Real Estate Thanksgiving

real estate thanksgiving
A Real Estate Thanksgiving

Thanksgiving is a time to take stock and be thankful.  Although the original Thanksgiving may have had a religious purpose, today’s secular holiday is about traditions.  However, it seems as if the tradition of enjoying a peaceful meal with family and friends has been increasingly difficult over the past few years.  But since the election is over, let’s try to talk about something worthy of discussion (at least until the next election cycle begins), such as real estate and housing. Yes, it’s a “Real Estate Thanksgiving.”

Why shouldn’t we focus on something we all can get behind? There is a good chance that your dinner guests will include someone will be moving next year.  Whether they are buying, selling, or renting a home, someone at the dinner table will be affected by such issues as housing affordability, mortgage rates, and availability of homes.

Things to talk about during your Real Estate Thanksgiving might be about mortgages, home sales, home prices, rent, maintenance, etc.  The topics are seemingly endless.

Talking about mortgages during the Real Estate Thanksgiving.  The current news is about mortgage interest rates.  How high will mortgage rates go?  Housing experts agree that mortgage rates will likely be about 5 percent next year (although the Fed just announced they may hold off on interest rate hikes after spring).  Paying more interest on your mortgage may not be your idea of positively affecting home sales.  However, increasing mortgage rates typically moderate home price growth because of affordability.  Another silver lining of increasing interest rates is a stimulated lending environment.  As a result, mortgage companies will likely further loosen lending requirements, which will increase the home buyer pool.

Real Estate Thanksgiving and home sales could focus on the reasons for the fall slowdown.  Will home sales rebound this spring?  You’re probably aware that home sales have dropped off during the fall.  Major media outlets have grasped the news and created the meme depicting “housing bubble 2.0.”  You can’t really blame them because there are many economists who are projecting bleak home sales to continue through spring.

The main reason for a disappointing 2019 forecast given by many industry insiders is affordability.  I contend that this rationale is shallow and one-dimensional.  There is no doubt that rising interest rates and increasing home prices are on the minds of home buyers.  However, the lack of home sale inventory is a dimension that is often forgotten when discussing home sales and rentals.  The lack of available homes for buyers and tenants to choose has forced many into fierce competition.  The result has been upward pressure on home prices and rents.

You have to also consider the economy at your Real Estate Thanksgiving. The strength of the economy is an aspect affecting the housing market that many haven’t discussed.  Whether you want to admit it or not, the economy is the strongest it has been in decades.  Consumer outlook is optimistic.  Home buyers and renters have expressed confidence about their job prospects too.  Employers are competing for talent, influencing the highest wage increases in over a decade.

Commenting on the economy, First American chief economist Mark Fleming believes that the economy will be a major force in the housing market (How Will a Potential September Rate Hike Impact Existing-Home Sales?; blog.firstam.com; September 18, 2018).  One of the features of his analysis for 2019 is “It’s the Economy and First-Time Home Buyer Demand, Stupid.”  He described a pent-up demand from a wave of millennial of first-time home buyers who will be in the market next year.

Fleming explained that home sales slump during an adjustment period that home buyers undergo when interest rates increase.  The same thing occurred in 2010 when rates increased from 4.5 to 5 percent.  However, the economy was struggling at that time, and home sales were stagnant.  Fleming described First American’s positive housing forecasts overcoming rising interest rates, saying,

“According to our Potential Home Sales Model, the boost from the strong economy and first-time home buyer demand should overcome any downward pressure from rising rates on home sales.”

Original article is published at https://dankrell.com/blog/2018/11/21/real-estate-thanksgiving/

Copyright© Dan Krell
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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.

Real estate services personality

The “one-size-fits-all” service model is becoming an all too familiar experience in every day life.  You encounter it when you go to the doctor’s office.  A day at the mall is certainly a one-size-fits-all adventure.  Now, there is also the pressure towards automated buying and selling systems in the real estate industry.  Real estate services that is one-size-fits-all?  The idea of a one-size-fits-all real estate transaction is becoming trendy from both online companies and local real estate companies.

How do real estate services treat clients?

real estate services
Real Estate Services (infographic from nar.realtor(

The move toward systematizing consumer encounters comes from the corporate goal of profiting from efficiency.  Don’t get me wrong, there is nothing wrong from a business making money.  After all, making money is the basis of our economy.  And the one-size-fits-all system for home buying and selling is a business solution during a healthy housing market where homes sell quickly.

However, the systematization of the service industry, including real estate, is not welcome by all consumers.  There is some acknowledgement that a systematized real estate transaction can have unfortunate outcomes when the plan is derailed.  Not all real estate transactions are easy, nor do all homes sell quickly.  It is a fact that that most home buyers and sellers still want an expert they can count on to help them navigate one of the most expensive and stressful transactions of their life.

Customer service research

Gauging the effects of a systematized service industry on the consumer is a growing interest.  One recent study examined customer service reactions when the provider system fails (Diaz, Gomez, Martin-Consuegra, Molina; The Effects of Perceived Satisfaction with Service Recovery Efforts: A Study in a Hotel Setting; Ekonomie a Management; 2017, 20:4 p.203-18).  The study suggested that customer issues are inevitable.  They conclude that customer service models should have strategies to address and resolve issues to maintain positive customer relationships.

Another study suggested that when it comes to automated service, some service industries are better suited than others (Scherer & Von Wangenheim;  Man Versus Machine-How the Service Channel Affects Customers’ Responses to Service Encounters; AMA Winter Educators’ Conference Proceedings; 2016, Vol. 27).  The authors suggest that a consumer’s expectation is guided by how a service is provided.  Satisfaction levels are increased when personal services are delivered by a human.  Furthermore, they found that consumers who prefer technology or automated services tend to be ego-centric.  These “self-service” consumers attribute success to their abilities, while shifting blame to externals when there is a failure.

Real estate services for all personalities

The growing body of research may explain why real estate agents have not become extinct in a technological world.  Instead, the profession has endured.  Moreover, Realtors have embraced technology (for better or worse).  As new technologies make the home buying and selling process easier, the industry will undoubtedly adapt.  The fad of systematizing the real estate transaction, as well as buyer and seller encounters, is in reality a “one-size-fits-some” solution.  In other words, there is a place for the automated and systematic real estate transaction, but it’s not for everyone.

Before you embark on your home buying or selling journey, you should think about your needs.  What are your expectations?

As a real estate consumer, you have a duty to explore your options for real estate services.  You should interview and compare real estate services. Questions to ask your real estate agent before you buy or sell a home:

  • Is there one point of contact, or do you have to deal with a “team” of people for different situations.
  • What do you do if the point of contact is not available?
  • How do they handle unexpected obstacles or emergencies?
  • Ask for recent client references whom you can call.

Original is located at https://dankrell.com/blog/2018/10/19/real-estate-services-personality/

Copyright© Dan Krell
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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.

Rent vs Buy puzzle

rent vs buy
The Rent vs Buy decision is a personal puzzle (infographic from keepingcurrentmatters.com)

For some, committing to buying a home is an easy decision.  However, some struggle rationalizing homeownership.  Adding to the confusion are the attempts to persuade tenants to be home owners by flaunting its benefits and financial savvy.  To be sure, there are personal and financial factors that go into deciding Rent vs Buy.  However, the reality is that the Rent vs Buy question is a complicated personal puzzle.

Are you weighing the decision of Rent vs Buy?  Consider that homeownership does have benefits over renting.  Besides having a place to live, the consensus is that homeownership provides stability and belonging to a community.   Numerous studies have associated being a home owner with increased well being and better health outcomes.  Research by the Harvard University’s Joint Center for Housing Studies concluded that homeownership and growing wealth are associated (Herbert, McCue, and Sanchez-Moyano; Is Homeownership Still an Effective Means of Building Wealth for Low-income and Minority Households? Was it Ever? Joint Center for Housing Studies Harvard University, September 2013).

But frustrated home buyers are returning to their rentals because of inventory shortages, intense competition, and increased home prices can be aggravating.

The latest National Association of Realtors (nar.realtor) press release indicted a 1.5 percent decrease in home sales from the previous year.  Although home sales were weak for the previous four months, home prices have increased for the 70th consecutive month!  Nationwide median existing home prices increased 4.6 percent from the previous year to $264,800.  The lack of home sale inventory is partly to blame for the decreased home sales, which increases the upward pressure on home prices.

The Greater Capital Association of Realtors (gcaar.com) release of August housing data for Montgomery County is not much different from the national figures.  Single-family home sales in the county decreased 0.7 percent from the previous year.  Inventory is 8.3 percent below last year’s available homes for sale at the end of August.  But median home sale prices jumped to $443,000, which is an increase of 4.2 percent.

Those who are dissuaded from buying a home because of increasing home prices are facing rent increases.  The median rent for Montgomery County is $1,647.  But according to Healthy Montgomery (healthymontgomery.org), there is upward pressure on rent.  This is not just a local phenomenon, it is nationwide.  According to the Census Bureau (census.gov), some metropolitan areas and cities have experienced increases well over $300.  Rent increases are in part due to inflation and the increasing cost of owning a rental property.  However, tenants are mainly experiencing rent increases because of supply and demand.  Rental inventory is just as tight as home sale inventory.  The Census Bureau reported that the vacancy rate decreased year over year.  Additionally, the Census Bureau reported last year that the percentage of renters who moved during 2017 was the lowest recorded since 1988.

The robust economy has prompted the Fed to increase interest rates this year.  Another rate hike is expected this week.  According to Freddie Mac (freddiemac.com), mortgage rates have increased in anticipation of the Fed’s rate hike.  According to Freddie Mac’s Mortgage Market Survey, the average 30-year fixed rate mortgage is 4.65 percent.  Although mortgage rates are the highest in several years, rates continue to be historically low.

For many who continue to rent, they’re perspective may be justified by comparing housing costs.  The Trulia Rent vs Buy Calculator (trulia.com/rent_vs_buy) is a tool that compares these factors.  Paying rent for a long term may make sense if your rent is low.  However, buying can be a better long-term decision when comparing similar size properties and housing costs.

Consulting with  Realtor can help too. You can find out which is feasible Rent vs Buy. You can see if there are any homes for sale in your affordability range. You can also find out what rentals are available in your rent range.  Regardless of your Rent vs Buy decision, your real estate agent can assist you with housing and the process for home buying or renting.

Original located at https://dankrell.com/blog/2018/09/27/rent-vs-buy-puzzle

Copyright© Dan Krell
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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.

The copious home sale contract

home sale contract
Home buying process (infographic from floridarealtors.org)

If you’ve recently bought or sold a home in Montgomery County MD, you probably recognized that the home sale contract was quite lengthy.  In fact, depending on the situation and additional addenda, a contract can be fifty-plus pages. It seems as if that the home sale contract gets fatter as every year passes. It’s no wonder why I am often asked “Why are home sale contracts long winded?”

Why is our home sale contract so long?  Our local home sale contract has a number of required addenda and disclosures.  There is a simple reason for this, but let’s look at the foundation and need for the contract.

It’s important to mention that property sale contracts around the country are not the same.  Every jurisdiction has their own criteria for a home sale contract.  A recent client who relocated from New Jersey shared their home sale contract, which was a fraction of the size of our local contract.  Likewise, a colleague asserted the same about the property contracts in Arizona, where he was licensed for a number of years.

Property sale contracts go back into antiquity.  Most likely, ancient contracts formed a basis of ancient record keeping.  These ancient contracts were also “promises” that were enforced in some manner that was keeping with the time.  For example, The History Blog (thehistoryblog.com) tells the account of the Mogao Caves which are located in the Gobi Desert and date back to the fourth century.  One of the caves held a cache of financial documents from medieval China, including property sale contracts and records!

According to the legal historian A. W. B. Simpson, modern English contract law has roots in the middle ages (A History of the Common Law of Contract: The Rise of the Action of Assumpsit; Clarendon Press; 1987).  The contract was founded in the concept of “assumpsit,” which was the basis for resolving “broken promises.”  Assumpsit allowed individuals to bring claims of broken promises to local courts.  Although the practice was traced back to the thirteenth century, court hearings were routine in the sixteenth century.  This model became the basis for enforcing a private contract.

It wasn’t until 1677 when the English Parliament enacted “An Act for the Prevention of Frauds and Perjuries,” known today as the Statute of Frauds.  According to Russell Decker, the Parliament enacted the law that required contracts to be written, because parties obliged by a contract were not allowed to provide testimony in court (The Repeal of the Statute of Frauds in England; American Business Law Journal; 1973; 11:1 p55).  The written contract was the “witness” to a promise.  However, most of the Statute of Frauds was mostly repealed in England in 1954.

The Statute of Frauds is still alive and well in the US and the basis for the real estate contract in Maryland.  Statute of Frauds is a subtitle of the Real Property Act of the Code of Maryland.  Section 5-104 Executory Contracts states: “No action may be brought on any contract for the sale or disposition of land or of any interest in or concerning land unless the contract on which the action is brought, or some memorandum or note of it, is in writing and signed by the party to be charged or some other person lawfully authorized by him.”

So ok, home sale contracts need to be in writing, but why are our contracts lengthy?  The reason is because many of the addenda and disclosures are generated because of statutory requirements to provide specific information in a contract of sale. Besides  the expected list of notices and disclosures (such as property condition), there is a compendium of additional required notices and disclosures that is found in Code of Maryland  Miscellaneous subtitle of the Real Property Act section 14-117 Contracts for Sale of Property.  Additionally, jurisdictions around the state include additional addenda and notices for home sales within the respective county and/or locality.  Of course, Montgomery County has added a number of disclosures and notices (such as the Utility Cost and Usage History Form and the Real Property Estimated Tax).

Make sure your agent is knowledgeable about the jurisdiction in which you are buying or selling.  As a buyer, you need to make sure you receive all the relevant notices and disclosures.  As a seller, you may incur a fine for non-disclosure of certain notices.

Original published at https://dankrell.com

Copyright© Dan Krell
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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.

Home inspections pointless?

home inspections
Home Inspection Myths (infographic fom visual.ly and apexwaterproofing.com)

I have heard an increasing voice of discontent over home inspections. Not just from home sellers and their agents, but from home buyers too! Home sellers often complain about the incorrect flagging of working components as being defective. Listing agents usually gripe that home inspectors scare buyers and interfere with their sale. But many home buyers are also growing dissatisfied with inspections and the subsequent property reports.

Inspection reports are becoming “matter of fact.”  Even when an inspector flags a component or system, less information is given about it and what to do.  Additionally, there is an increasing trend for recommendations to seek expert advice .  Home inspectors have been known to make mistakes too.  Some are starting to wonder why they should hire an inspector to tell them to hire an expert.  Consumers can just hire experts to inspect the corresponding major systems and components from the start.  Some are asking if home inspections are becoming irrelevant and pointless.

The home inspection, as we know it, began in the 1980’s. As the profession became standardized, it became a necessary part of the home buying process. The inspection used to be a straight forward examination of observable systems and components. But the home inspection has morphed from a once-over by a trained professional to the concept of getting a home perfect through remedying all of the home’s defects.  The fact that home inspections have become a tool for many agents to renegotiate price is another sign the inspection may have jumped the shark.

All things considered, home buyers expect a thorough and exhaustive inspection. They are relying on the inspector to identify concealed and latent defects. They are relying on the inspection and report to help them determine the condition of the home and its systems/components before they move forward with their purchase.

According to Maryland’s home inspector licensing law, the home inspection is intended to “provide a client with objective information regarding the condition of the systems and components of a home at the time of the home inspection;” and provides an opinion of “visible defects and conditions that adversely affect the function or integrity of the items, components, and systems inspected, including those items or components near the end of their serviceable life.” However, there are limitations (COMAR 09.36.07.03).

According to COMAR, a home inspection is “not technically exhaustive,” and it may not identify a concealed condition or a latent defect. Among the list of items that the home inspector is not required to ascertain, includes the condition of systems that are not accessible, and the remaining life of any system or component.

Furthermore, an article that appeared in RealtorMag last year suggests that home inspectors are generalists and don’t know everything about a home (4 Things Home Inspectors Don’t Often Check; realtormag.realtor.org; July 05, 2017). Inspectors often defer to experts on foundations, fireplaces, chimneys, well/septic systems, and roofs. This is done because those components are not easily inspected and also requires specialized knowledge that is usually outside the scope of the inspection and/or beyond the expertise of the inspector.

However, in today’s real estate environment, home buyers are wanting and expecting more from the professionals they hire as well as the homes they buy. Buyers anticipate their home inspection with high expectations about the inspector’s opinion and conclusions. So, it’s not a surprise that many home buyers are voicing displeasure with their inspectors. Some complain that the inspector missed items and/or did not inspect a component.  Additional complaints are about the inspection reports, that some feel are lacking in detailed information.

Have home inspections become irrelevant? Or is it just a case of the home inspectors having to educate the public what they do?

Home inspections are essential for most home buyers. But home buyers need to understand that inspectors are not the authoritative voice on all home systems and components. Instead, home inspectors bridge the knowledge gap between what the home buyer knows and what they should know about a home, especially the home they are buying.

Original published at https://dankrell.com/blog/2018/05/07/home-inspections-becoming-irrelevant/

Copyright© Dan Krell
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Protected by Copyscape Web Plagiarism DetectorDisclaimer. 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.