home buyer Archives - Real Estate News and Commentary

January 21, 2023January 21, 2023

Whose Responsibility is it anyway?

When selling a home, the seller is obligated to provide a set of disclosures to the home buyer. The disclosures cover almost everything from home condition to local zoning compliance. Even common ownership community (condo/HOA) disclosures are incorporated into the home sale contract. However, buyers always have questions. Some questions are easily answered because they are about the physical property. However, some questions require a call to the county/city or the condo/HOA association for an answer. When the buyer or their agent poses a question that requires a call to the locality or condo/HOA association, whose responsibility is it to gather and provide those answers?

This is not a new issue, and buyer agents usually make the call themselves. But I recently received from a buyer agent asking about a condo listing I had. The agent asked specific questions about the possibility of the property being used as a rental. She asked also asked about general condo rules for rentals in the community. I told the buyer agent to call the condo association and ask them directly. Taken aback expecting an answer from me, she apologized saying she thought I was the listing agent. I confirmed that I was the listing agent and directed her to seek the answers directly from the condo association, because they would be from the source.

Some agents would have given her some information, whether it was accurate or not. To be honest, I did not know the answer, therefore I couldn’t provide her with the info. Even if I did know something about it, I still would have directed her to the condo association for the complete accurate answer.

Whose responsibility is it anyway?

Home buyers rely on the information when making buying decisions, and how much to offer. So, it goes without saying that home buyers want accurate information. That’s why most agree that it’s best practice to direct the buyer/agent to get answers from the source. This way they can make the best decision based on correct answers.

Whose Responsibility is it to verify information? Regardless of what information is provided (or not provided) on the sell disclosures, the home buyer should verify doing due diligence. The home buyer should confirm the accuracy of what is disclosed, as well as investigate any areas of concern. Although it’s easy to verify some information because of its public information availability, some information can only be obtained via a phone call or email to the locality where the house is located.

By Dan Krell
Copyright © 2023

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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.

September 20, 2022September 20, 2022

Mortgage rates are on the move

This week’s Freddie Mac press release headline “Mortgage Rates Exceed Six Percent for the First Time Since 2008” grabbed everyone’s attention. Indeed, mortgage rates are on the move and what does that mean for you and the housing market?

According to Freddie Mac’s Chief Economist Sam Khater, “Mortgage rates continued to rise alongside hotter-than-expected inflation numbers this week, exceeding six percent for the first time since late 2008. Although the increase in rates will continue to dampen demand and put downward pressure on home prices, inventory remains inadequate. This indicates that while home price declines will likely continue, they should not be large.”

In her blog post, Nadia Evangelou, Senior Economist and Director of Forecasting for the National Association of Realtors, points out that the change in mortgage rates increased monthly payments about 60% compared to the same time last year. She also calls attention to the fact that the pace of rising rents is at a forty-year high! Regardless if you are renting or buying a home, housing affordability is declining. Using a little math, she underscores how increasing rents outpace a fixed-rate mortgage on the purchase of a home.

Yes, mortgage rates are increasing. But a little history will put things in perspective. We all know that mortgage rates reached its peak in the early 1981 as a result of the deep recession of the late 1970’s. Shortly afterward, average mortgage rates dropped of the next several decades (albeit the occasional peak).

However, after the peak housing market of 2007, average mortgage rates dropped slightly in 2008 as a reaction to the market crashes and a decimated housing market. It wasn’t until five years later and average mortgage rates hovering in 3 percent range, that the housing market once again became broadly attractive to owner occupants (as opposed to investors). Mortgage rates have been averaging below 4 percent since then, with the exception of 2018 when rates rose above 4 percent.

Mortgage rates are on the move. Average mortgage rates are now above 6 percent, and there may be a silver lining. Many are hoping that the rising interest rates will reduce home prices (although that remains to be seen). However, after the brief rate shock is over, increased mortgage rates will likely incentivize banks to lend which could increase the pool of home buyers

By Dan Krell
Copyright © 2022

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

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