Month: March 2024

National Association of Realtors announces $418 million settlement

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The National Association of Realtors (NAR) announced a proposed settlement on March 15 of four large antitrust suits involving buyers’ brokers commissions. The monetary settlement is set at $418 million. The settlement also involves a new rule prohibiting offers of compensation to buyers’ brokers on the MLS.

This dirt lawyer does not have the legal ability to discuss the antitrust issues involved in these lawsuits. The speculation about how this settlement will ultimately affect the housing industry is widely varied among experts in several professions.

The impetus for the original complaints was to lower housing costs artificially inflated by commissions which seem to be set in stone at six percent. Some experts suggest that our housing market will be completely remodeled, with the end product being lower home prices.

Other experts suggest that buyers will be crippled by having to either forego the assistance of a real estate agent or by agreeing to pay commissions out of pocket. Some of these writers even suggest that home prices will increase as a result of these machinations.

I’ve seen several suggestions that home buying will remain virtually the same by use of several work arounds. But I’ve seen other experts suggest that the proposed work arounds may also violate antitrust laws.

Some suggest that buyers, sellers and real estate agents will simply negotiate commissions.

One thing that is not in question is that the settlement must be approved in court. The settlement suggests that the new rules will become effective in July, but settlements in these large cases often take months to approve, so I wouldn’t be surprised to see delays beyond this summer.

This blog earlier discussed the $1.8 billion verdict in federal court in Missouri against the NAR and two brokerage firms. Other lawsuits followed this verdict, and this settlement intends to bring all the suits to a conclusion.

The industry may be in transition as all the experts digest the settlement and as we await court approval. There is no shortage of articles on the topic. I encourage dirt lawyers to keep their fingers on the pulse of these issues as the litigation dust settles.

Biden administration announces plans to lower housing costs

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ALTA says the attack on title insurance offers a false promise of savings

This blog never intends to discuss politics, so don’t interpret this post to take a political position. The intent is to inform real estate lawyers of news affecting our industry.

Just ahead of the State of the Union Address, President Biden announced plans to lower housing costs, calling on federal agencies to take all available actions to lower costs of consumers at the closing table and to help more Americans access homeownership. You can read the President’s Fact Sheet here.

Congress is asked to pass a mortgage relief credit that would provide middle-class first-time homebuyers with an annual tax credit of $5,000 a year for two years. Congress is also asked to provide a one-year tax credit of up to $10,000 to middle-class families who sell their starter homes, defined as homes below the area median home price in the county, to another owner-occupant. The intent of this proposal is to offset the loss of a lower interest rate when a homeowner sells. Congress is also asked to provide up to $25,000 in down payment assistance to first-generation homebuyers.

The President also proposes an expansion of the Low-Income Housing Tax Credit to build or preserve 1.2 million more affordable rental units. He also proposes a new $20 billion competitive grant fund to support communities to build more housing and lower rents and homebuying costs. Each Federal Home Loan Bank will be asked to double its annual contribution to the Affordable Housing Program. The intent will be to support the financing, acquisition, construction, and rehabilitation of affordable rental units and homes for sale.

Honestly, a lot of this seems like government-speak. We will have to wait to see the language of the actual proposals to form opinions, but lowering housing costs and providing more housing for low-income consumers is a great theory.

The one proposal that should concern practitioners is a pilot program to reduce closing costs by waiving the requirement for lender’s title insurance. At this point, the proposal only covers refinances, and the Fact Sheet indicates closing costs would be reduced by an average of $750. American Land Title Association (ALTA) issued a press release on March 7 stating that this proposal is a false promise of savings.

When I was in private practice, the cost of title insurance was less than the cost of an attorney’s opinion letter, and I believe lawyers would have to raise their charges to cover the additional liability. I’ve spoken many times and written many articles about the advantages of title insurance over title opinions, and I won’t repeat these arguments here. I am confident ALTA and title insurance companies will make those arguments plainly in opposition to this plan.

Alabama Federal Court finds Corporate Transparency Act unconstitutional

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While real estate practitioners are struggling to implement office procedures to accommodate the reporting requirements of the new Federal Corporate Transparency Act (CTA), one court has held the Act to be unconstitutional.

National Small Business Association v. Yellen, Case 5:22-cv-1448-LCB (U.S. District Court, Northern District of Alabama, March 1, 2024) held that the Constitution does not give Congress the power to regulate millions of entities and their stakeholders the moment they obtain formal corporate status from a state.  The government had argued that the foreign affairs power and the Commerce Clause grant the requisite authority because the purpose of the CTA is to prevent money laundering and tax evasion, especially by offshore actors.

The case begins with this language, “The late Justice Antonin Scalia once remarked that federal judges should have a rubber stamp that says STUPID BUT CONSTITUTIONAL.”  In other words, the Constitution does not allow judges to strike down a law merely because it is burdensome, foolish, or offensive. This opinion states that the inverse is also true—the wisdom of a policy is no guarantee of its constitutionality. Even in the pursuit of sensible and praiseworthy ends, Congress may enact smart laws that violate the Constitution. This case illustrates that principle, according to the Northern District of Alabama.

We’ll have to wait and see how appellate courts address this issue. In the meantime, we’ll have to comply!

Some IRS forms must be filed electronically as of January 1, 2024

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Chicago Title recently published an update on an IRS regulation, and I wanted to make sure readers of this blog have the most current information. Dirt lawyers know that cash payments greater than $10,000 must be reported to the IRS through form 8300.

For a primer on this requirement, review IRS Publication 1544 here. The government’s stated goal in imposing this requirement is to detect money laundering and to catch tax evaders, terrorists and those who profit from the drug trade.

Effective January 1, 2024, the IRS updated its regulations to require businesses that file 10 total information returns (such as 1099, W2 and, now 8300) to files these forms electronically unless the business requests and receives a waiver each tax year. You can view the revised regulations here.