Should I Accept the Referral?

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Readying for Retirement

When it comes to retirement, real estate professionals have it easy in some regards and harder in others. On the one hand, agents and brokers have the luxury of scaling back their business a little bit at a time. That’s what Tom Fannin did. Fannin started his Arizona real estate career in 1958 “before air conditioning,” and retired in 2010 from Coldwell Banker. Fannin said he “saved enough money, used a financial advisor and bought real estate” as he readied for retirement. On the other hand, real estate agents also are largely in charge of looking out for themselves when it comes to retirement planning. AAR spoke with two financial advisors to offer some sound advice for any real estate professional planning for retirement.

“As you evaluate your retirement readiness,” said Patrick A. Funke, CLU, ChFC, AIF of Patrick Funke and Associates, “consider utilizing any one of the many retirement calculators available on the Internet to estimate your financial needs at retirement based on your desired retirement lifestyle.” Funke goes on to say, “research has shown that you are more likely to meet your retirement goals if you set, and periodically monitor, those goals.” In addition to utilizing a retirement calculator to estimate your financial goals, Funke suggests conducting an insurance review to determine what risks could stop you from meeting those goals and evaluate any ways to mitigate those risks.

Kenneth T. Holman, president of Overland Group, RE/MAX Overland, and the National Association of Real Estate Investment Advisors suggests opening an  Individual 401(k) account with a third-party administrator/custodian who permits self-direction. Holman said, “a self-directed Individual 401(k) is similar to any large company 401(k) account, except it is tailored to businesses that only employ the owner and his/her spouse.” This account is well-suited for licensed real estate professionals who are 1099 independent contractors with no full-time employees.

Advantages of a Self-Directed Account

According to Kenneth Holman, the advantages of having a Self-Directed Individual 401(k) plan are significant:

  1. The contribution limits are significantly higher for an Individual 401(k) than for an IRA account. Compared to $5,500, the limit for 2014 is $17,500 for the employee and another $34,500 for the employer if you’re under 50 years of age. You can add $5,500 in a catch-up contribution if you are 50 or older. Your spouse can also have an account and contribute the same amount.
  2. A Self-Directed account allows you to not only invest in the mutual fund accounts of your choice, but also to invest directly in real estate, mortgages, tax liens and deeds, and other related real estate products.
  3. The Individual 401(k) account allows you to borrow up to $50,000 or 50 percent of the account balance, whichever is less. It’s a great savings account that lets you borrow the money for an emergency. You can’t do that with an IRA. The only restriction is that you have to pay the money back to your account over five years at the rate of 4.25 percent.
  4. If set up properly, the Individual 401(k) permits you to have a Roth component on the employe eportion of the contribution. A Roth account allows you to invest after-tax dollars that earn interest tax-free. When you retire, you are required to take minimum distributions at age 70 ½, but you pay no taxes on the distributions.

With your Individual 401(k) you can invest directly in leveraged real estate with no detrimental tax consequences. If you invest IRA money in a real estate deal that has debt, the IRA account is subject to Unrelated Debt Financed Income taxes on the leveraged portion of the investment. These taxes can be as high as 35 percent. However, 401(k) accounts are not subject to UDFI taxes

Conduct an Investment Review

Once you have set your retirement goals, Patrick Funke recommends an investment review. According to Funke, “Investment downturns are inevitable; having a plan of how you react during a market downturn is a key factor toward your ability to maximize your return over your investment horizon.”

In addition to evaluating the appropriateness of the investments you hold with respect to time horizon or how long until you need the money, minimizing debt, accumulation of a cash reserve and the accumulation of a retirement nest egg, are all significant factors to retirement readiness.  Funke states, ”studies have shown that a sustainable withdrawal rate, the amount of money you take out of your retirement assets on an annual basis, is approximately 4-5 percent annually. If you take out more than 4-5 percent of your assets annually, you run a substantial risk of depleting your assets at an earlier age in retirement.”

By planning ahead and allocating a little time each year to review and update your plan for retirement readiness, you can substantially increase the odds of your success.

About the contributors:

Kenneth T. Holman is president of Overland Group, RE/MAX Overland, and the National Association of Real Estate Investment Advisors. Mr. Holman has more than 30 years of experience in the real estate industry. Mr. Holman offers training for real estate agents on investing for retirement.  Sign up for his classes at He can be reached at or 801.931.5571.

Patrick A. Funke is the founder of Patrick Funke & Associates, Inc. He is a financial consultant and retirement plan specialist with more than 25 years of professional wealth management experience. For more information, visit:

Independent Contractor Agreements

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What’s the Buzz with Airport Noise?

Airport noise can be a nuisance. More importantly, if a property is located within a high noise contour or accident potential zone, it may affect the owner’s ability to utilize the property as intended.

Disclosure of airport noise

Arizona law mandates that sellers disclose if a property is located in territory in the vicinity of a military airport or ancillary military facility. To assist with this legally required disclosure, the Residential Seller’s Property Disclosure Statement and Vacant Land/Lot Seller’s Property Disclosure Statement ask whether the seller is aware if the property is located in the vicinity of an airport.

What is territory in the vicinity of an airport?

Territory in the vicinity is defined by Arizona law at A.R.S. §28-8481(20). The definition provides that territory in the vicinity means any property located within certain zones. Those zones are described by way of dimensions that surround specific military airports in Arizona such as Luke Air Force Base.

For visual learners, the Arizona Department of Real Estate compiles airport boundary maps and makes them available to the public. These maps illustrate the boundaries of areas in the immediate vicinity of military and public airports that are susceptible to a certain level of noise from aircraft. The boundaries are typically referred to as noise contours.

The maps are a useful guide to determine if a property falls within a noise contour. Maps for military airports can be accessed at and maps for many of the public airports are found at Additionally, images for the boundaries to military and public airports located in Maricopa County can be viewed at Notably, the maps are intended to show the areas subject to airport-related noise from a given airport. Periodic over-flights that may contribute to noise cannot usually be determined from these maps.

Zoning and development regulations

Not only can airport noise affect an owner’s enjoyment of their property, but it may affect their use of the property. More specifically, Arizona laws regulate the zoning and development of property located within areas of high noise contours or accident potential zones. The definition for noise or accident potential zones, along with the zoning and development regulations for those areas, can be found at A.R.S. §28-8481; and A.R.S. §28-8461;

It is important to note that while a property may be zoned for a particular use, if that property is located in a high noise contour or accident potential zone, a buyer may not be able to develop and utilize the property as intended. In other words, a vacant land or lot may be zoned as residential but because that property is located within a high noise or accident potential zone, the buyer may not be authorized to construct a residential home on the lot. Therefore, because zoning and development may conflict with one another, a buyer should verify whether the buyer will be able to utilize the property as the buyer intends before purchasing a property near an airport.

About The Author

Nikki J. Salgat, Esq.

Nikki J. Salgat, Esq.

Nikki J. Salgat, Esq. is Associate Counsel at the Arizona Association of REALTORS®. Please note that this post is of a general nature and may not be updated or revised for accuracy as statutes and case law change following the date of first publication. Further, this post reflects only the opinion of the author, is not intended as definitive legal advice, and you should not act upon it without seeking independent legal counsel.

Residential SPDS Release

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Flood Hazard Area Information Available

Floods are the most common and widespread of all natural disasters. Heavy monsoon storms, which are common in Arizona, can produce flash flooding in rivers, washes and other areas where rainwater flows.  They can occur with little or no warning and reach full peak in only a few minutes.

The City of Phoenix can help REALTORS® identify whether a property is located in a special flood hazard area and if elevation certificates are available. Contact the Floodplain Management Section at 602-262-4960.  Floodplain Management, located in Phoenix City Hall, 200 W. Washington St, 5th Floor, Phoenix, AZ 85003-1611, is open weekdays from 8am until 5pm. In Tucson, visit the Development Services Department website (under Engineering Forms) or come by the department in person at the Public Works Building, 201 N. Stone – First Floor, Tucson, AZ 85701. Flagstaff residents can visit (click on Floodplain) or call 928-779-7650 x7213 for help.

Homeowners should be aware of the importance of flood-proofing and insuring a flood-prone home.  To protect a home from flood losses, homeowners can purchase flood insurance through the National Flood Insurance Program. Homeowner’s policies do not cover flood damage. Owners should contact an insurance agent for information on flood insurance.

President Obama Signs Flood Insurance Bill Into Law

On March 21, 2014, President Obama signed the “Homeowner Flood Insurance Affordability Act” into law. This law repeals FEMA’s authority to increase premium rates at time of sale or new flood map, and refunds the excessive premium to those who bought a property before FEMA warned them of the rate increase. The bill limits premium increases to 18 percent annually on newer properties and 25 percent for some older ones. Additionally, the bill adds a small assessment on policies until everyone is paying full cost for flood insurance. For more information, watch this video from NAR:

RAPAC Major Investors Spend One-On-One Time with Legislators

Recently, AAR members attended several events where they had one-on-one time with legislators. On Monday, March 17, RAPAC Major Investors and members of the associations Legislative Committees spent an intimate evening at the Phoenix Art Museum with members of the Arizona Senate and House of Representatives. Legislators in attendance included Senators Andrea Dalessandro and Barbara McGuire and Representatives John Kavanagh, Jeff Dial, and Warren Petersen, among others.

On Friday, March 21, AAR joined the Arizona Multihousing Association, Arizona Rock Products Association, Home Builders Association of Central Arizona, NAIOP, Rose Law Group and SAHBA, in hosting a Republican Gubernatorial Candidate forum. This event featured Republican Gubernatorial primary candidates: Ken Bennett, Doug Ducey, Christine Jones, Scott Smith, Al Melvin and Frank Riggs.

See all the photos here:

Registration for the AAR Spring Convention Ends April 10

There’s only a few more days left to register for the AAR Spring Convention. This year’s event will take place in the cool pines of Prescott, Ariz., April 15 -18, 2014. Full-convention passes are $179 and one-day passes are $79. This year’s line-up includes:

  • Eight C/E classes ranging from Fair Housing to Contract Law, Disclosure to Agency
  • Presentations and panel discussions from experts like:
    • John Foltz, who’ll discuss “What Professionals Possess that Amateurs Don’t“;
    • Amy Swaney, certified mortgage broker who’ll discuss the new loan process for faster loan approval;
    • Duo Holly Mabery and Stacey Onnen will  reveal “Secrets of the Buyer Consultation”;
    • A hands-on AAR Genius Bar staffed by REALTOR® tech gurus to help you tackle everything from installing apps, to using Google Analytics to help gain more exposure to your website, to why you shouldn’t waste your time worrying about Zillow.
    • Unparalleled networking opportunities to build your referral network and REALTOR® Karaoke to show off your secret talents.

To view the schedule, C/E opportunities, sneak peeks and more visit:

REALTORS® “Ring” in $200,000 for Charity

Editor’s Note: In 2014, AAR will be featuring Arizona REALTORS® who rock – specifically when it comes to serving their community! These REALTORS® have thrown caution and selfishness to the wind – and their communities are better because of it. Do you know a REALTOR® that rocks? Let us know. Send us an email at

According to the Salvation Army, Wednesday is the most difficult day to find volunteers to help collect donations during the holidays. It’s so hard, in fact, that The Salvation Army actually pays people to man the red kettles, taking money away from those that need it most. When JoAnn and Joseph Callaway learned this, they did something about it. Last year, the Callaways assembled 1,096 of their closest real estate industry friends, along with local Salvation Army volunteer coordinators, to ring the bells at red kettle locations every Wednesday during December. REALTORS®, loan officers, escrow offices and title companies came together and kept the bells ringing for more than 180 kettles during December. These volunteers raised more than $117,000 and saved the Salvation Army $85,000 in expenses – an impact totaling more than $200,000.

A big thank you to all who volunteered!

If you’d like to get involved with The Salvation Army, visit