Real Estate News and Commentary

May 12, 2017

Real estate auction home buying and selling

As the housing market continues to grow, buying and selling homes through the real estate auction is becoming more popular. Contrary to popular belief, real estate auctions are not just for distressed properties. Being part of a real estate auction can be exciting, but it’s not for everyone. There are pros and cons for both the home buyer and seller.

A real estate auction is traditionally a “live” auction performed at a designated place where the bidders and auctioneer meet to conduct the auction. You must be present, or have a proxy present, to make your bid. You must register to bid at the auction, usually presenting proof of funds for your deposit. The pace of the live auction can be very quick, so you have to pay close attention to the action.

Another form of real estate auction that has blossomed out of the foreclosure crisis, is the online auction. The online real estate auction allows many homes to be auctioned simultaneously. The atmosphere and pace of an online auction is different from a live auction. Of course, buyers can make their bid from virtually anywhere, and the bidding can take place over days or weeks.

If you want to sell your home via real estate auction, the benefits include: decreasing your homes time on market; you know when the home will sell; the home sells “as-is;” home buyer contingencies are typically few or none. The National Association of Realtors (nar.realtor) auction information describes homes that are good prospects (What Properties are Suited for Auction?) , which include: homes with a lot of equity; unique homes; vacant homes; and homes that are difficult to appraise.

However, real estate auctions are not for all sellers. The downside to the auction is that your home may not sell, especially if you place a reserve (seller reserves the right to accept or reject highest bid) on the auction. There are also costs that typically include the auctioneer’s commission and advertising costs, which could be due even if the home does not sell.

If you’re a home buyer, a real estate auction offers benefits for you too. Real estate auctions offer another avenue to purchase homes other than those listed in the MLS. This can be attractive especially when there is limited inventory of homes for sale. Buyers guide the sale price through their bidding. Unless it’s a blind bid auction (where bids are not disclosed to other bidders), you can decide if you want to increase your bid based on others’ bids.

If you want to buy a home at auction, do your due diligence. Read the terms of sale, there may be a minimum bid, minimum deposit, and even a buyer’s premium (which can be as high as 5 percent of sale price) and other fees that may be due at closing. Check the auction schedule frequently because the date and time may change, or the auction can be cancelled. Understand the type of auction you’re bidding in, because you may not get the home even if you’re the highest bidder (especially online auctions). Inspecting the property may be a challenge as you may have limited access.

Hire a Realtor to help you buy a home at a real estate auction

Hire a Realtor to assist and guide you through the details of buying a home via real estate auction. Your agent can help you get the terms of sale and any due diligence material the auctioneer provides. Additionally, they can also provide comps for the property to help you decide on your bidding strategy. If you have the winning bid, your agent can help you with the details of getting you to settlement by assisting with contracts, financing, and other aspects of the sale.

From the National Association of Realtors auction section:

BENEFITS TO THE SELLER:
-Buyers come prepared to buy
-Quick disposal reduces long-term carrying costs, including taxes & maintenance
-Assurance that property will be sold at true market value
-Exposes the property to a large number of pre-qualified prospects
-Accelerates the sale
-Creates competition among buyers—auction price can exceed the price of a negotiated sale
-Requires potential buyers to pre-qualify for financing
-The seller knows exactly when the property will sell
-Eliminates numerous and unscheduled showings
-Takes the seller out of the negotiation process
-Ensures an aggressive marketing program that increases interest and visibility

BENEFITS TO THE BUYER:

Smart investments are made as properties are usually purchased at fair market value through competitive bidding
-The buyer knows the seller is committed to sell
-In multi-property auctions the buyer sees many offerings in the same place at the same time
-Buyers determine the purchase price
-Auctions eliminate long negotiation periods
-Auctions reduce time to purchase property
-Purchasing and closing dates are known
-Buyers know they are competing fairly and on the same terms as all other buyers
-Buyers receive comprehensive information on property via due diligence packet

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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.

May 5, 2017May 5, 2017

Home listing syndication is big business

Your home listing is a hot commodity! Not just to home buyers looking to buy, but to those who buy and sell information on the internet. MLS home listing information syndication is big business.

Much of what you see, hear, and read on TV, radio, and the internet is syndicated and distributed through a broad network of affiliated outlets. The purpose is to have as large of an audience as possible. The larger the audience, the larger the advertising revenue. Syndicating and distributing media content has been around for a very long time, and has been very a lucrative industry for those involved.

Internet syndication is no different and has become sophisticated, such that websites will pay for licensed content. The content attracts visitors and generates revenue via ads and/or pay-per-click. Needless to say, internet syndication has developed to become a multi-billion-dollar industry.

When you think about making money in real estate, you probably think about buying and selling property, not the internet. Most people don’t realize that real estate information generates $billions on the internet. Real estate portals generate revenue by publishing content that attracts home buyers and sellers. The sought after content, of course, is your home’s MLS listing. Websites generate income by selling real estate and other professionals access to consumers who visit their sites to view your MLS listing.

You may not know this, but your home’s listing is copyright-protected by your agent’s Multiple Listing Service. The content is licensed and syndicated to internet real estate portals and other publishers for a fee. How much do websites pay for MLS licensed content? Heck, you’d be hard pressed to find that information, much less acknowledgement that there is a fee paid at all! And I suspect that information is not readily disclosed because consumers would be up in arms if they knew.

However, an article by Natalie Sherman appeared in the Baltimore Sun on January 27, 2015 (MRIS looks to partner with Zillow) gives a hint about the monetary relationship between MLS boards, syndicators and publishers. Ms. Sherman wrote:

“Under the current system, Zillow pays to receive listings from Listhub.com, which has agreements with hundreds of multiple listing services, including MRIS, to provide syndication services to sites such as Zillow. Earlier this month, Zillow and Listhub said their existing deal would not be renewed.

A representative for Zillow, which has been working to establish more direct relationships with brokers and listing services for years, said a new deal would help keep the site more up to date.”

The article refers to the 2015 shakeup of real estate listing feeds to specific websites, such as Zillow. At that time, Zillow sought direct deals with individual MLS boards, such as our local MRIS (now part of Bright MLS), to get MLS home listing feeds.

Chances are that you are unaware that the information about your home that is uploaded to the local MLS (including pictures of your home) become the property of the MLS. Much less, you may not know that the information is licensed to others for a fee to be used on other websites.

Even though the MLS boards charge subscription fees to agents for the privilege of uploading and viewing content, they might argue that the fees generated by licensing and selling your information helps maintain the MLS system. However, not disclosing this aspect of the real estate listing poses some ethical questions that must be addressed.

Of course, there are real estate brokers who have opted-out of syndication of their MLS listings. These brokers want to retain control of home listing information to ensure accuracy and maintain professionalism when presenting your home to the public.

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April 28, 2017July 14, 2019

Gonzo home sales and prices

Everyone seems to be excited about this week’s Case-Shiller home price numbers reported for February. Even the title of the April 25^th press release sounded a little giddy: “The S&P Corelogic Case-Shiller National Home Price NSA Index Sets Fourth Consecutive All-Time High” (spindices.com). Yes, the Case-Shiller 10-city and 20-city composite indices are close to the 2007 level. But before you become intoxicated by reports of gonzo home sales and prices and run off to sell your home, here’s more to the story.

Gonzo home sales and prices

Gonzo home sales and prices depend on the market. According to the recent Case-Shiller release, Seattle, Portland, and Dallas topped the charts with annual index gains of 12.2 percent, 9.7 percent, and 8.8 percent respectively. Not surprisingly, Seattle and Portland have been the hottest real estate markets over the past year. Tampa’s and Cleveland’s housing markets are at the opposite end of the spectrum with decreases of -0.5 percent, -0.3 percent during February; while Miami’s home price index was unchanged. Washington DC reported an annual gain of 4.1 percent, with a 0.2% gain reported in February.

David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices stated:

“There are still relatively few existing homes listed for sale and the small 3.8 month supply is supporting the recent price increases. Housing affordability has declined since 2012 as the pressure of higher prices has been a larger factor than stable to lower mortgage rates.
Housing’s strength and home building are important contributors to the economic recovery. Housing starts bottomed in March 2009 and, with a few bumps, have advanced over the last eight years. New home construction is now close to a normal pace of about 1.2 million units annually, of which around 800,000 are single family homes. Most housing rebounds following a recession only last for a year or so. The notable exception was the boom that set the stage for the bubble. Housing starts bottomed in 1991, drove through the 2000-2001 recession, and peaked in 2005 after a 14-year run.”

Gonzo home sales and prices are dependent on local real estate. It’s true, housing inventory is lacking. At a time when homes should be coming to market for the spring season, the Greater Capital Area Association of Realtors Montgomery County single family statistics for March 2017 indicated that there were -1.8 percent less new listings compared to the same time last year. And the total number of active homes for sale are -16.4 percent less than the same time last year. Although June is usually the peak time for home sales and prices in our area, home sales increased 17.9 percent month over month, and is 11.7 percent higher than the same time last year; while average home sale prices increased less than 1 percent (gcaar.com)!

Holy shades of 2005, Batman!

Housing stats sound eerily like those before the housing bubble crash. But this market is different in many respects. Consider that housing speculation is not as prevalent as it was at that time; homes are not being flipped in a matter of days in most areas. And home buyers are more sophisticated and savvy than they were in 2005; home buyers are more demanding, as well as sensitive to home condition and price.

Yes, it’s true that house values are increasing. Yes, home sales are breaking records. But not all homes sell. You should realize that that home sale stats includes data of homes that sell. Homes that don’t sell are not included in the numbers of closings, nor are they included in home sale prices.

Homes that don’t sell tend to be overpriced for the home’s condition, or neighborhood. Sometimes, the physical location of the house is not ideal; for example, situated next to train tracks. If you’re selling your home this year, don’t get greedy. Get a professional opinion on pricing your home correctly; over priced homes tend to not sell quickly, or not at all.

Pricing your home may not be as easy as you think. Empirical research has confirmed that there are many variables that affect sales price. Factors that impact home sale price include the home’s location, condition, amenities, and market timing.

If you want to sell your home quickly and capitalize on home sale trends: consider repairing deferred maintenance issues, making updates, and don’t take home buyers for granted. When making repairs and updates, don’t go for the cheapest quote because it will likely show. Also, make sure your contractors are licensed.

Home buyers are just as savvy as you, so any attempt to deceive will backfire and hurt your sale. Focus on broadening your home’s appeal. Consider making your home turnkey, since most home buyers are looking for a home they can move right in and without making immediate repairs and updates.

For a guide on a successful home sale, take a look at “The magic of 4 to sell a home“

By Dan Krell
Copyright© 2017

Original post at https://dankrell.com/blog/2017/04/28/gonzo-home-sales-prices/

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April 21, 2017December 13, 2022

Curb appeal can boost home sale price

If you want to increase the sale price of your home this spring, you will no doubt focus on the interior. But how does the home’s exterior look? You’d be surprised about the amount of necessary cleaning, decluttering and repairing around the exterior of your home. But don’t skimp on the exterior home preparations before your sale – research conclusively shows that improving your home’s curb appeal can increase the sale price by as much as 8 percent!

An empirical study conducted by Chen, Evans-Cowley, Rutherford, and Stanley (An Empirical Analysis of Effect of Housing Curb Appeal on Sales Price of Newer Houses. International Research Journal of Applied Finance. 2013, Vol. 4 No 11, p1407-1419) was the first to demonstrate the relationship between a home’s sale price and curb appeal. The authors also discussed how home buyers’ preferences in a home’s exterior influence the home’s sale price. Besides curb appeal, they suggest that the home’s architectural elements could also be important in the final sale price. The idea that today’s modern designs are more desirable, and likewise costs more money, is only transitory; such that today’s designs could become trite and tired in twenty years.

The study used a seven-point “attractiveness” scale to determine how respondents viewed the attractiveness of a home’s exterior. They concluded that there is a relationship between a home’s exterior attractiveness and the home’s sale price. In fact, they reported that a one-point increase in their scale corresponded to an 8 percent increase in the home’s value!

Home buyers make assumptions about your home’s interior based on the appearance of the exterior. An unattractive exterior can repel home buyers before they even see the beautiful and updated interior. Attract home buyers and boost your home sale price by focusing on cleaning, repairing, and “finishing” your home’s exterior.

Basic landscaping can make a huge difference in your home’s attractiveness. Having too many plants, or letting them grow too much can make the home’s exterior appear crowded and unkempt. Make sure your lawn is full but manicured throughout your listing. Properly trimmed trees not only look tidy, but allow home buyers to see your home from the street. Appropriately placed and trimmed shrubs and flower beds can accent the home’s architectural design.

Check your home’s siding. Replace and repair any missing or broken siding pieces. Freshen up siding by power cleaning, or painting. Even if your home has artificial materials as siding, inspect window frames and fascia boards; these areas are often neglected and may need urgent repair.

How does the deck look? Unless you maintain the deck regularly, chances are it may seem dull and tired, and may need to be re-treated. Even if your deck is made of artificial decking, check the railings. Hire a licensed contractor to repair and secure the deck as necessary.

How about the sidewalks and patio? The sidewalk and patio can be easily cleaned by power washing. Cracks in the sidewalk and patio are not only unsightly, but can be a trip hazard. Cracks are typically caused by rain and water runoff, but can be repaired. Consider also sealing the sidewalk and patio to prevent further water damage.

Finally, consider finishing the exterior to make your home more appealing and cordial. Much like staging the home’s interior, you can use similar principles to increase the exterior’s attractiveness; such as placing appropriate chair(s) and potted plant(s) on the porch, deck or patio.

By Dan Krell
Copyright© 2017

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April 14, 2017December 13, 2022

Demand better consumer financial protection

In an effort to reform the Consumer Financial Protection Bureau (consumerfinance.gov) to become a better steward of consumer protection, H.R.5983 – Financial CHOICE Act of 2016 was introduced during the last congress. The effort to compel oversight on the now embattled agency, as well as provide for a panel of decision makers (in lieu of a single chairperson), is unfortunately highly politicized. As financial consumers, we should demand a better and fair protection agency serving without political motive.

From the Executive Summary of the The Financial CHOICE Act
Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs:

SECTION THREE: Empower Americans to achieve financial independence by fundamentally reforming the CFPB and protecting investors.
Change the name of the CFPB to the “Consumer Financial Opportunity Commission(CFOC),” and task it with the dual mission of consumer protection and competitive markets, with a cost-benefit analysis of rules performed by an Office of Economic Analysis.
Replace the current single director with a bipartisan, five-member commission which is subject to congressional oversight and appropriations.
Establish an independent, Senate-confirmed Inspector General.
Require the Commission obtain permission before collecting personally identifiable information on consumers.
Repeal authority to ban bank products or services it deems “abusive” and its authority to prohibit arbitration.
Repeal indirect auto lending guidance.

Some have hailed the CFPB because it was created out of good intention. There is no question that the CFPB has done a great job in collecting and publicizing consumer complaints. The announcements of consumer complaints seem to be a public airing of consumer grievances, which sometimes signaled forthcoming action from the agency in a specific financial sector.

However, critics contend that the CFPB rules have made lending more burdensome for both lenders and consumers by increasing bureaucratic red tape. It has also increased the cost of lending to consumers by adding levels of compliance measures that are now embedded within the lending process. Critics have also complained that the CFPB’s enforcement is not fair and unequal in focus.

Critics are becoming increasingly vocal, not only because of the sometimes invasive rule making, but more recently of how offenders are chosen and penalized. Jacob Gaffney’s article for HousingWire (Former CFPB attorney pretty much just confirmed the worst fears of the mortgage industry: housingwire.com; January 3, 2017) earlier this year discussed two genuine concerns about the CFPB:

1) “The CFPB targets lenders for enforcement action based on opaque internal decisioning;” and
2) “Monetary penalties seemed determined by revenue, not equalitarian application of said enforcement action.”

Gaffney quoted Ronald Rubin, a former enforcement attorney at the Consumer Financial Protection Bureau, (from a December 21^st 2016 piece “The Tragic Downfall of the Consumer Financial Protection Bureau” published online nationalreview.com) as confirming these concerns. For example, the Wells Fargo fake consumer account scandal, one of the most egregious consumer scandals post financial crises, was not addressed by the CFPB (until it was too late) because Wells Fargo was allegedly “not a target of the agency at that time.”

Referring to the complaint database, Rubin stated:

“The CFPB’s complaint database contained grievances against almost every financial business. Enforcement targeted the companies with the most revenue…rather than those with the most complaints.” He further stated: “Targets (of the CFPB) were almost certain to write a check… Even the size of the checks didn’t depend on actual wrongdoing — during investigations, Enforcement demanded targets’ financial statements to calculate the maximum fines they could afford to pay.”

The recent PHH Corp v Consumer Financial Protection Bureau case highlighted some of the alleged abuse of power by an agency with no oversight. US Appellate Judge Kavanaugh wrote in his opinion:

“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…
…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.”

We’ve followed the career of the CFPB since it was established in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Shortly after the financial crisis, we eagerly anticipated the new agency to help those who were the target of abusive lending and foreclosure practices. Since its inception, however, controversy has embraced the agency.

By Dan Krell
Copyright© 2017

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