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October 19, 2018July 21, 2019

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.

By Dan Krell
Copyright © 2018.

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.

September 27, 2018July 23, 2019

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.

By Dan Krell.
Copyright © 2018.

Original located at https://dankrell.com/blog/2018/09/27/rent-vs-buy-puzzle

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September 20, 2018November 23, 2021

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.

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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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May 7, 2018November 23, 2021

Home inspections pointless?

I have heard an increasing voice of discontent over home inspections. Not just from home sellers and their agents, but from home buyers too! Home sellers often complain about the incorrect flagging of working components as being defective. Listing agents usually gripe that home inspectors scare buyers and interfere with their sale. But many home buyers are also growing dissatisfied with inspections and the subsequent property reports.

Inspection reports are becoming “matter of fact.” Even when an inspector flags a component or system, less information is given about it and what to do. Additionally, there is an increasing trend for recommendations to seek expert advice . Home inspectors have been known to make mistakes too. Some are starting to wonder why they should hire an inspector to tell them to hire an expert. Consumers can just hire experts to inspect the corresponding major systems and components from the start. Some are asking if home inspections are becoming irrelevant and pointless.

The home inspection, as we know it, began in the 1980’s. As the profession became standardized, it became a necessary part of the home buying process. The inspection used to be a straight forward examination of observable systems and components. But the home inspection has morphed from a once-over by a trained professional to the concept of getting a home perfect through remedying all of the home’s defects. The fact that home inspections have become a tool for many agents to renegotiate price is another sign the inspection may have jumped the shark.

All things considered, home buyers expect a thorough and exhaustive inspection. They are relying on the inspector to identify concealed and latent defects. They are relying on the inspection and report to help them determine the condition of the home and its systems/components before they move forward with their purchase.

According to Maryland’s home inspector licensing law (mdrules.elaws.us/comar/09.36.07), the home inspection is intended to “provide a client with objective information regarding the condition of the systems and components of a home at the time of the home inspection;” and provides an opinion of “visible defects and conditions that adversely affect the function or integrity of the items, components, and systems inspected, including those items or components near the end of their serviceable life.” However, there are limitations (COMAR 09.36.07.03).

According to COMAR, a home inspection is “not technically exhaustive,” and it may not identify a concealed condition or a latent defect. Among the list of items that the home inspector is not required to ascertain, includes the condition of systems that are not accessible, and the remaining life of any system or component.

Furthermore, an article that appeared in RealtorMag last year suggests that home inspectors are generalists and don’t know everything about a home (4 Things Home Inspectors Don’t Often Check; realtormag.realtor.org; July 05, 2017). Inspectors often defer to experts on foundations, fireplaces, chimneys, well/septic systems, and roofs. This is done because those components are not easily inspected and also requires specialized knowledge that is usually outside the scope of the inspection and/or beyond the expertise of the inspector.

However, in today’s real estate environment, home buyers are wanting and expecting more from the professionals they hire as well as the homes they buy. Buyers anticipate their home inspection with high expectations about the inspector’s opinion and conclusions. So, it’s not a surprise that many home buyers are voicing displeasure with their inspectors. Some complain that the inspector missed items and/or did not inspect a component. Additional complaints are about the inspection reports, that some feel are lacking in detailed information.

Have home inspections become irrelevant? Or is it just a case of the home inspectors having to educate the public what they do?

Home inspections are essential for most home buyers. But home buyers need to understand that inspectors are not the authoritative voice on all home systems and components. Instead, home inspectors bridge the knowledge gap between what the home buyer knows and what they should know about a home, especially the home they are buying.

By Dan Krell
Copyright © 2018.

Original published at https://dankrell.com/blog/2018/05/07/home-inspections-becoming-irrelevant/

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