Category: real estate

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Do people really care about real estate agent ethics?

What factors do you consider when shopping for items or services? Is it price? Brand recognition? References? When it comes to hiring a real estate agent, if you’re like most people, chances are your choice is not necessarily based on the agent’s adherence to ethical standards.

Of course, high integrity and ethical behavior is admirable. However, what may seem counter intuitive to an ethical society, a body of research indicates that consumer choices are not typically based on ethical criteria. Of the many research articles published in peer reviewed journals, here is a very select few that point to such a conclusion.

First, a 2005 study seeking to determine if consumers buying decisions were based on companies’ ethics was conducted by De Pelsmacker, Driesen, & Rayp. They indicated that although there are numerous attitude surveys that reveal consumers actually value ethics in the marketplace, consumer behavior is not consistent. The study examined consumer’s willingness to pay for fair trade coffee (considered to be the “ethical” choice), and found that although 50% of the study sample were considered fair trade “lovers” or “likers,” only 10% of the study sample were willing to pay the premium for the ethical choice (Do consumers care about ethics? willingness to pay for fair-trade coffee. The Journal of Consumer Affairs, 39(2), 363-363-385.).

Not convinced? A 2001 study investigated whether consumers actually care about ethical behavior as well as whether good/ bad ethical behavior affects consumer choice. Carrigan & Attalla concluded that although consumers are increasingly sophisticated, consumer behavior doesn’t favor ethical companies or avoids those that are unethical. Additionally, the study found that a consumer’s knowledge of a company’s unethical behavior didn’t change buying behaviors nor did it contribute to actions against the unethical company. In addition to being cynical about ethics differentiation; consumers consider price, quality, and value more important than ethical criteria in consumer purchase behavior (The myth of the ethical consumer – do ethics matter in purchase behaviour? The Journal of Consumer Marketing, 18(7), 560-560-577.).

Although ethical criteria may not be necessarily used in when choosing a real estate agent, Neale & Fullerton found that consumers do perceive unethical behaviors as unacceptable. In their 2010 study, consumers rated ten of fourteen scenarios of questionable behaviors as being unacceptable (The international search for ethics norms: Which consumer behaviors do consumers consider (un)acceptable? The Journal of Services Marketing, 24(6), 476-476-486.).

Even though unethical behaviors may be considered unacceptable, reporting such behavior is a different story. Curtis, in his 2006 study found that although the seriousness of a breach of ethics would prompt a report, the decision to report unethical behavior is highly correlated to negative mood (e.g., anger, pain, etc) (Are audit-related ethical decisions dependent upon mood? Journal of Business Ethics, 68(2), 191-191-209.).

Rutledge, concluded in a 1994 paper that ethical issues are not always clear. Additionally, responses to such situations depend on personal principles and standards (Conflicts of interest or ‘thou shalt not steal’ revisited. Real Estate Issues, 19(3), 15-15.).

The research might suggest that consumers are not entirely impressed by an adherence to high ethical standards. Furthermore, even when ethical standards are breached, the offenders are not always reported. The research may point to an increasingly pragmatic view that real world ethics is a complex matter that is often determined by a person’s perception.

by Dan Krell
© 2011

This article is not intended to provide nor should it be relied upon for legal and financial advice.  Using this article without permission is a violation of copyright laws.

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What housing market surveys are telling us

You’ve probably heard, now and then, reports of housing surveys giving a status report of the housing and the real estate market. Of course the scientific method is forgotten for a chance at a headline; technical details and summaries are usually condensed to a one sentenced sound-bite. If you’ve ever taken the time to look into the survey results to see the samples and questions, you can see that any one poll is only a snapshot of respondents’ attitudes at the time of the survey.

The results of recent housing surveys conducted by Fannie Mae (fanniemae.com) are telling of the current economic environment. Reported quarterly and monthly, the National Housing Survey (NHS) “offers a window into the opinions of Americans across the country…” about owning and renting a home as well as personal finances and confidence in the economy.

The most recent quarterly NHS results were released August 15th, and quoted Doug Duncan, vice president and chief economist of Fannie Mae, as saying, “… consumer spending, which accounts for about 70 percent of the economy, ground to a halt in the second quarter. Consumers are more hesitant to take on additional financial commitments, and a setback to confidence means a setback to the recovery of the housing market.” Additionally, the quarterly survey indicated increasing consumer pessimism as employment concerns tops the list, economy on wrong track…yada, yada, yada.

Ok, not news to you. But how about trends indicating a further decline of the housing market?

The most recent monthly NHS (released October 10th) reported a “marked deterioration” of consumer home price expectancies. Mr. Duncan was quoted here saying that, “…The lack of a sense of urgency to buy homes, given expectations for further declines in home prices and continued low mortgage rates, coupled with general pessimism regarding their own personal finances and the economy, bodes poorly for the recovery of the housing market.”

The Home Values Survey (HVS) is another telling survey, which is conducted by Homegain (homegain.com); and examines Realtor® and consumer sentiment about the housing market and economy. The most recent Regional HVS was reported September 11th for Q3 indicated: that although a majority of real estate agents surveyed reported their client’s homes depreciated in value, home sellers continued to over-value their homes; home buyers overwhelmingly reported that homes were overpriced; 39% of home buyers surveyed in the Northeast reported that they thought homes were overpriced 10%- to 20%; and an overwhelming majority of real estate agents surveyed in the Northeast (62%) reported they believed that home values would decrease in the next six months.

The outlook is not all doom and gloom. Some surveys report a positive spin as well.

Although a Rasmussen Reports (rasmussenreports.com ) survey reported on September 21st indicated that 48% of adults nationwide felt that buying a home is the best investment for one’s family, a commentary posted on rasmussenreports.com (The Housing Bust Has a Good Side by Froma Harrop; September 22nd) promotes the idea that the housing downturn has brought home owners back to fiscal reality.

Additionally, Gallop (gallop.com) reported in April that of the American adults surveyed, there were just as many who felt that the average home price would decrease (30%) than increase (28%) in the coming year. And, of course- an overwhelming majority of those surveyed (69%) felt it was a good time to buy a home.

by Dan Krell
© 2011

This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws.

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Celebrity homes

Nothing grabs the public’s attention more than juicy celebrity gossip. So, it shouldn’t have surprised me when I received what seemed to be endless calls from Hollywood gossip reporters asking about Kate Gosselin’s move to Rockville, MD. At first, I thought the calls were from pranksters because I had no idea who Kate Gosselin was (I’m not a TV junkie, so I was unaware of her celebrity status); but when I was enlightened to her realty-TV fame, I was taken aback by the amount of attention and energy that was garnered just by a rumor. But that was in 2009.

Sure, I know you’re wondering “why would a celebrity be moving to Bethesda?” Well, the MD-DC-VA area attracts many celebrities. Of course there are the home grown celebs who have moved away, but the area attracts celebs of all kinds from around the world. Some celebs who live or have lived in the area are known for their on screen achievements, some are known for their writing ability, some are known for their contributions to their respective fields, some are royalty, and some are known just for their wealth.

Without question, the MD-DC-VA area attracts the political elite from around the world, not just because DC is the seat of government, but it is also perceived as a seat of world power. And don’t forget the many sports stars who choose to live locally as well; even though they don’t have to make their permanent homes locally, many do.

Even Donald Trump knows the attraction value of the area. A purchase of a Sterling, VA golf course on the Potomac River in 2009 was not the only recent local real estate purchase; his purchase of a Virginia vineyard made headlines earlier this year.

It’s only natural to be interested in how the rich and famous live, it taps into our human ambition and need for achievement; at some unconscious level, peeking into celeb lifestyles may also provide motivation or a vision of aspiration. But looking into the “window” of their home, so to speak, is a bit different than celebrity spotting around town with the paparazzi.

The interest in celeb homes and lifestyles has sparked such TV shows as MTV Cribs (mtv.com) and even Joan River’s show How’d You Get So Rich?(tvland.com). Looking inside a celeb’s home can give you a view of the elegant, trendy, or even cutting edge design. But most of all it allows a peek into a lifestyle that may seem familiar; many celeb homes are focused on family, on comfort, and around food (the kitchen).

Be warned- no matter how curious you are, don’t try to peek through the windows of a celebrity’s home (or anyone’s home for that matter) as you may wind up being detained by the police (or worse). If you’re interested in celebrities and their lifestyles, there is no loss for information in today’s saturated Media. Local TV shows and internet websites can not only give you the scoop on local celebs’ homes, some provide interior pictures and tours. Websites such as DC Curbed (dc.curbed.com) and The Real Estalker (realestalker.blogspot.com) have the latest info on celebs homes.

Today, the calls asking about celebrities moving into or out of town continue. But here’s a tip- don’t ask the real estate agent: a good agent knows the value of discretion for the sake of their famous client.

by Dan Krell
© 2011

This article is not intended to provide nor should it be relied upon for legal and financial advice.  Using this article without permission is a violation of copyright laws.

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Coping with a low appraisal

I know it’s trite to say that selling your home in today’s economic environment is challenging. You know that home buyers are very picky and money is tight. However, are you (or your real estate agent) prepared for a low appraisal?

According to the Appraisal Institute (appraisalinstitute.org), an appraisal is “a professional appraiser’s opinion of value.” The appraiser’s role is to “provide objective, impartial, and unbiased opinions about the value of real property”… “Appraisers assemble a series of facts, statistics, and other information regarding specific properties, analyze this data, and develop opinions of value.”

Although there is a standardized procedure in conducting and preparing an appraisal, lenders add their own criteria to meet their underwriting requirements. There is no doubt that many lenders have made their criteria more restrictive since the housing market downturn.

Contrary to the current attitudes, low appraisals have always been around. It was not until the market downturn when many home sellers were confronted with concrete evidence of their home’s depreciation. However, the issues with today’s low appraisals are slightly different those of years past. In addition to stricter lender requirements and increased appraisal scrutiny, some have argued that changes to the appraisal industry (including management and ordering) may have also contributed to low appraisals.

Although not as pervasive as they were several years ago, low appraisals are still common. If your home does appraise lower than the contract price, you can appeal the value with the lender – but it will be difficult. In the past, appraisal appeals were less demanding (typical comparables were homes that sold within 6 months and 1 to 5 miles from your home) providing you a higher chance of success. However, today’s lender requirements are more restrictive. Although lenders vary on their requirements, many lenders now only accept appeals that include three original comparables that sold within the last 3 months and are within ½ mile (or less) of your home.

Don’t wait for a low appraisal to throw a wrench in your sale; take a proactive approach. Long gone are the days of setting a price by tacking on thousands to your neighbor’s recent sale price! Pricing your home correctly doesn’t only help attract home buyers, but it can also help avoid a low appraisal. Furthermore, choosing appropriate comparables for your pricing strategy is highly important, which include: comparables that are most similar to your home (same style and within 15% to 20% of living area and lot size); the most recent sales (within 3 months, but nor more than 6 months); and in close proximity to your home (unless you are in a rural are the comparable should be within ½ mile, but no more than 1 mile).

Additionally, the appraiser should be provided with your pricing rationale (i.e., the comparables that indicate that your sale price is in line with the market as well as a list of improvements that add value to your home). The intent is not to pester the appraiser while they are trying to do their job. However, some appraisers are appreciative that you have made the effort to provide the information (especially those who are unfamiliar with the local market).

Regardless of the outcome of your home’s appraisal, take heart that you can be proactive to possibly avoid appraisal issues. And if need be, don’t be afraid to appeal a low appraisal.

by Dan Krell
© 2011

This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws.

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Understanding Title Insurance

title insurance
A Consumer Guide to Title Insurance from the Maryland Insurance Administration (insurance.maryland.gov)

The necessity of title insurance has been debated over the years by many home owners. However, foreclosure disputes, between lenders and former home owners, have brought focus on a valuable and often misunderstood protection. Besides the many stories that have been told about how an owner’s title insurance policy has saved or could have saved a home, many home buyers are unaware of how title insurance was conceived. Many have difficulty understanding title insurance.

According to the American Land Title Association (ALTA.org), title insurance came about as a result of a landmark court case in Pennsylvania in 1868, which found that home seller was not be responsible for a erroneous title opinion. Subsequently, the first title insurance company was formed in 1876 in Philadelphia. The company promoted itself by claiming that they would insure “the purchasers of real estate and mortgages against losses from defective title, liens and encumbrances”…”Through these facilities, transfer of real estate and real estate securities can be made more speedily and with greater security than heretofore.”

Like today, title examinations were conducted to ensure that the title was marketable (or defect free). However, prior to the offering of title insurance, property owners were often held responsible for liens and encumbrances left on the title by the previous owner, or when mistakes occurred. Title disputes were often settled in court.

Initially, title insurance was often a local process. However, the title insurance industry surged along with an expanded housing market after World War II ended. Additionally, the use of lender’s title insurance grew along with the secondary mortgage market; because as the number of nationwide mortgage holders increased, lenders found that title insurance was necessary to protect their interests.

Contrasting to the recordation system has been used in most of the United States (in some cases before the formation of the country); many other countries use a land registration. Land registration typically allows a government to determine ownership when property ownership is challenged; property owners usually have no recourse.

Title insurance is a result of our recordation system that continues to this day, where property ownership can usually be determined by conveyance. Although the recordation system relies on transfer instruments that indicate a grantor, grantee, and property description; the system is not perfect. Besides recordation mistakes and claims from unrecorded conveyances; fraud can also occur by recording falsified transfer documents with a complicit or unsuspecting clerk.

There are two types of title insurance that are offered: lender’s and owner’s. A lender’s policy is usually required by a mortgage lender and protects the interests of the lender by validating the lender’s validity and enforceability of the mortgage. The lender’s policy is typically issued for the mortgage amount and coverage decreases as the principal is paid down.

An owner’s title insurance policy protects the owner’s interest in the property. The policy is typically issued for the purchase price and is usually valid through ownership to cover claims against the title. Policy coverage varies- so check with your title agent for pricing and coverage levels.

When purchasing a title insurance policy, consult with your title attorney about the policy coverage and limitations. Additionally, A Consumer Guide to Title Insurance is available from the agency that regulates title insurance producers – the Maryland Insurance Administration (https://insurance.maryland.gov/Consumer/Documents/publications/titleinsurancebrochure.pdf).

by Dan Krell
© 2011

Original published at https://dankrell.com/blog/2011/08/18/title-insurance-a-misunderstood-safeguard/

This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws.

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