they are experts who guide consumers through the financial, legal and community complexities of buying or selling a home.

5. Does NAR have the funds to pay the proposed damages or post a bond to file an appeal? NAR is going to appeal and has the funds to post bond, which allows us to proceed with our appeals and defer potential payment of damages. While appeals will take years, and we are confident we will ultimately prevail, we also are financially prepared for any final judgment.

6. How does this verdict affect other ongoing litigation, including the other seller lawsuit? It doesn’t. Cases are tried separately, and we remain confident we will ultimately prevail because we have a strong case we’ll present on appeal and because our rules are pro-consumer and pro-business competitive.

7. Is there any scenario where NAR would consider settling? NAR always has been open to a resolution that maintains a way for buyers and sellers to continue to benefit from the cooperation of real estate professionals and eliminates our members’ risk of liability for the claims alleged. That being said, we remain confident we will prevail on our appeal.

8. Would NAR ever consider changing the cooperative compensation rule? This rule always has been in place to protect and serve the best interests of consumers, support market-driven pricing and advance business competition. NAR consistently reviews and considers evolving its rules in a way that responds to changes in the industry and what best serves consumers.

9. Do you expect the plaintiffs to seek an injunction that would require NAR to stop making the rule mandatory or eliminate the rule altogether? We cannot predict what plaintiffs will do. We would contest any such effort because this rule always has been in place to protect and serve the best interests of consumers, support market-driven pricing and advance business competition.

10. What’s the status with the Department of Justice and has anything changed with this verdict? We reached an agreement with the DOJ nearly two years ago. NAR has upheld our end of the agreement, and we expect the DOJ to do the same as affirmed by a federal court’s careful ruling. That is a separate matter from the case of Burnett v. NAR et al.

YPN Lunch & Learn: Navigating the Market Post-NAR Settlement – Oct. 3

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Thu., Oct. 3, 2024  |  Noon - 2:30pm
Lafayette Library: Don Tatzin Community hall
3491 Mt. Diablo Blvd. | $20 Includes Lunch & Parking

 Join YPN for an insightful Lunch & Learn where they’ve assembled a fantastic panel of real estate industry experts to discuss the current changes and challenges in the market post-NAR settlement.

Topics Include:

  • Updates to C.A.R. forms
  • Strategies to educate and engage your clients
  • Navigating today’s evolving real estate landscape

This is a great opportunity to network, pick up valuable tips, and enjoy a delicious lunch! Be sure to bring your appetite—and your questions!

Register Here
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ANSI Square Footage Standards: What Agents and Appraisers Should Know

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         KEY TAKEAWAYS:

  • As of April 1, Fannie Mae began requiring the ANSI home measurement standard for appraisals of single-family homes.

  • Since the standard is not used universally, you may see discrepancies between the living space reported by the appraiser and the living space showing in public records data.

  • Fannie Mae has issued frequently asked questions to answer questions about the standardized property measuring guidelines.

By: Craig Morley, REALTOR® Magazine

Fannie Mae’s adoption of the ANSI standard for measuring the area of a home is creating questions and inconsistencies.

Let’s say you take a listing on a nice little Cape Cod–style home that has 1,000 square feet on the main floor. The second floor, with two bedrooms and a bathroom, measures 500 square feet. You sell the property and, when the appraisal comes back, it shows only 1,000 square feet of above-grade space. What’s going on? Has the appraiser made a mistake?

The answer is no, and here’s why.

As of April 1, Fannie Mae requires the ANSI home measurement standard for appraisals; that standard has guidance on what constitutes living space that may differ from your understanding. It’s the only one of the secondary financial agencies—so far—that has officially adopted this standard. Other government lending institutions (Freddie Mac, FHA, VA, and Rural Housing) indicate that they’ll accept the ANSI standard, but it’s unclear if they’ll accept Fannie Mae’s protocol when there are portions of the property that are used as living space but aren’t classified as living space under ANSI.

Key Elements of the Standard
ANSI stands for the American National Standards Institute. It’s a private nonprofit organization founded in 1918 that administers and coordinates the U.S. voluntary standard and conformity assessment system. ANSI doesn’t develop standards itself but provides a framework for setting them in a wide range of disciplines. The ANSI home measurement standard is one of several; another commonly used standard is the American Measurement Standard.

The ANSI home measurement standard has a few key elements that you should be aware of:

  1. It applies only to single-family housing. It doesn’t apply to apartments, condos, or commercial property.
  2. The measurement standard is from the exterior walls and includes the area on each floor above grade based on exterior measurements including stairwells but excluding open areas.
  3. The standard requires a minimum ceiling height of seven feet. In second-story areas with sloped roofs living area starts at 5 feet on the slope, and 50% or more of the ceiling has to be 7 feet or above.
  4. Living space that is below grade, even if it’s only a foot or two, is to be considered basement space.
  5. The standard requires that the property to be measured to the nearest inch or one-tenth of a foot.

In the case of our Cape Cod home, its second floor has a ceiling height of 6 feet 9 inches. Under the ANSI standard, none of that space is considered living space. Fannie Mae guidance indicates that the space should be included and valued appropriately but is not to be reported as above-grade living space; rather; it must be reported on the lower section of the adjustment grid as another item. However, bedrooms and baths found in this space are to be reported as above-grade bedrooms and bathrooms.

If you are confused, you are not alone.

A host of potential questions and problems accompanies the adoption of this standard, including how to treat functional space that’s not defined as living space by ANSI. Fannie Mae has issued an FAQ that should answer many agent questions and provide guidance to appraisers on how to deal with individual situations. In addition, Fannie Mae’s Selling Guide includes a section on how gross living area is measured and calculated.

The Quandary: Conflicting Data
Why did Fannie Mae adopt the ANSI standard? Millions of appraisals are submitted to Fannie Mae every year, and the agency determined that a national standard was needed to improve the consistency and reliability of appraisal reports when it comes to living area determinations.

Getting to that national standard is easier said than done.

Much of the information about property physical characteristics is obtained from public record sources that are usually developed by the county assessor. Some counties have adopted the ANSI rule and some have adopted the AMS. Others follow local tradition and practice. There are some differences in the two most common home measurement standards. For example, in addition to the issue of ceiling height, the AMS doesn’t include stairwells in the living area, whereas ANSI does; that leads to discrepancies between appraisals and public records.

It is in our interest, as competent real estate professionals, to be aware of the ever-changing valuation landscape so that we can help our clients better understand the appraisal and financing process. In most areas, there are likely to be only minimal discrepancies between public records and the appraisal. But when those discrepancies are significant, it’s important to understand why they exist and to be sure the space is being valued properly. Broad adoption of the ANSI standard by the secondary mortgage market would reduce confusion.

DEI… Next Level: Diversity, Equity, and Inclusion Panel – Oct. 26

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Thursday, October 26, 2023  |  11:30am - 2:00pm
Hilton Concord | 1970 Diamond Blvd. | $25 Includes Lunch

Join CCAR YPN and LGR on Oct. 26 from 11:30am – 2pm at the Concord Hilton for a thought-provoking and insightful panel discussion and lunch on Diversity, Equity, and Inclusion (DEI).

Our panelists, comprised of industry leaders and DEI advocates, will share their experiences, insights, and strategies for creating inclusive environments in both professional and community settings. The conversation will delve into the importance of embracing diversity, promoting equity, and cultivating an inclusive culture that benefits everyone.

This event is an excellent opportunity to expand your knowledge, engage in meaningful discussions, and connect with like-minded individuals who are passionate about driving positive change.
Register Here
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