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January 30, 2015July 5, 2019

Fair housing and disparate impact – Supremes hear arguments

April is designated as Fair Housing Month. The timing for the commemoration is not arbitrary, but is the memorialization of the passing of the Fair Housing Act, which was enacted April 1968. According to HUD (hud.gov), “HUD hosted a gala event in the Grand Ballroom of New York’s Plaza Hotel” to celebrate the first year. Fair Housing Month celebrations held during April have become a “tradition” as events to remember the achievement became more prevalent. Fair Housing Month has become more than just recognition of the realization of passing a law; it has also become a celebration of diversity.

It’s January, and there’s an early buzz about Fair Housing; not because of any celebration or proclamation, but because of a case being considered by the Supreme Court of the United States. Oral arguments were heard last week by the Court in the matter of Texas Department of Housing and Community Affairs v. The Inclusive Communities Project. Although still obscure, the case may be one of the most important and controversial cases the Court will hear this year.

Amy Howe, in her January 6^th article for SCOTUSblog (Will the third time be the charm for the Fair Housing Act and disparate-impact claims? In Plain English; scotusblog.com), succinctly described the case that emanates from Texas: “In 2008, the Project filed this lawsuit against the state agency. It argued that the agency had allocated the tax credits in a racially segregated manner: it disproportionately granted the housing credits in minority areas of the Dallas region, while at the same time disproportionately denying them in white areas of Dallas. A federal district court agreed with the Project, finding that the agency’s allocation of tax credits violated the FHA because it had a disparate impact on minorities. Under the ruling, it did not matter whether the agency intended to discriminate against minorities; the effect was enough to violate the law. The U.S. Court of Appeals for the Fifth Circuit agreed that a disparate-impact claim could be brought under the statute. The state then asked the Supreme Court to weigh in, which it agreed to do in October of last year.”

Howe stated, that “The Fair Housing Act makes it illegal to ‘refuse to sell or rent . . . or to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any person because of race…’” This is the third case “…in less than four years, the Supreme Court granted review to consider whether this language allows lawsuits based on disparate impact. A disparate-impact claim is an allegation that a law or practice has a discriminatory effect, even if it wasn’t based on a discriminatory purpose.” The first two cases were settled before oral arguments.

According to the National Fair Housing Alliance (nationalfairhousing.org), disparate impact “…is a legal doctrine under the Fair Housing Act which means that a policy or practice may be considered discriminatory if it has a disproportionate “adverse impact” against any group based on race, national origin, color, religion, sex, familial status, or disability…” and “…safeguards the right to a fair shot for everyone.”

The outcome could affect more just the policies of a Texas housing agency. Although the Court’s opinion may not be given until later this year; the outcome will surely be felt beyond the housing and lending industries.

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 22, 2015July 5, 2019

Affordable housing redux

Statistics and indices have indicated that buying a home has become more affordable in recent years. In fact, the October 2014 Trulia Rent vs. Buy Index indicated that buying a home was 38% cheaper than renting (trulia.com). Additionally, the S&P/Case-Shiller National Home Price Index released December 30th indicated that average home prices for the 10-City and 20-City Composites are at “autumn 2004 levels” (housingviews.com). However, while interest rates continue to be favorable along with an expanding inventory that offers more choices, obstacles remain to home ownership.

Unlike the high home prices that drove affordable housing concerns in the past, many would-be home buyers today face income and savings challenges. Statistics suggest that many do not earn enough to qualify for a home purchase and/or have not saved enough for a down payment and closing costs. The latest report (Q2 2014) of the Maryland Association of Realtors® First-time Homebuyer Affordability Index revealed a decrease in home affordability from 84.1% to 75.7%; which indicates that Maryland first time home buyers had 75% of the income required “to purchase a typical starter home” (mdrealtor.org).

More importantly, a survey conducted by the Consumer Federation of America (7th Annual Savings Survey Reveals Persistence of Financial Challenges Facing Most Americans; February 24, 2014, consumerfed.org), revealed that “most Americans are meeting their immediate financial needs but are worse off than several years ago.” And, “… that, despite the economic recovery, most Americans continue to face significant personal savings challenges….” Stephen Brobeck, Executive Director of the Consumer Federation of America and a founder of America Saves, was quoted to say: “Only about one-third of Americans are living within their means and think they are prepared for the longterm financial future. One-third are living within their means but are often not prepared for this longterm future. And one-third are struggling to live within their means.”

With an eye to address housing affordability, the President reduced the FHA annual mortgage insurance premium (MIP). Increases in FHA’s MIP in recent years have helped offset losses from the foreclosure crisis; and inadvertently made mortgages more expensive. And although the recent MIP reduction helps more home buyers qualify, critics claim it increases FHA’s risk and exposure to future foreclosure losses. According to Zillow (How Much Can You Save with Lower FHA Annual Mortgage Insurance Premiums?; January 7,2015, zillow.com), a home buyer who has a 3.5% down payment on a 30 year mortgage of $175,000 can save about $818 per year (about $68 per month).

For those who have not saved enough for a down payment and closing costs, State and local initiatives offer down payment assistance and low interest rate mortgage programs. The Maryland Mortgage Program (mmp.maryland.gov) offers down payment assistance in the form of loans, an employer match program, or financial grants. Locally, the Housing Opportunities Commission of Montgomery County (hocmc.org) offers several down payment assistance options, including the House Keys 4 Employees program for many Montgomery County Employees. These programs have restrictions; you should check with each program for qualification and eligibility requirements.

The Montgomery County Department of Housing and Community Affairs (montgomerycountymd.gov/DHCA) offers additional affordable housing options: The Moderately Priced Dwelling Unit (MPDU) Program offers affordably priced homes to first-time home buyers who meet the program’s eligibility; and the Work Force Housing Program promotes “the construction of housing that will be affordable to households with incomes at or below 120% of the area-wide median.”

By Dan Krell
© 2015

January 16, 2015July 16, 2019

Due diligence when buying a home

If you’re a home buyer who’s ready to jump into the housing market this spring, you’ve probably begun searching to see what’s on the market. You may have already met a real estate agent or two; and if you’ve haven’t yet talked with a mortgage lender for a prequalification, it’s probably high on your priority list. Exercise due diligence throughout the home buying process.

Before you know it, you’ve selected an agent, mortgage lender, and title attorney to assist you. Then you find yourself searching for homes. Guess what? You’re well into in the process of buying a home! But before you put the buying process on cruise control, how much trust should you put into the professionals helping you?

Exercise your due diligence when buying a home.

It’s not to say that real estate agents, loan officers, home inspectors, or anyone else assisting your home purchase are not qualified. But then again, some professionals are better than others. Buying a home is probably one of the biggest purchases you’ll make during your life. The saying “trust but verify” should be your mantra throughout the home buying process to ensure you exercise due diligence.

Have you verified the credentials of those you’ve hired?

Believe it or not, there are some who are doing business without the authorization of the corresponding licensing agency. And yet, some reasons given for not having a license may sound innocuous, such as forgetting about a license renewal deadline; other reasons may not seem as innocent (for example, licensed professionals from neighboring jurisdictions, DC or VA, attempt to do business locally where they are not licensed).

Professional licensing is a regulatory safeguard that provides consumers a pool of professionals that meet or exceed a minimum professional competency. Agencies such as the Maryland Real Estate Commission; Maryland Home Improvement Commission; Maryland Commission of Real Estate Appraisers, Appraisal Management Companies, and Home Inspectors; Office of the Commissioner of Financial Regulation; and the Maryland Insurance Administration offers an internet portal to verify a licensee’s status, check for disciplinary actions, and also explains how to file a complaint.

Although the MLS strives for accuracy in home listings, there are inaccuracies. The MLS provides guidelines and standards for home listing data. However, exactness and truthfulness can vary because data input is performed by many agents and/or their staff. a disclaimer used by our local MLS prompts you to verify MLS listing information,

“Information is believed to be accurate, but should not be relied upon without verification. Accuracy of square footage, lot size, schools and other information is not guaranteed…”

Verify the schools are accurate.

You can verify schools by checking with the local school board. Our local school board has an online tool to check schools assigned to any county address. The tool is located here: Montgomery County Public Schools “School Assignment Tool” (gis.mcpsmd.org/SchoolAssignmentTool2/Index.xhtml).

Verify zoning, development and other information

You can verify zoning or development questions with your locality. Montgomery County allows you to check information online via Montgomery County Planning Department (montgomeryplanning.org).

Verify permits.

Sure the deck is beautiful and the basement is fully finished. But how do you know that they were built to meet county code? Maybe the home seller went with the lowest priced contractor who cut corners and did not pull a permit. Or worse, the seller did it themself to save paying a licensed contractor. Make sure any improvements and recent repairs have had the proper permitting! The permitting process certifies that repairs/renovations comply with building and zoning codes. Permitting ensures that houses are safe, structurally sound, and meet health standards. Permits can be checked by contacting your locality. Montgomery County allows you to check most building permits online via Montgomery County Department of Permitting Services (permittingservices.montgomerycountymd.gov) “eServices” data search portal.

Most home buyers are familiar with basics of the home buying process. However, “trust and verify” can help identify and reduce hidden and obscure risks. Exercising your due diligence can make your home buying experience increasingly trouble free and more enjoyable.

By Dan Krell
© 2015

Original located at https://dankrell.com/blog/2015/01/16/trust-and-verify-home-buyer-due-diligence/

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

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