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Table of Contents Where is Utah’s Hot Housing Market Headed? p. 20

Features 10 Does New Apartment Construction Negatively Impact Single-family Home Values? Dejan Eskic

20 Where is Utah’s Hot Housing Market Headed?

Dejan Eskic 24 RPAC Golf Tournament 26 Mitigating the Risk of Liability Richard Westlund

Columns 7 Why a Real Estate Association is Essential

Matt Ulrich – President’s Message

Departments 8 Happenings 8 In the News 28 Housing Watch

On the Cover: Cover: nd700 ©/ Adobe Stock Photo left: ink drop©/ Adobe Stock

This Magazine is Self-Supporting Salt Lake Realtor® Magazine is self-supporting. The advertisers in this magazine pay for all production and distribution costs. Help support this magazine by advertising. For advertising rates, please contact Mills Publishing at 801.467.9419. The paper used in Salt Lake Realtor® Magazine comes from trees in managed timberlands. These trees are planted and grown specifically to make paper and do not come from parks or wilderness areas. In addition, a portion of this magazine is printed from recycled paper.

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Salt Lake Board: (801) 542-8840 e-mail: dave@saltlakeboard.com Web Site: www.slrealtors.com The Salt Lake Board of REALTORS® is pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the nation. We encourage and support the affirmative advertising and marketing program in which there are no barriers to obtaining housing because of race, color, religion, sex, handicap, familial status, or national origin. The Salt Lake REALTOR® is the monthly magazine of the Salt Lake Board of REALTORS®. Opinions expressed by writers and persons quoted in articles are their own and do not necessarily reflect positions of the Salt Lake Board of REALTORS®. Permission will be granted in most cases, upon written request, to reprint or reproduce articles and photographs in this issue, provided proper credit is given to The Salt Lake REALTOR®, as well as to any writers and photographers whose names appear with the articles and photographs. While unsolicited original manuscripts and photographs related to the real estate profession are welcome, no payment is made for their use in the publication.

Why a Real Estate Association is Essential Imagine life without a real estate association. Now picture the consequences of having no association as a global pandemic takes hold. Fortunately, when Covid-19 struck, Utah’s real estate associations acted. Through local and state lobbying efforts, real estate in Utah was designated as an essential service. This meant Realtors® could continue to show and sell homes. “Without the Realtors® Political Action Committee (RPAC), real estate could have been shut down in Utah,” said Marcus Jessop, Salt Lake Board of Realtors®’ government affairs director. “In New York City, sales activity plummeted nearly 30 percent in 2020 when the city banned showings. In Salt Lake County, safety precautions were implemented, and showings continued. Home sales hit a record.” Some members have questioned the need for an association. With no association, last year could have been dire. Real estate showings would likely have been limited or prohibited. Instead of record sales, 2020 would have felt more like the Great Recession. The cost of membership in the Salt Lake Board of Realtors®, Utah Association of Realtors®, and National Association of Realtors® is minimal, less than $100 a month. Roughly 55 percent of that amount is retained at the local level and pays for the Supra Keybox lease agreement. One-fourth of membership dues are sent to the state association and provide homeownership campaigns, a legal hotline, and forms and contracts. The remaining amount is used on a national level where national lobbying efforts help protect the real estate profession and private property ownership. In addition, the Salt Lake Board of Realtors® offers housing and market statistics, mediation and arbitration services, free live CE education courses, marketing campaigns that promote the value of hiring a Realtor®, and regular events that feature national economists and speakers. Unlike many small business startups, annual membership for Realtors® is a bargain. What other small business opportunities offer so many resources for less than $100 a month? U.S. small business owners spend an average of $40,000 in their first full year of business, according to a January survey of entrepreneurs and small business owners by Shopify.com. Thankfully, the costs of being a Realtor® are much less than most small business owners. And the returns on investment can be substantial. Our real estate association is dedicated to your success!

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Views and opinions expressed in the editorial and advertising content of the The Salt Lake REALTOR® are not necessarily endorsed by the Salt Lake Board of REALTORS®. However, advertisers do make publication of this magazine possible, so consideration of products and services listed is greatly appreciated.

OFFICIAL PUBLICATION OF THE SALT LAKE BOARD OF REALTORS ® REALTOR® is a registered mark which identifies a professional in real estate who subscribes to a strict Code of Ethics as a member of the NATIONAL ASSOCIATION OF REALTORS®. October 2005

June 2021 | Salt Lake Realtor ® | 7

Happenings

In the News Zombie Foreclosures Rise ATTOM Data Solutions released its second-quarter 2021 Vacant Property and Zombie Foreclosure Report showing that 1.4 million (1,409,457) residential properties in the United States are vacant this quarter, representing 1.4 percent of all homes. The report revealed that 223,671 properties were in the process of foreclosure in the second quarter of this year, up 27.5 percent from the first quarter of 2021 but still down 13.3 percent from the second quarter of 2020. The number of pre-foreclosure homes or Zombie homes sitting empty (8,078 in the second quarter of 2021) was up both quarterly, by 21 percent, and annually, by 5.6 percent.

New Housing Construction is Booming in Utah Housing activity is on the rise in Utah. Nearly 8,300 residential permits were issued across the state in the first quarter, 13 percent more than the 7,300 permits issued in the first quarter of 2020. More than half (57 percent) of permits issued were for single-family homes. Multifamily units made up 42 percent of the total. Less than 1 percent of permits were for cabins and mobile homes. Total construction value of permits issued in the first three months of 2021 was $3.4 billion, up 35 percent from $2.5 billion a year earlier.

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Utah is No. 1 in Percent Change in Growth Utah was the fastest-growing state in the nation from 2010 to 2020, according to the U.S. Census Bureau. Nearly 508,000 people were added to Utah’s population over the past decade, pushing the population to 3.3 million, an 18.4 percent growth rate. Idaho, Texas, North Dakota, and Nevada rounded out the top five fastestgrowing states. The resident population of the United States on April 1, 2020 was 331,449,281, an increase of 22,703,743 or 7.4 percent from 308,745,538 in 2010. The most populous state was California (39,538,223); the least populous was Wyoming (576,851). The state that gained the most numerically since the 2010 Census was Texas (up 3,999,944 to 29,145,505).

8 | Salt Lake Realtor ® | June 2021

The portion of pre-foreclosure properties that have been abandoned into zombie status dropped slightly, from 3.8 percent in the first quarter of 2021 to 3.6 percent in the second quarter of 2021. Among the nation’s total stock of 99 million residential properties, the portion represented by zombie properties remains miniscule, but has grown slightly in the second quarter of 2021. One of every 12,256 homes in the second quarter sit empty in the foreclosure process, up from one in 14,825 in the first quarter of 2021 and up from one in 12,967 in the second quarter of last year. The count of zombie foreclosures has risen this quarter despite an ongoing federally-imposed moratorium on foreclosures aimed at helping homeowners get through economic troubles stemming from the worldwide Coronavirus pandemic. Affecting about 70 percent of home loans in the United States, the moratorium bars lenders from pursuing delinquent homeowners who have government-backed mortgages. It has been in place since last March and is currently in effect until the end of June. Some private lenders also have voluntarily offered mortgage extensions.

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Does New Apartment Construction Negatively Impact Single-family Home Values? Measuring the median value of homes from the year the apartment was built to 2019 shows that homes located within one-half mile of an apartment experienced a 10.0% average annual increase, while the value of those farther away increased by 8.6%. By Dejan Eskic Senior Research Fellow, Kem C. Gardner Policy Institute Over the last decade, Utah has led the nation in the rate of population growth, resulting in a record demand for housing. While the housing oversupply of the 2000s was absorbed as the economy recovered from the recession in the early 2010s, supply in the new decade has struggled to keep up, leading to a housing shortage of 53,000 units in 2020. According to the National Association of Realtors®, the year-over median sales price of a home in the Salt Lake metropolitan area increased by 12.3% in the first quarter of 2020. The Salt Lake metropolitan area ranked 16th of 182 metropolitan areas surveyed

10 | Salt Lake Realtor ® | June 2021

for a year over price increase. Housing price increases were lower in 90% of the metropolitan areas surveyed.1 Additionally, land improvement costs, such as excavation and utility work, increased by approximately 40% between 2007 and 2017, and building costs grew 23% in the same period.2 Land prices have also soared with a limited supply across the Wasatch Front. The Wasatch Mountains to the east and the Oquirrh Mountains to the west limit the availability of developable land in Salt Lake County. The combination of soaring demand and supply

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Figure 1: Areas of Analysis and Location of Apartments by Number of Units, 2010-2018

Source: Salt Lake County Assessor, Kem C. Gardner Policy Institute

shortages continues to push the market to provide a more affordable housing product. This is typically done through density because the price of land is distributed across more units. Over the last decade, the market has shifted to denser development, with nearly 48% of all units being built as something other than single-family. As denser projects continue to appear on city council agendas, opposition to them has grown, manifested in a rising Nimby (not in my back yard) sentiment.3 Amongst the grievances aired by those opposing denser development is an expected negative impact on property values. The question, “Does new apartment construction negatively impact single-family home values?” is challenging to answer because the housing market, over the last decade, has experienced historic price accelerations—it is rare to find a home whose value has decreased. Rather, this study attempts to quantify how new apartment construction has impacted single-family home price acceleration. This study found apartments built between 2010 and 2018 have not reduced single-family home values. Compared by distance, single-family

12 | Salt Lake Realtor ® | June 2021

homes located within one-half mile of a newly constructed apartment building experienced higher overall price appreciation than those homes farther away. Measuring the median value of homes from the year the apartment was built to 2019 shows that homes located within onehalf mile of an apartment experienced a 10.0% average annual increase, while the value of those farther away increased by 8.6%. This implies an additional 1.4 percentage points in annual price appreciation for homes closer to new apartment buildings (see Table 1). Similar results are seen in most of the county, with the likely driver being that new apartment construction brings new demand and new dollars to a community and redevelops an older piece of property, thus bringing more vibrancy and “buzz” to the area.4

Literature Review The academic literature leans towards showing multifamily, denser development having either no impact or a positive impact on single-family residential values. A study in King County, Washington, shows an increase in single-family home values for those located near denser development. The study also showed an increase

in access to other land uses and parks, adding additional benefits.5

communities as they provide more housing and amenity choices.9

A study completed by the National Association of Homebuilders found that between 1997 and 1999, single-family values increased 2.9% for those homes within 300 feet of an apartment building, compared with an increase of 2.7% for those that weren’t located next to an apartment.6 Based on data from 1970 to 2000, a study published in 2003 by Harvard’s Joint Center for Housing Studies concluded that apartments posed no threat to surrounding single-family house values.7

An additional benefit is a decrease in traffic, not an increase as often thought. A study by the National Personal Transportation Survey found that doubling density decreases vehicle miles traveled by 38% since denser households typically own fewer vehicles.10

A study from researchers at Virginia Tech University concluded that apartments with attractive design and landscaping increased the overall value of nearby detached housing, citing three possible reasons.8 These include, first, new construction serves as a potential indicator of positive economic growth; second, new apartments increase the pool of future homebuyers for current homeowners; and third, apartments with mixed-use development often increase the attractiveness of nearby

Methodology & Overview The Salt Lake County Assessor’s market value data is used to measure new apartment construction effects on single-family homes. Two measures are used. First, the average annual rate of value change from the year the apartment was constructed to 2019 is used to measure the overall impact. Second, the year-over percent change of median market value is used to estimate annual fluctuations. Because of data availability, only apartments built between 2010 and 2018 are used to measure these impacts. Single-family homes are divided into two categories, homes that are less than or equal to one-half mile (≤1/2 mi.) from new

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June 2021 | Salt Lake Realtor ® | 13

Table 2: Annual Apartment Units Built by Geographic Area (Excluding greater downtown area) Area

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019*

Salt Lake County

1,008

693

292

647

794

1,250

1,027

1,038

1,005

1,887

Early Suburbs 256 100 40 307 211 210 288 378 293 300 Southeast

0 0 0 288 42 416 181 330 211 239

Southwest

496 315 252 0 258 334 270 330 238 1,048

West

256 278 0 112 283 290 288 0 263 300

*The data to measure impacts of apartments constructed in 2019 was unavailable at the time of this study. Source: Salt Lake County Assessor, Kem C. Gardner Policy Institute

apartment construction, and those that are farther away (+1/2 mi.). Five geographies were covered in this study. Because of a range of development activity and multiple factors not present in the suburban parts of the county, the greater Salt Lake City downtown area is excluded from this study. The five geographies are based on Census tracts and consist of the following cities and townships: • Suburban Salt Lake County: consists of the four geographies mentioned below. • West: includes a part of Salt Lake City, Magna, West Valley City, Kearns, and Taylorsville. • Early Suburbs: includes a part of Salt Lake City, South Salt Lake, Millcreek, Murray, and Holladay. • Southeast: includes part of Midvale, Cottonwood Heights, Sandy, and part of Draper. • Southwest: includes Bluffdale, Harriman, Riverton, South Jordan, West Jordan, and part of Midvale and Draper. Apartment construction boomed in Salt Lake County during the last decade. Between 2010 and 2018, 7,754 units were completed. Another 1,887 units were delivered to the market in 2019 but are not included in this analysis as the data to measure their impacts are not yet available. By 2018, the county’s Southwest area accounted for 32.2% of total apartment units built since 2010, followed by the Early Suburbs area, accounting for 26.9%. The West area held 21.5% of new units built since 2010, and the Southeast area had the lowest share with 17.1% of units. In suburban Salt Lake County, 1,887 new apartment units completed construction and began leasing in 2019, a single-year record surpassing the 1,250 new units constructed in 2015 (see Table 2). In the Early Suburbs area, 2017 was a record year with 378 new units constructed. The Southeast area set its record in 2015, with 416 new units. The Southwest area holds the record for any single year, adding 1,048

14 | Salt Lake Realtor ® | June 2021

new apartment units in 2019. The West area also reached its record in 2019 for single-year construction with the delivery of 300 units. Key physical characteristics distinguish singlefamily units based on their proximity to new apartment construction and impact their value. The size of a home is a major factor driving market value. In suburban Salt Lake County overall, homes located within one-half mile of new apartments are approximately 270 sq. ft., or 11.1%, smaller than those farther away. The size difference is even greater for those homes located in the Early Suburbs area; homes ≤1/2 mile of new apartments are 640 sq. ft., or 26.0%, smaller than those that aren’t. Homes located in the Southeast area are 438 sq. ft. smaller or 15.3%, while those located in the Southwest area are nearly identical, with a size difference of only 88 sq. ft., or 3.0%. The difference in size for homes in the West area is 142 sq. ft., or 7.4%. Home age is another factor influencing value, although remodeling and updates often negate this effect. Homes in suburban Salt Lake County that are located ≤1/2 mile of new apartments are seven years older on average than those located farther away. Homes located ≤1/2 mile in the Early Suburbs area are 14 years older than those that aren’t. Southeast area homes are the same age, while those in the Southwest area that are located ≤1/2 mile of new apartments are four years newer than those located farther. Homes in the West area average 19 years older, the largest age difference between homes that are ≤1/2 mile of new apartments and those that are farther away. Lot size is another key category that influences overall value. In suburban Salt Lake County, lot sizes average 0.02 acre smaller for homes located ≤1/2 mile of new apartments. For homes located in the Early Suburbs area, lots are 0.05 acre smaller for homes ≤1/2 mile from new apartments. Home lots in the Southeast, Southwest, and West areas are 0.02 acre smaller for those located ≤1/2 mile of apartments. (continued on page 18)

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Table 1: Average Annual Change in Median Price, Year of Apartment Built to 2019 Area

+1/2 mi.

≤1/2 mi.

Salt Lake County

8.6%

10.0%

Early Suburbs

7.6%

10.7%

Southeast 7.3% 6.8% Southwest 7.7% 9.7% West

10.5% 13.7%

Note: See Figure 1 for area designations. Source: Salt Lake County Assessor, Kem C. Gardner Policy Institute

Results The median market value of single-family homes is greater for those that are located more than one-half mile away from new apartments. Between 2010 and 2019, those that are farther than one-half mile averaged a 4.7% higher median value. Homes located in the Early Suburbs area have the greatest discrepancies in values when compared by distance, with the difference averaging 34.6%. This is because some of the most expensive and largest homes are in the areas of Sugar House and Holladay. The average difference in value for homes located in the Southeast area over the last decade is 12.3%. Homes in the Southwest area show the median value disparity lessening with time. Between 2010 and 2016 the difference by distance was 9.1%; however, the disparity narrowed to 3.5% between 2016 and 2019. This was driven by a 10.4% increase in median building square feet for homes within 1/2 mile of an apartment, leading to an overall increase in home values. The median value for homes in the West area has averaged 13.6% between 2010 and 2019. While the total median market value is greater for those single-family homes farther than 1/2 mile from new apartment construction, the opposite is true when measuring the median value per square foot (PSF). Between 2010 and 2019, homes that are located ≤1/2 mile averaged an 8.8% higher PSF median value compared with those farther away. Although the Early Suburbs area shows the highest discrepancy in total median market value, comparing values on a PSF basis shows there to be little to no difference between the two distances. PSF home values in the Southeast area averaged 5.3% higher for homes located ≤1/2 mile over the last decade. Similar to the trend seen in total median values, the PSF discrepancies in the Southwest favored homes that were farther away between 2013 and 2016, but shows no substantial difference since. The West area shows homes located ≤1/2 mile of

18 | Salt Lake Realtor ® | June 2021

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a new apartment averaged 5.2% less in median value PSF over the decade when compared with homes farther away. The reason for this disparity is likely due to the homes’ age. Homes located ≤1/2 mile of new apartments in the West area average 19 years older than those farther away. In suburban Salt Lake County, from the year of construction to 2019, single-family homes located ≤1/2 mile of a new apartment experienced a 10.0% average annual increase in value, while the value of homes farther away increased 8.6% on average annually. Homes that were located more than 1/2 mile in 2010 and 2011 experienced a 1.9-percentagepoint larger decline in their value than those that were closer to a new apartment building, showing that apartment proximity had a positive impact overall on preserving value during the recession. From the year of construction to 2019, homes in the Early Suburbs area that are located ≤1/2 mile of a new apartment experienced a 10.7% average annual increase in value, while the value for homes farther away increased 7.6% annually on average. Year-over changes have shown some disparities over the last decade. Homes farther than 1/2 mile saw a more positive appreciation from 2012 to 2015, while homes located ≤1/2 mile outperformed those farther away between 2016 and 2019. The Southeast area is the only instance where homes that are more than one-half mile away from new apartment construction experienced higher average price appreciation than those located ≤1/2 mile. Homes farther away experienced an annual appreciation of 7.3% between year the apartment was constructed to 2019, and those located ≤1/2 mile saw their values increase 6.8% annually. The likely explanation for this discrepancy is that there is a

higher concentration of larger retail development near those homes that are located ≤1/2 mile of apartments than in any other study areas. In the other three study areas, homes located ≤1/2 mile of an apartment were near an average of 20% less retail space when compared with homes farther away. In the Southeast area, there is 84% more retail space near homes that are closer to new apartment construction compared with those farther away. Year-over annual trends stayed similar for both distance categories except for 2014 and 2017, when homes farther than 1/2 mile experienced slightly greater annual growth. Conclusion The public perception about high-density housing continues to be a point of conflict in growing communities across Utah and the country. While many stereotypes and generalizations about negative impacts are brought up in public settings, high density development does not actually appear to depress home values.11 From the year an apartment was constructed to 2019, in Salt Lake County, singlefamily homes that were located within one-half mile of new apartment construction realized 1.4% more in annual price appreciation than those single-family homes that were located farther away. This is likely because new apartment construction brings new demand and new dollars to a community and redevelops an older piece of property, thus bringing more vibrancy and “buzz” to the area. The challenges of housing affordability are not going away anytime soon. While density is a solution to alleviate costs, zoning is the mechanism that allows or denies it. Zoning regulations, more than any other local policies, govern the annual supply of single-family and multifamily housing. In recent years, the supply of housing has not met the demand, creating a housing shortage.12 This shortage has tremendous impacts on Utah’s future. The shortage has also excluded many from homeownership, added to substantial increases in doubling-up of households, delayed marriages, and discouraged young people from forming new households. Reprinted by permission of the Kem C. Gardner Policy Institute, Copyright © 2021.

Facts.” Urban Land Institute - ULI. Washington, D.C. 2005 5. University of Washington. “Denser development is good for single-family home values.” ScienceDaily. www. sciencedaily.com/releases/2012/06/120626151109.htm 6. National Association of Home Builders, “Market Outlook: Confronting the Myths about Apartments with Facts” (Washington, D.C.: Author, 2001), p. 4. 7. Alexander Hoffman, The Vitality of America’s Working Communities (Cambridge, Massachusetts: Harvard University Joint Center for Housing Studies, 2003). 8. Arthur C. Nelson and Mitch Moody, “Price Effects of Apartments on Nearby Single-Family Detached Residential Homes,” Working Draft (Blacksburg, Virginia: Virginia Tech University, 2003). 9. Arthur C. Nelson, “Top Ten State and Local Strategies to Increase Affordable Housing Supply,” Housing Facts & Findings, vol. 5, no. 1. 10. Robert Dunphy and Kimberly Fisher, “Transportation, Congestion, and Density: New Insights,” Transportation Research Record, 1996. 11. https://furmancenter.org/files/media/Dont_Put_It_ Here.pdf 12. https://gardner.utah.edu/wp-content/uploads/BestPractices-Dec2020.pdf

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Endnotes 1. National Association of Realtors® 2. https://gardner.utah.edu/wp-content/uploads/ May2018HousingReport.pdf 3. Haughey, R. “Higher Density Development Myths and Facts.” Urban Land Institute - ULI. Washington, D.C. 2005 4. Haughey, R. “Higher Density Development Myths and

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RPAC Golf Tournament The Salt Lake Board of Realtors® held its annual RPAC Golf Tournament at River Oaks Golf Course in Sandy on June 4th. More than 120 Realtors® and affiliate members took part in the tournament. Several prizes were awarded, including a year of free membership dues, paddle board, and 55-inch television. Money raised from the tournament is given to the Realtors® Political Action Committee, which promotes the election of pro-Realtor® candidates across the United States. Thank you to this year’s sponsors and the staff of River Oaks Golf Course.

Photos: Dave Anderton

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Mitigating the Risk of Liability 2020 saw a spike in reported errors and omissions claims, continuing a year-over-year trend of increased litigation against Realtors®. By Richard Westlund The measures agents and brokers need to take to avoid legal trouble can feel onerous at times, but dealing with a lawsuit can be much worse. Legal action by a buyer or seller, a fair housing complaint, or an alleged violation of the National Association of Realtors® Code of Ethics could result in a fine, penalty, or judgment for damages, not to mention lasting damage to a professional’s reputation. In today’s litigious environment, agents and brokers need to mitigate the risk of liability— being held legally responsible for conduct that results in a loss or injury to another person. That’s especially important as 2020 saw a spike in reported errors and omissions claims, continuing a year-over-year trend of increased litigation against Realtors®. Allegations of negligence and nondisclosure continue to be the most commonly reported claim types, according to Zach Vollmer, real estate E&O program manager with Victor Insurance Managers Inc., a Realtor Benefits® partner. “Losses pertaining to online services,

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such as virtual home tours and home staging, are becoming more commonplace,” he said. “Looking forward, we expect to see an increase in losses alleging fair housing violations and wrongful eviction stemming from the ongoing economic impact of the COVID-19 pandemic.” Broadly speaking, to reduce liability risks at any stage of their business dealings, agents should educate clients about every stage of a transaction, disclose all relevant information, and treat everyone in the same professional manner, said Bob Arnold, an agent who leads the M2M Team at Realty Executives Integrity in Milwaukee. “If agents make decisions for clients without discussing the options, they can get in trouble.” Deanne Rymarowicz, NAR associate counsel, takes that idea one step further. “Agents need to be careful about serving their clients and avoid overstepping their role,” she said. “If a legal issue arises during a transaction, agents should talk to their broker, call their association’s legal hotline, or refer the client to a lawyer.”

in terms of timelines, pricing, and financing. Then he showed the offers to the seller on a spreadsheet without the names of the buyers or their agents. Lisa Mack, an agent with Coldwell Banker Residential Brokerage in Chambersburg, Pa., advised a cautious approach to submitting “love letters” with a buyer’s offer in hopes of winning a bidding war for a home. “You need to avoid any issues related to fair housing,” she said. “I am very careful to keep to the details and terms of the offers, rather than have the seller focus on the buyer.” NAR attorneys advise that if a buyer insists on writing a letter, the agent should not help draft or deliver it. Other issues can arise in multiple-offer situations, such as a buyer’s agent who may be showing the same listing to multiple buyers. “You need to have a tactful conversation with each buyer and let them know you have other parties interested in the same property,” said Ransome. “Then you can give them the option of staying with you or referring them to someone else.”

It’s a smart practice to stick to the facts rather than giving opinions when discussing matters with clients, said Robert Ransome, broker-owner with Ransome Realty Group in Richmond, Va. In addition, “You should document your advice and conversations in emails, texts, and notes. That can be very helpful later if a liability issue arises that is related to the transaction.” Here are some of the seven issues that have legal or ethical pitfalls for agents and brokers.

1. Multiple Offers Buyer and seller agents need to handle multipleoffer situations carefully to avoid accusations of negligence or preferential treatment that violates federal, state, or local fair housing laws or ordinances. “Multiple offers have become the norm in our market,” said Arnold, “so it’s very important to make sure the buyers understand the best-case and worst-case scenarios when submitting an offer and to document that conversation.” Brian Bartholomew, an agent with eXp Realty of California in San Ramon, Calif., said he recently received 28 offers on a home that sold quickly for $80,000 above the list price. To help the seller obtain the highest and best offer from each buyer, he advised sending out the same counteroffer to all the buyer’s agents, requesting specifics

Agents and brokers need to follow their state laws and the Code of Ethics with regard to seller disclosures about the condition of a home. Bartholomew said he advises sellers to disclose any issues that come to mind when listing a property. “If a client tells you about a problem, it needs to be disclosed to buyers. Be honest with your clients so they can be honest with you.” From the buyer’s standpoint, Arnold suggested going over the disclosure form and pointing out issues without giving an opinion on whether a problem can be remedied easily or not. “We simply say, ‘This is what the seller has disclosed.” Buyers should always pay close attention to the seller disclosures, said Mack. “In a tight market with bidding wars for properties, a buyer might want to waive an inspection,” she said. “But you need to be sure they understand the consequences if they include a waiver in their offer.”

3. Fair Housing Fair housing issues can arise whenever buyers feel they’ve faced discrimination because of race, ethnicity, gender, age, disability, religion, or other protected classes. “This is a very timely issue now,” said Rymarowicz, citing a pending Massachusetts case where the seller saw the buyer’s name on an offer and asked the listing agent whether the buyer was Black. “The agent did the right thing and terminated the relationship.” (continued on page 30)

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APRIL HOUSING WATCH Median Price of a Single-Family Home in Salt Lake County Climbs to $515,000

“Housing demand is still strong compared to one year ago, evidenced by home sales from this January to April, which are up 20% compared to 2020,” said Lawrence Yun, NAR’s chief economist.

Unprecedented demand for homes has pushed sales and prices to new heights. Home sales in Salt Lake County in April climbed 26% compared to the same month a year earlier. The year over year percent increase reflected the dismal number of sales in April 2020, when Covid-19 forced business shutdowns and quarantines. In April there were 1,509 sales of all housing types. New listings for the month fell to 1,820, down 7% from a year earlier. Pending sales, or signed real estate contracts to purchase a home, increased to 1,513 units, up 5% year over year. The inventory of homes for sale fell to 1,282, down 59% from a year ago.

The median sales price of all housing types sold in April increased to $440,649, up 21% compared to a median price of $365,000 in April 2020. The median price of a single-family home soared to $515,000, up 36% from a year earlier. Salt Lake home prices have been rising every year since 2012. Salt Lake homes were on the market five days in April, down from eight days in April 2020. “Housing demand is still strong compared to one year ago, evidenced by home sales from this January to April, which are up 20% compared to 2020,” said Lawrence Yun, NAR’s chief economist. “The additional supply projected for the market should cool down the torrid pace of price appreciation later in the year.” The median U.S. existing-home price for all housing types in April was $341,600, up 19% from April 2020 ($286,800), as every region recorded price increases. This is a record high and marks 110 straight months of year-over-year gains. First-time buyers were responsible for 31% of sales in April, down from 32% in March and 36% in April 2020. NAR’s 2020 Profile of Home Buyers and Sellers – released in late 2020 – revealed that the annual share of first-time buyers was 31%. “First-time buyers in particular are having trouble securing that first home for a multitude of reasons, including not enough affordable properties, competition with cash buyers and properties leaving the market at such a rapid pace,” Yun said. Individual investors or second-home buyers, who account for many cash sales, purchased 17% of homes in April, up from 15% in March and 10% in April 2020. All-cash sales accounted for 25% of transactions in April, up from both 23% in March and 15% in April 2020. Distressed sales – foreclosures and short sales – represented less than 1% of sales in April, equal to March’s percentage but down from 3% in April 2020. According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage was 3.06% in April, down from 3.08% in March. The average commitment rate across all of 2020 was 3.11%. Yun expects the 30-year fixed-rate mortgage to remain below 3.5% in 2021.

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Risk of Liability (continued from page 27) It’s not just seeing a buyer’s name that can lead to potential fair housing violations. Sellers can decide not to sell to certain individuals after looking at their social media posts or security videos when prospects tour the home. “Keep sellers focused on the buyers’ offers rather than the people,” Ransome said. Ed Forman, president of Watson Realty Corp. in Jacksonville, Fla., advises agents to be clear and transparent with buyer clients to be sure they feel they have been treated fairly—and to document those conversations. “In one case, buyers we represented didn’t understand why the seller accepted an offer that was $10,000 below their bid on their dream home,” he said. “I reviewed our agent’s notes and saw their offer was contingent on the sale of their own home, making it less attractive to the seller. When I explained this to the buyers, they thanked me, saying, ‘Now that I know what happened, this won’t worry me for the rest of my life.’” 4. Wire Fraud Agents and brokers need to guard against wire fraud scams that could cost a buyer or seller hundreds of thousands of dollars. “We put a warning on all our documentation not to accept any last-minute wiring instructions,” said Forman. “We encourage title companies to speak directly to the buyer. However, we did catch one fraudulent transfer a few weeks ago and called the FBI. We were able to freeze the bank account and the buyers got their money back before it disappeared.” Bartholomew likewise tells his clients to call the escrow agent or title company directly at a known number to confirm the details before sending a wire transfer. 5. Social Media Be very careful before posting to social media, said Forman. Avoid misleading or deceptive representations and comments that could violate fair housing principles. Be sure to follow staterequired disclosures on advertisements, in keeping with NAR’s policies. “Keep your posts professional and talk about the home, rather than the buyer,” said Mack. “We are accountable for our personal as well as our professional posts, so think twice and be sure you are not violating any laws or causing a potential backlash from anyone.” Last November NAR expanded the Code of Ethics to ban discriminatory hate speech and conduct directed at members of any class protected under Article 10. The change applies to all of a member’s activities, not just those that are real estate– related. “We all represent the real

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Your Legal Tip Sheet 1. Don’t make decisions for the client. 2. When in doubt, disclose it. 3. Put decisions in writing. 4. Give facts rather than opinions. 5. Focus on the offer rather than the buyer. 6. Follow the NAR Code of Ethics. 7. Stick to the real estate transaction and don’t give legal advice.

estate industry, and must be careful to uphold those standards in all our posts,” added Forman. 6. ADA Website Accessibility In Florida and other states, plaintiffs’ lawyers have contacted real estate brokers and agents whose websites fail to meet the accessibility guidelines in the Americans with Disabilities Act. “You need to be sure your site can be accessed by everyone,” said Rymarowicz. Accessible websites or mobile apps can interact with assistive technologies, including software that converts speech to text and screen readers that display voice-to-text on a webpage. Users should be able to navigate a site using just a keyboard, if necessary. Forman said the ADA compliance requirements offer an opportunity for upgrades to sites to be sure everyone has an equal opportunity to educate themselves, search for homes, and make a well-informed decision. “Sometimes the lawyers give you a gift in terms of doing what’s right for your customers,” he added.

7. Do Not Call Registry Bartholomew makes sure every call is made personally, without violating the Telephone Consumer Protection Act or the National Do Not Call Registry. “Agents should avoid making automatic calls and be sure to leave voicemail if no one answers,” he said. “Our clients are upset about getting robocalls from companies using virtual assistants and dialers to see if they want to sell their homes.” Richard Westlund is an award-winning freelance writer in Miami, Florida, who focuses on real estate, technology, finance, and a wide range of other business topics. He can be reached at rnwestlund@ gmail.com. Reprinted from Realtor® Magazine Online, May-June 2021, with permission of the National Association of Realtors®. Copyright 2021. All rights reserved.

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