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August 26, 2016November 23, 2021

Radon is everywhere – testing is not

Montgomery County MD is implementing two controversial bills. New county recordation tax rates. And – Radon is everywhere, but new law falls short to protect county residents.

Effective September 1^st, increased recordation tax will be collected in Montgomery County. The rate for the first $500,000 will be $8.90 per $1,000. The rate for any amount exceeding $500,000 will be $13.50 per $1,000. The individual primary residence exemption is also increased from $50,000 to $100,000. Read more about the controversy here.

Recordation tax is an excise tax that is collected for the “privilege” of recording an instrument in the land records. Of course, transfer tax is collected when a home is sold; and is also collected when a mortgage is refinanced.

Effective October 1^st radon testing is compulsory for homes that are sold in Montgomery County MD (however, the law lists exemptions). The seller must test, or allow the buyer to test radon levels in the home. The radon test must not be older than one year from the closing date. Both the buyer and seller must receive the radon report. If radon levels are above the EPA recommended action level of 4 picocuries per liter, then an estimate must be obtained from a licensed contractor to reduce level to 2 picocuries per liter. Read more about the controversy here.

Radon is a toxic, radioactive gas that is formed by the natural breakdown of radium. Radon seeks its way to the surface as an odorless, colorless, and tasteless gas. A 1999 National Academy of Sciences report (The Biological Effects of Ionizing Radiation, The Health Effects to Indoor Radon) indicated that radon causes up to 22,000 lung cancer deaths per year. As there are no immediate symptoms of radon exposure, the only way to know if a building has high levels of this gas is to test for it.

Radon is everywhere, but testing is not. Although the radon testing law is well intentioned, it misses the mark on comprehensive radon testing, education and awareness.

First, the law may unintentionally provide a false sense of security to home buyers. By requiring the test by the sale, it suggests to home buyers that the initial radon test (when the home is purchased) is the only test needed. In fact, the EPA recommends radon testing every two years. Homes with low radon levels may change over time to have increased levels, and vice versa. Additionally, the self-testing conducted by home owners may not be accurate (or worse, may be intentionally erroneous). Consequentially, home buyers should hire a qualified expert to test the home regardless of home seller provided test results.

Second, it must be asked as to why only require testing for single family home sales? Radon is everywhere. The radon law should have been more comprehensive to also include radon testing every two years for single family rental units, schools, and public buildings.

And finally, the law should have provided for consumer education much like the EPA lead paint pamphlet (Protect Your Family From Lead In Your Home) that is required for home sales and rentals. Likewise, why not provide to consumers the EPA pamphlet “Home Buyer’s and Seller’s Guide to Radon” (epa.gov/sites/production/files/2015-05/documents/hmbuygud.pdf)?

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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 19, 2016November 23, 2021

Home sale timing – sell for more

Everyone wants to know the future, especially when it comes to the home sale timing. Home sellers and buyers want to predict home prices. Home sellers want to know the best time to sell. While Home buyers want to know if they’re getting a good price. And apparently there may be a fairly reliable predictor to home prices, however it’s not what you think it is.

Several empirical studies have attempted to provide a methodology for predicting the housing market (home sale timing). Of course there is the familiar of forecasting real estate through divorce and premarital agreements. Back in 2013, the American Academy of Matrimonial Lawyer (AAML.org) issued a press release citing the increase of prenuptial agreements as sign of the improving economy. The increase in prenuptial agreements meant that people felt there was value in their assets. And this was meant to be a good sign in for housing market.

Of course there was also a spike in divorces that year, leading some to believe this to also be a good sign that people felt better about the economy because of their willingness to begin anew. But as University of Maryland sociologist Philip N. Cohen pointed out in his November 2015 blog post (Divorce rate plunge continues; familyinequality.wordpress.com) the increased divorce activity of 2013 was a just a recession related “bump” and in actuality the divorce rate decreased in 2014.

Then there was predicting housing through internet search data, which sounds more like fortune-telling than research to be honest. However, Beracha and Wintoki (Forecasting Residential Real Estate Price Changes from Online Search Activity; The Journal of Real Estate Research 35.3 (2013): 283-312.) concluded that, indeed, you can gauge regional housing trends through specific keyword search volume. Given this method, I used Google Trends to look up the keyword “home for sale” for the Washington DC metro region – and it is bound to become a hot market in the next six months (maybe a Presidential election has something to do with that?).

But a better indicator of where home prices will go may be the availability of credit. Most would argue that mortgage lending is a matter of housing demand. However, a working paper by Manuel Adelino, Antoinette Schoar, and Felipe Severino (Credit Supply and House Prices: Evidence from Mortgage Market Segmentation; February 19, 2014) concluded that “easy credit supply leads to an increase in house prices.” They contend that higher conforming loan limits and low interest rates benefit home sellers in the form of higher sale prices.

Adelino, Schoar, and Severino’s premise can be witnessed in hindsight as the pre-recession housing boom seemed to be fueled on easy credit. As credit became increasingly available, home value appreciation took off. Likewise, housing stabilized and home values appreciated post-recession as home lending requirements loosened.

Of course, many associate easy credit policies with recessions, and even the Great Depression. However, it’s not necessarily the easy credit that precipitates the recession – but rather it’s the tightening of credit. Stephen Gandel (This is When You’ll Know it’s Time to Panic About a Recession; fortune.com; March 8,2016) said it succinctly, “Tightening credit doesn’t always lead to a recession. But every recession starts with that.”

One may infer from Adelino, Schoar, and Severino’s research that a home seller can gauge their home sale price based on the lending environment. Lower interest rates and loose credit points to a higher sale price. However, tightening credit policies may point to flat or even lower home prices.

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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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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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