Real Estate News and Commentary - news, commentary, and opinion

October 19, 2018October 19, 2018

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?

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/

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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.

October 11, 2018October 11, 2018

Quick sale investor promise?

Is a quick sale to a real estate investor worth it?

House flipping is a misunderstood industry. Sure, these investors promise a quick sale, but legitimate home flipping is valuable to the real estate industry and the community. Home flippers revitalize run-down homes, and market appealing homes to home buyers. In a low inventory housing market, home flips have become a significant percentage of home sales in a low inventory market.

House flipping data

ATTOM Data Solutions (attomdata.com), the data solutions behind Realtytrac, recently released its Home Flipping Report for Q1 2018. The report indicated that there were 48,457 U.S. homes that were flipped, which represented 6.9 percent of all home sales. Although the number of homes flipped decreased 3 percent from last year, the percentage of flipped homes in the home sale inventory increased! The number of flipped homes decreased to a two-year low, but the home flipping rate is the highest since 2012. The average gross profit of $69,500 is at the highest point since ATTOM started collecting the data in 2000.

Given the stats and profits, it was just a matter of time for the mom and pop home flipping business to become corporatized. Using the power of the internet and corporate financing, companies such as Opendoor, Offerpad, and recently Zillow have become players in house flipping business. Whether corporate flippers are profitable or have a sustainable business model is for another column. But, there is no doubt that home sellers are seduced by one-click instant offers and promises of a quick closing.

How real estate investors operate

House flippers are known to buy foreclosures and other financially distressed properties. However, these real estate investors also go after other properties too, as long as it’s financially feasible (it’s a business after all). Other types of targeted homes include estate sales, divorce sales, long-time rentals, and outdated or obsolete homes. So, if you haven’t already received a letter offering you a quick offer and fast closing, it’s just a matter of time.

For some home sellers, a quick sale to an investor is fitting. The seller is disposing of a home that would otherwise continue to be a financial burden and deteriorate further. However, many realize they can sell for more on the open market (MLS).

Is a quick sale to an investor all it’s cracked up to be?

If you’re thinking of selling your home (or even currently selling), you might be fascinated by the idea of a quick sale. But for most, the dream of selling for a large sum and closing quickly is just a fantasy. You should realize that home flipping is risky business, and the investors build their costs into their offer. So, be prepared for a really low offer. A typical investor offer is about 70 percent of the home’s value minus rehab, carrying, and marketing costs.

Before you sell to an investor, do your due diligence. Compare multiple investor offers. Verify that the investor is legitimate. Be wary of investors who include extended contingencies. Be aware that “wholesalers” will tie up your home while looking to sell their purchase contract to other investors. Although most investors promise “cash” deals, the reality is that most investors actually borrow money. It is not uncommon for investors to back out or default on a deal because their financing doesn’t come through. Most important, have your attorney review any contract before you sign.

Also, talk to a Realtor. You could possibly sell your home for more than the investor’s “instant” offer. Marketing your home on the MLS at a price appropriate for its condition could net you more.

Original is located at https://dankrell.com/blog/2018/10/11/quick-sale-promises/

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October 3, 2018October 11, 2018

Winter home sale profits

If you are planning to sell next spring, don’t wait! Consider a winter home sale. A National Association of Realtors survey indicates that a surge of home sale inventory is on the horizon. The NAR third quarter Housing Opportunities and Market Experience survey indicated that 77 percent of Americans believe it to be a good time to sell (Homeowners Ready to Sell in the Third Quarter of 2018, says Realtor Survey; September 25, 2018; nar.realtor)! This happens to be a record high for the survey. NAR Chief Economist Lawrence Yun believes that the strong sentiment is due to recent home price appreciation. He stated:

“Though the vast majority of consumers believe home prices will continue to increase or hold steady, they understand the days of easy, fast gains could be coming to an end. Therefore, more are indicating that it is a good time to sell, which is a healthy shift in the market.“

A winter home sale has less seller competition

The housing market conditions are such that we are on the verge of experiencing a déjà vu. Two years ago, winter home sales were fueled by rising mortgage interest rates, low inventory and pent up demand. As I predicted in a November 2016 column, rising interest rates and pent up demand were credited for the almost 10 percent jump in home sales by the end of January 2017! The massive jump in home sales occurred during the deep winter, when existing home sale inventory dropped about one-third of the summer inventory. Sellers who had a winter home sale during 2016-17 were greeted by eager home buyers and faced little competition.

Fast forward to 2018. Yes, admittedly, home sales have slightly dropped off during summer. But many are attributing this phenomenon to the lack of inventory. Consider that Montgomery County existing single-family home sale inventory was almost 20 percent lower than that of the summer of 2016. Although summer home sales dropped off, indicators point to a hot winter housing market. Moderating home prices, combined with pent up buyer demand and a strong economy could make a winter home sale ideal.

It’s clear that home buyers facing rising interest rates have taken a pause. But as rates approach 5 percent, positive economic sentiment is lessening the shock and many are planning to buy before rates creep higher. Giving perspective to the mortgage rate hysteria, current mortgage rates are about the same as they were during 2014. Additionally, the last time we saw mortgage rates above 5 percent was in 2010. Rates exceeded 6 percent when home sales broke records during the market buildup of 2006.

Current sentiment is good for a winter home sale

Another indicator that a winter home sale may be primed is the most recent Fannie Mae Home Purchase Sentiment Index (No Thanks to Housing, Home Purchase Sentiment Edges Up; fanniemae.com; August 2018). Home buyer sentiment increased the first time since May. Economists attribute this uptick to a strong economy along with the awareness of the recent market slowdown. The job and income related index components increased significantly indicating that buyers feel financially more secure with a home purchase. There is also a belief that home prices may moderate due to the summer sales slump.

Winter home sales tend to have less competition and serious home buyers. As I said in 2016, don’t wait until spring to sell your home! If you wait until spring to list your home, you’ll be faced with a profusion of seller competition.

Original published at https://dankrell.com/blog/2018/10/03/winter-home-sale-profits/

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September 27, 2018October 11, 2018

Rent vs Buy puzzle

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 70^th 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 published at https://dankrell.com/blog/2018/09/27/rent-vs-buy-puzzle

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September 20, 2018September 20, 2018

The copious home sale contract

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/blog/2018/09/20/copious-home-sale-contract/

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