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/(opens in a new tab)

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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.

August 29, 2018June 3, 2020

Hire a reputable mover

mover checklist — Moving Checklist (from Federal Motor Carrier Safety Administration fmcsa.dot.gov)

Moving is stressful enough without having to deal with a rogue mover. Before your hire a mover, do your research and know your rights. Your rights may vary depending if your move is intrastate or interstate. An intrastate move is within the same state, while an interstate move is between states. Although intrastate movers are not licensed by the state of Maryland, there are a rules and consumer protection laws governing their business. However, interstate movers must comply with Federal regulations.

Hiring a mover to move within Maryland (intrastate)

The Consumer Protection Division of the Maryland Attorney General published The Consumer’s Edge: Hiring a Mover? Protect Yourself! The publication outlines your rights for a move within the state of Maryland (marylandattorneygeneral.gov). The pamphlet advises that estimates must be written, and must specify if it’s binding or non-binding. Binding estimates are prohibited to change, while non-binding estimates in Maryland are capped and cannot exceed 25 percent of the original estimate. Be wary of low-ball estimates, or a mover who does not ask a lot of questions about your possessions. Don’t sign a blank or incomplete estimate.

If your move is within Maryland, consult the Maryland Movers Conference. The MMC is a non-profit organization that is part of the Maryland Motor Truck Association, and works with “governmental authorities and consumer groups to promote the highest standards for the moving industry in Maryland.” The organization established a Registered Mover Program, where movers abide by a code of ethics and other rules. You can view valuable consumer info and the MMC’s list of member movers at their website (mdmovers.org).

Hiring an interstate mover

mover pamphlet — FMCSA Ready to Move Brochure
(fmcsa.dot.gov)

If your move is interstate, your mover is regulated by the Federal Motor Carrier Safety Administration of the US Department of Transportation. The FMCSA website “Protect Your Move” (www.fmcsa.dot.gov/protect-your-move) provides an abundance of information to help you choose a reputable mover as well as tips and a checklist to help make your move less hectic. The FMCSA maintains a registry of legitimate interstate movers from which you can search and view licensing, insurance, as well as complaints.

During the planning stage of your interstate move, Federal regulation requires your mover to provide you with a copy of the booklet “Your Rights and Responsibilities When You Move” and a copy of FMCSA’s brochure “Ready to Move.” These publications (available on the FMCSA website) offer insight to make an informed decision, as well as understand your consumer rights in case something goes awry.

The FMCSA suggests that estimates that sound too good to be true are often a way for scammers to get your business. What are the red flags for which to be on the lookout? Be wary of:

Estimates given without onsite inspection of your possessions
A demand for cash or a large deposit
Blank or incomplete documents
Refusal to provide a written estimate
Movers who claim to be insured without providing proof
A mover who generically answers the phone “movers” instead of using the company’s name
No address or insurance info on the company’s website
Use of a rental truck instead of a company branded truck.

Moving Rights and Responsibilities — Rights & Responsibilities Booklet (fmcsa.dot.gov)

Movers must deliver your possessions. Call the police if a mover threatens to not deliver for any reason. Interstate movers may be in violation of Federal law if they hold your shipment “hostage.” The FMCSA offers some recourse if you feel victimized by an interstate mover or broker. The Protect Your Move Website has an online tool to make complaints. A complaint may trigger a Federal enforcement investigation against the mover.

By Dan Krell.
Copyright © 2018.

Original published at https://dankrell.com/blog/2018/08/29/hire-reputable-mover/

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August 2, 2018July 23, 2019

Home buyer fatigue

Home Buyer Fatigue or Housing Derangement Syndrome?

Although home prices remain strong, the volume of home sales has dropped off during June. This is causing some in the media to exhibit “housing derangement syndrome” by reporting a pending housing collapse. However, there is a more sensible answer and that may be “home buyer fatigue.” Buyer fatigue is not solely used in real estate, rather it’s a term to describe consumers who do not engage in a market sector for a short duration for various reasons. Home buyer fatigue has occurred multiple times since 2013 after a period of sustained home price increases.

Let’s look at the facts.

The National Association Realtors (nar.realtor) reported in a July 23^rd press release that the total existing home sales for June decreased 0.6 percent, and is down 2.2 percent from the same time last year. Home sales in Montgomery County have also been retreating. The Greater Capital Area Association of Realtors (gcaar.com) reported sales declines for single-family and condos during June (-3.4 percent and -13.9 percent respectively). Year-to-date sales are also below last year’s transactions for the same time period.

NAR chief economist Lawrence Yun observed:

“There continues to be a mismatch since the spring between the growing level of homebuyer demand in most of the country in relation to the actual pace of home sales, which are declining.”

However, his explanation for the home sales retreat sounds like home buyer fatigue:

“The root cause is without a doubt the severe housing shortage that is not releasing its grip on the nation’s housing market. What is for sale in most areas is going under contract very fast and in many cases, has multiple offers. This dynamic is keeping home price growth elevated, pricing out would-be buyers and ultimately slowing sales.”

Although national home prices are increasing, the gains remain steady. The latest S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index reported on July 31^st (spice-indices.com) indicated a 6.4 percent annual gain during May, which is the same as the previous month. However, the 20 City Index showed a slight decline to 6.5 percent (from 6.7 percent). Seattle, Las Vegas and San Francisco continue to lead the nation with double digit gains (13.6, 12.6 and 10.9 percent respectively). The Washington DC region, however, showed a modest annual home price growth of 3.06 percent.

As home sales decline, many contribute home buyer fatigue to increasing home prices and mortgage interest rates. A few have already begun to ring the warning bells of bubble popping home price deflation citing Seattle and San Francisco’s housing woes.

However, those exhibiting housing derangement syndrome need to take a deep breath and look at the facts. Most of the country’s home values are increasing at a sustainable rate. Additionally, contrary to reports of inventory surpluses, home sale inventory continues to be low in most of the country (Montgomery County single-family and condo listings are below last year’s level by -9.3 and -12.8 percent respectively).

It’s also important to look deeper into what may be driving those overheated housing markets to experience the sharp price spikes and recent sale declines. For example, Seattle’s housing juggernaut may be tied to Amazon’s nine years of a seemingly hiring frenzy. According to reporting by Matt Day for The Seattle Times (Amazon’s employee count declines for first time since 2009; seattletimes.com; April 26, 2018), Amazon begun corporate layoffs, as well as a possible hiring freeze, earlier this year.

By Dan Krell.
Copyright © 2018.

Original published at https://dankrell.com/blog/2018/08/02/home-buyer-fatigue/

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July 26, 2018December 13, 2022

Affordable housing

It’s no secret that housing is expensive. Home prices are relentlessly marching forward, making it more difficult for first-time home buyers to purchase a home. One of the contributing factors is the low inventory of homes for sale. The deficiency of homes on the market is limiting options and stoking competition among determined home buyers, many of whom are willing to offer slightly more than then their cohorts. All this puts upward pressure on home prices and impacting affordable housing.

Having enough for a down payment and closing costs is a hurdle for many first-time home buyers. Home buying programs exist to help home ownership more affordable for home buyers. The Maryland Mortgage Program (mmp.maryland.gov) offers down payment assistance in the form of loans, an employer match program, or financial grants. In Montgomery County, 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. Of course, you must meet eligibility, so check with your lender and/or mortgage program.

Affordable housing is not only an issue for home buyers. It’s also an issue for renters. According to the US Census Bureau’s American Community Survey five-year estimates results (census.gov), the median rent in the US increased about $21. That does not sound life changing, however, it is the result of an analysis of nationwide monthly rents. Results of the Survey indicated that, “Of the 382 metropolitan areas in the United States, the median gross rent in 156 areas did not change between 2007 to 2011 and 2012 to 2016…” However, “Of the 219 that did change, increases outnumbered decreases four to one with 175 increases and 44 decreases.”

Some areas had a decrease in rent, while others faced increases. Among some of the areas with top increases include Andrews TX and McKenzie County ND, where monthly rents increased an average of $352 and $397 respectively.

The Census Bureau recent survey on rent concludes that “gross rents are on the rise.” Other Census data indicates that 2017 had the lowest percentage of renters move since 1988. The combination of fewer available rentals and increased rents are making it difficult to find an affordable rental.

Although “affordable housing” has been tossed about like a football, it wasn’t until Mary Schwartz and Ellen Wilson’s (US Census Bureau) analysis of the 2006 American Community Survey that really gave it meaning (Who Can Afford To Live in a Home?: A look at data from the 2006 American Community Survey; census.gov). The analysis revealed the percentage of income that is spent towards housing.

The report indicated that forty-six percent of renters spend 30 percent or more of their income on housing costs. Compare that to home owners: thirty-seven percent of owners with mortgages and sixteen percent of owners without spent 30 percent or more of their income on housing. Schwartz and Wilson came up with the “30 percent standard,” and discussed that thirty percent or more of income spent on housing is considered a “housing-cost burden.”

Addressing affordable housing for renters, Representative Joe Crowley introduced H.R.3670 – Rent Relief Act of 2017 to help renters with their housing-cost burden. The credit would only be available for taxpayers whose gross income is less than $125,000. The bill allows for a refundable tax credit when rent exceeds 30 percent of the individual’s gross income for the taxable year. Depending on the renter’s gross income, the amount of the credit could range from 10 to 100 percent of the excess (above 30 percent). One caveat is that if the tenant’s rent exceeds 150 percent of the fair market rent for that specific residence, the excess above 150 percent won’t be included for the purpose of determining the amount of the credit. Government-subsidized renters would be able to claim a credit equal to 1/12 of the rent paid by the taxpayer. Although the bill was last heard in the House Committee on Ways and Means, at the time of this article, it is being prepared by Senator Kamala Harris to be introduced in the Senate.

Maryland offers tax credits for some renters, check with the Maryland Consumer Rights Coalition (marylandtaxcredit.com) for qualifying information.

By Dan Krell
Copyright © 2018.

Original published at https://dankrell.com/blog/2018/07/26/affordable-housing/

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June 18, 2018January 7, 2020

Modern homeownership

June is National Homeownership Month. In recognition of modern homeownership, National Association of Realtors President Elizabeth Mendenhall stated in a June 1^st press release that “National Homeownership Month is a time to celebrate and promote the modern American Dream of owning a home. Homeownership changes lives and enhances futures, and many Americans see it as one of their greatest hopes. These individuals are counting on the nation’s 1.3 million Realtors to champion and protect homeownership and help make it more affordable, attainable and sustainable (nar.realtor).”

The NAR provides a history of celebrating modern homeownership which goes back almost a century (nar.realtor). The roots of celebrating homeownership go back to the 1920’s when local associations would bring together consumers and brokers during “Real Estate Day” events. In 1955, the National Association of Realtors created a national “Realtor Week” to promote the value of Realtors when buying a home. The celebration of modern homeownership began in 1976 when “Realtor Week” was changed to “Private Property Week.” Then in 1986, the celebration was changed to “American Home Week” to promote owning a home as part of the American Dream. June became National Homeownership Month through a proclamation by President Bush in 2002, which expanded the American Home Week to include HUD initiatives. Although 2008 was the last official proclamation of National Homeownership Month, it has been observed annually. However, last year, President Trump revived the annual proclamation recognizing the significance of homeownership.

Although the idea of homeownership hasn’t changed since the 1920’s, many things have. For example, buying a home is much easier and affordable today than it was then. You can now search homes from your couch, rather than driving to individual broker offices. Additionally, low down payments and thirty-year fixed rate mortgages have made modern homeownership a realty for many.

Of course, some things haven’t changed in a century. A home is still an asset that maintains relative market value. Given regular cycles of up and down markets, real estate can appreciate over time. There are also some tax advantages to owning a home (consult your tax preparer). Furthermore, owning a home stabilizes communities and encourages civic pride, which positively affect home values.

Additionally, there are many social benefits to homeownership. Studies demonstrate that home owners tend to be more charitable, have an increased connection to their neighborhood, have an increased general positive life outlook, express an increased self-esteem and higher life satisfaction, and be healthier. Other studies indicate that children living in owner-occupied homes have higher test scores, higher graduation rates, decreased delinquencies, and an increased participation in organized activities.

homeownership rate — Homeownership Rate (census.gov)

The comparisons of the costs of renting vs. the costs of owning a home hasn’t changed over time. Of course, the debate takes on a different tone depending on the state of the economy. During the Great Recession, many believed that owning a home was folly. Even after the recession, many continued to believe that real estate wasn’t a viable investment, while discounting the other benefits of homeownership. The homeownership rate bottomed to a modern low of 62.9 percent during the second quarter of 2016 (census.gov). However, homeownership is back in vogue. Even with increased home prices and mortgage rates, buying a home today can still be less expensive than renting.

Modern homeownership – your home is a silent witness to your life.

You have a relationship with your home. When you own a home, your relationship with it is intimate and symbiotic, which contributes to an intangible and intrinsic sense of wholeness.

Original published at https://dankrell.com/blog/2018/06/18/modern-homeownership/

By Dan Krell
Copyright © 2018.

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