Presentation toPresentation to

Department of Ecology Department of Ecology Woodsmoke Work GroupWoodsmoke Work Group

September 13, 2007September 13, 2007

Sam PaceSam Pace, , GRI, MBA, JDGRI, MBA, JD

Association of REALTORSAssociation of REALTORS®®

SamPace@concentric.netSamPace@concentric.net(253) 630-5541(253) 630-5541

Requiring Requiring “Change-out at Point of Sale”“Change-out at Point of Sale”

Would Constitute Would Constitute

“A Ban on Home Sales”“A Ban on Home Sales”

6 ReasonsIt’s An Unacceptable

Approach:

1.1. Exchanging a Deed for a Exchanging a Deed for a Check Check

DoesDoes NotNot Cause Woodsmoke. Cause Woodsmoke.

Burning WoodBurning Wood

Is what causes Woodsmoke.Is what causes Woodsmoke.

2. Unfairly singles out Families 2. Unfairly singles out Families who need to sell because of a who need to sell because of a change in their family change in their family circumstancescircumstances

Lost a jobLost a jobDivorceDivorcePromotion/TransferPromotion/TransferDeath in the familyDeath in the family

Unfairly hits them when their Unfairly hits them when their downdown

3. It Would Cause Extreme 3. It Would Cause Extreme Disruptions in Washington’s Disruptions in Washington’s Real Estate Market Real Estate Market ($17.3 ($17.3 Billion in current transactions Billion in current transactions in jeopardy)in jeopardy), and add , and add thousands of Dollars of Costs to thousands of Dollars of Costs to individual transactions.individual transactions.

This would further compromise This would further compromise both Affordability, and the both Affordability, and the Ability of Families to MoveAbility of Families to Move

Understanding How It Would Impact Understanding How It Would Impact Washington’s StatewideWashington’s Statewide

Housing Affordability CrisisHousing Affordability Crisis

Washington Research Council* Washington Research Council* (Policy Brief 06-19):(Policy Brief 06-19): Last SEA-MSALast SEA-MSA 5 yrs5 yrs** Since Since

19901990****

Household Incomes Increased Household Incomes Increased 14%14% 71% 71% Home Prices Increased Home Prices Increased 61%61% 173%173%

Washington Center for Real Estate ResearchWashington Center for Real Estate Research 2007 Data: 2007 Data:

There are Only 2 Counties (Adams & Benton) in WAThere are Only 2 Counties (Adams & Benton) in WA With Homes Affordable to 1With Homes Affordable to 1stst Time Buyers Time Buyers

** Seattle Times 9/12/07** Seattle Times 9/12/07

Data on Washington’s StatewideData on Washington’s Statewide Housing Affordability Crisis Housing Affordability Crisis

Statewide Median Home Price Statewide Median Home Price $ 300,800$ 300,800Statewide FTB Affordability IndexStatewide FTB Affordability Index 52.052.0 (100+(100+ ==

Affordable)Affordable)

CountyQ1 - 2007

MedianHome Price

Q1 - 20071st Time Buyer

Affordability Index

Clark $ 269,400 61.5

Thurston $ 255,000 65.3

King $ 440,000 39.7

Pierce $ 282,000 56.4

Snohomish

$ 370,000 49.6

Kitsap $ 286,000 58.2

CountyQ1 - 2007

Median Home Price

Q1 - 20071st Time Buyers

Affordability Index

Skagit $ 258,900 58.0

Mason $ 196,000 70.3

Island $ 293,000 52.7

Lewis $ 189,800 54.8

Yakima $ 134,400 90.2

Spokane $ 181,900 71.2

Kittitas $ 249,500 45.9Source: Washington Center for Real Estate Research at WSU, Q1- 2007

King County:King County:

40% of the State’s Jobs40% of the State’s Jobs

50% of the State’s Payroll50% of the State’s Payroll

Less than 2% of Houses Affordable to Median Income Less than 2% of Houses Affordable to Median Income HouseholdsHouseholds

17 of King County cities have 17 of King County cities have NONO houses for sale that are houses for sale that are affordable to median income households, and 7 have only 1.affordable to median income households, and 7 have only 1.

15 have less than 10 affordable condos*15 have less than 10 affordable condos*

Condo Prices Up 27.48% in last 3 years ($82,375 Affordability Condo Prices Up 27.48% in last 3 years ($82,375 Affordability Gap)Gap)

Handout on the working families priced out of the market **Handout on the working families priced out of the market **

* NWMLS data, January 8, 2007* NWMLS data, January 8, 2007

** ** Washington Employment Security Department OEW Occupational Employment & Wage Data - Washington Employment Security Department OEW Occupational Employment & Wage Data - http://www.wa.gov/esd/lmea/occdata/2005oes/TOC007.htmhttp://www.wa.gov/esd/lmea/occdata/2005oes/TOC007.htm

Why Would A Ban on Home SalesWhy Would A Ban on Home SalesMake The Situation Worse?Make The Situation Worse?

Approximately 50%* of Sellers move to a location within 10 miles of the Approximately 50%* of Sellers move to a location within 10 miles of the property they’re selling. Thus, families don’t escape these high real estate property they’re selling. Thus, families don’t escape these high real estate prices, or the Housing Affordability Crisis.prices, or the Housing Affordability Crisis.

The growing gap between The growing gap between IncomesIncomes and and Real Estate PricesReal Estate Prices (14% vs. (14% vs. 61%) means families need to preserve their equity in order to afford to move. 61%) means families need to preserve their equity in order to afford to move. Singling out families just because they need to move, and then taking Singling out families just because they need to move, and then taking thousands of dollars of their equity to satisfy a new woodsmoke mandate, thousands of dollars of their equity to satisfy a new woodsmoke mandate, compromises their ability to do so.compromises their ability to do so.

When families can’t afford to move out, 1When families can’t afford to move out, 1stst Time Buyers don’t have homes Time Buyers don’t have homes to move into. When 1to move into. When 1stst Time Buyers must remain renters, the combination of Time Buyers must remain renters, the combination of their continued presence in the rental market, and increasing demand, their continued presence in the rental market, and increasing demand, exacerbates the “exacerbates the “Downward Compression & CompetitionDownward Compression & Competition” in the rental ” in the rental markets, which makes things even worse for the most economically vulnerable markets, which makes things even worse for the most economically vulnerable families at the “families at the “Bottom of the PileBottom of the Pile.”.”

* Research data from the National Association of REALTORS* Research data from the National Association of REALTORS®®

4. Washington Not In A Position4. Washington Not In A PositionTo Actually Implement A Workable To Actually Implement A Workable

BanBan

In just 19 western counties served by NWMLS: In just 19 western counties served by NWMLS:

Currently (July 2007): 47,106 properties on the marketCurrently (July 2007): 47,106 properties on the market

4.8 month supply = 117,765 Annually, + Eastern 4.8 month supply = 117,765 Annually, + Eastern WashingtonWashington

Don’t have trained, independent, government approved - Don’t have trained, independent, government approved -

certified inspectors to handle the volumecertified inspectors to handle the volume

PSCAA: 12 personnel, less than 50 woodsmoke cases last PSCAA: 12 personnel, less than 50 woodsmoke cases last yearyear

Real Estate Transactions are extremely time Real Estate Transactions are extremely time sensitivesensitive

Compliance (effecting a change-out) may be Compliance (effecting a change-out) may be especially problematic in areas not served especially problematic in areas not served

by by

natural gasnatural gas

5. 5. HUGE Annual Financial HUGE Annual Financial Impacts Impacts For State & Local For State & Local Governments: Governments: $963.4 Million$963.4 Million REET Revenue at REET Revenue at RiskRisk

Real Estate Excise Tax (REET) on real property sales:Real Estate Excise Tax (REET) on real property sales:

1.28% of sale price to State Budget1.28% of sale price to State Budget

0.25% of sale price to cities and counties (10.25% of sale price to cities and counties (1stst ¼%) ¼%)

0.25%0.25% of sale price to cities and counties (2nd ¼%) of sale price to cities and counties (2nd ¼%)

1.78% of the Total Sales Price of the Property1.78% of the Total Sales Price of the Property

Failed sales (and/or slower sales) compromise Real Estate Failed sales (and/or slower sales) compromise Real Estate

Excise Tax (REET) receipts for state and local governmentsExcise Tax (REET) receipts for state and local governments

$$ 308,281,082 308,281,082 REET for State & Local REET for State & Local GovernmentsGovernments in Jeopardy Just On Current in Jeopardy Just On Current

ListingsListingsIn the 19 Counties Served by NWMLSIn the 19 Counties Served by NWMLS

In Western WashingtonIn Western WashingtonNWMLS - 19 Western Washington Counties - 79% of State's Population

(For Statewide Approximation Multiply by 1.25)

Single Family(SFR)

Condos(MF)

CombinedSFR + MF

# Properties On the Market CurrentlyWith Wood Burning Appliances/Fireplaces

28,295 3,838 32,133

Average Value $557,597 $401,760

Total Valuation $15,777,207,115 $1,541,954,880 $17,319,161,995

Total REET at Risk $280,834,286 $27,446,796 $308,281,082

Current Statewide REET At RISK Current Statewide REET At RISK based on $17.31 Billion in Value of based on $17.31 Billion in Value of Current Listings:Current Listings:

$ 308,281,082 Western $ 308,281,082 Western WashingtonWashington

$ 77,070,270$ 77,070,270 Other Counties Other Counties$ 385,351,352$ 385,351,352

Current $17.31 Billion represents 4.8 Current $17.31 Billion represents 4.8 months of inventory. On a 12-month months of inventory. On a 12-month annualized basis (multiply by 2.5) Risk annualized basis (multiply by 2.5) Risk Is:Is:

$ 963,378,380$ 963,378,380

ALLOCATION of ALLOCATION of $ 963,378,380$ 963,378,380 Annual RISK Based on:Annual RISK Based on: State REET of 1.28% State REET of 1.28% Local REET of 0.50% (.25% + .25%) Local REET of 0.50% (.25% + .25%)

State Legislature’s Budget:State Legislature’s Budget: $692,766,475$692,766,475**Local Government Budgets:Local Government Budgets: $270,611,905$270,611,905

*Amounts may be double for the Legislature’s Biannual Budget*Amounts may be double for the Legislature’s Biannual Budget

6. There Are 6. There Are Better Approaches Better Approaches The REALTORS® The REALTORS® SupportSupport

Part of the REALTORS® Part of the REALTORS® Strong Environmental Ethic & Strong Environmental Ethic & Commitment To Quality of LifeCommitment To Quality of Life

REALTORS® REALTORS®

REALTORS’REALTORS’ 1st in the Nation…1st in the Nation…Environmental CouncilEnvironmental Council

Founding Member…Founding Member…Washington Wildlife Washington Wildlife and and Recreation CoalitionRecreation Coalition

Amend Seller Amend Seller DisclosureDisclosure

RCW 64.06.020RCW 64.06.020 Similar to 2005 Consensus ApproachSimilar to 2005 Consensus Approach

Clean Air Agency’s May Adopt A Woodburning Clean Air Agency’s May Adopt A Woodburning Appliance Registration RequirementAppliance Registration Requirement

Amends the Statewide Amends the Statewide StatutoryStatutory Seller’s Seller’s Property Disclosure Form (aka “Form 17”) To Raise Property Disclosure Form (aka “Form 17”) To Raise the “Woodsmoke” Issue At Point of Salethe “Woodsmoke” Issue At Point of Sale

The Approach:The Approach:

Adds the following questions to the Seller’s Adds the following questions to the Seller’s Statutory Statewide Property Disclosure Form:Statutory Statewide Property Disclosure Form:

Is there an uncertified woodstove or uncertified Is there an uncertified woodstove or uncertified fireplace insert on the property?fireplace insert on the property?

If so, is it subject to a registration requirement?If so, is it subject to a registration requirement?

If so, has it been registered, and have all applicable If so, has it been registered, and have all applicable fees fees been paid?been paid?

Sellers must answer:Sellers must answer: YesYes,, NoNo oror Don’t KnowDon’t Know..

YesYes && Don’t KnowDon’t Know Put Buyers on Notice to Put Buyers on Notice to Investigate.Investigate.

The Approach:The Approach:

Applies statewide to most residential purchase Applies statewide to most residential purchase and and sale agreements (of 1-4 units)sale agreements (of 1-4 units)

Has Statewide Application (where Clean Air Has Statewide Application (where Clean Air Agencies choose to make use of it by Agencies choose to make use of it by implementing a registration requirement) while implementing a registration requirement) while

not creating problems in other areas not creating problems in other areas

May have the potential to take advantage of new May have the potential to take advantage of new non-waiver portions of the statute’s disclosure non-waiver portions of the statute’s disclosure requirements adopted in 2006requirements adopted in 2006

Places the Issue “In Play” Without Automatically Places the Issue “In Play” Without Automatically Killing Some TransactionsKilling Some Transactions

Improves Consumer Knowledge and Choices, Improves Consumer Knowledge and Choices, and and may create bargaining leverage in may create bargaining leverage in transactionstransactions

Sellers can be held civilly liable for false Sellers can be held civilly liable for false statements.statements.

Is consistent with approaches to other Is consistent with approaches to other environmental hazards:environmental hazards:

Lead Based PaintLead Based Paint

Urea Formaldehyde InsulationUrea Formaldehyde Insulation

A 3-Pronged A 3-Pronged Approach: Approach:

1.1. “Clock Hour” Education on “Clock Hour” Education on Environmental IssuesEnvironmental Issues

For Real Estate License RenewalsFor Real Estate License Renewals

2.2. “On-the-Ground” Environmental “On-the-Ground” Environmental Remediation Remediation & Enhancement Projects & Enhancement Projects (Hylebos in October)(Hylebos in October)

3.3. Point of Sale “Brandable” Brochure: Point of Sale “Brandable” Brochure: How to Be an “Earth Friendly” How to Be an “Earth Friendly” HomeownerHomeowner

New REALTORNew REALTOR®® Partnerships PartnershipsWith Local Clean Air Agencies:With Local Clean Air Agencies: Ask the Clean Air Agencies to develop Ask the Clean Air Agencies to develop websites (with websites (with support/cooperation from DOE and EPA) on “Best Practices" for support/cooperation from DOE and EPA) on “Best Practices" for reducing woodsmoke. (Does the HPBA also have an reducing woodsmoke. (Does the HPBA also have an Association website available?)Association website available?)

The Association of REALTORS The Association of REALTORS ®® can can promote these to our promote these to our members and buyers as part of our educational efforts and members and buyers as part of our educational efforts and public outreachpublic outreach Allow us to put a link to each of those web sites on our Allow us to put a link to each of those web sites on our REALTORREALTOR®® web sites around the state (with a “back” link) web sites around the state (with a “back” link)

New REALTORNew REALTOR®® Partnerships PartnershipsWith Local Clean Air Agencies:With Local Clean Air Agencies:REALTORREALTOR®® support for Clean Air Agency funding requests to support for Clean Air Agency funding requests to

underwrite the joint development of “clock hour” license underwrite the joint development of “clock hour” license renewal classes the Association could offer to REALTORS renewal classes the Association could offer to REALTORS ®®

Contributions:Contributions: GovernmentGovernment -- Course ContentCourse Content

REALTORSREALTORS®® - - Can satisfy Regulatory Requirements: Can satisfy Regulatory Requirements:

DOL state-approved Real Estate School & RE DOL state-approved Real Estate School & RE InstructorsInstructors

Obtain DOL approval of RE Curriculum Obtain DOL approval of RE Curriculum

Course Marketing & RegistrationCourse Marketing & Registration Course Proctors Course Proctors Classroom Meeting Facilities & Scheduling Classroom Meeting Facilities & Scheduling

Some Preliminary Some Preliminary Ideas/Thoughts Regarding Ideas/Thoughts Regarding Scope of Course Content:Scope of Course Content:

The woodsmoke issueThe woodsmoke issue

How to determine if a woodburning appliance may How to determine if a woodburning appliance may present a present a disclosure issue under “Form 17”disclosure issue under “Form 17”   

The health risk from indoor woodsmoke (for kids, The health risk from indoor woodsmoke (for kids, asthma asthma sufferers and older folks, in particular)sufferers and older folks, in particular)

How growth projections will affect the woodsmoke issue How growth projections will affect the woodsmoke issue and the government's regulatory responseand the government's regulatory response

What to expect in terms of the federal government What to expect in terms of the federal government continuing to change Clean Air standardscontinuing to change Clean Air standards

What those current and future changes will mean for real What those current and future changes will mean for real estate home buyers and sellersestate home buyers and sellers

What to expect in terms of burn bans, and what those What to expect in terms of burn bans, and what those will will mean for buyers and sellers mean for buyers and sellers 

Sources of additional information on "change outs" Sources of additional information on "change outs"

(including government incentive programs & perhaps (including government incentive programs & perhaps guest speakers from the HPBA – members - if they’re guest speakers from the HPBA – members - if they’re interested/willing)interested/willing)

SummarySummaryPoint of Sale Ban on Transactions Is UnacceptablePoint of Sale Ban on Transactions Is Unacceptable

REALTORSREALTORS®® could Support Statutory Amendments To Statutory could Support Statutory Amendments To Statutory Seller Property Disclosures (assumes action by CAAs)Seller Property Disclosures (assumes action by CAAs)

REALTOR REALTOR ®® Support for including “Point of Sale” Brandable Support for including “Point of Sale” Brandable Information as part of the REALTORS Environmental CouncilInformation as part of the REALTORS Environmental Council

REALTOR REALTOR ®® Support for New Partnerships Support for New Partnerships

Cooperative Cooperative WebsitesWebsites

Development of Clock-hour re-licensing classes for real Development of Clock-hour re-licensing classes for real estate licensees estate licensees

Thank You!Thank You! - Sam Pace- Sam Pace

Sam Pace, Sam Pace, GRI, MBA, JDGRI, MBA, JD

Association of REALTORSAssociation of REALTORS®®

SamPace@concentric.netSamPace@concentric.net

(253) 630-5541(253) 630-5541

“Hierarchy Of Needs”

Self ActualizationSelf Actualization

Esteemed By OthersEsteemed By Others

Belongingness & LoveBelongingness & Love

SafetySafety

Water, Food & Water, Food & SHELTERSHELTER (Housing)(Housing)

Abraham Maslow, Motivation and Human Personality, 1954.