Real Estate News and Commentary

August 12, 2016January 3, 2020

Sign ban or boosting Realtors?

Sign ban or free speech — Sign ban or Free speech? (infographic from newseum.org)

A special thanks to the Montgomery County Council whose proposed sign ban will undoubtedly help local real estate agents. Last week’s testimony about a zoning text amendment relating to signs and their location illuminated their place in the community as well as reminded us they are a form of free speech.

Of course the unintended consequences of a blanket sign ban in the right of way is yet to be determined. However, it would certainly make it more difficult for county residents to sell their home by owner (without an agent), as well as home buyers wanting to go it alone without an agent. The resulting lack of information that is currently provided by these signs would certainly compel consumers to hire a local Realtor®. Thank you.

Greater Capital Area Association of Realtors® (GCAAR) president Peg Mancuso testified: “From a real estate perspective, signs are an inevitable means of communicating with Montgomery County residents both new and existing. The proposed sign ban would be a tremendous inconvenience to community members who are in need of information for short term related events, such as open houses.” She mentioned a Realtor® best practice (which most agents adhere to) of placement of open house signs just prior to and removal immediately after the event. She also pointed out that many home owners are unaware how their properties relate to the right of way, as well as being uneducated about the permitting process of signs. These logistical and educational issues would make such a sign ban difficult for home owners to advertise their homes.

GCAAR vice president and COO Bill Highsmith, Jr reminded those at the hearing that GCAAR not only represents local real estate professionals, but is also a voice for home owners on property rights issues. He asserted that signs in the right of way have historically been a means of business advertisement, expression, and community engagement. He stated that “…publically visible signs are an important method of communication for county residents, Realtors® and the broader real estate market.”

Mr. Highsmith stated, “For Realtors® and the clients they serve, these signs are a particularly important way to communicate information about open houses and homes that are for sale. While you may believe the internet is the primary way folks learn about opportunities to purchase a home, real estate signs are vital to let the broader public know about the real estate market in surrounding neighborhoods.” He cited anecdotal evidence that many home buyers have bought the home they initially spotted from a sign. He asserted that many consumers begin the home buying process by visiting open houses (especially first time home buyers). And additionally suggested that these signs allow more county residents to become home buyers.

Allen Myers of the Maplewood Citizen Association (MCA) stated that these signs are useful to inform their residents of association meetings. Collection of permitting fees for temporary signs would be cost prohibitive, possibly adding additional financial burden to the members of the association. He asserted that the MCA believes that the signs are Constitutionally protected form of free speech.

It is reasonable to believe that many people agree seeing “shoe repair” signs are annoying. And it is also reasonable to surmise that improperly planted signs can become a hazard. Nonetheless, the takeaway for anyone attending last week’s hearing should be that these signs are beneficial to the community.

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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.

August 5, 2016November 23, 2021

Money laundering through real estate

In the post financial crisis era, when anti-fraud units from various law enforcement agencies stepped up activity to prosecute real estate related crimes; real estate continues to be a vehicle for scammers and fraudsters. Although mortgage fraud and identity theft have been the mainstay, money laundering through real estate has not received the same attention. That is until this year, when a pilot program was initiated to identify money laundering in residential real estate. The program was ordered through the Financial Crimes Enforcement Network of the US Department of the Treasury (FinCEN), which is tasked with the protection of our financial system by primarily combating money laundering (fincen.gov).

FinCEN’s concern is the laundering and/or structuring of money through all cash deals into luxury real estate, primarily through shell companies. Through the use of LLC’s or other business structures, individuals can hide assets anonymously. According to FinCEN, “Money laundering” is the disguising of funds derived from illicit activity so that the funds may be used without detection of the illegal activity that produced them.”

A 2008 FinCEN report (Money Laundering in the Residential Real Estate Industry: Suspected Money Laundering in the Residential Real Estate Industry; April 2008) found that suspicious activity reports (SAR) remained steady through 2002. However, began to increase in 2003, and sharply rose through 2005; the increase was significantly more than the rapidly expanding real estate market at that time. Findings of the report indicated that over 75 percent of those engaging in money laundering activities were unaffiliated with the real estate industry.

The program to identify money laundering in residential real estate seemed to be the next logical step in a series of investigations. As a result, FinCEN announced Geographic Targeting Orders (GTO) on January 13^th of this year. The GTO was enforced from March 1^st, 2016 through August 27^th, 2016. And required title companies to report the individuals behind the companies buying high end real estate without financing (all cash deals), located in Manhattan and Miami-Dade County.

In an April 12^th FinCEN news release, former FinCEN director Jennifer Shasky Calvery stated “The analysis and DOJ forfeiture cases continue to show corrupt politicians, drug traffickers, and other criminals using shell companies to purchase luxury real estate with cash. We see wire transfers originating from foreign banks in offshore havens where shell companies have established accounts, but in many cases we also see criminals using U.S. incorporated limited liability companies to launder their illicit funds through the U.S. real estate market.”

On July 27^th, FinCEN announced the expansion of the GTO, beginning August 28^th and lasting for 180 days. The geographic areas were expanded to include: New York City; Miami-Dade, Broward and Palm Beach counties; Los Angeles County; San Francisco, San Mateo, and Santa Clara counties; San Diego County; and Bexar County, Texas.

Increased scrutiny of money laundering in residential real estate compelled the National Association of Realtors® to issue Anti-Money Laundering Guidelines for Real Estate Professionals (realtor.org; November 15, 2012). The voluntary guidelines state that the real estate agent’s exposure is generally “mitigated” because most real estate transactions involve financing and mortgages (which are regulated). However, when encountering risk factors that fall outside the norm, NAR encourages due diligence and reporting of suspicious activity.

By Dan Krell
Copyright © 2016

Original published at https://dankrell.com/blog/2016/08/05/money-laundering-and-real-estate/

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July 29, 2016July 12, 2019

Home selling don’ts

When preparing for a home sale, the devil is in the detail. You probably already know about the “do’s,” de-cluttering, curb-appeal, staging, and making necessary repairs. But here are a few home selling “don’ts” that often trap home sellers into making mistakes:

Home selling is not about you. Don’t make a statement. Now is not the time to be bold with renovations and staging; but rather stay focused on getting your home sold. Stay away from trendy features, and bold designs. Although bright and dramatic colors seem tempting, stick with neutral color schemes. Besides making rooms feel awkward, making a statement with trendy fixtures and bold colors may turn off home buyers. Bold style statements make home buyers fixate on the style, rather the space and potential of each room.

Home selling is not about being cheap. Don’t hire a contractor because they are the cheapest. When it comes to home repair, the idiom “you get what you pay for” typically holds true. Home buyers have a discerning eye and can spot poor workmanship. Don’t be tempted to hire the unlicensed handyman to save a few dollars either; you and the future buyers won’t have recourse if there is a problem with the repair. Don’t also be talked into a cheap renovation that is meant to appear as a luxury amenity. Poor workmanship, sloppy installation, and/or inferior materials will turn away many home buyers.

Home selling is not about being amateur. Don’t assume all house painters are alike. A good paint job can make a room look terrific and create positive emotions; while a poor paint job makes a room appear shabby and unstylish. And even though you may be tempted to save a few dollars, don’t paint your home on your own – hire a professional. The amateur paint job appears sloppy and has the telltale uneven edges, painted over light switches and receptacle covers, and painted shut windows.

Home selling is not about guessing. Don’t assume your prepping will bring you a big return on your investment. If you deferred regular maintenance, you may have to make repairs regardless of the return. Likewise, if your home is outdated, you may consider making some updates to lure home buyers. Before getting in too deep on a prepping project, have a budget in mind and do a cost benefit analysis.

Consider checking out this year’s Remodeling Magazine’s Cost vs. Value Report (costvsvalue.com) to find out what updates and renovations make sense and which ones can bring you the biggest returns. Although most renovations won’t bring you a dollar-for-dollar return, they may add to the overall aesthetic and make your home more appealing. However, some renovations may not only lose money but can also blemish your otherwise beautiful home. For example, adding a backup generator may seem as if it is a much needed amenity, however, the report indicated that for the Washington DC region, you would only recoup about 57.5% of the cost. And it is possible that the home buyer will remove it because of it was poorly installed and too noisy.

The purpose of preparing your home before a sale is to not only to compel home buyers to make a top-dollar offer on your home, but to also get it sold quickly. Consider planning out how you will prepare your home. Do the research. Don’t fall into the traps that ensnare many home sellers because it can cost you. You may not only have to correct poor workmanship, but your negotiated sale price may be lower than expected.

By Dan Krell
Copyright © 2016

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July 22, 2016November 23, 2021

Real property disclosure

Finally, there is a new resource to get real property disclosure for home buyers. Home buyers can access property information that is not always readily available or hard to find. A July 19^th RealtyTrac (realtytrac.com) press release introduced Attom Data Solutions, their new parent company. The introduction described what the company offers to the real estate industry and consumers. Attom Data Solutions’ (attomdata.com) self-stated mission is: “to increase real estate transparency by arming businesses and consumers with the property and neighborhood data needed to make wise decisions.”

You may recognize RealtyTrac as being the go-to resource for foreclosed homes. But what you may not realize is, like other real estate websites it is an aggregator of information. RealtyTrac describes itself as “the leading provider of comprehensive housing data and analytics for the real estate and financial services industries…” by providing information on over 125 million properties.

So the idea of aggregating property information is not new. However, until now, there has not been this amount of information available for each property located in one place. The size and scope of Attom Data Solutions’ aggregated information is mindboggling. RealtyTrac’s press release revealed that the new parent company’s database of property information (called “ATTOM Data Warehouse”) holds more than 9 terabytes of information! (One terabyte is 1 trillion bytes). Putting the jargon into perspective, the data represents 99% of the U.S. population. And it features “enhanced and standardized data for more than 150 million U.S. property parcels.”

Before the ATTOM Data Warehouse, you would have to check a number of websites and make inquiries to several local agencies. The aggregated info includes: a property’s historical and current public records, ownership, mortgages, foreclosures, neighborhood information, demographics, environmental issues, natural hazard information, potential health hazards, and property features and neighborhood value information.

Besides being able to help you decide on which home to buy, Attom Data solutions’ reports may also help you decide on price. Additionally, home sellers may find the information useful as a form of disclosure, to answer many of the questions that are often difficult to find. Attom Data Solutions is reportedly offering data licensing to the industry, however the information is also available via their consumer websites RealtyTrac.com, Homefacts.com and HomeDisclosure.com.

The idea of consolidating property information into one location has been trending for several years. There have even been hints of creating a national MLS. Several years ago, the National Association of Realtors® created the Realtors Property Resource® (narrpr.com) to assist Realtors® in providing detailed reports to home buyers and sellers. Besides offering details on neighborhood comps, the generated reports incorporate data from various sources. Buyers and sellers are informed of analytics, trends and other factors. Of course, RPR is exclusive to Realtors®. But if you receive a report from your agent, they can help you with the analysis.

The amount of information about any given property seems to be ever increasing. However, an ongoing issue echoed among professionals and consumers is that the data is not always reliable. Even information that is pulled from public records are not always current. Verify the veracity included in any property report by cross checking several resources.

By Dan Krell
Copyright © 2016

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July 15, 2016

About friendly advice

Home buyers and sellers often seek advice from others. Even when they’re working with a professional who provides expert guidance. You might think it’s good to get validation from others on your real estate decisions. However, a Vancouver consumer study suggests that following friendly advice may be a bad idea (Friends give bad advice; The Sun, 4/14/2011, p29).

Research of consumer psychology and behavior have time and again found that consumers want to be correct in their choices. They want to feel good about their decisions. They want to believe that their purchases are the best, and the professionals they choose are tops in their field. Consumers are known to behave irrationally to prevent the cognitive dissonance that occurs when they are confronted with conflicting thoughts about their choices. And that means they often make poor decisions.

Mintel’s American Lifestyles 2015 report indicated that 69% of those surveyed sought out product and service reviews before purchasing. While 57% of those surveyed sought out recommendations from social media. Given the finding, it is suggested that there may be emphasis for communal thinking over “individual preference.” However, about 38% of those surveyed considered independent review websites as “trustworthy;” while 34% found them useful. But, 31% found social media contacts trustworthy; while 25% found them useful (Seven in 10 Americans seek out opinions before making purchases; mintel.com; 6/3/2015).

Seeking out friendly advice is part of herding behavior, which has been found to be a part of our everyday decision making process. A groundbreaking study of home owners’ decisions to walk away from their mortgages (strategic default) during the great recession revealed how people seek and give advice (Luchtenberg & Seiler (2013). The effect of exogenous information signal strength on herding. Review of Behavioral Finance, 5(2),153-174). The study concluded that people tend to seek advice when they feel that their choice is not in agreement with others. While advice was readily given by those who felt their choices were believed to be the consensus.

Buying and selling a home may not always feel as if it is a rational process. And you may think it logical to seek friendly advice. However, indiscriminately following advice may not be the best practice because all real estate transactions are different. Each transaction presents a different set of variables such as personalities, market conditions, contract terms, etc.

Given the research, more often than not, you are doomed to follow the advice of a friend or family member – even when confronted with the evidence that the advice is ill advised. You can infer from the Vancouver study mentioned earlier that friends and family feel “pressured” to give you advice on your real estate transaction because they want to be helpful. Furthermore, herding research suggests that you probably give emphasis to advice from friends and family because following their advice will likely make you feel you are “doing the right thing,” as well as increase your acceptance by them.

Regardless of your rationale, your real estate decisions are most likely based in psycho-emotional needs and/or fears (such as status, acceptance, and avoidance of failure). Breaking away from the herd is difficult. Improve your decisions and make your transaction successful by pursuing balanced information and becoming aware of your motivations.

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