Whose Responsibility is it anyway?

When selling a home, the seller is obligated to provide a set of disclosures to the home buyer. The disclosures cover almost everything from home condition to local zoning compliance. Even common ownership community (condo/HOA) disclosures are incorporated into the home sale contract. However, buyers always have questions. Some questions are easily answered because they are about the physical property.  However, some questions require a call to the county/city or the condo/HOA association for an answer. When the buyer or their agent poses a question that requires a call to the locality or condo/HOA association, whose responsibility is it to gather and provide those answers?

whose Responsibility is it
Homebuying goals

This is not a new issue, and buyer agents usually make the call themselves. But I recently received from a buyer agent asking about a condo listing I had. The agent asked specific questions about the possibility of the property being used as a rental. She asked also asked about general condo rules for rentals in the community. I told the buyer agent to call the condo association and ask them directly. Taken aback expecting an answer from me, she apologized saying she thought I was the listing agent. I confirmed that I was the listing agent and directed her to seek the answers directly from the condo association, because they would be from the source.

Some agents would have given her some information, whether it was accurate or not. To be honest, I did not know the answer, therefore I couldn’t provide her with the info. Even if I did know something about it, I still would have directed her to the condo association for the complete accurate answer.

Whose responsibility is it anyway?

Home buyers rely on the information when making buying decisions, and how much to offer. So, it goes without saying that home buyers want accurate information. That’s why most agree that it’s best practice to direct the buyer/agent to get answers from the source. This way they can make the best decision based on correct answers.

Whose Responsibility is it to verify information? Regardless of what information is provided (or not provided) on the sell disclosures, the home buyer should verify doing due diligence. The home buyer should confirm the accuracy of what is disclosed, as well as investigate any areas of concern.  Although it’s easy to verify some information because of its public information availability, some information can only be obtained via a phone call or email to the locality where the house is located. 

By Dan Krell
Copyright © 2023

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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.

Mortgage rates are on the move

This week’s Freddie Mac press release headline “Mortgage Rates Exceed Six Percent for the First Time Since 2008” grabbed everyone’s attention.  Indeed, mortgage rates are on the move and what does that mean for you and the housing market?

Mortgage rates are on the move
Get pre-approved before home shopping

According to Freddie Mac’s Chief Economist Sam Khater, “Mortgage rates continued to rise alongside hotter-than-expected inflation numbers this week, exceeding six percent for the first time since late 2008. Although the increase in rates will continue to dampen demand and put downward pressure on home prices, inventory remains inadequate. This indicates that while home price declines will likely continue, they should not be large.”

In her blog post, Nadia Evangelou, Senior Economist and Director of Forecasting for the National Association of Realtors, points out that the change in mortgage rates increased monthly payments about 60% compared to the same time last year. She also calls attention to the fact that the pace of rising rents is at a forty-year high! Regardless if you are renting or buying a home, housing affordability is declining.  Using a little math, she underscores how increasing rents outpace a fixed-rate mortgage on the purchase of a home.

Yes, mortgage rates are increasing. But a little history will put things in perspective. We all know that mortgage rates reached its peak in the early 1981 as a result of the deep recession of the late 1970’s.  Shortly afterward, average mortgage rates dropped of the next several decades (albeit the occasional peak). 

However, after the peak housing market of 2007, average mortgage rates dropped slightly in 2008 as a reaction to the market crashes and a decimated housing market. It wasn’t until five years later and average mortgage rates hovering in 3 percent range, that the housing market once again became broadly attractive to owner occupants (as opposed to investors). Mortgage rates have been averaging below 4 percent since then, with the exception of 2018 when rates rose above 4 percent.

Mortgage rates are on the move. Average mortgage rates are now above 6 percent, and there may be a silver lining.  Many are hoping that the rising interest rates will reduce home prices (although that remains to be seen).  However, after the brief rate shock is over, increased mortgage rates will likely incentivize banks to lend which could increase the pool of home buyers

By Dan Krell
Copyright © 2022

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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.

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The thorough home inspection

Back in 2005, one of the first columns I wrote for the Montgomery County Sentinel was about getting a thorough home inspection.  The market was similar to the recent sellers’ market, where homes sold in hours after receiving multiple offers.  Home buyers were making non-contingent offers, foregoing a home inspection, and many times offering incentives to the seller (such as free rent back, cars, vacations, etc).  The point then, as it is now, is that inspections are important and helpful.

home inspection
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Of course, the last year-and-a-half has been just as brutal to home buyers. Many buyers paid way over the list price.  And of course, many also had to forego an inspection just to be in the running with the competition. 

Although home sales have waned recently, it is likely that sales will rebound in the fall.  That said, the recent mini cycle allowed buyers and sellers to take a breather to figure out where the market is headed.  As an increasing number of homes are for sale, the market will become be more balanced.  A balanced market allows for mutual negotiation, including having a thorough home inspection.

It’s undeniable that home buyers have high expectations during the buying process.  And that includes the home inspection.  Buyers expect a thorough and exhaustive inspection.  They rely on the inspector to identify concealed and latent defects. Basically, buyers expect the inspection to help determine the condition of the home and its systems/components before they move forward with the purchase. 

Even though home buyers view the inspector as all-knowing, home inspections are not infallible.  Home inspectors are limited in their inspections and can miss items and/or make mistakes.  Additionally, according to the state’s home inspector state licensing, a home inspection is “not technically exhaustive,” and it may not identify a concealed condition or a latent defect.

Home inspections are for all types of homes.  Besides resale homes, inspections also are for new and recently renovated homes.  It is not uncommon to discover incomplete installation of a system in new or renovated homes. 

Overall, there is still a benefit of conducting a thorough home inspection. However, home buyers need to understand the limitations of their inspection.  They should also attend their inspection ready to take notes and ask questions. 

By Dan Krell
Copyright © 2022

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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.

Get a mortgage preapproval

Many years ago, the home buying process was very different than it is today.  For example, home buyers relied on their real estate agents to qualify them to figure out how much home they could afford, instead of getting a mortgage preapproval.  Making an offer on a house was done without a mortgage preapproval letter.  And the mortgage application was usually made after the contract was ratified.  The process may seem backwards by today’s standards, but that’s how it was done. 

real estate mortgage preapproval
Real estate is voted as best investment

The problem with the old process was that sometimes the loan was denied, causing heartache and anguish for the homebuyer and seller. Times have changed.  In today’s market, homebuyers are expected to be more organized, which helps streamline the homebuying process. The includes getting a mortgage preapproval letter.

You may have heard it called a prequalification or a preapproval, the purpose is the same.  The preapproval letter not only qualifies you, but also gives the home seller confidence that you can complete the sale.

To preapprove you, your lender checks your credit and reviews your financial documents.  This will give the lender an idea of what loan program is best for you, as well as calculating your debt-to-income ratio to determine your maximum loan amount.

Your preapproval gives you a head start on the home buying process.  When the lender reviews your credit and finances, they can see if there are any obstacles to getting your loan.  The lender can help structure your loan in advance, which will guide you in your preparations.  Additionally, the preapproval letter will show your agent and sellers that you’re a serious buyer because you’ve already started the mortgage process.

Don’t feel pressured to work with any lender, even if they are affiliated with your agent.  As a homebuyer, you have right to choose the lender you want.  Some buyers will go where they bank for a mortgage, because there is a mutual familiarity.  Some look for the best interest rate, and others look for personal service.  It can help to understand the lender better by comparing several by talking to a local loan officer.  The bottom line, however, is to make sure the lender is licensed and is knowledgeable of the jurisdiction where you are buying.

By Dan Krell
Copyright © 2022

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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.

Local housing market changing

Lately, the housing market is definitely making noise and grabbing everyone’s attention, and not in a good way.  However, we won’t actually know how it plays out until it’s over.  As the idiom says “hindsight is 20/20.”   Nevertheless, if you’re currently in the market to sell or buy a home, pay attention to current local housing market conditions as they are critical to your decision making.

Here we go…

Changing housing market
More home are being listed for sale

The S&P CoreLogic Case-Shiller Home Price Index (spglobal.com) reported in a June 28 press release that average April 2022 home prices increased 20.4 percent from April 2021.  Tampa, Miami, and Phoenix led metro areas with 35.8 percent, 33.3 percent and 31.3 percent gains respectively.

We won’t really know if rising interest rates have any effect on home prices for several months.  Home pricing and sales data is reported in hindsight (data is reported three to four months behind).  The Case-Shiller release points out that mortgage rates just began to increase when these stats were being compiled (April).  However, the recent S&P CoreLogic Case-Shiller Home Price Index is already showing home price moderation (even before rising mortgage rates).  The Year-to Date S&P CoreLogic Case-Shiller Home Price Index for the US only shows an increase of 7.95 percent, while the 3-month index increased 6.66 percent and 1-month only increased 2.08 percent

Rising mortgage interest rates is only part of the economic story that is developing.  It was likely that home prices were already moderating as a reaction to the year and a half of sharp increases.  As I wrote last week, we are in the beginning of the shifting housing cycle.  Mixing in other economic factors, such as mortgage rates etc., can either make the housing market more sever or temperate.  And as I mentioned, we won’t know for sure until it has happened.

Bottom line

If you’re currently in the market to buy and/or sell a home, focus on the short-term local trends.  Speculation of future national home prices and home sales may be interesting, however is meaningless in the here and now.  You should hire a seasoned professional to help understand your neighborhood’s trend, as well as being informed about your potential competition and the local housing market inventory. 

If you’re buying a home, work with a seasoned real estate agent who can provide valid comps and analysis before you make an offer.  Also, consider having a thorough home inspection.  In the last year and half, home buyers felt forced to forgo the inspection to make their offer competitive.  However, in the changing market, home inspections will return.

If you’re selling a home, be aware that home pricing strategies that were lucrative last year won’t work to your advantage this year.  It’s nice to think that your home could sell for a peak price much like other neighborhood homes that sold twelve to twenty-four months ago.  However, in a changing market, overpricing your home sale could be counterproductive, driving potential home buyers to competing homes.

By Dan Krell
Copyright © 2022

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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.