New settlement rules may facilitate much needed communication

Signed into law July 21^st, 2010, the Dodd–Frank Wall Street Reform and Consumer Protection Act (aka Dodd – Frank) was intended to improve accountability and transparency in the financial system, to protect consumers from abusive financial services practices, and to end “too big to fail.” The Act created the Consumer Financial Protection Bureau, which enforces regulations to protect consumers and implements rules such as the Qualified Residential Mortgage (also mandated by Dodd – Frank).

Five years after enactment, Dodd – Frank seems to be the Act the keeps on giving with the upcoming implantation of Sec 1098; which states that the Consumer Financial Protection Bureau (CFPB) “shall publish a single, integrated disclosure for mortgage loan transactions” in a “readily understandable language” so as to help borrowers understand the financial aspects of their loan clearly and to be nontechnical.

The new disclosure and settlement statement is intended to present important information conspicuously to help consumers decide if the mortgage is affordable and give warning about undesirable loan features. The new forms seek to standardize fee and cost disclosures so as to make shopping for a mortgage easier. One of the more important aspects of the new regulation is that the new Closing Disclosure is to be given to the borrower at least three days prior to settlement. During the three days prior to closing, changes to the Closing Disclosure that increase charges are prohibited (unless allowed by exception).

Firm timelines for closing and mortgage associated matters, have always been a crucial aspect of the home purchase contract. Not adhering to the dates specified in the contract usually has consequences. However, changes to Realtor® contracts are being considered to reflect the three day waiting period. What was once a firm timeline may no longer have the “time is of the essence” feel, as future contract revisions may not hold the buyer in breach of contract if the home does not close by contract settlement date. Carryover issues may also include implications to meeting loan commitment and appraisal contingency timelines.

If you’re buying a home, note that there are a number of situations that could cause your closing date to be rescheduled because of a “reset” to the three day waiting period, including a loan product changes, 1/8% increase in APR, and/or there is an added pre-payment penalty. Additionally, other lender actions may also require you to reschedule closing; such as a lender required repair with reinspection.

Many in the industry are also concerned about routine buyer and agent pre-settlement walkthroughs. Rather than prior to closing, they will have to be scheduled to allow for negotiation on potential issues without resetting the three day waiting period (and cross your fingers that nothing happens to the home the three days prior to closing).

However, CFPB Director Richard Cordray was quoted emphasizing “The timing of the closing date is not going to change based on the final walk-through…” in a National Association of Realtors® (realtor.org) May 12^th press release reporting on speakers at a regulatory issues forum.

The complexity and implications of the new regulations will undoubtedly cause some confusion in the first days of implementation. However, the new rules inadvertently address one of the weak links to the real estate transaction – communication. Many are beginning to recognize the necessity for everyone involved in the transaction to be proactive and communicate with each other to ensure compliance.

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.

May 8, 2015September 24, 2018

Basements, humidity and dehumidifiers

There seems to be a misconception of the relationship between basements, humidity and dehumidifiers; which probably results in the dehumidifier being one of the most misunderstood and least respected household appliances. This is apparent because many first time home buyers are turned off to any home where they see a dehumidifier, thinking there is a moisture problem. The dehumidifier doesn’t even have to be running; it could be turned off and tucked away in a closet.

The battle that all home owners deal with is keeping moisture out of the basement. Of course, regular maintenance can retard water penetration from the exterior: having the proper grading and extending downspouts will keep rainwater away from the home’s foundation. And serious water penetration issues should be resolved by licensed professionals. However, if the home doesn’t have a foundation or water penetration issue, basement humidity is still an ongoing battle. And if your home has an in-ground basement, chances are you know what I am talking about.

Believe it or not, it’s not necessarily a water problem that dictates humidity in a basement; but rather it’s physics. More precisely: thermodynamics and entropy. Put simply: temperatures in your home seek equilibrium, and warm air will move toward cooler air. Basements tend to be cooler than the upper floors because warm air rises. However, as the temperature seeks equilibrium, the warm air will also move toward the cooler basement air. When warm air meets cold air, the air condenses and develops humidity.

Basements, humidity and dehumidifiers

Although humidity is generally thought of as the amount of moisture in the air; according to Dehumidifier Basics(energystar.gov), it is most commonly referred to as “relative humidity” or RH. “RH is the amount of water vapor actually present in the air compared to the greatest amount of water vapor the air can hold at that temperature.” An RH between 30% and 50% is considered to be optimal. When RH is above 50%, bacteria and mold may grow.

If you don’t have a dehumidifier, you might consider buying one to help maintain the optimal RH in your basement. Dehumidifiers are differentiated by capacity, which is described as pints per 24 hours (measured by the size and conditions of the area where the unit may be placed). Energy Star provides a chart to help you decide the capacity best suited for your needs.

If you already have a dehumidifier, you might be surprised to know that most units are not meant to be operated in areas that are below 65°F (according to Energy Star); however, there are models that are designed for lower temperatures. If you use your dehumidifier in temperatures below 65°F, the unit may not function properly even though you may hear the compressor running. Below 65°F, frost can form over the condensing coils inhibiting the unit from removing moisture from the air. If your unit frosts, it should be unplugged and allowed to defrost.

Although some units are designed to be placed against walls, Energy Star recommends placing your dehumidifier in an area that allows free circulation of air around the unit for optimal operation. And of course, refer to manufacture’s manual for operation and electrical safety warnings.

Maintaining a comfortable RH level in the home can be achieved, and it starts by proper home maintenance. However, a dehumidifier may be necessary for optimal comfort. Energy Star (energystar.gov) provides consumer information about selecting and safely operating a dehumidifier.

Original published at https://dankrell.com/blog/2015/05/08/basements-humidity-and-dehumidifiers-whats-the-problem/

By Dan Krell

April 30, 2015January 16, 2020

Millennials redefining American Dream – and it’s not what you think

There is no doubt that the baby boom generation has fueled the housing market for over four decades. That’s right, our vision of the American Dream was shaped by those who are said to have been born between 1946 and 1964. Success was measured against a standard of working at one job or career for a lifetime, buying a suburban house to raise a family, and do it all on a single income.

As time passed and the economy changed, single income families became passé. Many struggled to keep up with the Jones’ and maintain the American Dream. The Dream became twisted into maintaining a lifestyle at all costs, even by financing it with their home’s equity.

In fact this meme was used in a Lending Tree commercial that ran prior to the housing bust. The commercial starts with the character “Stanley Johnson” introducing himself, and then posing with his family proclaiming they are great. The scene pans out to show his home as he continues to describe his four bedroom home being located in a great community. He then shows off his new car. And is proud to point out he is a member of the local club. He rhetorically asks with a smile while grilling in the backyard, “How do I do it?… I’m in debt up to my eyeballs…” And the commercial ends with “Stanley” mowing the lawn as he proclaims, “Somebody help me…”

At the time when the commercial ran, cash-out refinancing was popular. But in retrospect, the dark comedy seems prophetic of what went wrong with the American Dream. And as some have wondered if the American Dream died with the housing bust, it is becoming apparent that the dream is being redefined by Millennials (those born between 1980 to 2000) – and it may not be exactly what you think.

Millennials have been blamed for holding back a strong housing recovery by delaying household formation and not buying homes. But Brena Swanson of HousingWire proclaimed that to be old news in her April 28^th article (Hey Millennials — You know nothing about housing finance; housingwire.com). She reported that many housing economists have declared 2015 as the year of the Millennial. Furthermore, she reported that by the end of 2015, Millennials are expected to be the largest home buying group; which may be derived from recent polls indicating that they believe it’s a good time to buy a home.

But don’t blame Millennials if 2015 doesn’t turn out they way housing economists expect. Why should the problems of a housing market be attributed to a generation who refuses to walk lockstep with older generations? Gen-X blogger, Jeremy Vohwinkle, pegged it in 2007 when he wrote about the problems with the housing market being rooted in an antiquated vision of the American Dream (The Real Estate Generation Gap: The Baby Boomers Are Trying to Sell, but Who’s Buying?; genxfinance.com). He proclaimed that the Baby Boom real estate cycle (starter home, upgrade to large home, downsize to retirement home) is not what younger generations want.

So, it’s not that the American Dream is dead, as some have thought; it is just being reinterpreted, most likely being restored to its original intentions. And rather than keeping up with the Jones’, it appears to be that the American Dream for Millennials is focused on increasing their quality of life – and whatever that brings with it.

Protected by Copyscape Web Plagiarism Detector

April 23, 2015

Housing market is partying like it’s 2006

After month’s worth of good housing market news, many optimistic home buyers and sellers are preparing for their jump into the market. But some caution that not all the data is positive and the jump into the market should be taken with care.

Have you noticed when there is positive housing news, someone offers data that throws a wrench in the recovery party? Maybe we’ve just become overly analytical about the housing market, looking for reasons to be optimistic. If one month’s home sales exceed expectations, the buzz is about how the market is recovering and anecdotes about multiple offers and fast sales are talked about as if it is the norm. However, when there is a disappointing month, some will try to explain it away giving reasons such as winter weather (even though the data is already seasonally adjusted) or some other one-time incident.

If you haven’t yet figured it out, housing economics is not cut and dried – there is truth in opposing views. The good news is that those who are positive about the housing market are probably correct; the bad news is that those who urge caution are also probably correct. The truth is that since 2010, the housing market has cycled with a two year period oscillating between positive and negative data – one year showing promise, while the next disappoints.

Sure, home prices have increased in recent years, with the sharpest increase occurring from 2012 through 2013. But rebounding home prices are like the sword of Damocles hanging over the housing market: as home prices rebound, affordability has become an issue for many home buyers.

Furthermore, there is a consensus that interest rates will rise sometime in the near future; and some are worried about the effect on the housing market. Spencer Jakab of the Wall Street Journal made this clear in his March 30^th piece (Spring Puts Bounce in Housing Market: Home Prices May Get a Second Wind: wsj.com) by explaining the relationship between mortgage costs and affordability.

Jakab starts off by saying “The demise of the housing recovery has been greatly exaggerated.” And points out how home prices have rebounded, while February home sales were as good as (if not slightly better than) February 2014 (regardless of the two year cycle). He also indicates that although home prices have not reached their pre-crisis levels, they are at the highest levels since the crisis. However, he cautions those who are ready to call it a housing recovery trend. He states: “Once the Federal Reserve starts raising interest rates, likely sometime this year, affordability will begin slipping. Say 30-year mortgage rates are a percentage point higher a year from now, and prices are 5% higher. Then a monthly mortgage payment, assuming a typical down payment, would rise by about 18%.”

Considering that average wages increased 2.1% during 2014, an 18% increase in the cost of home ownership could arrest home price appreciation and possibly cause a déjà-vu market liken to 2008-2009. If you don’t remember: homes were on the market for extended periods; home prices decreased; and home buyers and sellers retreated.

So why should we get all excited about a little good news? Rather than focusing on 2 data points each month (comparing a month’s data to the previous month, and the same month from the previous year), maybe it’s time to focus on the bigger picture.

April 15, 2015December 13, 2022

So how’s that internet working out for you?

If you’re like many other Americans, internet reviews persuade your choice of online purchases. Internet reviews have become so influential that it is life or death for many restaurants. Even service industries have added weight to internet reviews. But a recent Amazon lawsuit, once again, has many talking about the authenticity of internet reviews.

The gaming of internet reviews was first given attention in a 2011 New York Times exposé by David Streitfeld, when he described the effort for businesses and individuals to appear better than their competition by saying: “…an industry of fibbers and promoters has sprung up to buy and sell raves for a pittance.” And at that time, Cornell researchers concluded, at the 49^th annual meeting of the Association of Computational Linguistics (Proceedings of the 49th Annual Meeting of the Association for Computational Linguistics, pages 309–319, Portland, Oregon, June 19-24, 2011.), that the detection of fake reviews is “well beyond the capability of human judges;” and recommended an analysis of reviews to include, among other things, psycho-linguistically motivated features.

Since the issue was brought to light in 2011, you might think that the practice of using fake reviews might have dwindled. On the contrary. It seems as if the practice has become increasingly sophisticated to circumvent the controls that are meant to weed them out. You can still find services that will write reviews – for a fee; fake reviews have even become specialized, where “reviewers” advertise to place their evaluations on specific websites. Furthermore, you can find online classified ads offering payment for reviews or to “swap” reviews for free.

In response to the seemingly persistent problem, Amazon is the first to take legal action to crack down on fake reviews. Jay Greene’s April 8^th Seattle Times report (Amazon sues to block fake reviews on its site; seattletimes.com) indicated that the Amazon suit alleges that such reviews are deceptive and harmful to those who don’t abuse the review system. And according to CNET (Amazon sues alleged reviews-for-pay sites; cnet.com), Amazon (like many online sites) has invested in monitoring controls to foil fake reviews; but people seek out to game the system.

I hear you asking: “Surely, real estate agents don’t post fake reviews, right?”

According to Lani Rosales of AGBeat, the posting of fake agent reviews are “…unethical but seemingly common practice.” She reasoned in her 2011 report (Sketchy new trend – hiring fake online review writers; agbeat.com) that there has always been an element posting fake real estate agent reviews. And she anticipated that the trend would continue, as agents coped with the down market, “…Realtors are already using and will undoubtedly increase use of these willing reviewers, making for a repeat of history where agents are painted as being ‘number one,’ having ‘impeccable integrity’ and ‘superior service’…”

As we spend more time online (emarketer.com reported in 2013 that web users spent an average of 23 hours per week using email, texting, and social media), getting your online attention is big business – especially in the real estate industry. Apparently, there’s a lot of money at stake, such that a battle has be waging during the last year between Zillow Group (Zillow and Trulia) and News Corp (Move Inc and Realtor.com); alleging stolen secrets and wanting access to property listings.

And much like the fake reviews that vie for your business, the lawsuits between the real estate giants may ultimately reveal the business of the internet; which may not actually be about customer service, but really about selling a commodity – you.