Category: real estate

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The internet: a catalyst for change between real estate agents and their clients

Have you ever thought of how the internet has changed your personal relationships? Before the proliferation of social media on the internet, you may have related to your friends and family much differently than you do today. Whether you know it or not, your relationship with businesses has also changed; banking and shopping seem to be mostly initiated on the internet. And, of course, the internet has changed your relationship with your real estate agent.

Before public use of the internet was commonplace, real estate agents mostly met with their clients in person to review available home listings. Although many used the technology of the day (fax machine and telephone), a face-to-face meeting was still a necessity. As the internet flourished, early adaptations allowed real estate agents to correspond with clients via email (of course those who were sophisticated enough to have an email account).

As the internet evolved, so too did the business of real estate. And while surfing the internet became a regular daily routine (like your morning coffee); MLS services, Realtor® Associations, brokers and real estate agents all tried to capitalize on the latest technologies to capture business.

One could even try to make the argument that technology and the internet was an enabler of a real bubble that would eventually pop. Because house-hungry buyers wanted to be the first know about new listings and be able to present their offer before anyone else, internet applications were developed to adapt to that market need; internet applications were touted to automatically send listing alerts to buyers’ emails and cell phones. The increased use of mobile technologies such as texting and SMS, along with the ability to surf the internet on the cell phone allowed buyers to search homes anytime/anywhere. Tech savvy buyers could not only get notice of a new listing almost immediately, but they could also send an offer to the listing agent without ever leaving their chair!

Of course, many who hastily bought without inspections (or worse- sight unseen), realized that the internet was not a substitution for visiting the home and doing due diligence. The internet has since grown to become the leading source for real estate related information. What was once ballyhooed as the means of procuring clients is now realized as a tool to augment client relationships.

Certainly, the internet has not yet become the replacement for human interaction in real estate transactions. However, for better and worse, the maturing internet has impacted the relationship between the real estate agent and their client. Where at one time, the public solely relied on real estate agents for information; the public now relies on their real estate agent for specialized information and increased personal service. The business of real estate has shifted from selling the idea that real estate agents had the listings and all the related information, to not only selling personal and specialized services to facilitate the real estate transaction – but to assist the public in understanding the overwhelming barrage of data and information by providing meaningful interpretation and implementation.

Much like the effects to other financial industries, the internet has not totally replaced human interaction; but instead has changed relationships. At one time the internet was thought to become the virtual revolution; but in actuality has forced the real estate industry and agents to rethink their function and relationship with their clients.

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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Expensive mortgages on the horizon

Owning a home takes work. Soon, it will cost more too. In response to a crippling financial crisis, sweeping changes were established in the mortgage industry to not only stabilize the crippled financial sector of the housing market, but to also to temporarily provide access to credit in an all but frozen credit market. Now that the temporary stop gaps are coming to an end, will private investors make home mortgages more expensive or will Congress bow to housing trade groups to extend current interventions?

Since the increase of FHA mortgage down payments to 3.5% a few years ago, there has been talk of increasing it further to 5%. The move comes at a time when mortgage assistance programs are winding down and reliance on FHA mortgages to refinance underwater home owners is diminishing. Concerns over FHA reserves prompted higher annual FHA mortgage insurance premiums and, of course, also elicited calls to increase FHA mortgage down payments to 5%.

Of course, while some look for a solid FHA mortgage down payment increase, some look to future decreases. H.R. 1977: FHA Reform Act of 2011 (introduced May 24th which has been currently referred to committee) creates the position of “Deputy Assistant Secretary of FHA for Risk Management and Regulatory Affairs,” whose job would be, among other things, to review down payment requirements.

Besides the push for increased FHA down payments, the FHA maximum loan amount is set to decrease in October of this year. Temporarily increased to $729,750, FHA loan limits will revert to those set by the Housing and Economic Recovery Act of 2008 (HERA). Unless Congress acts on maintaining the current FHA loan limits, HUD states that 669 of the 3,334 counties or county equivalents that are eligible for FHA insured mortgages will be affected. In “high cost” areas, such as Montgomery County, the maximum FHA loan limit will be reduced to $625,500 (“Potential Changes to FHA Single-Family Loan Limits…A Market Analysis Brief; hud.gov).

In addition to changes in FHA mortgages, conforming loans (mortgages that conform to Fannie Mae and Freddie Mac guidelines) will also change. October 2011 is also when the maximum conforming loan limits will revert to those established by HERA, as stated in a May 26th release from the Federal Housing Finance Agency (FHFA is the oversight agency for Fannie Mae, Freddie Mac, and Federal Home Loan Banks). Although the new loan limit will not differ from the current amount in a majority of regions, FHFA estimates that 250 counties or county equivalents will be affected. The maximum conforming loan limit for “high cost” areas, such as Montgomery County, will also be reduced to $625,500.

Although the current FHA and conforming loan limits were temporary, housing trade associations have warned about possible effects of reverting to lower mortgage limits on an unstable real estate market. Both the National Association of Realtors and National Association of Home Builders have commented on the imminent changes and have called on Congress to make the temporary changes permanent.http://www.blogger.com/img/blank.gif

Recent government interventions in the housing market may have been necessary but they were intended to be temporary. Continued intervention may continue to allow “lower cost” mortgages for some home buyers, but some have warned against maintaining the temporary stop gaps because it hinders private investors from entering the housing market as well as the possibility of artificially inflating housing prices.

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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Negotiating home repairs

During the housing boom last decade, it seemed as if problems that killed real estate deals were rare. Appraisals almost never came in low, and if it did the buyer gladly paid cash for the difference between the sales price and the appraised value. Loan denials were also rare, because mortgages were easier to obtain. And of course, the home condition almost never seemed a problem because many people forwent home inspections.

Today, however, buying and selling a home feels different than it did in those halcyon days. Although the process remains the same, the rules have somewhat changed. Buyers are more apt to ask the seller to address issues that arise along the way, including problems with the home’s condition. Both the buyer and seller need to be aware of property condition issues that may arise as well as being prepared when encountered.

Home buyers are looking for their perfect home, while sellers already view their home as such. Because of this subjective view, it seems as if home buyers are “walking away” more often these days because they cannot come to terms with the seller on property condition repair items.

Home sellers generally have progressed over the last few years such that they are more open to a buyer’s request to address reasonable and necessary repairs. However, it is not uncommon for repair negotiations to end in a “take it or leave it” scenario when the buyer’s request is deemed excessive by the seller.

The termite inspection can also create tension between buyers and sellers, even though sellers usually treat infestations and/or repair resulting damage. Many buyers and sellers do not realize that the termite inspection is somewhat of a misnomer because the inspection not only checks for termites, but searches for evidence of any wood destroying insects (such as: termites, carpenter ants, and powder post beetles) as well as reporting damage. Infestation of termites and other wood destroying insects can occur anytime in the life of a home; if left untreated, an infestation can feast on a home leaving behind costly damage and in cases left untreated for many years- possibly an uninhabitable home.

Another source of a property condition inspection, that most buyers and sellers are unaware of, originates from the buyer’s lender. Mortgage lenders require the home to meet minimum condition standards, which is reported on the appraisal; the appraiser will “inspect” the home for the lender. For conventional mortgages, the appraiser will rate the overall condition as well as possibly noting condition flaws (such as structural deficits and utility connections). A poor rating will typically raise a red flag for the underwriter to require repairs prior to closing.

FHA and VA appraisers not only rate the home’s condition, they will also list all deficiencies that do not meet minimum underwriting condition requirements to be addressed prior to closing. The list of deficiencies is provided to the buyer, who in turn typically addresses with the seller. The seller can agree or refuse to make repairs; however, the contract is sometimes voided when neither the buyer nor seller agrees to make the repairs.

When it comes to property condition repairs, buyers and sellers should be prepared for extra rounds of negotiations. However, surprises and further negotiation can be minimized if both sides are prepared and understand the scope of the required property condition repairs.

By Dan Krell
Copyright © 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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Planning to de-clutter

De-cluttering your home is not just reserved for a home sale. It’s also a bit more than just a thorough cleaning and putting away items that are not in use. You may already be overwhelmed by the thought of cleaning, but remember that if you prepare a realistic plan and stick to it, you will be finished before you know it.

When going through each room, decide which items are necessities and which items need to go. There are many items that you may decide are not necessary to keep, yet they are personal or sentimental. Professional home stagers talk about the idea of “depersonalization” when discussing de-cluttering. This means that the home should be “neutralized” so, rather than view your life and personalization, home buyers can have a vision of the home as their own. Keeping depersonalization in mind, decide which items need to go.

Remember that de-cluttering doesn’t necessarily mean that you dispose of everything you don’t need or want in your home. Many of your personal and sentimental items you wish to keep can be stored temporarily or for long periods of time. You can rent storage units of various sizes on a monthly basis, or you may decide to have a portable storage container delivered to your home. The portable storage container is a practical solution if many of the items that you’re pulling from your home will be used in your new home. Additionally, if you’re move is not immediate, the portable storage container can be transported by the company to storage until you’re ready to unload the container in your new home.

The items you decide that you no longer need or want can be donated, disposed of, or you might even decide to have a yard sale! If you have many items that need to be removed from your home, consider donating the items to a charity before throwing it all away. Since many charities vary on what is acceptable for donation, it’s a good idea to check with them before scheduling a pick up or dropping items off to their collection site.

Be careful when throwing items away; you may need to take precautions or make separate disposal plans for certain materials. Some items that cannot be picked up by the regular trash collection can be scheduled for pick up by the county or local municipality; or can be hauled to the local processing facility. If you’re unsure how to dispose of certain items, you can check with the Montgomery County Division of Solid Waste Services for facility hours and disposal/recycle procedures.

If you don’t have the time to haul your unwanted items on your own, you may decide to hire a hauling company. Charges to haul items away can vary depending on the company, as well as how they dispose of the items. Some haulers may drop everything to a county processing center, while some may sort your items either for donation or sale.

De-cluttering is the keystone to your home’s presentation. De-cluttering a home may sound laborious, but it doesn’t have to be if you have a realistic plan. If you’re unsure how to begin de-cluttering your home, you can check with your Realtor® or you can hire a Professional Organizer. The National Association of Professional Organizers (napo.net) maintains a national directory of Professional Organizers.

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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Can timing the real estate market help you get a better deal?

If you’re trying to time the market before buying or selling your home, you may decide to wait a little longer after hearing the recent housing data; however, you could also change your mind when you consider some recent research.

First, a recent housing report released May 8th by Zillow.com indicates further erosion of home values. According to Zillow.com’s chief economist Stan Humphries, home values continue to slide nationwide – except for the metro areas of Honolulu, HI (there was a slight increase in home values in March 2011 compared to the same time last year) and Pittsburgh, PA (where home values have been determined to be flat for the time period) (Zillow.com).

Even the Washington, DC metropolitan appears to have taken a hit. According to Zillow.com, area home values declined 0.5% in March 2011 compared to February 2011; and declined 7% in March 2011 compared to March 2010.

Humphries further stated that housing demand continues to be “fundamentally weak;” while housing supply is and will continue to be affected by distressed properties due to higher than normal delinquency rates (which are expected to continue into the near future).

Given the less than rosy picture of the housing market, those doubting the long term value of home ownership may continue to wait out the market. But a recent research article by Anderson & Harris (2010. Timing the market: You don’t have to be perfect. Real Estate Issues 35, (3) (10): 42-42-50) may indicate that you don’t have to be perfect when timing your purchase and sale of your home.

Anderson & Harris studied various strategies of purchasing and selling commercial real estate to determine if there is a significant difference in return. Their strategy simulation provided these results: the typical “buy and hold strategy” over a thirty year period results in an annualized return of 8.18%; however, buying when a recession has ended with a predetermined sale period yields a wide range of return that ranged from 13.38% to 1.42% annualized total return. Alternatively, timing your purchase and sale with the overall peaks and valleys of the market could be more effective than trying to be exact; although they concede that peaks and valleys are realized in hindsight.

Although their data analyzed commercial real estate investor behavior, the results may have implications for the housing market. As the data suggests, attempting to exactly time your purchase and sale can yield a wide range of unpredictable results; while a long term strategy appears to be more stable. Additionally, they caution that market timing can also be affected by macroeconomic factors as well as your personal financial picture; which can reverse positive returns, even if your timing was perfect.

Anderson & Harris’ data may indicate that attempting to time your purchase may not yield the results you might expect; long term home ownership can be as good, if not better, than speculating on the exact bottom or top of the housing market. Likewise, home sellers waiting for the housing market to rebound before making a move may be missing an opportunity as well.

Obviously, you should consult financial professionals before making any financial decision; as well as consulting a Realtor® to assist you in analyzing local and neighborhood sale data. However, if you’re trying to time the housing market, consider a long term approach before making your decision.

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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