Dear Ask George: "Are Massachusetts real estate agents required to undergo any particular kind of updating so that I, as a consumer, know that I am properly represented?" -- First Time Homebuyer

Answer: "Yes," or "maybe", the decision is up to you. I'll explain further.

Updates to Massachusetts Real Estate Licensure are called "Continuing Education." Currently, a Massachusetts licensee is required to obtain a total of 12 classroom hours of "CE" for every two year term he or she is licensed.

In fact, I traveled from Houston, Texas, recently (where I am based) to obtain CE credit for my Massachusetts real estate Broker's license. The instructor was a gentleman named Bill Morgan, CRB, CBR, who had been teaching real estate courses for substantially more than 20 years. He had taught courses in every town, or city, in which the American Real Estate Academy ("A.R.E.A.") had classes. In my opinion he is an excellent teacher, delivering a mixture of fact, spell-binding case stories, humor, well-modulated voice control and a demand for student participation so that each student left the 12 hour class feeling that they had been singled out for special treatment.

So what's with the "maybe" in my answer in the first paragraph? Well, you see, the only method the Commonwealth of Massachusetts has to verify that each and every real estate licensee has completed the CE requirement, is a signature applied by the licensee that under "the pains of perjury" the licensee has complied with Massachusetts General Laws applicable to everything required for license renewal. In other words, it is based upon the honor system.

How many real estate licensees renew their license, pay the renewal fee and sign off under pain of perjury that he or she has completed the 12 hours of CE without having actually attended any CE classes? I don't know. One of my classmates opined that it was "more than one."

The Texas and Georgia Real Estate Commissions, as well as others, rely upon authorized schools and colleges to submit verification on CE completions by each licensee. Either Massachusetts has a superior "fast-track method" of assuring continuing education compliance, or Texas and Georgia are spending a lot of unnecessary funds. What does the reader think?

Dear Ask George: "I hold a RE brokers license in California and Nevada and have a friend who is relocating to the Houston area. Am I able to participate in showing and helping him to buy a property as a Buyer's agent in the state of Texas?" -- Reciprocity

Answer: Texas does not have reciprocity with any other states with regard to real estate licensure. Therefore, you would not be able to represent a buyer or seller in Texas unless you also have a Texas real estate license. You can, however, refer your friend to a Texas licensee and receive a referral fee for having done so. You may travel to Texas with your friend, see properties with him, and generally be a part of his home buying experience. You may not, however, engage in any activities requiring a real estate license in Texas including, but not limited to, participating in negotiations. For more detailed information, visit the Texas Real Estate Commission web site.

Dear Ask George: "Could you tell me if it is illegal for me, as a rehab real estate investor located in Massachusetts, to pay a bird dog or other non licensed individual a referral fee for providing a successful lead on a real estate opportunity? The particular property in question is not listed with a realtor." -- Wanting To Pay Bird Dogs

Answer: If you are not a licensed Massachusetts real estate broker or salesperson, and conspired with a person who is also unlicensed by paying the unlicensed individual a referral fee for introducing you to an owner of a property that you successfully purchased, at the very least the unlicensed individual would be in violation of M. G. L. Chapter 112 Section 87PP. I also think you could have some exposure for conspiring with the unlicensed individual to circumvent the Commonwealth's Laws.

Dear Ask George: "On annual earnings of $40,000 what is the amount of home for which we would qualify? We were told by one mortgage company that we could qualify for a home priced under $140,000. We found one home for $136,000. Is that too risky?" -- Questioning

Answer: The rule of thumb states that one can borrow (subject to favorable credit reports), an amount whereby the monthly mortgage payment (including principal, interest, taxes and insurance) does not exceed 25 percent of the gross monthly earnings. At $40,000 annually, your monthly gross earnings are $3,333.33, and 25 percent of that is $833.33. That is called the "Income Ratio."

The next ratio, called the "Debt Ratio" is that the monthly mortgage payment (principal, interest, taxes and insurance) plus your monthly recurring debt (car, credit cards, etc. but not rent) should not exceed 36 percent of your gross monthly income.

If you have a really good credit report, have been working in the same field for a certain time, I should think you ought to qualify for up to $120,000.00 mortgage loan. If you paid 10 percent down, then you could buy a $133,333.00 home (Cash down payment $13,333.00 Mortgage loan $120,000.00 = Sales Price $133,333.00).

Having said all that, there are a lot of variables that go into the underwriting process of a mortgage loan. I have seen Income Ratios of 30 percent or more, and Debt Ratios of 40 percent, even 50 percent and higher. The key here is to work with a mortgage broker or mortgage banker you trust and be completely truthful with him or her.

Dear Ask George: "Can Earnest Money be held in another state's Escrow Facility when the Commercial Property is in Texas? Is the contract still a legal and binding document if your answer is yes?" -- Interstate Escrow

Answer: Yes and yes. Interstate escrows are very common. Most often, you use an affiliated title company (same underwriter) and use an insured closing letter to assure the parties' money is properly handled. Assuming the contract contains all the required notices and/or disclosures and meets any other applicable requirements when selling real property in Texas, it should be both binding and enforceable.

Published: April 12, 2005

Use of this article without permission is a violation of federal copyright laws.

George Stephens, CRB is the Broker of ERA Stephens Properties. He is licensed as a mortgage broker in Texas, and a real estate broker in Texas, Georgia, and Massachusetts. Charles J. Jacobus, JD is Board Certified by the Texas Board of Legal Specialization in Residential and Commercial Real Estate Law, and the author of Texas Real Estate Law, and Texas Real Estate, both published by Thomson Publishing. He also teaches at Champions School of Real Estate, Houston Community College, and is an adjunct professor at the University of Houston Law Center. To send us a question visit AskGeorge.net and click the "Ask A Question" button. The answers to questions in this column do not contain legal advice. George and Chuck are co-authors of Texas Real Estate Brokerage and Law of Agency, published by Thomson Publishing. If you wish to obtain legal advice, you should consult your own attorney.