Real Estate News and Commentary

August 23, 2022August 23, 2022

Real estate agents have a role

Last year, at the height of the latest sellers’ market, I talked to a friend about selling his property. He gleefully quipped “Haven’t you heard? Nobody uses a real estate agent anymore [to sell a home].” To be honest, I hear that every seller’s market…and it’s a false statement. In fact, most home sellers hire a real estate agent to sell or buy a home. So, in response I asserted that Real estate agents have a role in the real estate transaction.

The National Association of Realtors’ 2021 Profile of Homebuyers and Sellers indicated that 90 percent of home sellers hired a real estate agent. The reasons for hiring an agent to list your home apply in any market, and include assisting you to set the list price, to prepare the home, and to facilitate the sale process.

Setting the right sale price is important in any market. During a sellers’ market, it may be tempting to set a high sale price. But the fact is that you can still turn off home buyers with an unrealistic price. A real-life example comes from a listing appointment I had last year. The seller was disappointed in the price range I suggested for her home (her home was smaller than other homes in the neighborhood). She was clearly dissatisfied with what I shared and said, “In this market, all homes sell for more than the last one that sold.” This is also a false statement. In a market where homes sold on average 7 days, she wasted 30 days on the market only to sell for a price that was in the range I suggested based on comps and adjustments.

Home preparation is also a key factor in any market. Home preparation entails decluttering, staging and sometimes repairs. Let’s face it, the better the home presents, the quicker it sells. In a seller’s market, a well-prepared home can elicit a bidding war, raising the sale price above list price.

Hiring a real estate agent is not for everyone. But the stats revealed by NAR’s 2021 Profile of Homebuyers and Sellers indicate that real estate agents have a role in the real estate transaction. Real estate agents are housing-market experts, recognizing and anticipating trends. Agents can provide detailed market analyses to assist in formulating a home’s listing or sale price.

Furthermore, from the time your home is listed to the day of settlement, agents are facilitating the transaction. Starting with marketing your home, the agent will work to procure offers on your home and assist in negotiation. They will also assist in helping completing the sales contract and follow up on contingencies. They will also work alongside other professionals to ensure any bumps in the journey to settlement are worked out.

By Dan Krell
Copyright © 2022

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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 14, 2022August 14, 2022

The changing housing market is still viable

There are a number of ways to determine a changing housing market. An obvious indicator of a changing housing market is a swelling home sale inventory. According to the National Association of Realtors July 20^th press release, “inventory of unsold existing homes rose to 1.26 million by the end of June, or the equivalent of 3.0 months at the current monthly sales pace.” As a matter of comparison, home sale inventory rose 9.6 percent from the previous month, and 2.4 percent from the same time last year.

Another indicator of a changing housing market is remodeling activity. Believe it or not, there is an index for this. The Leading Indicator of Remodeling Activity (LIRA) is a product of the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University. The LIRA projects that investments in home remodeling will “decelerate” from 2022’s 17.4 percent to 10.1 percent by the second quarter of 2023.

In a July 19^th press release, Project Director of the Remodeling Futures Program at the Center, Carlos Martín, stated: “Slowing sales of existing homes, rising mortgage interest rates, and moderating house price appreciation are expected to dampen owners’ investments in home improvements and maintenance over the coming year. Steep slowdowns in homebuilding, retail sales of building materials, and renovation permits all also point to a cooling environment for residential remodeling”

Although a changing market sounds ominous, it’s still a viable market. Abbe Will, Associate Project Director of the Remodeling Futures Program, stated: “While beginning to soften, growth in spending for home improvements and repairs is expected to remain well above the market’s historical average of 5 percent. In the first half of 2023, annual remodeling expenditures are still set to expand to nearly $450 billion.”

Other signs the market is still viable, is that first time home buyers are still a large part of the market, and all-cash transactions continue to be a factor as well. As indicated in NAR’s press release, first-time home buyers accounted for 30 percent of the home sales in June, which is an increase from May, but slightly down from the 31 percent the same time last year. Additionally, buyers paying all cash accounted for 25 percent of home sales, which is an increase from 23 percent the same time last year.

A final note on the health of the housing market, NAR reported that distressed, foreclosure and short sales accounted for less than 1 percent of home sales during June, which is basically unchanged from the previous year.

By Dan Krell
Copyright © 2022

August 7, 2022August 7, 2022

Living with your HOA

If you’re buying a new home or a resale within a planned development (or already own is such a community), it’s very likely there is a home owners association, also known as HOA. The HOA has rules and covenants to live by, so to speak. So, you’re not only living with your community, but living with your HOA as well.

Most residents and owners living under the umbrella of their HOA are interested staying within the lines of the rules and covenants. However, it’s difficult sometimes to be aware of all the rules as they sometimes change. Getting an infraction notice isn’t the end of the world, as it’s just the HOA’s way of reminding you of the rules. Most infractions are resolved without a fuss.

It’s not unreasonable for you to want to live quietly in your own home. Nonetheless, when you move into a community that has a HOA, you agreed to be living with your HOA rules and covenants.

There may be occasions where the home owner feels that the HOA’s notice is a nuisance. Sometimes home owners feel the HOA is unfair, they may feel singled out, and their voice is unheard. It’s not uncommon that a home owner may feel as if the HOA is engaging in selective rule enforcement. You may not agree with the HOA action or decisions, however seeking a resolution is mutually desirable.

Responsible community management is not a one-sided affair. It’s also the responsibility of the home owner to maintain the rules and covenants. However, when there is a dispute, what can you do? Fortunately in my area, there are neutral resources to assist in mediating disputes between community management companies, boards of directors and home owners.

The Montgomery County Commission on Common Ownership Communities (housed within the Montgomery County Office of Consumer Protection) was established in 1991 and is committed to providing owners, tenants, residents, boards of directors, and community management companies with information, assistance, and impartial dispute resolution programs. Statewide, the Consumer Protection Division of the Maryland Attorney General can receive complaints under the Maryland Condominium Act, as well as the Maryland Homeowners Association Act for resolution.

By Dan Krell
Copyright © 2022

July 31, 2022July 31, 2022

Looking for a foreclosure discount

Over the last year and a half, some have talked about an impending foreclosure apocalypse. Home price run up aside, some home buyers have decided to wait for foreclosure inventory to hit the market to get a property at a foreclosure discount.

Although some expect something akin to 2007-2008 foreclosure crisis, they may be disappointed. Experts don’t expect a repeat of the last foreclosure crisis for a number of reasons, including the fact that home equity positions of homeowners are much different today than they were the last time. Additionally, although home sale prices may be moderating, it’s expected that future home price appreciation is still be positive.

Let’s take a look at foreclosure data compiled by Attom Data. The July 22^nd press release (Top 10 U.S. Counties with Highest Foreclosure Rates in June 2022; attomdata.com) indicates that, “there were a total of 90,139 U.S. properties with foreclosure filings in Q2 2022. That figure was up 15 percent from the previous quarter and up 165 percent from a year ago. The report noted that national foreclosure activity total in Q2 2022 was 68 percent below the pre-recession average of 278,912 per quarter from Q1 2006 to Q3 2007 – making Q2 2022 the 23rd consecutive quarter with foreclosure activity below the pre-recession average.”

So basically, foreclosures have increased. However, the number of foreclosures is nowhere near the amount prior to the great recession. Even though the number of foreclosures will likely not impact the overall housing market, there are buyers looking for the foreclosure discount.

If you’re looking for a foreclosure discount, read the recent research by Ralph B. Siebert published in the Journal of Real Estate Research (2022, Vol. 44 Issue 1, p1-28). The study revealed where deeper discounts may be found when buying a foreclosed property. Siebert’s analysis indicated that discounted foreclosed property depends on the metro and/or regional housing market where the house is located, as well as the home’s value position relative to the market segment.

Siebert’s study included transactions in Florida and Indiana from 2000 to 2020. His results indicated that foreclosure discounts were higher in Indiana than Florida. Also, Indiana foreclosed homes in the lesser value segment lost the most value, whereas similar value segments of foreclosed homes in Florida did not lose as much. He also found other differences that resulted in higher discounts as well.

If you’re looking for foreclose discounts, consider the comparing market locations and value segments. Buyer beware, however, it’s likely that the home will likely need repair and/or renovation. So, although the acquisition of the property may be at a discount, the cost of bringing it up to your standard may be costly. Do due-diligence, and consult with licensed real estate professionals to assist in making home buying decisions.

By Dan Krell
Copyright © 2022

July 23, 2022July 23, 2022

The thorough home inspection

Back in 2005, one of the first columns I wrote for the Montgomery County Sentinel was about getting a thorough home inspection. The market was similar to the recent sellers’ market, where homes sold in hours after receiving multiple offers. Home buyers were making non-contingent offers, foregoing a home inspection, and many times offering incentives to the seller (such as free rent back, cars, vacations, etc). The point then, as it is now, is that inspections are important and helpful.

Of course, the last year-and-a-half has been just as brutal to home buyers. Many buyers paid way over the list price. And of course, many also had to forego an inspection just to be in the running with the competition.

Although home sales have waned recently, it is likely that sales will rebound in the fall. That said, the recent mini cycle allowed buyers and sellers to take a breather to figure out where the market is headed. As an increasing number of homes are for sale, the market will become be more balanced. A balanced market allows for mutual negotiation, including having a thorough home inspection.

It’s undeniable that home buyers have high expectations during the buying process. And that includes the home inspection. Buyers expect a thorough and exhaustive inspection. They rely on the inspector to identify concealed and latent defects. Basically, buyers expect the inspection to help determine the condition of the home and its systems/components before they move forward with the purchase.

Even though home buyers view the inspector as all-knowing, home inspections are not infallible. Home inspectors are limited in their inspections and can miss items and/or make mistakes. Additionally, according to the state’s home inspector state licensing, a home inspection is “not technically exhaustive,” and it may not identify a concealed condition or a latent defect.

Home inspections are for all types of homes. Besides resale homes, inspections also are for new and recently renovated homes. It is not uncommon to discover incomplete installation of a system in new or renovated homes.

Overall, there is still a benefit of conducting a thorough home inspection. However, home buyers need to understand the limitations of their inspection. They should also attend their inspection ready to take notes and ask questions.

By Dan Krell
Copyright © 2022