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Bay State REALTOR® January-February 2009
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| President's Message: A Defining Moment for the Association |
By Gary Rogers
Tradition: the handing down of beliefs, customs, information from generation to generation, esp. by word of mouth or by practice; a long-established or inherited way of thinking or acting.
I value tradition. I believe it helps shape us and guide us in all that we do. I’m from a family with a long history of serving in the military, and I was proud to follow that tradition. I was also proud to join the Realtor® Association and become part of a tradition that has lasted over 100 years.
As an organization, we have a long tradition of responding to all sorts of changes in the real estate market, triggered by all sorts of causes. Many of these times were defining moments for Realtors® as a group. In fact, the very start of our organization was caused by a group of men who were tired of the, then, unprofessional world of real estate. Right then and there they began an association and its code of ethics, defining who they were both as individuals, and as a group dedicated to being professional.In my mind, the current times are a defining moment for us as an Association and as Realtors®. As Realtors®, we have the chance to show our worth to the consumer as the trusted and knowledgeable source of all of the information necessary to make sound decisions about buying and selling what is typically a person’s biggest investment. As an Association it is our responsibility and mission to nurture market confidence and provide members and consumers with the resources that will result in the market shift for which we are all looking.
We confirm the strength and ability to effect change with our government affairs work, through activism, lobbying, and our grassroots efforts. Our ability to provide factual and logical information to the consumer gives them the confidence to buy or sell their homes, a decision that should be based on facts, not media hype. As an Association, we will continue to provide resources, such as MAHomeFacts.com, an MAR website for consumers to get market information and tools to help them understand the benefits of homeownership.
It’s clear that we will continue to have challenges in 2009. But we will continue to provide the tools and services for our members to remain competitive and productive. Leadership has been forward thinking by creating and providing such relevant programs as the Loss Mitigation Certification course, as a way for our members to hone their skills to stay in line with what the market is demanding from us. The new Green Designation is another.
Fate has a funny way of putting the right people in the right place at the right time. I believe that this year’s Board of Directors, including the Regional VPs, Focus Area VPs, and Leadership Team of Secretary-Treasurer Trisha McCarthy, President-Elect Kevin Sears, Past President Susan Renfrew, and of course our dedicated staff, ARE the right people in the right place at the right time. |
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Safeguarding Yourself and Your Business |
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By Michele Lerner
Keeping your business on track in tough times requires taking a closer look at the practices you have in place and effectively streamlining your expenses and instituting cost-saving measures to safeguard yourself and your business. Office expenses can place a heavy burden on brokers, and for both brokers and agents, marketing plans and personal financial strategies can be implemented to help you stay successful.
Strategies for Brokers
Brokers are finding several ways to streamline their businesses and tighten their belts while still maintaining effective, productive offices. Avenues to reach this goal include looking at office expenses and marketing expenses. Experts provide ideas in both of these areas.
Office Expenses
Rental properties can include fluctuating payments and often require maintenance fees. Owning office space, if a company can arrange financing, may be a more viable option since the real estate itself becomes a long-term investment. Space should include only what’s necessary to run an effective office. Offering rental space to ancillary businesses such as lawyers and lenders can utilize unused space and produce additional income. Utilities expenses should be controlled frugally by adjusting the thermostat and making sure that lights and computers are turned off at night. Brokers should encourage paperless processes and bundle Internet service and phone lines. Sharing offices may be an option for agents, along with offering agents the opportunity to work virtually away from the office by providing continuous online access
and communication.
Rick Healey, broker/owner of Foster-Healey Real Estate in Fitchburg, Leominster, and Athol, says he uses “zero-based” budgeting.“We have to justify every program that costs money, and there are definitely no more frills,” Healey says. “We ask the fundamental question about what value we get out of each penny we spend, rather than trying an across-the-board percentage cut.”Zero-based budgeting stipulates that every department function is reviewed comprehensively and all expenditures, not just increases, must be approved.
Zero-based budgeting requires that any budget request be justified in complete detail starting from the zero base.
Marketing
Reduce spending on print ads by focusing solely on open-house ads or one institutional ad in a core local publication in order to keep the office name and its agents visible. Cut back on mass mailings and stay in touch with customers through e-mail or phone calls. Some offices, including George Russell Realty in Worcester and Millbury, buy time on a local cable television channel, which provides them with affordable additional visibility for listings.
Experts agree that the best place to spend marketing dollars is online; make sure that each listing receives maximum exposure through multiple websites and photos. Spending additional money for enhanced listings on Realtor.com can be offset by reducing funds used for print ads or mass mailings.
Goal Setting
Not every broker agrees that setting goals as an office works to motivate agents. Russell avoids quotas and instead coaches his agents and encourages them to set personal goals.According to Jeanette Tighe, vice president for New England at Exit Realty, broker-owners are trained in goal-setting classes and then arrange one-on-one goal-setting sessions with each agent for the following year. “The agents are the assets of the corporation so they need to be educated,” says Tighe.
Recruiting Agents
To keep a real estate office growing, brokers rely on recruiting agents. While brokers report that they are recruiting fewer agents than in the past, many are still training people new to the business or bringing back agents who had left the field to pursue other careers but now want to return to real estate.Exit Realty has an unusual recruiting program; it pays agents who bring in new agents a commission based on the sales of each recruit. The program applies to every recruited agent across the U.S. and Canada. The recruiting agent can earn 10 percent of what the new agent makes, up to $10,000 per year, while the recruiting agent works. Reduced commissions are earned by retirees and their beneficiaries.
Cost-Cutting for Agents and Brokers
Both brokers and agents can cut their spending through some simple financial strategies.Instead of meeting for lunch or dinner, agents should consider networking over breakfast, which is considerably less expensive yet accomplishes the same goals. Agents should evaluate the money they spend on publications and memberships in groups such as alumni groups or other associations. Belonging to a group simply to keep your name on a list may not be valuable, but if you frequently attend networking events or receive insurance or other benefits through the group, it may be worth the dues.Monica Dupre, broker-owner of Dupre Realty in Lakeville, says she and her agents stay active with community volunteer work, which is free and raises their visibility to bring in referrals.
Personal Finance Strategies
Brokers and agents need a financial plan to survive the vagaries of the real estate profession. The first steps include making a budget, exercising discipline over spending, and starting an emergency fund. Michael Dooley, a financial planner with MAR Benefit Partner, The Patriot Financial Group, believes that commission-based agents should build an emergency fund with savings equal to nine to 12 months of the average budget from the previous two years. If that seems unattainable to start, try saving three to six months of expenses.Agents and brokers can save money by combining errands to save on gas, packinga lunch instead of eating out, and bringing coffee from home rather than making a daily coffee run. Saving just two dollars per day quickly adds up to $60 per month and $720 per year. Vacations and dinners out should also be curtailed or eliminated.“Paying off debt and maintaining a fixed daily and monthly living expense is priority item number one,” says Dooley, who suggests that real estate agents meet with a financial advisor or accountant to review 90 days of expenditures and develop a comprehensive analysis of their finances.
Retirement Savings
Financial planners recommend that everyone continue to contribute to a retirement fund, despite the current volatility of the stock market. Investing while the market is low can result in greater future returns. Jim Littleton, a CPA and financial advisor with The Patriot Financial Group, says, “It can be painful when cash flow is a key issue, but you don’t want a year to go by without putting at least something into retirement.”
Reevaluating Estimated Tax Payments
As independent contractors, real estate agents need to fund their own health insurance and pay estimated taxes. Littleton says that when incomes are rising, estimated tax payments should be based on the prior year’s tax liability, but he suggests an alternative method when incomes are stable or reduced.“Agents should pay 90 percent of their estimated 2008 liability if they are making less than last year,” Littleton says. “But they should be conservative and keep track of their income to avoid a penalty for underestimating the taxes. If you think you’ll owe $5,000 in taxes, it is much better to pay that than to have the government holding onto $10,000 and wait for a refund, especially when cash flow is tight. But it might be wise to add a little cushion and pay $6,000 to be sure you avoid a penalty.”
Staying Motivated
One of the least expensive ways to stay on track in the real estate business is free: having a positive attitude. Staying optimistic with the public and other agents is crucial. No one wants to be affiliated with a pessimist.Brokers can keep their agents motivated by bringing in coaches and trainers who can encourage people to try new techniques with clients. Additionally, many brokers continually educate their agents about the market with information that can, in turn, be shared with clients. “Realistically, someone’s tragedy is someone else’s opportunity,” Healey says. “For instance, if you can help someone avoid foreclosure with a short sale, then you have helped them out of a difficult situation, and you’ve helped someone else find a house they can afford.”
Advantages of Zero-Based Budgeting
Promotes efficient allocation of resources based on needs and benefits.
Drives managers to find cost-effective ways to improve operations.
Detects inflated budgets.
Useful for service departments where output is difficult to identify.
Increases staff motivation by providing greater initiatives and responsibilities in decision-making.
Increases communication and coordination within the organization.
Identifies and eliminates wasteful and obsolete operations.
Identifies opportunities for outsourcing.
Forces cost centers to identify their mission and their relationship to overall goals.
(Wikipedia)
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| Your 2009 President -A Tradition of Change Without a Change in Tradition |
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MAR’s incoming president, Gary Rogers, is a student of history who thrives on traditions—traditions of family, career, and country, all of which have provided him with a depth of knowledge, perseverance, and passion he brings to the Association this year as president. Gary’s respect for history, tradition, and past leaders has guided his appreciation for the richness of the Realtor® organization, and has prepared him to lead through the tides of change, without losing sight of the traditions of success on which the Association prides itself.
Gary lives and works in Waltham, where he’s spent most of his life, met his wife, Cynthia, and started his family. Waltham is a city rich in history and tradition, a landmark in the watch industry, home of the Waltham Watch Company, and home to some notable historical figures.
The Gore Estate (the scene for the cover photograph) was the summer home of Christopher Gore, who is most recognized for his service as a Revolutionary War soldier, the first United States Attorney for Massachusetts, a former Governor, and a U.S. Senator. Gary appreciates the determination and service of Christopher Gore and sees him as a role model.
Tradition of Service
Gary’s father served with the 82nd Airborne at Fort Bragg, North Carolina; his grandfather was also a veteran and he has discovered ancestors who served in the military going back to the Revolutionary War. This tradition of service influenced what Gary credits to be the best decision of his life: becoming an EMT and then a paramedic in the Air Force where he found his love of caring for other people. The advanced training required to become a paramedic was readily attainable through the military, so he enlisted in the Air Force. Here he “found his way” as a military medic, receiving honors and awards from both the military and the American Red Cross for life-saving actions and exemplary duty. He was also appointed to the Honor Guard, which he lists as one of his proudest achievements.
Gary’s father’s service to his country, his work ethic, and his business acumen really set the examples that Gary emulated in the military and beyond. Toward the end of his tenure in the military, Gary’s father introduced him to the DeWolfe team in Framingham, and Gary was convinced that real estate was a good fit—he got his license and started selling real estate in 1987.
As with his previous career choices, Gary gave the job his all. He began serving in the Realtor® Association after a short time in the business, became a member of Council K of the Greater Boston Real Estate Board, and was asked to run for council president. He was elected to that position and never looked back. “The real estate industry became so much bigger than the five square miles where I practiced,” he said “and the more you get involved, the more aware you are of the industry and how your efforts can have such a positive effect on your business and those that you serve.”
Gary believes that the tools the Association provides at all levels help members better serve their customers and clients. The Realtor® organization works to build confidence in the industry and he will look to continue that mission in the coming year. His team will communicate the value of the Association to its members and energize them by providing useful information on housing legislation, market data, member value and benefits, and other important aspects of the
trade that will aid in building
market confidence.
A Tradition of Growth
Gary attributes his confidence and longevity in real estate to the basic training he attained in the service. He explains that basic training helps you learn that you can do more than you ever thought possible and to never give up on yourself, all while teaching you that teamwork is essential
to success.
At DeWolfe he began his career with a good mentor, a seasoned broker who shared with Gary one particularly great philosophy that he values still to this day. “He taught me how to do things differently, explaining that being unique and thinking out of the box is important. And, if I show I care, am prepared and honest with the people I work with, I’ll have success.” That, combined with the advice from his dad and aunt, Realtor® Carol Marchionne, paid off; Gary received 1988 Rookie of the Year.
The formula for success and growth in good times is not hard to figure out, Gary believes. It’s when times are challenging that experience, training, and drive separate the true professionals from those less committed. The Association’s mission is to provide training and education to enhance the commitment and professionalism of its members.
MAR will continue working on an online CE platform and will develop other new programs and grow existing ones such as the Loss Mitigation Certification course (LMC) that helps members adapt to current market demands. Additionally, the Association will remain on the forefront of Smart Growth with its Quality of Life Initiative, a program working cooperatively with other housing agencies and elected officials to promote Smart Growth and affordable housing issues.
Gary states that the Smart Growth message must continue to spread across the state. We are making headway in helping cities and towns understand Smart Growth principles and mixed-use properties are gaining acceptance. In the coming year, energy conservation initiatives also will be an important part of growing local communities. The Association on a national level is already addressing energy principles with the launch of the Green Designation program, designed to show Realtors® how to list and market green properties and implement green practices to meet consumers’ needs. MAR will bring the Green Designation to Massachusetts Realtors® and look for additional ways to educate members on energy issues and how they affect private property.
Tradition of Adaptability
When Gary entered real estate in 1987 it was considered one of the worst markets in recent history; yet, he was able to launch a career and maintain a successful business despite the ups and downs. Gary attributes that endurance to the adaptability, responsibility, and humanity that he, and each and every Realtor®, shares with each other and their customers and clients.
Fast forward to 2009 as Gary takes office in one of the toughest times since 1987, but he wouldn’t have it any other way. His military background, emergency rescue training, and his appreciation for teamwork taught him how to overcome obstacles to succeed. “I believe my background, experience and love of my work can help keep our Association not only on course, but position us for the future,” he states.
The future is based on the Association’s core values of cooperation, respect, and courtesy—the Code of Ethics. But Gary believes our message goes beyond the Code, to truly being the “voice for real estate” on behalf of consumers. “We need to affirm our commitment to the Code of Ethics and lead by example to our members as well as to the consumer. There is no better time to show our character than in today’s climate.”
Gary believes MAR’s Government Affairs commitment is also equally vital. Whether the issue is transfer taxes, property owner rights, or energy use, we must be ready to take action. “It’s our watch, our responsibility, and we’ll continue to be vigilant in the coming year, fortunate to have many in leadership with the experience and passion in the area of Government Affairs to get the job done.”
Embracing tradition means understanding where you come from and bringing the best of yourself to the table. As an honor guard, Gary learned one of life’s biggest lessons while paying tribute to veterans at funerals. “When the eulogies are read during the services, anyone with a sense of tradition feels something as I did; you hear stories of how they fought for their country and you get a sense of the sacrifice, honor, and service that so many took as their responsibility.”
That sense of honor and tradition lives in the Association, an organization which has existed for over 100 years and which has been part of our nation’s successes and challenges. Gary is proud to be part of such tradition and hopes to build on the many successes of the past and bring energy and fortitude to the future. |
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| Technology Update: Personalize Your E-Mail and Domain Addresses |
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In this column you’ll find tips and tricks for using today’s technology to increase your productivity and enhance your professional image.
One of the easiest ways to appear more professional to clients is to have your own custom e-mail address. Just think about it: the average person may, in fact, feel uneasy about negotiating the largest purchase of their life with someone whose e-mail address is “funjoe11@aol.com.”
A fast and simple way to set up a personalized domain for e-mail is to use Google Apps for Business, a complimentary service. Google Apps includes e-mail, calendar and Google Docs for word processing, spreadsheets, and slideshow creation. These tools compete head-to-head with the most commonly-used features of Microsoft’s Office suite. The spin is that Google offers all of these services online, all the time, with the ability to share and collaborate on documents with clients and
co-workers in real time.
The E-mail Setup
Whether or not you own your own domain, you start at the same place: www.google.com/a. Click on the “Compare to Standard Edition” link. This will show you a side-by-side feature comparison of the Premium Edition and the Standard Edition of Google Apps.
Make your choice based on your needs, but keep in mind that you can always start with the free Standard Edition and upgrade to the paid version down the road. However, note that if you don’t already own a domain, you must begin with the Standard Edition to register a new domain name for customized e-mail, and then you can upgrade if you wish.
Choose Your Domain Name Carefully
If you don’t yet own your own domain name, you should choose the option “I want to buy a domain name” to get started. Enter whatever domain name you wish to have, keeping in mind that the name you choose can serve as your website name, e-mail address, and more. Be careful what name you select, and keep in mind that you may not get your first, second, or even tenth choice if it’s already taken.
Once you choose an available domain, you’ll be prompted to go through the registration process, which is just like any other standard online purchase. Once that’s completed, you’ll be prompted to set up your account e-mail addresses. The beauty of this process is that Google does all of the e-mail configuration for you, but you still have complete control over your domain name should you decide, down the road, that you no longer want or need Google’s services.
After registration, you’re practically finished. You can log in to your Google e-mail (Gmail) account and configure more personal settings there: signature, folders, contacts, and more.
Already Have Your Own Domain Name?
If you already have a domain name, you can easily use Gmail with your URL. Just sign up for Gmail’s normal free service and go to the “Settings” section, then choose “Accounts.” You’ll see a link to “Add another e-mail address.” Follow the simple instructions to send a confirmation e-mail to any other addresses you have. Once confirmed, you’ll be able to send e-mail from other addresses using Gmail.
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| Legal Hotline: EPA Audits, Landlors Issues and Compensation |
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By Stephen J. Ryan, Esq.
MAR General Counsel
Here are a few recent questions posed on the MAR Legal Hotline, which should provide some direction on how to deal with complex real estate issues.
Surprise Visit by the EPA?
Q. Is it true that agents of the federal government have appeared recently at real estate offices in Massachusetts and asked to review closed transaction files to check for compliance with lead paint disclosure laws?
A. Yes. The Environmental Protection Agency (EPA) and the U.S. Department of Housing and Urban Development periodically conduct audits of real estate offices to ensure agents are using lead-based paint disclosure forms. If an audit is performed, files must contain evidence that the proper disclosure forms were signed. You can obtain a free copy of the disclosure form, Property Transfer Lead Paint Notification, which also contains a series of questions and answers, at http://www.mass.gov/dph/clppp/ptnnew.pdf.
Brokers specifically need to be certain that all their records are in order for residential sales transactions involving properties built before 1978, the year lead paint was taken off the market. Brokers should also examine their office policies to ensure that the requirements are spelled out and being followed by all associates, since they can be held liable for their actions. Brokers and property managers should also consider conducting an internal audit to be sure their policies are being followed. Penalties for violations of the law can range from a notice of offense to fines of as much as $10,000 for egregious offenses.
When the Snow Has to Go
Q. My client owns a multifamily and insists that he has no responsibility for removal of snow except for clearing the sidewalks as required by municipal ordinance. Is he right?
A. No. A common question from landlords this time of year is who is responsible to remove the snow and ice from my rental property? The short answer is the landlord is responsible. Many landlords attempt to pass this responsibility onto their tenants by writing a provision into their leases. This practice, however, may not protect the landlord from liability.
The Massachusetts sanitary code provides that the “owner shall maintain all means of egress in a safe, operable condition” and that all “exterior stairways, fire escapes, and egress balcony, shall be kept free of snow and ice.” Massachusetts law also provides that any provision in a rental agreement which waives the protections given by the sanitary code is void as against public policy. Taken together, it would appear that the landlord cannot assign this responsibility in a lease, however, the law is unclear on the matter.
The sanitary code does not cover driveways or sidewalks; therefore, logic would suggest these could be assigned into a lease. If a landlord decides to form a side agreement with a tenant to compensate them for snow and ice removal they should carry workers’ compensation insurance as these tenants are now employees of the landlord.
Request for Compensation in an Offer
Q. I am a listing broker and I have received a written offer from a buyer agent in which the buyer is asking the seller to pay the buyer broker a commission based upon a percentage of the sale price of the home. The requested amount to be paid to the buyer agent is higher than the amount of compensation I offered on the MLS. I think I offer a very fair percentage to cooperating brokers on the MLS and I don’t understand why my seller has to accept these terms. Am I required to present this offer?
A. Yes. Under both state regulation and the Realtor® Code of Ethics you are obligated to present the offer to your client. It is important to remember, however, that your client is not required to accept any term in an offer that they find to be unacceptable. Whether it be a request to pay for another broker’s services to a buyer, pay to fix a furnace, give a credit for closing costs, or any other thing of value that the buyer may incorporate into their offer; the seller has the right to accept the offer as written, reject the offer, or strike the objectionable provisions and thereby make a counteroffer to the buyer.
In short, it is not a violation of the Realtor® Code of Ethics for a buyer to incorporate a request that the seller compensate their buyer agent into their offer. It is also not a violation of the Code for your seller to reject that term.
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| Legal Realtor®: FDIC-Insured Escrow and Operating Accounts |
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By Robert S. Kutner, Esq.
Given the recent upheaval in the financial markets, Realtors® have grown concerned about whether or not funds deposited in their escrow and operating accounts are protected in the event of bank failure. Protection for most, but not all, accounts is provided through the Federal Deposit Insurance Corporation (FDIC). The FDIC is an independent agency of the United States government that protects against the loss of insured deposits. If an institution is listed as having FDIC insurance, there is no need for a depositor to apply. Coverage is automatic. To verify that a particular bank or savings association is insured by the FDIC, search for the bank on the FDIC website, www.fdic.gov, or call 1-877-ASK-FDIC.
Coverage Limits
Historically, the FDIC limit has been $100,000 per interest-bearing account, depending on the category of the account and the number of owners. That limit has been increased temporarily to $250,000, but it will expire on December 31, 2009, unless Congress enacts new legislation. The $250,000 limit applies to all accounts in a single financial institution, including all branches and subsidiary institutions. In determining whether the limit has been reached, all balances for a person in an account category are combined. It is possible to have more than $250,000 in a single institution and still be fully covered, provided that the accounts are in different ownership categories, such as single accounts, joint accounts, IRAs, trust accounts (per beneficiary), and corporation or partnership accounts.
On October 14, 2008, the FDIC announced that all non-interest-bearing transaction deposit accounts at FDIC-insured institutions, including all personal and business checking deposit accounts that do not earn interest, are fully insured for the entire amount in the deposit account, pursuant to the FDIC’s Temporary Liquidity Guarantee Program. This unlimited insurance coverage is temporary and will remain in effect for participating institutions until December 31, 2009.
For joint accounts holding deposits of two or more individuals, the dollar coverage is per person, provided that the following conditions are met. First, all joint owners must be individuals, not corporations or artificial entities. Second, each co-owner must have an equal right to withdraw funds. Third, each co-owner must sign the deposit signature card. An example illustrates how the limit applies. Suppose that a husband and wife have $50,000 in a joint checking account, $150,000 in a joint savings account, and $450,000 in a joint CD, all with the same bank. Their total amount in the joint account category is $650,000, or $325,000 per person. They are FDIC-insured up to $250,000 each, leaving $75,000 each uninsured.
When a business is operated as a sole proprietorship, the FDIC does not distinguish between business accounts opened in the person’s name and non-business personal accounts. The insurance limit for every account held by that individual combined is $250,000. On the other hand, if a business account is for a corporation or partnership, the coverage limit is $250,000 for that entity. Because this is a different ownership category, the corporation/partnership limit is separate from the limit for accounts held in the name of the individual. Corporations cannot increase their coverage limit at a single bank by opening one account under the name of the corporation alone and a second account jointly with another corporation.
Escrow Accounts
An escrow account is a type of “fiduciary” account that is protected by FDIC insurance. A fiduciary account contains funds deposited by the escrow agent (fiduciary) on behalf of one or more principals (clients). If the account has been properly established, the FDIC’s $250,000 insurance limit will apply separately for each principal whose funds have been deposited. Funds deposited for that person in the escrow account are added to all individual accounts of that person at the particular financial institution to determine if the FDIC coverage limit has been reached. Escrow account fund totals are not combined with amounts in accounts of the broker, since the escrowed funds belong to the principals, not to the broker.
According to the FDIC, to set up a fiduciary or escrow account properly, the fiduciary nature of the account must be stated in the account title. And the identity and interest of each principal whose funds the fiduciary is holding must be ascertainable either from the deposit records of the bank or from records maintained in the regular course of business by the escrow agent or by some other person who has agreed to maintain those funds on behalf of the escrow agent. These requirements are similar to those mandated by Massachusetts license laws for proper handling of escrowed funds. The name on the account must clearly indicate that it is an escrow account so that funds in the account are beyond the reach of creditors of the escrow agent.
Avoiding Potential Problems
To avoid potential problems, particularly in cases where deposits exceeding $250,000 are held for a particular transaction, check with the bank to determine if it provides supplemental insurance for the full amount of the deposit. Alternatively, escrow accounts may be established at two or more banks with no more than $250,000 deposited in a single institution. When larger amounts are held in escrow, it may also be advisable to inform clients of the name of the institution, so that they can determine whether or not the total amount of all their accounts at that institution, including funds held in escrow, exceeds $250,000.
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License Law: Escrow and License Renewal Timeframes |
By Joseph Autilio
Executive Director, Board of Registration
Below the Massachusetts Board of Registration of Real Estate Brokers and Salesperson answers a query by an agent in the field regarding real estate licensing laws on brokerage in Massachusetts
Returning the Escrow Deposit
Q. How long do I have to return an escrow deposit?
A. The relevant Board regulation provides that escrow funds must be immediately returned upon either the consummation or the termination of the sales transaction. This question typically arises in situations where the transaction falls apart. The regulation requires immediate return of the escrow funds. The Board understands that circumstances may prevent immediate return, and, in such circumstances, there would be no violation of the regulatory provision, but in the absence of such circumstances, the escrow funds must be returned immediately.
The Board regulations extend only to the practice of real estate agents and not to the contractual agreements made between the buyer and the seller. It is very common for the purchase and sale agreements between the buyer and the seller to contain deposit dispute clauses instructing the broker to continue holding escrow funds until he or she receives mutually agreeable instructions concerning distribution. In these situations, the broker is bound by such clauses, and the regulatory requirement would not apply.
Absent agreements between the buyer and the seller or exigent circumstances, the Board’s escrow regulation applies, and brokers must make a good faith determination of the rightful party to return escrow funds and then do so immediately.
Broker License Renewal
Q. Are there situations in which my corporate broker’s license is no longer in force?
A. Yes, when you fail to renew your license on time, or if it has been suspended or revoked. The Board also licenses brokers’ corporations and partnerships, as well as limited liability companies (LLC) and limited liability partnerships. In the case of corporations and partnerships, one of the officers of the corporation or one of the partners in a partnership must be individually licensed as a broker in the Commonwealth. In the case of LLCs, one of the members of the LLC must be individually licensed as a broker. If that broker, known as the broker of record, allows his or her license to expire, or if it is suspended or revoked, then the corporation or partnership license is no longer in force, unless, of course, a new broker of record is brought into the corporation or partnership.
Another situation in which a business entity’s broker’s license will no longer be in force is if the business entity is dissolved, either voluntarily or involuntarily. Keep in mind that business entities have to file annual reports with the Massachusetts Secretary of State and may have to pay minimum taxes, even if no income was received by the business entity. Failure to file or pay these taxes constitutes grounds for involuntary dissolution, and if the entity has been dissolved by the Secretary of State, the license issued by the Board is no longer in effect.
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