Borrowing costs have fallen over the last two months.

Mortgage rates are ringing in the new year much lower than their near-8% peak this past fall. The 30-year fixed-rate mortgage has decreased for the past nine weeks, though breaking for a slight uptick this week to reach 6.62%, Freddie Mac reports.

“The overall trajectory of mortgage interest rates in 2024 is expected to decrease,” says Jessica Lautz, deputy chief economist at the National Association of REALTORS®. “While mortgage interest rates ease, there will be weekly shifts in the average rate. As home buyers move forward into the spring market, staying closely attuned with a mortgage broker can help them navigate the best rate.”

At this week’s rate of 6.62%, a monthly mortgage payment for a $400,000 home would translate to $2,048, Lautz says. That is considerably lower than in the fall, when a rate of 7.12% translated to a monthly mortgage payment of $2,221.  

Between late October and mid-December 2023, the 30-year fixed-rate mortgage plummeted more than a percentage point, says Sam Khater, Freddie Mac’s chief economist. “Given the expectation of rate cuts this year from the Federal Reserve, as well as receding inflationary pressures, we expect mortgage rates will continue to drift downward as the year unfolds. While lower mortgage rates are welcome news, potential home buyers are still dealing with the dual challenges of low inventory and high home prices that continue to rise.”

NAR is predicting that the 30-year fixed-rate mortgage will average 6.3% in 2024.

Freddie Mac reports the following national averages with mortgage rates for the week ending Jan. 4:

• 30-year fixed-rate mortgages: averaged 6.62%, rising slightly from last week’s 6.61% average. A year ago, 30-year rates averaged 6.48%.
• 15-year fixed-rate mortgages: averaged 5.89%, dropping from last week’s 5.93% average. Last year at this time, 15-year rates averaged 5.73%.

©National Association of REALTORS®
Reprinted with permission

Privacy, accessibility, pay-to-play—engaging home buyers and sellers online is getting complicated.

The World Wide Web is no longer the Wild West. Changing rules on data privacy, accessibility for disabled people, and net neutrality are throwing hurdles in your efforts to reach customers online.

In May, a European Union law took effect that is changing what’s considered acceptable practice in how you disclose your privacy policy and how you collect and store data on your customers. The General Data Protection Regulation makes it a crime to collect data on any person who lives in the 31 countries of the European Economic Area without first getting their permission. It also requires you to delete their data if they request it.

The good news for you, from a compliance perspective, is that the law is expected to have a significant effect on your business only if you focus your marketing on European consumers, says Finley Maxson, NAR senior counsel, noting that regulators have not yet released formal guidelines.

Still, compliance is a smart risk management strategy, says Maxson. At least one state—California—is advancing its own GDPR-like law(link is external), and others could follow. As more major American businesses with global web properties adopt privacy and security standards that conform to GDPR, consumers will start expecting the same from you. That means, if you’re not disclosing up front your policy on how you use cookies and store data, you could be called out by consumers for those omissions.

Accessibility Battle

Another flashpoint is website accessibility. In 2010, the U.S. Department of Justice released a notice about its intentions to extend the accessibility requirements under the Americans with Disabilities Act to websites. The rationale is that commercial websites are places of public accommodation just as commercial buildings are.

The department also weighed in on the issue in court, most recently in a case involving the big retailer Winn-Dixie(link is external). In that instance, it stated that websites that are public accommodations should be accessible to the disabled. Despite its demonstrated interest in the issue, the DOJ never followed up with final rules, muddying the legal picture and leaving the door open to lawsuits and demand letters from lawyers seeking changes for disabled clients.

In 2017, plaintiffs’ lawyers sent 815 of the letters, 16 percent more than in the previous year, to businesses, including real estate brokerages. “Absent rulemaking from the DOJ to clarify the ADA’s application to websites, businesses continue to be confused about what constitutes an accessible website,” says NAR Deputy General Counsel Lesley Muchow.

The cases by and large have been settled with the businesses agreeing to modify their websites based on standards called the Web Content Accessibility Guidelines 2.0, developed by a group of business, nonprofit, and government representatives. The standards say websites must be perceivable, operable, and understandable to people with impairments and robust enough so that software aids that people use are compatible with the sites. The standards outline a dozen concrete steps website developers can take, including captioning photos and videos and adding a feature for enlarging text. “In the absence of the DOJ promulgating rules, courts have been left to create them themselves,” says Andrew Grant, an attorney with DLA Piper in Washington.

NAR General Counsel Katie Johnson recommends working with a website provider knowledgeable about the WCAG 2.0 standards, and to seek indemnification from the website provider related to accessibility issues.

What’s needed are final rules from the federal government, but they’re unlikely to appear soon. In January, the Justice Department deprioritized the rules, which effectively takes them off the table for the foreseeable future. NAR is working with a coalition of industry groups on this issue, and several members of Congress are preparing a letter urging the department to issue guidance on website accessibility to stem these lawsuits.

Skirmish Over Internet Lanes

On top of these challenges, your real estate website is now facing the possibility of getting hit with pay-to-play schemes to stay competitive. The Federal Communications Commission earlier this year ended net neutrality rules that had been put in place in 2015. Net neutrality required internet service providers like Comcast, Verizon, and AT&T to treat all online traffic the same. But since the rules were terminated officially on June 11, ISPs are now free to monetize web traffic by offering speedier service to sites willing to pay for it.

That’s something the association continues to oppose. “NAR has concerns that the FCC’s decision to roll back net neutrality could negatively impact the way consumers search for homes or how real estate is transacted,” says NAR President Elizabeth Mendenhall. “We are still urging Congress and the FCC to work to ensure the internet remains a fair and open platform in which our 1.3 million members can freely share lawful content.”

In their public statements, ISPs have said they don’t plan to divide up internet traffic into fast and slow lanes, but there are skeptics. “At some point, the lines are going to be drawn by the major providers,” says longtime MLS executive David Charron, who chairs the Council of Multiple Listing Services. “The beast is going to have to be fed, so shareholders of these major corporations can benefit.”

The concern for real estate is that ISPs can offer premium plans to listing aggregation sites that are willing to pay the cost, giving them a leg up over competitors’ sites and reducing consumer choice.

Legal challenges are underway, including a suit against the FCC filed by almost half of the states’ attorneys general. In May, the Senate passed legislation calling for the restoration of net neutrality. In the House, it faces a higher climb, and the White House is unlikely to support its return, NAR analysts say.

The range of battles affecting your engagement with people online attests to the internet’s central place in the business world and modern life. The days of ISPs as upstart, marginal players are over. For real estate pros coping with a range of web uncertainties, adopting best practices in data protection and website accessibility will help you with risk management and ensure you’re meeting consumers’ changing expectations. The broader fight over net neutrality—and who’s controlling your access—will be waged in the courts, Congress, or both, for some time to come. The venerable warning from the analog age still applies: Don’t touch that dial.

©National Association of REALTORS®
Reprinted with permission

Incorporating a community name into your marketing can put you at risk.

Imagine you’re a real estate agent in Cold Mountain, N.C., using the tagline “Your Cold Mountain Real Estate Connection” to market your services. You receive a cease and desist letter from an enterprising developer who’s registered a federal trademark for the term “Cold Mountain” in connection with real estate brokerage and management services, demanding you stop using the term in your social media and advertising materials. Given how common the practice of marketing one’s real estate business with a place name is within the industry, the potential for disputes is significant. The issue is even more problematic when the community name is based not on geography but rather on a made-up term, such as Bellhaven Woods or Oakcroft.

What’s Protectable?

Trademark rights can exist even in the absence of formal registration. The rights of a trademark holder extend only to that company’s own field or related fields. That’s how two different companies—an airline and a plumbing fixture manufacturer—can both have trademarks on the word Delta.

However, generic descriptors for a category of goods or services are not defensible as trademarks. One cannot have a monopoly on the word “coffee” when used in connection with the sale of a cup of joe, for example. Beyond generic words, terms that describe a product or service are usually not able to be trademarked, but under special circumstances they can move over from descriptive to become protected. Using the term “rich” to sell your coffee probably wouldn’t ever rise to the level of a protected mark. But consider the case of using “sharp” to sell televisions: Once employed to describe picture quality, “Sharp” eventually became protectable because it was used by one company for a long enough time that consumers began to recognize the association.

Geographic terms are generally treated the same as descriptive marks: They are protectable if the mark owner was the first to use the name in connection with its product or service and consumers think of the company when they hear the name. (That’s why Nantucket Nectars is a registered trademark, despite the fact that the beverage company using it is based in Nantucket.) In addition, a place name isn’t seen as merely descriptive if the public doesn’t associate the term with a specific place. So, a place that’s relatively obscure, newly minted, or generic enough to be associated with multiple locations is generally protectable as a trademark.

The Trademark Fair Use Defense

Thankfully, the fair use doctrine in U.S. trademark law offers some flexibility. The use of a place name to state where a business is located is generally acceptable, provided it doesn’t suggest an affiliation with the mark holder. “Nominative” fair use allows you to refer to the trademark owner or its product as long as the brand you reference is not easily identifiable without use of the trademark, you only use as much of the mark as necessary, and you don’t falsely suggest a relationship with the trademark owner. This is what allows an auto mechanic shop to advertise that it repairs Ford vehicles without being an authorized service center and what allows for comparative advertising, such as “If you like Coke, try Pepsi.”

Exercise caution when using marketing materials with a geographic indicator, particularly with coined locations. Refer to place names in a nominative or descriptive fashion, not as a brand name or slogan. Instead of “Your Cold Mountain Real Estate Connection,” try “We Understand the Cold Mountain Market” or “Serving the Cold Mountain Community for Over 106 Years.” Because fair use is not black and white, consult an attorney with trademark expertise. It’s always in your interest to avoid having acceptable language come as a result of a costly lawsuit.

©National Association of REALTORS®
Reprinted with permission

After months of NAR fighting for the right for multiple listing services to obtain copyright for their databases, the U.S. Copyright Office appears poised to accept listing databases as copyrightable if they’re sufficiently creative. The association created materials, which were reviewed and approved by the agency, to help MLSs demonstrate that creativity.

In a tentative win for multiple listing systems, the U.S. Copyright Office seems to have changed course after calling into question MLSs’ right to obtain copyright protection for their databases.

Last fall, the office issued requests for clarification to hundreds of MLSs regarding pending applications, and suggested the MLSs hadn’t shown the proper level of creativity in the arrangement, selection, or coordination of their databases to qualify for protection under copyright law. In an effort to deal with the situation on a collective basis, the National Association of REALTORS® convinced the Copyright Office to issue a grace period during which the association could better explain the creativity of MLSs in general.

Now that grace period is being lifted and MLSs again have the opportunity to state their cases individually. NAR created educational materials, including a template descriptive statement, to help MLSs better state their cases for copyright protection. The Copyright Office approved those materials, though it noted that all applications will be reviewed on their own merits.  

Furthermore, the Copyright Office announced it will streamline the application review process. MLS applicants may now submit one revised descriptive statement, which will apply to all pending submissions, minimizing the materials that MLSs need to supply. MLSs may also withdraw older claims they no longer want to pursue. The Copyright Office is now sending emails to MLS applicants, offering them 45 days to submit the revised descriptive statement.

The Fight for Copyright

When the Copyright Office questioned the rights of multiple listing services to obtain copyright protection for their databases last fall, it was a surprise for the industry. After all, the action did represent a significant change from the norm. For decades, many MLSs have obtained copyright registrations protecting their databases with little or no question from the federal government.

“It seemed to come right out of the blue,” says Corporate Counsel Kriti Rajput of MLSListings Inc. in Sunnyvale, Calif. “Prior to this situation, we’d never had a letter questioning our copyright claims from the government, that I know of.”

MLS executives weren’t the only ones taken aback by the shift. “We were surprised about the pushback from the copyright office,” says industry watcher Mitchell A. Skinner, lawyer and managing member of Larson Skinner PLLC, a Minneapolis law firm that routinely deals with both copyright and MLS issues. “For more than 18 years, MLSs have been filing copyright applications with the U.S. Copyright Office for federal copyright registration of compilation copyright in the MLS database. And for all that time, the Copyright Office has approved those applications.”

NAR was quick to act on behalf of these MLSs. NAR Senior Counsel Chloe Hecht and NAR Senior Technology Policy Representative Melanie Wyne held a series of meetings with representatives from the Copyright Office to explain the creative process of gathering and displaying listing information and discuss how this policy change may affect the industry. In response, the Copyright Office granted MLSs a grace period on all pending applications to allow the time necessary to assess the situation and determine the best plan of action for moving forward.

Defining Creativity

Those unacquainted with copyright law might be surprised to learn that the bar is actually quite low for what constitutes creativity. The Copyright Office cited the 1991 U.S. Supreme Court case Feist Publications, Inc., v. Rural Telephone Service Co.(link is external) as the basis for denying registration of MLS databases; the ruling found that copyright can apply only to the creative aspects of a collection, not to the facts themselves. However, the organization of facts and other information may be protected if the selection, coordination, and arrangement show a spark of creativity, which Hecht notes is a low threshold to achieve. She adds that subsequent court rulings made after the 1991 case generally support the claims MLSs make in copyright protection for their databases.

Many in the industry argue that MLSs do exert a great deal of creative force in deciding how data will be selected, collected, arranged, and displayed. And with this new window to revise the descriptive statement on their applications, MLSs are getting another chance to highlight the creativity inherent in their databases.

“An MLS’s chances of receiving a copyright registration increase as the number of creative choices they’ve made increases. Anytime they decide to add or delete fields, or change the database display, they’re demonstrating creativity,” says Hecht. “Those choices are often based on local or geographic differences, which is one of the real strengths that MLSs bring to the real estate industry in general.”

Hecht says other examples of creative choices include revising data field names and descriptions, altering how photographs are displayed, and changing data sources on back-end fields. The argument for protection is further strengthened when agents and brokers agree that the creative choices they make when uploading listing content—such as which photographs to include in what order and which data fields to complete—are a “work made for hire” for the MLS. This doesn’t give the MLS ownership of the listing content, but it does acknowledge that the MLS “owns” how participants choose to upload that content.

Tools Beyond Intellectual Property

During the grace period, NAR convened the Protecting Listing Content Workgroup to bring brokers and MLSs together to articulate the best legal strategy for protecting property listing content and devise a plan to help brokers and MLSs implement such strategy. The group not only gave feedback on NAR’s ongoing conversations with the Copyright Office but also looked at other ways MLSs could protect data, without the use of copyright protection.

While many MLSs see copyright as an important vehicle for protecting listing data from being stolen or misused, some don’t bother seeking such protections from the federal government. There are other vehicles for protecting listing data: license agreements, terms of use, breach of contract laws, and the Computer Fraud and Abuse Act, among others. Still, many MLSs would like to retain as many weapons as possible in the battle to keep listing data safe.

“Keeping listing data out of the hands of bad actors is time-consuming and important to our subscribers, and MLSs need all the help they can get,” says Rajput. “While we’re planning on renewing our copyright, we also need to watch where our data is going and enforce our agreements and licenses.”

©National Association of REALTORS®
Reprinted with permission

When clients deceptively skirt their responsibility to disclose property defects, it could spell trouble for you, too.

When Kristen Martinez and her family bought a home in the Seattle area two years ago, she specifically asked about the electrical wiring. “We had been told [by the seller] when we bought the house that there was no knob-and-tube wiring,” Martinez says. This older form of electrical wiring is less resistant to damage and more prone to causing fires. The issue went undetected during an inspection because the electrical work appeared to have been masked, says Martinez, who wasn’t at the inspection. But as soon as the Martinez family moved into their new home, they realized they had been deceived.

“We had come to realize that the seller—who is a house flipper and electrician—did a shoddy job hiding the bad wiring and illegally connected dangerous knob-and-tube wiring with [more modern] wiring,” Martinez says. About $7,000 later, the Martinez family’s electrician completely rewired their home, but they still come across safety issues. “It has been a terrible experience.”

Sellers can be held legally liable under most state laws for not disclosing property defects and material facts, such as leaky basements or knowledge of lead paint. You, too, can suffer legal consequences if you don’t disclose material defects found on the property that you become aware of in the course of serving your client. But if your seller is hiding problems he or she is aware of, and you’re none the wiser about them, can the finger be pointed at you? Legally, you can’t be held liable for property issues you don’t have knowledge of in most jurisdictions. But your reputation as an agent—having even unwittingly represented a seller who lied—could inadvertently take a hit.

Even if you’re selling a property “as is,” which indicates the buyer must accept the home’s condition, the buyer still has the right to know what the problems are. “The buyer [must have the information available to] make an educated decision about whether or not to make an offer,” says Kevin Deselms, a sales associate with RE/MAX Alliance in Golden, Colo.

If you suspect your client is either unaware of property issues or being less than forthcoming about them, and you want to ensure more transparency in the transaction, you could disclose your observations of the property’s condition to the buyer and encourage them to seek further professional advice, says Bryan Zuetel, a real estate attorney and broker-owner of Esquire Real Estate Inc., in Irvine, Calif. “For instance, an agent might smell a moldy scent in the basement and see what looks like mold, but the agent is not qualified—nor required to—conclude that there is mold in the basement,” Zuetel says. “The agent could simply disclose a ‘moldy scent’ or a ‘moldy appearance’ in the basement, and advise all parties to engage the proper professionals for further evaluation. Whether a seller acknowledges the issue is not relevant to the agent’s duty to disclose.”

Cassandra Corum, managing broker at Sotheby’s International Realty in Beverly Hills, Calif., takes this approach, cautioning that “we can’t force a seller to tell the truth, and sometimes they may not know the truth. The home could have flooded prior to their ownership, so their experience has been that the property has never flooded.” Corum makes sure to get the disclosure form, including her notes about her observations of the property, to the buyer before they schedule a home inspection. That way, the buyer can make a more informed decision about how they want to proceed earlier in the transaction. “This is tricky,” she says, “because you can’t say [a problem exists where it might not], but you would hope and assume that a comment about an odor, for example, would turn on a lightbulb and move the buyer to schedule a mold inspection.”

Though you have no duty to search for property defects yourself, it would be wise to pay attention to the home’s condition as you and your client prepare it for market. If you notice a potential problem the seller has not told you about, ask your client questions to gauge their knowledge of the issue and willingness to fix it. Uncooperativeness at this juncture may mean you’re working with an unscrupulous seller—and you’d be better off walking away from the deal. “One listing, however great it may be, is not worth an agent’s license,” says Vincent Averaimo, an attorney with Milford Law in Milford, Conn. “Rather than get involved in deceit, it is a more prudent business decision to walk away from the deal and advise your broker immediately.”

Fred Glick, e-PRO, a sales associate with Arrivva Inc., in Aptos, Calif., says it’s best to be painfully honest with sellers about the importance of a disclosure form at the start of the business relationship. “I tell them that this form can be used in court to prosecute them,” he says. “It could be used to prove fraud, which could be criminal. I encourage the seller to do an inspection of the property before we list and allow buyers to get their own inspections.” Most buyers will do their own inspections anyway, which likely will reveal whatever issues sellers may want to hide and possibly lead to a termination of the offer or a large negotiation on the home’s price, says Nancy Wallace-Laabs, SFR, co-partner at KBN Homes in Frisco, Texas. Therefore, not being upfront about property issues quite literally eats away at the seller’s bottom line. “The headaches that ensue with a dishonest client are not worth the price of any commission you might make on the property,” Wallace-Laabs says.

©National Association of REALTORS®
Reprinted with permission

If you give clients a list of inspectors to contact, be sure all of those inspectors are qualified.

Your buyer and the seller have a signed contract and now the inspection process begins. You tell your buyer she needs a general property inspection and her first question is, “Whom do you recommend?” It’s a good practice to give her three choices if you decide to offer that help. She picks an inspector, the inspection proceeds, and the transaction closes.

Six months later, you get sued.

The buyer claims you made a “negligent referral to an unqualified inspector” because the person she selected from your list missed many significant defects.

Think this can’t happen? In the past 18 months, I’ve have had three transactions thrown into chaos because of poorly conducted inspections. All of them involved mold inspections conducted by unqualified inspectors, resulting in transaction delays. One also involved insufficiently inspected structural and sewer issues. These problems didn’t result in lawsuits because, as either a buyer or seller representative, I flagged the problems for my clients, but I’ve seen lawsuits arise on other agents’ transactions.

Requirements Vary by State

Some states certify or license property inspectors. My state of California does not. As a matter of risk management, you need to know the qualifications of the inspectors you refer. It’s not enough for a person to have a business card and contract form to be a home inspector. The reality may be that the least qualified inspector might be the one who finds the least amount wrong with the house, keeping your deal on track. But referring that person is a good way to increase the chance you’ll end up in court.

In one recent case I was involved in, the inspector claimed he was certified by the North American Inspection Association, but there was no record of such an association existing. Professionals at the American Society of Home Inspectors(link is external) and the California Real Estate Inspectors Association(link is external), two recognized professional associations in my state, had never heard of it. He claimed to follow the “ASHI Standards of Practice” but had never been a member of the group. He had no errors and omissions or liability insurance and no contracting license. His contract included clauses to limit his liability, but those clauses were eliminated by the Business and Professional Code of California in 1997. Just picture yourself in court trying to tell the jury why this person was on your referral list.

Check Qualifications

For the protection of you and your client, check the qualifications of the property inspectors you include on your list. They should all have proof of E&O and liability insurance; membership in at least one professional association, whether it’s ASHI or your local or state association; a record without lawsuits; a contract that reflects current state law; and documented inspection experience.

If you have two great inspectors and one not-so-good one on your list and hand that list to your client, there’s a chance the client will pick the least qualified one, especially if that person is the cheapest one.

Be diligent with specialized inspectors, too. A mold inspector might not have to have any certification or license in your state. But as a matter of good practice, that inspector should have specific mold insurance as part of E&O coverage and be a certified industrial hygienist. A mold inspector should also have several years of experience, membership in appropriate associations such as the Indoor Air Quality Association or the American Industrial Hygiene Association, and the ability to take air and surface samples for testing.

Bottom line: The more qualified the inspectors, the more likely the inspections will be done right and no one will be sued.

©National Association of REALTORS®
Reprinted with permission