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November 11, 2016December 13, 2022

Realtors giving back

It was about one month ago when I received the call from a local public relations firm. The voice on the other end of the line wanted me to write a column about their real estate agent client. They wanted to draw attention to Realtors giving back, specifically to the fact that their client started a program where they will be donating a portion of their commission to a charity chosen by the home buyer or seller.

Although I was pressured to commit to write the piece as well as provide a publication date, it seemed (at least for the moment) that seeking publicity about one’s altruism was ironic. In the ensuing weeks, I received follow up calls to write the piece. But rather than saying “No,” I told them it would most likely be a piece that is generally about real estate agents’ charitability. After all, we’re headed into the holiday season, and the timing seems right about bringing attention to Realtors giving back.

Not to give the short shrift to the PR firm and their client, whose “Pay it Forward” initiative was announced in an October 19^th press release that their team of agents, processors and coordinators will donate a portion of each commission to a charity of their client’s choice. Although an amount or percentage to be donated was not specified in the press release that I received, they are committing a portion of every commission to charity throughout the year. The team’s plan of giving a portion of commission to charity is not their exclusive idea, nor is it a novel one; nonetheless, that real estate team deserves kudos for the move – welcome to the fold!

It should come as no surprise that real estate and charitable giving goes hand-in-hand. Nationwide, real estate companies, franchises, and agents have sought to give back to their respective communities. In 2007, Gerald Leonard, then owner of Coastal Elite Real Estate in San Clemente CA, announced he was pledging 50 percent of all commissions to charity. And in 2009 Laurie Loew of Give Realty (located in Austin TX) announced giving 25 percent of her commissions to charity.

RE/MAX has supported the Children’s Miracle Network Hospitals through year-round contributions from participating agents. Since 1992, RE/MAX agents have given an estimated $143 million, as reported by a recent post to the Children’s Hospital Foundation website (childrensnational.org/giving). Besides individual agent contributions, RE/MAX “also hosts a variety of fundraising events throughout the year.” Additionally, RE/MAX agents can designate specific homes as “Miracle Homes” – “those homes that have yard signs also indicating the agent’s commitment to improving local pediatric care.”

In addition to agent donations and national fundraising for the Children’s Miracle Network, local RE/MAX offices host fundraising events too. For example, RE/MAX Centre in Olney MD holds an annual Charity Gala, the tenth one recently raised more than $40,000. Last year, RE/MAX Gateway in Chantilly VA raised more than $30,000. And RE/MAX Town Center of Germantown MD holds an annual golf tournament.

Real estate agents don’t only donate money, they get involved; and are recognized by Realtor® Magazine’s Good Neighbor Awards. The Good Neighbor Awards was launched in 2000 and “has since recognized more than 160 Realtors® for their service to their communities…Good Neighbor charities have received more than $1,000,000 in donations. In addition, each winner receives national and local publicity, which generates additional donations…Realtors® are also recognized for their community service through state and local real estate associations.”

Original published at https://dankrell.com/blog/2016/11/11/realtors-giving-back/

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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.

November 4, 2016November 4, 2016

35 years of home buying changes

Years of home buying changes? (infographic from keepingcurrentmatters.com)

This week’s release of the National Association of Realtors® Annual Profile of Home Buyers and Sellers marks the 35^th year of NAR’s analysis and description of home buyer and seller behaviors and attitudes. You may not remember what it was like in 1981, but the country was coming out of a deep recession. The economy was still scarred with double-digit unemployment, inflation and interest rates. The 35^th issue makes us think about home buying changes over the years.

According to the US Census Bureau (census.gov), the median price for a new home in 1981 was $68,900, while in 2010 the average new home price was $221,800. Freddie Mac’s (freddiemac.com) data indicates that the average mortgage interest rate in 1981 was 16.63 percent, and 4.69 percent in 2010. Surprisingly, the cost of housing (when financing 100 percent of the sale price) has only increased about 17.5 percent from 1981 to 2010!

People want their space and privacy. According to the American Enterprise Institute (aei.org), the median square feet per person in a home in 1981 was about 550sf, while in 2014 it was 987sf. This expansion in personal space was expressed in the home size. The median size of a home in 1981 1,550sf, while 2010 it was 2,169sf (according to the Census Bureau). Also consider that the typical home of 1981 only had one and a half bathrooms, and the expectation today is that a home should have at least two and a half bathrooms.

An October 18^th news release from the NAR (Five Notable Nuggets from NAR’s Home Buyer and Sellers Survey’s 35-Year History; realtor.org) provided some insight into how the housing market has changed through the years. One noticeable factor is the reduced number of first time home buyers entering the market due to underemployment, student debt, lack of down payment, or delaying family formation. Last year’s percentage of first time home buyers dropped the lowest rate since 1987; and “according to the U.S. Census Bureau, the homeownership rate for 18-35 year-olds is currently at 34.1 percent, the lowest level in records dating back to 1994.”

It’s becoming apparent that real estate agents are not being replaced by the internet. Although a majority of home buyers use the internet to assist them with the home buying process, the NAR reported that 90 percent of home buyers and sellers surveyed for this year’s profile worked with a real estate agent. As a result, for-sale-by-owner transactions were at the lowest level ever (FSBO transactions peaked during 2003-2004).

The home buying process now takes longer than it used to. Putting aside recent changes to the mortgage process, the 2016 Home Buyer and Seller Profile brings attention to the amount of time a home buyer needs to find a home. According to the NAR, the average time to find a home was relatively unchanged from the 1980’s to about 2007; which about seven to eight weeks. The duration of the home search peaked at twelve weeks from 2009 to 2013. However, since then the average time needed to find a home is about ten weeks. The increased search time is due to a number of factors. Brisk sales combined with periods of low inventory has not provided home buyers with much of a choice from which to select. Not to mention an unprecedented amount of available information that has created a savvy home buyer.

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October 28, 2016December 13, 2022

Home inspection surprises

The American Society of Home Inspectors (ASHI) often conducts surveys to measure home buyer satisfaction. Although most home buyers are typically satisfied with their home inspections, you should be prepared for home inspection surprises after you move into your new home.

A 2012 ASHI survey conducted by Harris Interactive indicated that home buyer confidence was boosted in eighty-eight percent of respondents who had a home inspection before buying. A 2011 ASHI survey revealed that about seventy-two percent of homeowner respondents indicated that their home inspection helped them avoid potential problems with their home.

Although the surveys suggest a majority of home buyers are usually satisfied with their home inspections, there are some that are not. It’s not unusual to read or hear about a home inspection that is not perfect. And sometimes the home inspection goes awry from the start. An agent once told me a story about a home inspector who flooded a condo because he wanted to check the fill rate of tub by closing the drain; he walked away and forgot about the quickly filling tub. Years ago, I witnessed how a home inspector almost caused a fire by turning on an oven – if the inspector first checked inside before turning the oven on, he would have noticed that is where the homeowner stored pans separated by paper towels.

There’s a lot going on during a home inspection to distract the inspector from their duties. And no one said home inspectors are supposed to super human or perfect; but there is an expectation that they are thorough. Not so much because they are paid professionals; but rather, they’re relied on for information about one of the highest cost purchases of a lifetime – your home.

When you first meet with your home inspector, they will tell you they are not perfect. However, they are supposed to follow “standards of practice.” Years before home inspectors were licensed, ASHI developed standards of practice as a means of establishing expectations placed on inspectors. Many of those standards have since been incorporated into state home inspector licensing laws.

Maryland’s home inspector licensing law (COMAR Title 9 Subtitle 36 Chapter 7) states that the inspector identify the scope of the inspection, and visually inspect “readily accessible areas” to determine it the items, components and systems are operating as intended, or are deficient. Further, to be in accord with the standards of practice, a home inspection: “Is intended to provide…objective information regarding the condition of the systems and components of a home at the time of the home inspection; Acts to identify visible defects and conditions that, in the judgment of the home inspector, 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; May not be construed as compliance inspection…; Is not intended to be construed as a guarantee, warranty, or any form of insurance; Is not an express or implied warranty or a guarantee of the adequacy, performance, or useful life of any item, component, or system in, on, or about the inspected property…”

Given the limitations of the home inspection, home buyers are sometimes confronted with surprises about the condition of items that were not readily seen during the inspection, such as: the roof, chimney, foundation, and HVAC. However, you can limit subsequential issues by having a licensed contractor further examine those areas during the inspection period.

By Dan Krell
Copyright © 2016

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October 21, 2016July 14, 2019

Realtor ethics and presidential election

Allegations of sabotage, fraud, and collusion. A yearning for power and money. And let’s not forget about the sex, lies, and video tape. No, I’m not referring to this year’s presidential election – I’m talking about Realtor ethics (although the similarities are intriguing). I’ve reported in the past about real estate agents who’ve engaged in fraud, sabotage and collusion while taking part in scams. There have also been the recent reports of alleged money laundering and extortion. And let’s not forget the agents caught on video in homes for sale engaging in sexual acts, rummaging through underwear drawers, and stealing.

The National Association of Realtors® (realtor.org) is proud of their Code of Ethics, which was first introduced in 1913. And for years, the NAR has promoted the Code of Ethics as one of the feature advantages of hiring a Realtor®. And notwithstanding the focus on high ethical standards, some agents still act repugnantly. And as a result, it’s not a surprise that real estate agents typically fall in the lower to middle range of Gallup’s Honesty/Ethics in Professions poll (gallup.com). The December 2-5^th 2015 poll indicated real estate agents ranked below journalists, bankers, and lawyers in honesty and ethical standards (lobbyists and members of congress are at the bottom of the ranking).

So, why are agents often viewed as unscrupulous and dishonest? The answer begins with the purpose of the NAR Code of Ethics. Jeremiah Conway and John Houlihan’s 1982 study (The Real Estate Code of Ethics: Viable or Vaporous?; Journal of Business Ethics. 1;201-210) determined to find out if the NAR Code of Ethics was just a “clever” marketing scheme or a viable tool for “promoting and enforcing” ethical behavior. Their critique of the 1982 version of the NAR Code of Ethics exposed “numerous ethical flaws.” They revealed loopholes for enforcement as well as statements that promoted the interests of Realtors®, contrary to the “service of the public.”

And although required to adhere to the NAR Code of Ethics, there are still some agents who breach their duties to the public and their clients for their own benefit. George Izzo’s 2000 study of moral reasoning and ethical decisions in real estate (Cognitive Moral Development and Real Estate Practitioners. Journal of Real Estate Research., 20;1;179-188) revealed that cognitive moral development and ethics are mutually exclusive. While some are more “mature” in their moral reasoning and motivations, the study determined there is no difference among stages of moral development when making ethical decisions.

Sometimes a person’s moral reasoning is just irrational, illogical, or unfounded – regardless of how high the purpose.

It has been thirty-four years since Conway and Houlihan’s assessment of the NAR Code of Ethics. Of course, the NAR Code of Ethics is updated each year to reflect changes in technology and business; however, the basic purpose remains unchanged – promote your client’s best interest, cooperate with other agents, treat all parties honestly, a commitment to the truth and refrain from misrepresentation (among other things). Since then, the changes to the Code have been overwhelmingly positive such that the NAR Code of Ethics framework has been adopted into real estate licensing laws across the country.

Nevertheless, after decades of promoting Realtor ethics as a basis for hiring one, it became clear that consumers did not choose their agents based on ethical behavior. As a result, in 2014 the NAR began to promote Realtor added value.

By Dan Krell
Copyright© 2016

Original published at https://dankrell.com/blog/2016/10/21/realtor-ethics-presidential-election/

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October 14, 2016July 13, 2019

Liberty, housing, private citizens

Since its inception, the Consumer Financial Protection Bureau (consumerfinance.gov) has had many advocates and many critics. While many point to the CFPB’s staunch protection of consumers, some have argued that the independent agency has too much power with little oversight. And this week’s opinion from the United States Court of Appeals in the case of PHH Corp v. Consumer Financial Protection Bureau seems to side with CFPB’s detractors – and highlights liberty, housing, private citizens.

As you know, the CFPB was created in the aftermath of the financial crisis by the passing of Dodd-Frank in 2010. Dodd-Frank (also known as the Dodd–Frank Wall Street Reform and Consumer Protection Act) came at a time when politicians wanted to reign in financial institutions and businesses. In order to carry out financial reform, Dodd-Frank created a number of oversight boards and agencies in an expansive piece of legislation that covered many areas spelled out in over 2,000 pages. And even in its behemoth size, Dodd-Frank left much of the reform regulations to be written by agencies and its unelected officials – including the CFPB.

The CFPB has issued many new rules and have fined many banks and lenders. Some of the new rules have fundamentally changed the relationship between the consumer and the bank. For example, the TRID (TILA-RESPA Integrated Disclosure) rule that went into effect this year which not only changed how settlements are conducted but can levy stiff a penalty for each violation.

The case PHH Corp v. Consumer Financial Protection Bureau, appeared as if a seemingly “bad” mortgage lender was pushing back against fines and penalties for doing wrong. (PHH Corp was fined $108 million by the CFPB for mortgage re-insurance deals with company affiliates, even though it claimed to have followed HUD’s previous rule of paying a reasonable market rate.) But there’s more to this story, and it highlights exactly the what the CFPB’s critics have complained about – the CFPB’s independence from oversight and guidance. The case is about the CFPB’s authority to change the rule and retroactively apply it to PHH Corp.

Judge Kavanaugh wrote: “This is a case about executive power and individual liberty. The U.S. Government’s executive power to enforce federal law against private citizens – for example, to bring criminal prosecutions and civil enforcement actions – is essential to societal order and progress, but simultaneously a grave threat to individual liberty.”

He continued to say that “…the Director of the CFPB possesses enormous power over American business, American consumers, and the overall U.S. economy. The Director unilaterally enforces 19 federal consumer protection statutes, covering everything from home finance to student loans to credit cards to banking practices. The Director alone decides what rules to issue; how to enforce, when to enforce, and against whom to enforce the law; and what sanctions and penalties to impose on violators of the law…That combination of power that is massive in scope, concentrated in a single person, and unaccountable to the President triggers the important constitutional question at issue in this case.”

The result is that the CFPB will continue to operate and go after bad actors in the financial world. However, the recent appellate ruling will likely change the scope and focus of its operations, as the CFPB will be under the “ultimate supervision and direction of the President.” This case and the opinions of the Court can be found here (https://www.cadc.uscourts.gov/internet/opinions.nsf).

By Dan Krell
Copyright © 2016

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