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January 8, 2015July 5, 2019

Making real estate sexy again

The go-go market of almost ten years ago was unique. The wealth aspect of the market seemed to have an effect on almost anyone who owned property; there was somewhat of a carnal attraction that had many home owners seeking more property and turning renters into home owners. It was no surprise that home ownership rates swelled to historic highs. Those who sold their homes or cashed out on their equity found themselves wealthier; while those who didn’t sell were happy to know their “paper wealth” was rapidly growing as home values realized monthly double digit gains.

At that time, the attraction to real estate for many seemed to be instinctive; the flirtation between home buyers and real estate may have been about a future of happy living and financial growth and security. Well, the sex appeal of real estate has worn off and seems to have been replaced by a “meh” attitude; probably indicating a lack of inspiration and/or interest.

Trying to regain the attention of home buyers, some agents have tried to re-establish real estate’s sex appeal. And it has been purposeful to attract home buyers by pairing homes with items that elicit carnal desire; listings are surrounded by exotic cars, modern art, and even sexy models have been credited to facilitate sales of luxury properties.

An April 2011 report by Julie Rose of WFAE 90.7 Charlotte (Realty Firm Uses Sex Appeal To Sell Luxurious Homes; wfae.org) described a photo shoot of a luxury home where, …” a blonde in tight jeans arches her back and tips a wine glass to her glossy lips. Her date leans closer, admiring…” But as Rose sates, “She’s lovely, but she’s not what you’re supposed to be looking at…” You’re supposed to be attracted to the kitchen features that seem to be a backdrop behind the model. However, the real estate agent interviewed said that the idea was to give an idea of what the home’s potential could offer.

Not all agents are on board with this technique, some have characterized the sexy advertising as “cheesy” and distasteful. One agent was quoted by Rose as saying, “It’s definitely gonna make someone stop and look at it. But once they’re in the listing looking at the pictures, I think they’re gonna focus a little more on the models rather than focusing on the home. And I think the bottom line is you want people to focus on the home.”

Sex appeal marketing is just a new take on selling a lifestyle. Lifestyle marketing has been the cornerstone of luxury real estate for years. For example, pairing fine art with luxury real estate has become commonplace; homes and condo projects have incorporated art collections to sell the lifestyle. In fact, the premier art show, Art Basel, has become the place to not only buy/sell fine art but high end real estate as well (Luxury Property Brokers Raring To Pounce On Wealthy Art Lovers At Miami Art Basel; November 28, 2013, Forbes.com). And for gear heads who want their homes built around their supercars, Miami’s über luxury Porche Design Tower will open in 2016.

Want to convey a lifestyle about your home? Before you hire models to pose in your home, consider talking to your agent about focusing on the things that made you enthusiastic and energized about your home. Chances are that the buyer of your home will be attracted to it the way you once were.

By Dan Krell
© 2015

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

January 1, 2015July 5, 2019

Relief and uncertainty for short sellers

Although we’ve come a long way, the housing market is still feeling the effects of the financial and foreclosure crises. Consider that the CoreLogic’s October National Foreclosure Report (corelogic.com/about-us/news.aspx) indicated that there were 41,000 “completed foreclosures” (the total number of homes lost to foreclosure) during October, which is a 26.4% reduction of the 55,000 recorded during the same time last year; and about 65% lower than that of the peak during September 2010. Although moving in the right direction, the 41,000 completed foreclosures is a far cry from the 21,000 average monthly recorded completed foreclosures before the housing downturn (2000 and 2006).

Also seen as progress is the increasing number of home owners who are paying their mortgages; which is observable from the decrease of mortgage defaults since 2010. The November 2014 S&P/Experian First Mortgage Default Index, was 0.97%; and although this is slightly higher than the 3 months prior, there has been a -3.72% change from the November 2010 index of 4.69% (us.spindices.com).

Negative equity mortgages are making headway too. CoreLogic reported on September 25^th (CoreLogic Reports 946,000 Residential Properties Regained 1 Trillion Dollars in Total Equity in Q2 2014) that “950,000 homes returned to positive equity” during the second quarter of 2014. The number of underwater borrowers dropped to 5.3 million (compared to 6.3 underwater borrowers reported in the previous quarter). However, as of Q2 there were 3.2 million underwater borrowers with first mortgages, and an additional 2.1 million underwater borrowers with first and second mortgages.

The number of home owners that continue to be underwater may have been the impetus for Congress to pass the Mortgage Forgiveness Debt Relief Act before adjourning for break; the legislation was subsequently signed by the President. A December 17^th National Association of Realtors® press release (realtor.org) praises the passage of the legislation meant to help “distressed home owners and commercial property investors with transactions made during 2014.” NAR President Chris Polychron stated, “Realtors^® strongly supported the bipartisan Mortgage Forgiveness Tax Relief Act, which was included in the package to prevent underwater borrowers from paying taxes on any mortgage debt forgiven or cancelled by a lender in a workout or after their home was sold for less money than was owed.”

The Mortgage Forgiveness Debt Relief Act of 2007 was initially passed and signed into law December 20^th 2007; which, if you remember, was a time when the housing market was in a sharp downturn. Any debt forgiveness from lenders (either from a mortgage refinance/ modification or a short sale) typically resulted in a huge tax liability (debt forgiveness is usually considered income). The legislation provided tax relief through 2009 to qualified underwater home owners and sellers seeking to avoid foreclosure. The legislation was extended several times thereafter.

Since the last extension expired December 31^st 2013, the recent passage of the Mortgage Forgiveness Debt Relief Act was received as a reprieve by many underwater home owners expecting tax relief from debt forgiveness of short sales that closed during 2014. However, since the recent extension only covers mortgage debt forgiveness during 2014, those who have a short sale planned to close during 2015 find themselves in a tentative situation.

Current politics and economics have many pundits believing that any further extensions of the legislation may not be forthcoming. If you have a short sale planned for 2015, you should consult with your tax preparer about any potential tax liability you may incur.

By Dan Krell
© 2015

December 26, 2014November 23, 2021

Maryland Lead Program rental property registration

Beginning January 1^st, if you own a rental property located in Maryland that was built before 1978, you must register with the Maryland Department of the Environment (MDE). The new law extends the existing registration requirement for homes used as rental units built before 1950. The registration fee is $30 per unit, and must be renewed annually prior to December 31^st.

Since the registration of rental properties built before 1978 began July 1^st, many landlords and property managers have been planning to be in compliance by the New Year. However, many home owners, whose selling strategy includes a simultaneous rental listing, may not be aware of the new law; which could not only affect a potential lease, but may also incur potential penalties and/or liability for non-compliance. The coinciding listing strategy is an artifact from the market following the housing downturn; when many listed homes that did not sell were extemporaneously rented as a means to ride out the market, with the intention to sell at a later time when prices increased. For many home sellers today, a simultaneous rental listing is part of a selling strategy as a means to allow them to move (either by selling the home or by renting it to a tenant).

It is not uncommon that some of these sale/rental home listings are vacant. If you find yourself in this category, consider that you’re required to have the property registered with the MDE and lead inspected by an MDE accredited inspector before your tenant moves in. If the inspection requires any remediation to meet Program requirements, all work must be performed by a MDE accredited contractor.

If you’ve never registered with MDE Lead Poisoning Prevention Program, you need to contact the Rental Registry Division (410-537-4199) to be assigned a “tracking number.” A list of accredited inspectors and accredited contractors can be found on the “Lead Poisoning Prevention Program” website (www.mde.state.md.us/lead). Registration likely began early so as not to create bottlenecks and delays; however, if there is a chance your home could become a rental sometime during the New Year, you might consider not waiting until the last minute.

A July 1^st MDE press release (news.maryland.gov/mde) emphasized that, “Exposure to lead is the most significant and widespread environmental hazard for children in Maryland. Children are at the greatest risk from birth to age 6, while their neurological systems are developing. Exposure to lead can cause long-term neurological damage that may be associated with learning and behavioral problems and with decreased intelligence.” And although lead poisoning cases decreased about 98% since the enactment of Maryland’s 1994 Lead Risk Reduction in Housing Act, a significant number of new lead poisoning cases were linked to homes built before 1978. The MDE cited a 2011 study, which found an 80% “likelihood” of lead paint in properties built between 1950 and 1960. The MDE also cited data analysis that almost half of the confirmed cases of initial lead poisoning reports from the last two years in Maryland counties outside of Baltimore City, “involved children living in post-1949 rental housing.” The MDE states, “Failure to register, certify or follow approved lead-safe work practices may subject property owners to thousands of dollars in fines and potential lawsuits.”

Details about the lead registration requirements and further information about the MDE Lead Poisoning Prevention Program can be obtained from the website (https://mde.maryland.gov/programs/LAND/LeadPoisoningPrevention/Pages/LeadRegistration.aspx).

Original at https://dankrell.com/blog/2014/12/26/maryland-lead-program-rental-property-registration/

December 18, 2014November 23, 2021

Real estate professionals reputation

Gallup (gallup.com) conducts a regular poll of ethics and honesty of various professions. Although the survey is not inclusive of all professions, many are covered in alternating years. Results from the 2013 survey ranked the top five professions as (along with their corresponding “Very High/High” rating) nurses (82%), pharmacists (70%), grade school teachers (70%), medical doctors (69%), and military officers (69%). At the bottom of the list we can find lobbyists (6%), members of congress (8%), car salespeople (9%), state office holders and advertising practitioners were tied at 14%, and lawyers and TV reporters were tied at 20%. Where do real estate professionals rank?

Real estate agents were included in the 2011 Gallup Ethics and Honesty survey, where they were rated with a 20% Very High/High rating; which would be toward the bottom of the list. The 20% rating is actually an improvement from the 17% rating given in 2008. Believe it or not, the 20% rating seems to be the highest rating achieved by real estate agents since the first time they appeared in the poll in 1977; and 2011 was the second time for such a rating (2005 was the first). Historically, the rating ranged from 13% to 19%; not surprisingly, the lowest ratings seem to coincide with housing market slowdowns.

The “Very High/High” rating used to compare consumer opinion of professions may be a little misleading. The 20% “Very High/High” rating in ethics and honesty could lead one to believe that agents are generally viewed negatively. However, in 2011 the “Low/Very Low” rating was 22%; while the 57% “Average” rating may be more indicative of consumers’ opinion of real estate professionals ethics – which is indifference.

The National Association of Realtors® has for years tried to influence public opinion of Realtors® and the industry (not all real estate agents are Realtors®; Realtors® are members of the NAR), by publicly promoting the high ethical standards by which Realtors® are held. Many are unaware that a code of ethics was adopted in 1913 by the association (which was then called the National Association of Real Estate Boards), and has since strived to instill and maintain a high level of integrity in the field.

With such emphasis on ethics, you might expect that public opinion would be much higher. Unfortunately, the limited research on consumer perception of ethics is mixed at best. And according to one study, consumers consider price, quality, and value more important than ethical criteria in purchase behavior (The myth of the ethical consumer – do ethics matter in purchase behaviour? The Journal of Consumer Marketing. 2001;18(7),560-577.)

The reality may be that consumers are not necessarily concerned about ethical behavior or honesty when hiring real estate professionals; which may be why the NAR has decided to add a compulsory dimension of “value” for practitioners so as to increase public opinion of the industry. In an effort to increase professionalism standards, the NAR recently approved an “aspirational” Code of Excellence. A report on the November 10^th NAR Board of Directors meeting stated (realtor.org):

“The goal is to raise the practice of real estate measurably through increased training in the competencies that consumers value. These competencies include the stewardship of property listing data, privacy and security of consumer information, advocacy of property rights, community involvement, and technology.”

NAR President Steve Brown was quoted to say, “This is the first step in a process for the continuing improvement of our profession…”

Original located at: https://dankrell.com/blog/2014/12/18/changing-the-publics-opinion-of-real-estate-professionals/

December 11, 2014November 23, 2021

Value vs. affordability – how inflation affects home prices

Home buyers have been tagged as being too picky for not buying homes this year. Surely home buyers have a right to be particular; after all, they’ll be spending a lot of time in the house – and spending a lot of money to get it too! But, maybe there are other reasons that home buyers have become hesitant.

Consider the uncertainty that immediately followed the Great Recession, when home sales volume dropped off. At that time home buyers seemed overly analytic, weighing many factors including short term value. Yet in truth they were fearful about economic uncertainty, and paying for a home that could potentially depreciate after closing.

The specter of another housing bubble in late 2013 may have seemed farfetched by many. But the double digit appreciation in many housing markets around the country reminded many home buyers of the environment that existed in the pre-downturn “go-go” market of 2005-2007. Anecdotal reports of bidding wars and high listing prices in early 2014 may have scared off some home buyers who reported not wanting to participate in such a market.

Reasons for home sales sluggishness during the latter part of this year may have been signs that the fear of a home price bubble was being realized by home buyers. As home buyers sought value, home sellers wanted higher home price appreciation. Was the psychology of fear playing a part in the ongoing home pricing struggle?

In hindsight, the limited housing inventory that existed during 2013 may have caused upward pressure on home prices by forcing increased competition among home buyers. The rapid home price appreciation may have also been the reason for many home owners to go to market. Brimming with listings, housing inventory swelled to levels not seen in years. Yet it may not be home prices per se that is at issue, but rather affordability.

Affordability goes beyond just the purchase price of a home. It comprises the overall costs of home ownership; which includes monthly mortgage payments, property taxes, homeowners’ insurance, regular and emergency maintenance, and utility costs. Putting aside home prices, home buyers are faced with the prospect of sharply inflating ownership costs. Consider the April 25^th LA Times article reporting on utility costs (U.S. electricity prices may be going up for good; latimes.com); Ralph Vartabedian stated, “… the price of electricity has already been rising over the last decade, jumping by double digits in many states, even after accounting for inflation. In California, residential electricity prices shot up 30% between 2006 and 2012, adjusted for inflation, according to Energy Department figures. Experts in the state’s energy markets project the price could jump an additional 47% over the next 15 years.”

Savings also affect the affordability of a home. Marilyn Kennedy Melia, in her May 17^th feature: Savings Habits and the Housing Market: American are saving less, issues with affording a home (nwitimes.com), reported that a lack of savings is preventing some home buyers from purchasing homes by not having enough for a down payment and/or little for homeownership costs. She described a recent Bankrate survey that indicated “…51 percent of Americans have more emergency savings than credit card debt, the lowest percentage since the financial site began tracking this issue in 2011.” Doug Robinson, of NeighborWorks America, was quoted to say, “Two-thirds of the people who faced foreclosure didn’t have any emergency savings…”