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Housing Problem Solvers
Housing Problem Solvers
|Posted on April 9, 2016 at 7:19 AM||comments ()|
Whether you’re a seasoned house hunter or a first-time buyer, the process of purchasing a home has plenty of pitfalls. And while you may assume that sellers are being upfront, it’s not uncommon for them to gloss over some of their home’s shortcomings.
“All homeowners sign a disclosure document about their property so buyers know what they’re getting into; however, it can be very tempting for some to tell white lies or conveniently forget facts,” says Wendy Flynn, owner of Wendy Flynn Realty in College Station, TX. “In fact, a very large number of real estate lawsuits stem from owners misrepresenting their property.”
So, just to be on the safe side, here are some common cover-ups and how you can crack them.Water damage
Water stains aren’t just ugly; they’re also signs of leaks, and a breeding ground for mold. And they’re fairly easy for homeowners to hide with strategic decoration or staging, according to Frank Baldassarre, owner of Ace Home Inspections on Staten Island, NY.
“Many sellers try to conceal water intrusion in the basement, for example, with a pile of cardboard boxes or suitcases,” he says. You could always ask the homeowner to move the furniture a few inches and shine a pocket flashlight around. If the home has obvious red flags (an odd odor or visible wall cracks), it’s not unreasonable to request removing a large picture frame to take a peek at what’s behind it.
Another popular tactic for concealing water damage: a coat of fresh paint.
“Always ask the homeowner when they last painted,” says Baldassarre. “If it was a year ago, they’re probably not trying to hide water stains.”A contaminated backyard
If you’re looking at an older home—specifically, if it was built before 1975—odds are it used to run on oil. Back then, homeowners typically had large oil tanks installed in the basement or underground in the backyard to conserve space and maintain the home’s aesthetic.
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“The problem is that oil can contaminate soil, and because it’s incredibly costly to remove, some people try to hide evidence of the tank,” says Baldassarre. “Recently, I arrived to a home inspection early and caught the homeowner sawing off the top of the fill pipe.”
So while walking through a home’s backyard, look for a small fill pipe sticking up from the ground (sometimes covered by patches of grass), a dead giveaway that an oil tank is on the premises. Or double-check by asking the seller if the home was heated with oil in the past.A shaky foundation
If the paint job in a home looks a little uneven around the door frames or windows, take a closer to look to see if it’s concealing any jagged cracks in the wall, advises Flynn. Those zigzags can signify foundation problems, a costly and potentially dangerous situation for potential buyers.
A weak foundation can prevent cabinets and doors from closing, cause supporting beams to snap from stress, or even result in a poor home appraisal, which can affect your loan and the home’s resale value.
Another clue that the house has a weak foundation: “if you feel as though you’re suddenly walking up or down—even slightly—as you move through the home,” says Flynn.Problem neighbors
Barking dogs, rocker teens, and blaring horns are all factors that can turn off potential buyers. That’s why some owners try to downplay these situations with well-timed open houses and neighborly negotiations.
“Homeowners have an obligation to disclose what are called ‘neighborhood nuisances,’ but if they don’t, buyers have to rely on their word,” says Carrie Benuska, a Realtor® at John Aaroe Group in Pasadena, CA. “I know people who have asked their neighbors to keep noisy dogs inside during showings or only open their homes during strategic times of the day.”
Even well-intentioned owners may not be candid if they’ve become accustomed to their environment. One workaround, suggests Benuska, is for buyers to take a stroll around the neighborhood at different times of the day to get a more authentic feel for the area. And don’t hesitate to make small talk with the locals, who can offer a more objective view of their surroundings.Weird temperature changes
Anyone who’s lived in a home with a freezing bathroom or unusually warm bedroom knows that a temperature imbalance can result in avoiding a room altogether. That’s why tapping into your senses is key when viewing your potential new home.
“If you walk into a room and there’s a subtle shift in the atmosphere—maybe the air feels dry or damp—ask the owner what the room feels like throughout the seasons,” says Benuska. “The culprit is usually poor insulation, sometimes as a result of the owner adding a second room or floor to the home.” Oftentimes, an owner isn’t trying to outright conceal extension work. However, if the construction was done without a permit—“more common than you’d imagine,” says Benuska—you aren’t required to pay for the extra square footage.
|Posted on April 9, 2016 at 7:14 AM||comments ()|
Buying, selling, or making renovations to a home is about as emotionally stressful as illness, death, car repairs, marriage, or birth, according to a Texas A&M University study that ranks "high-emotion events" in a person's life.
To help reduce your clients' anxiety, BUILDER recently highlighted the following tips to increase their comfort:
|Posted on April 9, 2016 at 7:10 AM||comments ()|
With mortgage rates remaining near historic lows, many financial experts are making the case that student-loan debt doesn't have to hold back millennials from buying a home. But the message isn't getting across: Nearly 70 percent of millennials say they are delaying a real estate purchase because of their student debt load, according to a new survey by CommonBond.
Forbes.com recently highlighted whether a person with student-loan debt was ready to become a home owner with the following assessment:
|Posted on December 30, 2015 at 9:25 AM||comments ()|
WASHINGTON (December 18, 2015) – A significant piece of tax legislation is now on its way to the President’s desk, and the bill includes the extension of a number of expired tax provisions important to supporting homeowners and real estate investment.Tom Salomone, National Association of Realtors® president and broker-owner of Real Estate II Inc. in Coral Springs, Florida, praised Congressional leaders today after the House and Senate passed a tax extenders package that includes many provisions supported by NAR.“These tax extenders offer critical support for consumers, homeowners, commercial property investors and small businesses alike,” said Salomone. “A strong economy requires certainty, and this proposal gives a healthy dose of it to millions of American taxpayers.”Salomone highlighted the decision to extend tax relief for mortgage debt forgiveness as a win for Realtors®. This provision protects underwater homeowners from incurring a large tax bill on phantom income in connection with a workout or a short-sale. Since 2007, this tax relief has strengthened individual communities and the broader economy as more distressed homeowners were offered the flexibility to responsibly address an underwater mortgage. The tax extenders deal offers an additional two years of protection covering tax years 2015 and 2016.The bill also includes a permanent extension of a 15-year cost recovery period for the depreciation of qualified leasehold improvements. This provision ensures that a commonsense cost-recovery period remains permanently in place for improvements made to nonresidential commercial property.Real-estate related provisions also include the renewal of certain incentives to promote energy efficient commercial and multifamily buildings. Similarly, an expired tax credit of between $1,000 and $2,000 for energy-efficient new homes is extended for an additional two years under the bill.The legislation also permanently extends rules allowing small–and mid–sized businesses to immediately expense business equipment, rather than depreciate the equipment over several years. This is important to Realtors®, who purchase new computers, copiers, cameras and even vehicles in the course of doing business.Finally, the tax bill also includes changes to the Foreign Investment in Real Property Tax Act (FIRPTA) that will ease restrictions on investment in commercial real estate.NAR sent a letter to House and Senate tax-writing committees as the final package was being developed to ask for support on maintaining these key provisions. Salomone thanked members on the committee for their leadership and attention to Realtor® concerns.“We’re grateful for the leadership shown on this important piece of legislation and look forward to continuing our work in support of homeownership,” said Salomone.The bill is expected to be signed quickly into law by the President.The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.
|Posted on September 10, 2015 at 5:39 PM||comments ()|
Foreclosures are falling fast. Since reaching a peak in September 2010, the number of foreclosures has plunged 68 percent – from 117,225 nationwide to 38,000 as of July, according to CoreLogic's July 2015 National Foreclosure Report, released this week.
In the past year alone, foreclosure inventory has fallen by nearly 28 percent and completed foreclosures have dropped about 24 percent. Completed foreclosures are the total number of homes actually lost to foreclosure.
Since the financial crisis began in 2008, about 5.8 million completed foreclosures have occurred across the country.
But the number has slowed significantly. As of July, the national foreclosure inventory is about 1.2 percent of all homes with a mortgage – the lowest since December 2007.
The number of mortgages in serious delinquency – 90 days or more past due – is also falling, dropping by 23 percent year-over-year. About 3.4 percent of total mortgages were considered in serious delinquency as of July – also the lowest rate since December 2007.
"Job market gains and home-price appreciation helped to push serious delinquency and foreclosure rates lower," says Frank Nothaft, CoreLogic's chief economist.
Five states alone accounted for nearly half of all completed foreclosures nationwide, according to CoreLogic. Those five states with the highest number of completed foreclosures for the 12 months ending in July were: Florida (98,000), Michigan (47,000), Texas (33,000), California (27,000) and Georgia (27,000).
Meanwhile, the five areas with the highest foreclosure inventory (as percentage of all homes with a mortgage) were: New Jersey (4.8 percent), New York (3.7 percent), Florida (2.7 percent), Hawaii (2.5 percent) and the District of Columbia (2.4 percent).
|Posted on September 8, 2015 at 1:54 PM||comments ()|
The average employee isn’t getting a big raise this year—but apartment rents are growing more quickly than ever.
“Across most markets, renters are paying a higher percentage of their incomes in rent,” says Luis Mejia, director of U.S. multifamily research with the portfolio strategy division of research firm CoStar.
That’s not stopping apartment rents from going up. That’s partly because the average income is surprisingly high for households living in rental housing with unrestricted rents. These households can, on average, afford to pay and they don’t have that many attractive alternatives. For now, for-sale housing is not a lure for these renters, who may not have gathered the necessary funds for a down payment, according to experts. Eventually, however, they may look for cheaper housing in other neighborhoods, bidding up the prices for market-rate apartments in new areas and gentrifying new neighborhoods.“Eventually, budget-constrained renters will look for more affordable options in neighborhoods that haven’t been exposed to significant demand, or are more distant from the central districts but still accessible to employment centers,” says Mejia.Market-rate renters have (relatively) high incomes
Most of the renters who live in “market-rate” apartments, in which the rents are not restricted by affordability programs, have enough income to pay for current rent increases, at least for now, according to researchers. “The average annual household income for residents of market-rate apartments is around $85,000, well above typical household income for the U.S. populace as a whole,” according to Greg Willett, chief economist with RealPage, Inc., a company that provides property management software for the multifamily industry. Willett’s data is based on the 10 million apartments that use RealPage’s software.
“We think that info pulled from market-rate apartment users of RealPage products lines up pretty well with the characteristics of the market-rate stock that exists in the U.S. as a whole,” says Willett. For example, the proportion of class-B and class-C stock is about the same in Real Page’s large sample as in the U.S. overall.
The average income of $85,000 that RealPage reports is not as high as it might sound at first, since many of the households may have two or more people earning incomes. However, it’s enough to pay the average of $1,200 that these households pay in monthly rent, which works out to just 17 percent of their average income, says Willett. Apartment market research firm MPF has a few caveats: rents are higher compared to incomes in West Coast markets and for younger people.
“But that’s been true for young adults in every generation historically,” says Willett. “The big-picture story is that affordability isn’t especially challenging for most market-rate apartment renters.”
Most of these renters seem willing to accept rising rents. The average lease renewal rates are now relatively high compared to years past, according to researchers including MPF. “Rents will continue to grow faster than wages and inflation,” says Douglas Robinson, spokesperson for NeighborWorks, an organization that supports affordable housing. “Bottom line is people need to live somewhere, so they will pay the higher rent and make it work in terms of budget.”Where are low-income people living?
MPF’s data may show that the nation’s problem with unaffordable housing is worse than many thought. About 30 percent of U.S. households earn $30,000 or less a year (once again, that’s household income, not individual income). That’s not enough money to afford the rent on an average market-rate apartment almost anywhere across the country.
“A significant chunk of the very low-income households likely live in rental single-family home product,” says Willett. Roughly half of the nation’s rental housing is located in single-family homes.
This may present extra challenges for low-income people, since these single-family homes may be more likely than apartments to be located far from jobs or infrastructure like light rail stations and bus stops. In the past, when many low-income people were crowded into inner-city neighborhoods, they were more likely to be near employment opportunities, mass transit options and social services.
“Transit costs can surprise a person who lives in the suburbs and commutes into a job center,” says Robinson.
Demand is also high for government-subsidized “affordable” apartments with restricted rents, though the number of these apartments is much smaller than the number of low-income families, according to numerous experts.Apartment rents rise higher and higher
Rents for market-rate apartments are expected to keep growing quickly. “Reis is expecting to see rent growth accelerate in 2015,” says Michael Steinberg, analyst for economics and research at research firm Reis, Inc.
Effective rents will likely increase by 3.8 percent in 2015, according to Reis. That’s roughly twice the rate of inflation. It’s also faster than the 3.5 percent rent growth in 2014 and 3.2 percent rent growth in 2013.
Rents will grow quickly, even though developers plan to finish hundreds of thousands of new apartments by the end of the year. These new apartments will cause the vacancy rate to increase slightly, to reach 4.6 percent by the end of the year. That’s the wrong direction for vacancies to go, but the vacancy rate is currently so low that a slight increase won’t change the dynamic by much.
“There is some concern about the direction of fundamentals, but we are coming from a very strong performance,” says Reis’ Steinberg. “Even with the amount of new supply, vacancy rates are still pretty low.
|Posted on August 31, 2015 at 8:01 AM||comments ()|
The cities where developers are opening the most new apartments are handling the new supply pretty well, at least for now.
“Looking at rent growth performances, there’s really only one spot [major metro apartment market] that is having trouble digesting new supply,” says Greg Willett, chief economist for RealPage Inc. “That’s Houston.”
But developers aren’t finished. Even as they race through an incredibly busy year for new construction, apartment developers are now planning even more new projects. They still often choose to start construction in the same cities and the same submarkets within those cities where they have been busy building since 2010. “We’re tending to continue to build most heavily in the same spots,” says Willett.
Banks seem very willing to finance these new developments. “You will have a number of lenders offering financing—no matter where,” says Michael Riccio, co-head of national production for CBRE Capital Markets. That includes nearly all property markets—with the possible exception of more troubled markets like Houston and Washington, D.C. “Houston might be the outlier.”Strong markets absorb new apartments
So far, the news is good from many apartment markets where developers have built large numbers of new apartments relative to market’s inventory of existing apartments. The towns that have best handled a lot of new construction include Denver, Colo.; Seattle and Charlotte, N.C., according to MPF Research, a division of RealPage.
“Charlotte, in fact, may be the real surprise performer on this list. The metro is dealing with a lot of new supply stunningly well,” says Willett. Occupancy rates and rent growth in Charlotte remain notably stronger than the historical norm. “That performance speaks to the strength of Charlotte’s overall economy, the favorable characteristics of the metro’s renter base, and the general upward movement of this locale in terms of overall desirability as an apartment investment choice.”
Out of the top 10 metro markets where developers are building the most new apartments, relative to the existing industry, only Houston seems to have been seriously damaged.
In Houston, rents for class-A apartments only grew 1.8 percent over the last year, compared to 5.2 percent per year on average over that last three years. Another 32,000 apartments are still under construction, according to Willett. There’s a real possibility that average rents may fall at the top end of the market over the next 12 to 18 months. “Construction activity is only part of the story,” says Willett. Economic growth generally and job production specifically have fallen in Houston with the price of oil.
Developers continue to start in construction projects in same places where they have already built many new apartments. Charleston, S.C.; Nashville, Tenn.; Austin, Texas, and Charlotte top MPF’s list of the top 10 metro markets, even though they have already absorbed thousands of completed new apartments. Houston comes in eighth on MPF’s top 10 list, with many projects that started construction before the crash in the price of oil.
There are just two cities where apartment developers have deeply cut back on new construction after a building boom in recent years. There are still 20,651 new apartments under construction in the Washington, D.C., metro area, down steeply from the 30,095 apartments under construction in late 2013. In Raleigh/Durham, N.C., developers are now building 6,960 new apartments, a little more than half the 11,423 developers had under construction in late 2013.Developers pile into downtowns
Developers also continue to start projects in same submarkets—often downtown. About a third of all new apartment construction is being built downtown, according to data from CoStar.
For each of the metro areas on MPF’s top 10 list for new construction, the apartment inventories are growing faster downtown than for the metro area as a whole. That’s creating huge changes for these downtown areas—many of which did not have many apartments before the last few years. The scale of this new construction downtown could create problems, since downtown apartments tend to be luxury high-rise projects that are expensive to build and that relatively few potential renters can afford.
“We are starting to see vacancies tick up in downtowns across the country,” says Jay Parsons, director of analytics and forecasts for MPF Research at RealPage.
Developers are relying less on downtown as they plan future projects—though they are still disproportionately focused on downtown markets. “The urban core submarkets generally now account for less of total ongoing construction than they did two to three years ago,” say Willett. “That’s an encouraging shift.”
|Posted on August 24, 2015 at 10:34 AM||comments ()|
Over the next five years, the housing market will see around 1.5 million eligible return buyers jump back into home ownership. These return buyers, nicknamed 'boomerang buyers,' lost their homes during the housing crisis, and they've restored their credit and are ready to impact housing again.
Since 2006, 950,000 of these former owners have already purchased a home again, and boomerang buyers will continue to be an important market for real estate professionals to target.
"Now fueled by a gradually improving economy and the strong rebound in home prices, some of these former distressed owners have returned to the market, and more will likely become eligible in coming years," says Lawrence Yun, chief economist with the National Association of REALTORS®.
A recent study from NAR showed the states that will be most impacted by return buyers are California, Florida and Arizona. Additionally, a study by Realty Trac notes that Phoenix, Miami, Las Vegas, and Tampa, Fla. should also see an increase in boomerang buyers.
In a new interview with the Associated Press, one of these return buyers, Debbie Cooley-Guy describes her housing journey. "I used to look at people like me and think, 'How did you let this happen? In hindsight, I had set myself up so well. Just because you can afford things, it doesn't mean you should buy them." But her story is one with a happy ending. After agreeing to a short sale, getting rid of her debt, repairing her credit, and saving up money, Cooley-Guy got an FHA loan and re-entered the housing market.
Cooley-Guy's story will become more common, since close to 700,000 of the 7.3 million homeowners who went through foreclosure or short sales are now are eligible to get a mortgage again this year, reports Daren Blomquist, vice president of Realty Trac.
The market will see an influx of buyers with past credit problems who are looking for mortgages, and not just foreclosures or short sales, says John Councilman, president of the Association of Mortgage Professionals. "We have a lot of people with issues and many are coming back into the market."
|Posted on August 24, 2015 at 10:21 AM||comments ()|
Disclosure problems are the single biggest source of negligence actions against practitioners.
Three years ago, I was buying a small investment property and my real estate agent marched into my office unannounced. She tossed onto my desk a stack of property disclosure forms that the seller and [listing] agent had filled out and asked if I had read them. I told her I hadn’t yet had a chance to look at them as carefully as they required. This was an inexcusable omission on my part since, as an attorney who has worked with property buyers, sellers, and agents on hundreds of matters, I know how important it is to review such disclosures carefully.
As it turns out, the disclosures made it clear the property needed to be tented, which is a procedure exterminators use to encapsulate and fumigate a property that has signs of termites. I ended up buying the property despite the termite situation, but the story illustrates the key role my agent played in making sure I had read and understood the disclosures before I made my decision. In my several decades of practicing real estate law and serving on several legal committees for the California Association of REALTORS®, the single biggest legal liability I continue to see facing real estate professionals is negligence on property condition -disclosures.Look for Inconsistencies
Disclosure requirements differ by state, but most states today have some form of property disclosure form that sellers are required to complete. In California we have a state-mandated disclosure form as well as additional forms that are more detailed, including a buyer’s advisory. This gives buyers several opportunities to understand potentially troubling issues with a property. As a real estate professional, you can help your client by pointing out any inconsistencies between the reports.
A problem might be described differently on two separate forms, or there might be a mismatch between the written description of a problem on one form and its visual depiction on another. These inconsistencies are a red flag that the property needs a thorough going-over by a property inspector.
If your state doesn’t have a multiple disclosure requirement, it’s no less important for you to understand what the disclosures you do have are saying so that you can point potential problems out to your clients, like my agent did for me. If you just pass the disclosure form along to your client, then you could become a target if your client finds an issue such as an insect infestation after purchase and sues you. You could be cited for negligence for failing to point out problems or not making an effort to explain them.
Whether you’re found to be negligent, either in a lawsuit or an arbitration proceeding, will depend on the facts of the case. But you can do more to protect yourself by not only pointing out issues to your clients but also documenting that you actually did so. It’s important to send your concerns in an e-mail so you both have a record of it.Be Sure to Communicate
Written communication is always a good practice, but it’s especially important if you’re working in a hot market in which properties are seeing multiple offers and buyers are paying more than the listing price. After spending top dollar for the property, the last thing they want to see is a property condition they weren’t aware of but that was in fact disclosed.
If you approach property condition disclosures with skill, care, and diligence, and you’re equally careful about documenting what you tell buyers about the findings, you’ve done what you can to protect yourself should something turn up after purchase, and you’re less likely to be part of the next negligence case to come across a lawyer’s desk.
|Posted on August 24, 2015 at 10:15 AM||comments ()|
Existing-home sales were back on the rise in July, marking the third consecutive month of increases, while low inventories of homes for-sale and rising prices were the reason behind first-time buyers falling to their lowest share since January, according to a new report from the National Association of REALTORS®. Total existing-home sales – which include single-family homes, townhomes, condos, and co-ops – rose 2 percent in July to a seasonally adjusted annual rate of 5.59 million. Sales are at the highest pace since February 2007, and are 10.3 percent above a year ago."The creation of jobs added at a steady clip and the prospect of higher mortgage rates and home prices down the road is encouraging more household to buy now," says Lawrence Yun, NAR’s chief economist. "As a result, current home owners are using their increasing housing equity toward the down payment on their next purchase."
Here's a look at five main indicators from NAR's latest housing report:
1. Home prices: The median existing-home price for all housing types was $234,000 in July – 5.6 percent above a year ago. "Despite the strong growth in sales since this spring, declining affordability could begin to slowly dampen demand," says Yun. "REALTORS® in some markets reported slower foot traffic in July in part because of low inventory and concerns about the continued rise in home prices without commensurate income gains."
2. Housing inventories: At the end of July, the inventory of homes for-sale fell 0.4 percent to 2.24 million existing homes available for sale. The inventory now is 4.7 percent lower than a year ago and at a 4.8-month supply at the current sales pace.
3. First-time home buyers: The percentage of first-time home buyers fell for the second consecutive month, reaching 28 percent in July – the lowest share since January. Last year at this time, first-time buyers comprised 29 percent of all buyers.
"The fact that first-time buyers represented a lower share of the market compared to a year ago even though sales are considerably higher is indicative of the challenges many young adults continue to face," says Yun. "Rising rents and flat wage growth make it difficult for many to save for a down payment, and the dearth of supply in affordable price ranges is limiting their options."
4. Days on the market: Properties stayed on the market for an average of 42 days in July, below the 48 days average from a year ago. Forty-three percent of homes were on the market for less than a month in July. Short sales were on the market the longest at a median of 135 days while foreclosures were on the market for 49 days and non-distressed homes sold in 41 days.
5. All-cash sales: The percentage of all-cash sales rose to 23 percent of transactions in July, down from 29 percent a year ago. The share of individual investors – who account for the bulk of cash sales – was 13 percent in July, down from 16 percent a year ago.
6. Distressed sales: The percentage of foreclosures and short sales declined to the lowest share since NAR began tracking it in October 2008. Distressed sales fell 7 percent in July month-over-month and are 9 percent below a year ago. In July, 5 percent of sales comprised foreclosures while 2 percent were short sales. On average, foreclosures sold for a discount of 17 percent below market value while short sales sold for an average discount of 12 percent.
"Five years ago, distressed sales represented 33 percent of the market in July," says Chris Polychron, NAR's president. "For many previously distressed homeowners throughout the country, rising home values in recent years have helped recover equity and the vast improvement in several local job markets means fewer are falling behind on their mortgage payments."