“Sharing data helps all of us,” said a speaker at NAR’s recent C5 Summit. But many commercial brokers avoid technology and keep info “close to the vest.”

CHICAGO – If commercial real estate lags behind residential in adoption of technology, it’s not due to a lack of investment in the sector. In the first half of 2021, equity and debt investment in U.S. proptech (technology that optimizes researching, renting, buying, selling and managing property) totaled $8.5 billion, surpassing the total amount of capital invested in 2020, according to GCA, an adviser in the proptech market.

“The biggest challenge we face is [lack of] data sharing,” said Deena Zimmerman, vice president at SVN Chicago Commercial, during a proptech panel at the National Association of Realtors®’ (NAR) C5 Summit Monday. “In this business, people still keep information close to the vest. Landlords will say to me, please don’t tell CoStar what we leased this space for. People need to realize, when we share data, it helps all of us.”

Zimmerman is a zealous advocate for technology. While her company subscribes to CoStar, she said she’s also a fan of Crexi, a commercial listing platform that offers a discount to NAR members, and Realtors® Property Resource, where commercial practitioners can research properties and market areas, and find deep data on more than 1 million active commercial listings and 55 million off-market properties. There’s no cost for NAR members to use RPR; it’s a benefit of membership. She also uses ArcGIS from ESRI and SitesUSA to help tenants do site selection.

Having access to such tools routinely helps Zimmerman beat out larger real estate companies in her tenant rep business, she told the C5 Summit audience. In one instance, adding an RPR trade market report to a proposal led to an hour-long discussion with a potential client. No other broker had offered near that depth of information, she said. She won the business and earned a sizeable commission.

Other panelists echoed Zimmerman’s comments and offered reassurance to brokers nervous about taking the plunge into new, potentially disruptive technologies.

“Brokers are here to stay, and brokers are essential to the transaction,” said moderator Ashkan Zandieh, entrepreneur-in-residence for NAR REACH Commercial.

“New technology has leveled the playing field,” said Andrew Flint, co-founder of Occupier, a lease-management solution and 2020 REACH Commercial company. “I spent a lot of time at JLL, where we had access to platforms not available to smaller firms. Today, if you’re a five-person team, you can be up and running with this stuff within two weeks.”

Tyler Thompson, vice president of Second Century Ventures, said the pandemic has helped speed up the adoption of technologies.

“The best brokerage teams out there are saying, ‘How can I leverage this stuff to boost my team?’” he said. But bringing transaction management to commercial real estate remains a challenge. “It’s a bigger problem to tackle in commercial [compared with residential] because every deal is different.”

What every commercial broker should be thinking about is the customer experience they’re providing compared with experiences consumers have in other industries, Thompson said. “On the commercial side, there’s a lot of work to be done.”

Source: National Association of Realtors® (NAR)

© 2021 Florida Realtors®

MIT Study: Older Americans living in areas with shorter life expectancy (bottom 10%) live 1.1 years longer if they move to a peak area (top 10%) for life expectancy.

NEW YORK – Location may impact how long you live, according to a new study from MIT economists. The study examined seniors between the ages of 65 to 99 who relocated long-distance from 1999 to 2014.

For example, when a 65-year-old moves to a metro area in the top 10th percentile for longevity from a metro area in the 90th percentile, they can increase their life expectancy by 1.1 years, researchers say.

“There’s a substantially important causal effect of where you live as an elderly adult on mortality and life expectancy across the United States,” says Amy Finkelstein, a professor in MIT’s Department of Economics and co-author of the study Place-Based Drivers of Mortality: Evidence of Migration. The study appears in the August issue of the American Economic Review.

Why do certain areas have longer longevity than others? The study didn’t pin down a reason, but researchers point to several possible ones, such as more conducive medical care, climate, pollution, crime and traffic safety.

Researchers found that many urban areas on the East and West coasts – including New York City, San Francisco, and Miami – have positive effects on longevity for seniors who relocate there. Midwestern metro areas, like Chicago and Minneapolis, scored high as well.

On the other hand, several Southern states had poorer effects on longevity, such as parts of Alabama, Arkansas and Louisiana.

Researchers continue to investigate why certain places have longer longevity. The MIT research team is currently investigating health care use or other factors that could have an impact.

“Differences in healthcare across places are large and potentially important,” Finkelstein says. “But there are also differences in pollution, weather, and other aspects … What we need to do now is get inside the black box of ‘the place’ and figure out what it is about them that matters for longevity.”

Source: “Place-Based Drivers of Mortality: Evidence From Migration,” American Economic Association (August 2021) and “Comparing Seniors Who Relocate Long-Distance Shows Where You Live Affects Your Longevity,” MIT News (Sept. 1, 2021)

© Copyright 2021 INFORMATION INC., Bethesda, MD (301) 215-4688

After weeks of little movement in the 2.88% range, the average 30-year, fixed-rate mortgage rose to 3.01% this week. Economist cites “many factors” pushing the increase.

MCLEAN, Va. – The average 30-year, fixed-rate mortgage has fluctuated little over the past few months, hovering somewhere around the 2.88% range. However, it rose to 3.01% this week, breaking the psychological 3% barrier.

“Mortgage rates rose across all loan types this week as the 10-year U.S. Treasury yield reached its highest point since June,” says Sam Khater, Freddie Mac’s chief economist. “Many factors led to this increase, including the Federal Reserve communicating that it will taper its support of the capital markets, the broadening of inflation and emerging energy supply shortages, which compound other labor and materials shortages.”

The Federal Reserve Board decision might have a longer-term impact. At its September meeting, the Fed suggested it would cut down on its number of bond buys, done to stimulate the economy. Since July 2021, the Fed has been buying $80 billion in Treasury securities and $40 billion in mortgage-backed securities (MBS) each month. The cutback in mortgage securities could push rates higher over time.

“We expect mortgage rates to continue to rise modestly, which will likely have an impact on home prices, causing them to moderate slightly after increasing over the last year,” Khater adds.

Average mortgage rates for the week of Sept. 30, 2021

• The 30-year fixed-rate mortgage averaged 3.01% with an average 0.7 point, up from last week’s 2.88%. A year ago, the 30-year FRM averaged 2.88%.
• The 15-year fixed-rate mortgage averaged 2.28% with an average 0.6 point, up from last week’s averaged 2.15%. A year ago, the 15-year FRM averaged 2.36%.
• The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.48% with an average 0.3 point, up from last week’s 2.43%. A year ago, the 5-year ARM averaged 2.90%.

© 2021 Florida Realtors®

Texas single-family landlords refused an applicant who wanted to create a group home for people with mental disabilities. HUD says that’s a fair housing violation.

WASHINGTON – The U. S. Department of Housing and Urban Development (HUD) charged the owners of several residential properties in Houston, Texas, with violating the Fair Housing Act because they refused to rent a house to an application who wanted to use it as a group home for persons with mental disabilities.

“Rental property owners do not have the right to unlawfully deny housing based on their perceptions about persons with disabilities,” says Demetria McCain, HUD’s principal deputy assistant secretary for fair housing and equal opportunity. “HUD remains committed to taking action whenever individuals in a position to control access to housing fail to meet their responsibility to comply with the nation’s housing laws.”

A Texas Health and Human Services Commission contractor who provides housing and related services for persons with severe mental disabilities filed a complaint with HUD. In the complaint, she alleges that she was denied the opportunity to rent a single-family home because her clients have mental disabilities. In HUD’s charge, filed on behalf of the woman, she alleges that the owner stated to her: “[O]ur neighborhood does not want those type of people. We are trying to get them out of our neighborhood.”

“The Fair Housing Act affords all persons the opportunity to enjoy housing free from discrimination, including people with mental disabilities who are in need of the safe and stable environment a group home can provide,” says Damon Smith, HUD’s General Counsel. “As this charge demonstrates, HUD will protect the rights of persons with disabilities to live in their communities, free from unlawful discrimination.”

HUD’s charge will be heard by a United States Administrative Law Judge unless any party elects for the case to be heard in federal court. If the administrative law judge determines that discrimination has occurred, they may award damages to the complainant for losses that have resulted from the discrimination. The judge may also order injunctive relief and other equitable relief, as well as payment of attorney fees. In addition, the judge has the ability to impose civil penalties. If the matter is decided in federal court, the judge may also award punitive damages.

The Fair Housing Act prohibits housing providers from denying housing to persons with disabilities or subjecting them to discriminatory terms or conditions. HUD says this prohibition include rental property owners’ refusal to accept applicants of group homes that allow persons with disabilities to live in the community.

© 2021 Florida Realtors®

Nationwide credit scores fall about 20 points in the months following a home purchase, but they bounce back fully in less than one year. In four Fla. cities included in a LendingTree study, the full credit-score rebound ranged from 332 days in Miami to 387 in Jacksonville.

WASHINGTON – Credit scores take a hit after a homebuyer takes out a mortgage, but a study from LendingTree shows credit scores rebound within a year.

Credit scores are unlikely to fall no more than 20 points, on average, in the four and a half to six months after getting a mortgage. And even credit scores that fall by more than that average 20 points tend to fully rebound to pre-mortgage levels within a year.

After closing on a mortgage, credit scores nationwide took an average of 165 days to reach their lowest points. Average credit scores fell the fastest in Richmond, Va., taking about 137 days to hit its lowest point, while San Jose, Calif., had the longest decline at an average of 189 days.

In four Florida cities included in the study, credit scores averaged 730 before buying a home. After the purchase, the scores took 169 days to drop an average 20.9%. However, the credit scores then started to rebound, and the impact of a home purchase was completely gone in slightly less than a year – 351 days.

Florida cities’ credit score averages after home purchase

• Tampa: The average 732 score dropped an average 17.65 points to 714. It took 168.15 days to reach a low point and 349 to fully recover.
• Miami: A 727 score dropped an average 21.72 points to 705. It took 162.5 days to reach a low point and 332 days to fully recover.
• Jacksonville: A 720 credit score dropped an average 22.1 points to 707. It took 108.66 days to hit a low point and 387 days to fully recover.
• Orlando: A 732 credit score dropped an average 22.1 points to 710. It took 165.75 days to hit a low point and 338 days to fully recover.

“The complete credit cycle – the time it takes for scores to decline and then rebound – is 339 days, on average,” the LendingTree study notes. “This means that borrowers across the country can typically expect their credit scores to return to their starting points in a little under a year.”

Source: “Buying a Home Will Hurt Your Credit Score, But Data Shows It’ll Rebound Within a Year on Average,” LendingTree (Sept. 28, 2021)

Source: 2021 INFORMATION INC., Bethesda, MD (301) 215-4688

© 2021 Florida Realtors®

Help generally comes in the form of support and listening, but the right balance can be challenging. Also: What should you do if a co-worker is being sexual harassed?

NEW YORK – Johnny C. Taylor Jr. tackles your human resources questions as part of a series for USA TODAY. Taylor is president and CEO of the Society for Human Resource Management, the world’s largest HR professional society and author of “Reset: A Leader’s Guide to Work in an Age of Upheaval.”

The questions are submitted by readers, and Taylor’s answers below have been edited for length and clarity.

Question: I supervise a group of six employees at a logistics services company. I suspect one of my employees is showing signs of clinical anxiety. Should I approach the employee to address it? How can I support the employee if this is true? – Lisa

Johnny C. Taylor Jr.: I appreciate you wanting to support one of your employees, but you’re going down an incredibly dangerous path. I always recommend referring employees to trained medical professionals for health matters. And because of the stigma attached to mental health, which can discourage openness about mental health, leave it to the professionals.

Now, what can you do? Show support simply by being available to listen. If the employee shares the struggle, encourage this person to utilize an Employee Assistance Program, use time off balances, or take personal mental health days as needed.

Under the Americans with Disabilities Act you can make certain medical inquiries of employees in very limited situations. You should not ask employees about health conditions without having a reason considered “job-related and consistent with business necessity.” If your employee poses a direct threat to themselves or others, an employer could make a medical inquiry in that instance.

If your employee’s performance is not up to expectations, you may want to address the issue with this person directly. However, if the employee’s behavior or conduct seems off, you could check in to see how he or she is doing. This could include seeing if an employee has all the tools or timeframes needed to successfully complete job duties.

If this person discloses a mental health condition, you should engage in the interactive process under the ADA. The interactive process can help determine if an accommodation is needed and if providing accommodation is reasonable or causes an undue hardship on the business. An employee with a disability may still be held to the same performance expectations as employees without disabilities.

As a workplace leader, you can always address your team as a whole without singling out a specific individual. Emphasize in team meetings what resources are available to protect mental wellness, especially during periods of high stress. It can also help to talk about the steps you take to protect your own mental health. Workers often take cues from their leaders. So, it is important for leaders to set the tone for what they want to see in the workplace.

Frequently touch base with all your employees to stay aware of their needs. Listening to them promotes openness, awareness and understanding. Prioritizing mental health not only protects your workers, it also protects the workplace.

Question: I witnessed a co-worker of mine be targeted with inappropriate sexual comments. However, she does not want to report it. Am I obligated to report what I have seen? – Sandra

Taylor: It is understandable for your co-worker to be uncomfortable escalating or talking about experiencing sexual misconduct. However, showing concern and support can help this person feel better about taking necessary action.

While there aren’t any federal regulations requiring you to report inappropriate sexual conduct directed at co-workers, many employers have a workplace harassment policy that covers sexual harassment and retaliation. I recommend you review your company’s relevant policies. If you are required as a witness to report any kind of inappropriate conduct, then by all means do so.

However, if your company’s policies don’t require you to report it, you may want to consider your options and what is best for all involved. This could be very tricky, especially when you want what’s best for your co-worker and your workplace.

You could encourage your co-worker to consider speaking with the alleged harasser and let this person know his or her comments were inappropriate. If you witnessed the harassing comments, and if you are comfortable and feel safe doing so, address the person who is inappropriately targeting your co-worker. Respectfully let the person know you witnessed the behavior and make clear this behavior is inappropriate and not tolerable. Unfortunately, most of the time, behavior like this will not stop until someone steps up and says something.

If the inappropriate comments continue or there is other harassing behavior, explain to your co-worker that you aren’t comfortable not saying anything to anyone. Encourage your co-worker to report it to Human Resources or upper management and show support through the process by voicing your general concerns, even if this person doesn’t speak up.

Workers play a vital role in creating and protecting their workplace culture. Realistically, HR can’t be everywhere and see everything. Neither can managers or senior leadership. So, being intentional about what you want and, in this case, don’t want in your workplace is important. Taking action to protect your co-workers and yourself is wholly appropriate.

Copyright 2021, USATODAY.com, USA TODAY

Starting Fri., the U.S. Postal Service will “implement new service standards for First Class Mail and Periodicals,” spokeswoman Kim Frum said in an email to USA TODAY.

WASHINGTON – Americans who have been frustrated with the slow service of the U.S. Postal Service since the beginning of the COVID-19 pandemic probably won’t be thrilled to hear this: The service is about to get even slower.

Starting Friday, the Postal Service will “implement new service standards for First Class Mail and Periodicals,” spokeswoman Kim Frum said in an email to USA TODAY.

The changes mean an increased time-in-transit for mail traveling long distances, such as from New York to California. Frum said that “most first class mail (61%) and periodicals (93%) will be unaffected” by the changes. Single-piece first-class mail traveling within the same region will still have a delivery time of two days.

The Postal Service defines first-class mail as “standard sized letters and flats,” Frum said. That’s different from first-class packages, which are typically used for shipping smaller, lightweight packages. Currently, first-class mail and first-class packages have the same delivery standards, but that will change beginning Friday.

The changes to service standard times are part of the Postal Service’s 10-year strategic plan, which was announced by Postmaster General Louis DeJoy in March. The plan has drawn heavy criticism from elected officials.

DeJoy took his position in June 2020 despite no previous Postal Service experience. The position of postmaster general is not appointed or nominated by a president but rather appointed by the independent Postal Service Board of Governors.

The Postal Service has been riddled by financial problems for years, and the coronavirus pandemic has only worsened the situation.

By making this change, Frum said, “the Postal Service can entrust its ground network to deliver more First-Class Mail, which will lead to great consistency, reliability and efficiency that benefits its customers … whether it’s 300 miles or 3,000 miles, the current standard for (first-class packages) require 3-day service for any destination within the contiguous U.S. with a drive time greater than six hours. This is unattainable and forces us to rely on air transportation, yielding unreliable service. With this change, we will improve service reliability and predictability for customers while also driving efficiencies across the Postal Service network.”

Additionally, starting Oct. 3 through Dec. 26, the Postal Service will temporarily increase prices on commercial and retail domestic packages because of the holiday season and its increase in volume. Those price increases will not affect international products, Frum said.

Copyright 2021, USATODAY.com, USA TODAY

When creating a list of must-haves and would-likes, three out of four homebuyers include some consideration of disaster risk, according to a realtor.com study.

CHICAGO – About three in four recent homebuyers say they factored natural disasters into their decision when choosing a location for their new home, according to a new survey of about 3,000 consumers conducted by realtor.com.

Nationwide, 75% of recent home buyers say they’re concerned about the threat of natural disasters. The natural disasters that have them most concerned are:

• Tornadoes (39%)
• Severe Cold Or Winter Storms (38%)
• Floods (35%)
• Hurricanes (29%)
• Earthquakes (21%)
• Wildfires (17%)
• Droughts (11%)
• Sinkholes (8%)

In addition, one out of three respondents say they’d even consider selling their current home and moving to avoid natural disasters.

Homeowners located in rural and suburban areas are the most concerned about tornadoes and severe cold or winter storms. Flooding was a top concern for homeowners living in urban areas.

“Natural disasters can have enormous impacts on communities and homeowners, and with increased frequency and intensity of weather-related events, National Preparedness Month [in September] is a good reminder of how important it is to be prepared,” says Mickey Neuberger, realtor.com’s chief marketing officer.

Beginning in 2020, realtor.com began displaying flood risk next to its real estate listings. Properties include scores from Flood Factor between one (minimal risk) and 10 (extreme risk), which represents the home’s cumulative risk of flooding over a 30-year mortgage.

Source: realtor.com

© Copyright 2021 INFORMATION INC., Bethesda, MD (301) 215-4688

NAR Economist Yun credited “rising inventory and moderating price conditions” for bringing more buyers back to the market. A separate realtor.com survey found three Fla. metro areas to be “hottest markets,” including the areas around Orlando, Tampa and Jacksonville.

WASHINGTON – Pending home sales rebounded in August, recording significant gains after two prior months of declines, according to the National Association of Realtors® (NAR).

Each of the four major U.S. regions tracked by NAR mounted month-over-month growth in contract activity. However, each territory was also down in year-to-year pending-sale comparisons, with the Northeast down a double-digit 15.8%. In contrast, the South – which includes Florida – was down only 6.3%

The Pending Home Sales Index (PHSI) – a forward-looking indicator of home sales based on contract signings – increased 8.1% to 119.5 in August. Year-over-year, signings dipped almost the same amount, 8.3%. An index of 100 is equal to the level of contract activity in 2001.

“Rising inventory and moderating price conditions are bringing buyers back to the market,” says Lawrence Yun, NAR’s chief economist. “Affordability, however, remains challenging as home price gains are roughly three times wage growth.”

Such an imbalance in the market is unsustainable over the long-term, Yun says.

“The more moderately priced regions of the South and Midwest are experiencing stronger signing of contracts to buy, which is not surprising,” Yun adds. “This can be attributed to some employees who have the flexibility to work from anywhere, as they choose to reside in more affordable places.”

Realtor.com’s Hottest Housing Markets data revealed that out of the largest 40 metros, the most improved metros over the past year, as of September 27, were Orlando-Kissimmee-Sanford, Fla.; Tampa-St. Petersburg-Clearwater, Fla.; Nashville-Davidson-Murfreesboro-Franklin, Tenn.; Jacksonville, Fla.; and Austin-Round Rock, Texas.

August pending home sales regional breakdown: Month-over-month, the Northeast PHSI rose 4.6% to 96.2 in August, a 15.8% drop from a year ago. In the Midwest, the index climbed 10.4% to 115.4 month-to-month, but was down 5.9% year-to-year.

Pending home sales in the South increased 8.6% to an index of 141.8 in August, down 6.3% from August 2020. The index in the West grew 7.2% in August to 107.0, but it was still down 9.2% year-to-year.

© 2021 Florida Realtors®

No two shutdowns are the same, but the IRS would likely stop verifying homebuyers’ Social Security numbers and income. That created backlogs in earlier shutdowns.

NEW YORK – As the federal government teeters near the edge of another shutdown, you might wonder what it could mean for you if the slow gears grind to a halt.

Congress hasn’t adopted any appropriations bills before the new fiscal year, which starts Oct. 1. If it doesn’t meet the deadline by midnight Sept. 30 – or adopt a continuing resolution to buy more time – a shutdown is likely.

That means nonessential government functions would cease until Congress adopts funding and President Joe Biden signs it into law.

Question: What agencies are affected by a government shutdown?

Answer: Every shutdown is a little different. The Office of Management and Budget (OMB) coordinates plans for a shutdown developed by each federal agency. Those plans are updated on a rolling basis.

The guidelines OMB gave those agencies say functions that continue must fall under legal exceptions, including one that prohibits halting functions related to public safety. Mandatory spending programs that don’t require annual authorization also would continue.

Air traffic control, law enforcement and power grid maintenance have been among the public safety services that kept running during previous shutdowns, according to the Committee for a Responsible Federal Budget.

Social Security, Medicare and Medicaid are mandatory spending programs that would continue to operate, according to CRFB.

If Congress cannot reach a deal, this would be the first shutdown during a pandemic. It’s unclear how a shutdown would affect the federal government’s response to COVID-19.

Q: When was the last government shutdown?

A: The last government shutdown was at the end of 2018 and the start of 2019. It lasted for 35 days, beginning Dec. 21, 2018. It followed brief shutdowns in January and February 2018.

Before that, the government ceased operations for 16 days in October 2013 and 21 days from December 1995 to January 1996.

A shutdown was narrowly avoided at the end of 2020. After a standoff with lawmakers, President Donald Trump signed a $900 billion COVID-19 relief package that was attached to a spending measure that kept the government open through September.

Q: What could be affected during a shutdown?

• Social Security and Medicare: Payments would continue, but benefit verification and card issuance would stop.
• National parks: Some park gates remained open during the last government shutdown, but visitor services and maintenance stopped.
• Flights: Air traffic controllers and Transportation Security Administration officers worked through the last shutdown, but slowdowns were reported in airports.
• Mortgage and loans: The Internal Revenue Service would not verify Social Security numbers and income. In previous shutdowns, this created a backlog of loan approvals.
• Food inspections: The Food and Drug Administration delayed inspections during shutdowns.
• Supplemental Nutritional Assistance: Benefits were paid while carryover money was available in state and federal accounts.
• Border: Customs and border agents worked at crossings and ports of entry during previous shutdowns.

Source: Committee for a Responsible Federal Budget, Congressional Research Service, USA TODAY

Copyright 2021, USATODAY.com, USA TODAY

Buyers who want to make their offer more appealing sometimes consider changes to the contract’s “Loan Approval Period.” Of the possible changes they can choose to make their offer more appealing, this one may carry the highest risk.

ORLANDO, Fla. – Part three of a three-part series on buyers’ offers: The series focuses on potential pitfalls in relation to buyers’ attempts to make their offers “more appealing” in today’s market.

The Loan Approval Period may be the riskiest clause to change due to all the potential issues that may pop up later. Some buyers choose to submit a cash offer but still pay with financing, which by itself is not an issue, unless buyers ultimately don’t have enough funds to close. If buyers don’t close because they can’t get a loan, a change to this clause means they don’t have the protections included in the Loan Approval Period. As a result, they’d be considered in default under the contract, and the seller can claim their deposit.

Other buyers and agents try to make the terms of the Loan Approval Period more appealing, by marking that it’s a conventional loan when it’s actually FHA or VA. Or they may state they’re going to finance less than they actually intend to finance.

The first issue with this? If buyers truly do not intend to adhere to the terms set forth in the contract, the sellers may argue that the buyer’s failure to pursue the loan as described in the contract is a default. In the case where buyers opt to move forward with a VA loan rather than a conventional loan as written in the contract, the sellers would not be obligated to absorb costs associated with VA financing. Similarly, if buyers seek to finance a sum in excess of that described in the contract, those buyers would not be using good faith and due diligence to obtain the loan they agreed to obtain.

Second, if agents know their buyers plan to do one of these things – or even worse encourage it – they could be accused of falling short of their duties to act fairly and honestly, or of being deceptive or misleading.  

However, it’s not always deception on the buyer’s part. Often, these situations occur unintentionally.

For example, the buyers may fully intend to apply for a conventional loan and state this in the contract, only to have their lender tell them they don’t qualify for a conventional loan – but they would qualify for an FHA loan instead. The buyers then move forward with an FHA loan, not considering the repercussions in the contract. In this case, the buyers need to get an addendum signed by the sellers that reflects the change in type of financing. Otherwise, their deposit could be at risk.

Whether buyers intentionally misrepresent the terms of the loan they intend to get or unintentionally get approved for a loan that doesn’t match the terms of “Loan Approval” under the contract, the result is the same: Buyers may lose the protections of the financing contingency and ultimately their deposit.

Another tactic sometimes used – reducing the timeframe for the Loan Approval Period – also creates risk. If buyers fail to provide notice to the sellers, either that they have obtained Loan Approval or have not obtained Loan Approval within the appropriate time, the contract gives sellers three days to terminate. In most instances within the Loan Approval Period, buyers should get their deposit back – but after the Loan Approval Period, buyers do risk losing their deposit.

Note that there are additional protections for a buyers’ deposit after the Loan Approval Period has ended, but in order to receive the protections of paragraph 8(b), buyers need to get their Loan Approval and provide notice within the timeframe of the Loan Approval Period.

Articles in this series

Part I: Legal Dangers If Buyers Make Offers ‘More Appealing’
Part II: Adding Appraisal Gap Language? Consider This
Part III: Loan Approval Period and Possible Pitfalls

Laura Gomes is a Florida Realtors attorney
Note: Advice deemed accurate on date of publication

It’s important for buyers and sellers to fully read a contract and ask about any words that confuse them. In the Far/Bar AS IS contract, “deem” appears 10 times and “waive” 12 times, but some Florida Realtors Legal Hotline callers seemed confused about their definitions.

ORLANDO, Fla. – One reason people struggle to understand contracts is that they contain words that aren’t a part of everyday conversation. Before signing a significant contract, it’s important for both parties to slow down and read every word. If they find a word they don’t understand, they should look up what it means or, even better, reach out to their own lawyer with any questions. If they just skip over words, that ignorance could cost them.

Let’s look at a couple of words that seem to trip up callers to our Florida Realtors Legal Hotline: “deem,” and “waive.”

Deem

Here’s how a legal dictionary defines the word deem: “to treat something as if it were really something else.” In other words, it creates a legal fiction.

“Deem” appears 10 times in the “AS IS” Residential Contract for Sale and Purchase approved by the Florida Realtors and Florida Bar, which is the contract we’ll use throughout this article. Let’s look at two examples to see how it works.

The first one is easy to understand. Section 2(a) allows parties to check one of two boxes relating to delivery of escrow. The first box provides that it accompanies the offer, while the second creates a deadline (3 days, if left blank). It then says “IF NEITHER BOX IS CHECKED, THEN OPTION (ii) SHALL BE DEEMED SELECTED.” That means that, although both parties signed a contract with no box selected, for legal purposes we’ll pretend the second box was checked.

Here’s a more subtle use: “Loan Approval which requires a condition related to the sale by Buyer of other property shall not be deemed Loan Approval for purposes of this subparagraph.” So, let’s say a buyer receives a letter from a lender titled “Loan Approval” that shows the buyer is approved for the exact type of financing described in the contract. However, it also mentions that the buyer must close a pending sale of other property before the lender will fund. In that case, the loan approval they received “shall not be deemed a Loan Approval.” Therefore, the buyer should act like they never received the loan approval.

In other words, the contract pretends the lender denied the application or remained silent. The buyer will have the option to terminate the contract before the loan approval period or, if they’re confident everything will work out, go forward with their deposit likely at risk.

Waive

The word “waive” generally means to give away a legal right. You’ve likely seen it in the context of a waiver document. It’s the kind of thing you would sign before going white water rafting, riding go-karts, or even using computer software. The company is basically asking you to give away your right to sue them in the future if you get harmed in ways described in the waiver. Some variation of “waive” appears in the contract 12 times.

Section 18, Standard X, titled Buyer Waiver of Claims, provides that “To the extent permitted by law, Buyer waives any claims against Seller and against any real estate licensee involved in the negotiation of this Contract for any damage or defects pertaining to the physical condition of the Property that may exist at Closing of this Contract and be subsequently discovered by the Buyer …”

While this is a broad waiver that could cut off a number of otherwise valid legal claims a buyer would otherwise have, that first part “To the extent permitted by law” does leave the door open for claims like a seller’s fraud or failure to disclose latent defects.

Joel Maxson is Associate General Counsel for Florida Realtors
Note: Advice deemed accurate on date of publication

© 2021 Florida Realtors®

Listing brokers determine cooperating compensation, either an amount or percentage. However, the issue has been a frequent topic of discussion in today’s market of thin listings and high buyer demand.

Dear Joey: How does cooperating compensation work?

ORLANDO, Fla. – Dear Joey: I recently encountered a buyer’s agent who refused to show my listing unless I increased the offer of cooperating compensation. I was told to “tell my seller to raise the compensation.” – Curious One

Dear Curious One: We’ve been seeing your question more frequently in this historic market.

Cooperating compensation is determined by the listing broker, not the seller. However, the seller has the right to know what the compensation will be for a cooperating brokerage before entering a listing contract.

Standard of Practice 1-12 of the Realtor® Code of Ethics states: “When entering into listing contracts, Realtors must advise sellers/landlords of “the Realtor’s company policies regarding cooperation and the amount(s) of any compensation that will be offered to subagents, buyer/tenant agents, and/or brokers acting in legally recognized non-agency capacities …”

The MLS requires the offer of compensation to be entered into the MLS either as a dollar amount or a percentage of overall compensation.

I liken cooperating compensation to a contractor who charges homebuyers a set price to build the buyer’s dream home. The sale price includes the contractors profit margins, expenses and the cost for bringing in tradesmen to do the electrical, plumbing and carpentry.

The same goes for cooperating compensation, the amount offered in cooperation to sell the listing broker’s listing, which is paid through the proceeds of the sale. And, at the conclusion of the transaction, the listing broker pays the cooperating broker for being the procuring cause.

It’s unethical for an agent to deliberately refuse to show a property based on cooperating compensation. This could potentially be a violation of Article 1 of the Code of Ethics, which says when representing a buyer, seller, landlord, tenant or other client as an agent, Realtors pledge to promote and protect the best interest of their client.

With that said, Realtors are obligated to treat all parties in a transaction honestly. So, if I am working with a buyer, and I conveniently fail to inform my buyer that I have found a property that checks the boxes on the buyer’s “wish list,” have I been honest? It boils down to self-dealing plain and simple.

If you want to make more money and you do not want to spend time on a listing because it doesn’t pay enough, refer the buyer to another brokerage and collect a referral fee.

Taking this scenario a step further: If the buyer’s agent shows the property and refuses to submit the offer unless the listing broker increases the offer of compensation, we could be talking about a violation of Article 16, more specifically, Standard of Practice 16-16, which clearly states Realtors shall not use the terms of an offer to purchase to modify the listing broker’s offer of compensation.

To sum up, it’s important to reiterate that, ultimately, the listing broker negotiates their compensation with the seller and then offers part of that as the cooperating compensation. This cooperating compensation can be more; it can be less; it can be equal to the amount the listing broker collects for services rendered. The listing broker decides, period.

We all want what’s best for our business and clients. It’s important to remember, regardless of which side of the transaction you work, you can cooperate and get the job done – a win, win for everyone!

Joey Sale is the Director of Local Association Services for Florida Realtors
Note: Advice deemed accurate on date of publication

© 2021 Florida Realtors®

A seller gave explicit instructions to the listing office: No showings unless the buyer supplies proof of funds first. But the buyer’s agent doesn’t want to disclose that kind of personal info just to see a home. Does he have to do it anyway?

ORLANDO, Fla. – A seller gives explicit instructions to the listing office: No showings take place unless the buyer supplies proof of funds first. The listing agent puts this information in the “Broker Remarks” section of the MLS listing. A buyer’s agent then sees the listing and requests to see the property with his buyers. The listing agent agrees but reminds the buyer’s rep about the proof of funds requirement.

The buyer’s agent is furious – he feels his customers shouldn’t have to show personal information like this before even seeing the inside of the property. This has to be illegal, right? Or at least unethical behavior on the part of the listing agent?

In short, the answer to both questions is no.

A seller has a fairly wide range of prerequisites he can chose from before he allows a property showing; he can even demand an actual offer from the buyer. While this tends to happen with high-end or celebrity-owned properties, it’s important to understand that a seller can require information from a buyer before the buyer can step onto the property.

Many times, a seller requires information, such as proof of funds, as evidence that the buyer has a serious interest in the property.

If you are a listing agent with a specific seller request, make sure to get this instruction in writing – i.e., as part of your listing agreement or in an email sent by the seller. If you’re a buyer’s agent, let the buyer know what the seller requests when you bring the listing to them.

Please note: In many cases, personal information regarding the buyer can be redacted or blacked-out. For instance, an account number or a social security number or a home address could be redacted in any document requested by the seller, such as a proof of funds.

Standard of Practice 3-9, which supports Article 3 of the Code of Ethics, says Realtors shall not provide access to listed property on terms other than those established by the owner or the listing broker. When a seller requires a buyer to meet certain prerequisites before entering the property, Realtors are obligated to comply.

If the listing agent permits access contrary to the seller’s instruction or if he ignores the seller’s instructions, both Realtors could be the subject of an ethics violation. If the listing agent is at fault, it would be a possible violation of Article 1 based Standard of Practice 1-16 and in the case of a cooperating agent, Article 3, Standard of Practice 3-9, could apply.

Meredith Caruso is Associate General Counsel for Florida Realtors

Note: Advice deemed accurate on date of publication

© 2021 Florida Realtors®

A price increase of almost 20% year-to-year is unheard of – until now. Home prices hit record highs in 19 of the 20 cities included in monthly Case-Shiller reports.

WASHINGTON (AP) – U.S. home prices soared in July by a record amount from a year earlier as buyers desperate for homes bid up prices amid a limited supply.

The S&P CoreLogic Case-Shiller 20-city home price index surged 19.9% in July compared with a year ago, the largest gain on records that date back to 2000. In 17 of the 20 cities, prices rose more quickly in July than in June. And prices reached all-time highs in 19 of 20 cities. The one exception was Chicago, where prices are just 0.3% below their 2006 peak.

Sales of new and existing homes have jumped this year, driven by low mortgage rates and a desire for more living space during the pandemic. Sales of existing homes are up 16% in the first eight months of 2021 compared with last year, and they’re up 12% from the same period in 2019.

Phoenix, San Diego, and Seattle reported the biggest price increases, with Phoenix leading the nation for the 26th straight month.

The rising prices are making it harder for younger would-be buyers to purchase a home, with the proportion of sales going to first-time homebuyers falling to 29% last month, the lowest since January 2019, according to the National Association of Realtors® (NAR). Meanwhile, investors snapped up 15% of homes in August, up slightly from a year earlier.

There were just 1.29 million homes for sale in August, according to the NAR. That’s down nearly one-third from a year earlier.

There are some signs that home demand is cooling, and sales ticked down last month. Fewer buyers are waiving home inspections, the NAR says. Still, 87% of homes are being purchased after less a month on the market.

Copyright 2021 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.

Multifamily property owners with a Fannie or Freddie loan will be offered forbearance indefinitely. In exchange, they must follow rules that limit tenant evictions.

WASHINGTON – The Federal Housing Finance Agency (FHFA) announced that mortgage financing giants Fannie Mae and Freddie Mac will continue to offer forbearance indefinitely to qualifying multifamily property owners.

It’s FHFA’s fourth program extension. The latest extension was set to expire this Thursday, Sept. 30.

“Given the uncertain nature of this pandemic, the FHFA is taking further action to protect renters, property owners, and the mortgage market,” says Sandra L. Thompson, FHFA acting director.

Property owners with Fannie Mae- or Freddie Mac-backed multifamily mortgages can enter a new or modified forbearance if they experience a financial hardship due to the pandemic’s impact on their business operations. If they choose to do so, property owners must inform tenants in writing about tenant protections available during the forbearance and repayment periods. They also must agree not to evict tenants for nonpayment of rent while the property is in forbearance.

Additional tenant protections are in place when the repayment period starts.

For more information, visit consumerfinance.gov/housing on relief options.

Source: FHFA.gov

© Copyright 2021 INFORMATION INC., Bethesda, MD (301) 215-4688

Consumer sentiment dropped for the second month in a row, though attitudes about personal situations rose – both current outlooks and expectations for next year.

GAINESVILLE, Fla. – Floridians’ economic attitudes dropped again in September, the second month in a row for declines.

The monthly index released by the University of Florida’s (UF) Bureau of Economic and Business Research hit 76.1 in September, down 2.4 points from a revised figure of 78.5 in August to hit its lowest level in almost 8 years (October 2013, at 69.9 points).

“The decline in consumer confidence was largely fueled by growing pessimism in Floridians’ expectations about national economic conditions in the short- and long-run,” says Hector H. Sandoval, director of the Economic Analysis Program at UF’s Bureau of Economic and Business Research. “In the last two months, these two components have accumulated substantial losses indicating that Floridians foresee a slower than anticipated economic recovery.”

Among the five components that make up the index, two increased and three decreased.

Current conditions: Floridians’ opinions about current economic conditions were mixed. On the one hand, perceptions of personal financial situations now compared with a year ago increased 1.1 points from 71.6 to 72.7. On the other hand, opinions as to whether now is a good time to buy a major household item like an appliance dropped 2.3 points from 72.9 to 70.6.

Although these two components moved in opposite directions, opinions were split across demographic groups.

Future expectations: Floridians’ opinions about future economic conditions were also mixed in September. Expectations of personal finances a year from now increased slightly, rising from 90.8 to 91.1.

Expectations about U.S. economic conditions over the next year, however, dropped 5 points, from 78.6 to 73.6, while the outlook of U.S. economic conditions over the next five years tumbled 5.7 points from 78.5 to 72.8 – the largest decrease of any reading this month.

“Notably, while responses to the different components of the index were split by socio-demographic groups, men consistently reported less favorable views across all five questions of the index,” Sandoval says.

“The drop in consumer confidence is consistent with the current economic outlook,” says Sandoval. He says the economic recovery slowed after supply-chain bottlenecks started to drive up prices. In addition, the “delta variant dented consumer demand for some services and stalled the long-anticipated increase in business travel,” which he calls one of the largest sources of revenue for the hotel industry.”

He says the consumer confidence decline doesn’t forecast an economic downturn. However, “the loss of confidence could prolong the recovery of the jobs lost during the pandemic. Nonetheless, as the snowbird season approaches and COVID-19 travel restrictions are lifted, we anticipate a boost to Florida’s economy and consumer confidence in the coming months.”

Conducted Aug. 1 through Sept. 23, the UF study reflects the responses of 203 individuals who were reached on cellphones and 274 individuals reached through an online panel, a total of 477 individuals, representing a demographic cross section of Florida. The index is benchmarked to 1966, which means a value of 100 represents the same level of confidence for that year. The lowest index possible is a 2, the highest is 150.

© 2021 Florida Realtors®

A podcast can connect you to a lot of people and being “the community expert” can draw in a lot of leads. If you’re going to do a podcast, focus on that local insight.

NEW YORK – When expanding a real estate brand, a key goal is to build trust within your local community and become a voice of authority. To this end, real estate agents should consider launching a podcast.

Maria Quattrone, founder and CEO of Maria Quattrone & Associates in Philadelphia, has recorded more than 150 Facebook live events since the onset of the pandemic, and converted them into the Be the Solution podcast.

In the podcast, agents record an episode every week and as often as three times per week. They alternate between two types of shows – “Mega Agent,” which features friends in real estate across the country and even in Canada, and “Business” episodes, which focus on local leaders and community organizations.

Agents interested in starting a podcast should start by creating a theme, which should be something that’s meaningful to agents and their team. Be the Solution, for instance, seeks to be the team that gets properties sold after other agents or brokerages fail.

Next, invest in good recording equipment, such as a webcam, ring light and a headset with an external microphone. Suggestions for a successful podcast series include:

• Create a dedicated space for interviews
• Research guests well ahead of time
• Listen closely to guests rather than running through a list of questions; ask follow-up questions based on what the guest says
• Be consistent and promote the podcast via e-blasts, social media and other platforms
• The focus shouldn’t be on a particular agent. It should be about learning, networking and staying plugged in to what’s happening locally and beyond

Source: Inman (09/23/21) Quattrone, Maria

© Copyright 2021 INFORMATION INC., Bethesda, MD (301) 215-4688

National consumer confidence fell for the third month in a row. Economist Lynn Franco says the delta variant spread dampened optimism, but inflation fears eased a bit.

BOSTON – The September Consumer Confidence Index dropped, marking the third straight month for declines. It now stands at 109.3, down from 115.2 in August.

The Present Situation Index – U.S. consumers’ assessment of current business and labor market conditions – fell to 143.4 from last month’s 148.9. The Expectations Index – based on consumers’ short-term future outlook for income, business and labor market conditions – fell to 86.6 from 92.8.

“Consumer confidence dropped in September as the spread of the delta variant continued to dampen optimism,” says Lynn Franco, senior director of economic indicators at The Conference Board. “Concerns about the state of the economy and short-term growth prospects deepened, while spending intentions for homes, autos and major appliances all retreated again.”

However, worries about inflation ebbed a bit but “remain elevated,” according to Franco.

“Consumer confidence is still high by historical levels – enough to support further growth in the near-term – but the Index has now fallen 19.6 points from the recent peak of 128.9 reached in June,” she adds. “These back-to-back declines suggest consumers have grown more cautious and are likely to curtail spending going forward.”

Present situation

Consumers’ appraisal of current business conditions

• 19.3% said business conditions are “good,” down from 20.2%.
• 25.4% said business conditions are “bad,” up from 24.1%.

Consumers’ assessment of the labor market

• 55.9% of consumers said jobs are “plentiful,” up from 55.6%.
• Conversely, 13.4% of consumers said jobs are “hard to get,” up from 11.2%.

Expectations six months in the future

Short-term business conditions

• 21.5% of consumers expect business conditions to improve, down from 23.4%.
• 17.6% expect business conditions to worsen, up from 17.4%.

Short-term labor market outlook

• 21.5% expect more jobs to be available in the months ahead, down from 23.1%.
• 20.3% anticipate fewer jobs, up from 18.0%.

Short-term financial prospects

• 17.3% of consumers expect their incomes to increase, down from 18.2%.
• 11.5% expect their incomes will decrease, up from 9.9%.

© 2021 Florida Realtors®

Of the top 10, three are in Fla. NAR says it analyzed 390 commercial real estate markets and found a “robust recovery with positive net absorption and strengthening rents across the multifamily, industrial and retail property markets.” However, the office sector continues to struggle.

Compared to one year ago, asking rents climbed for apartments/multifamily (11%), industrial (7%) and retail (2%) properties, but declined for office properties (-0.4%).

NEW YORK – The National Association of Realtors® (NAR) identified the top 10 commercial office markets as of the third quarter of 2021 in its monthly Commercial Market Insights report released Monday, and three of those top markets are in Florida.

In alphabetical order, the markets are:

• Austin, Texas
• Boise, Idaho
• Chattanooga, Tennessee
• Daytona Beach, Florida
• Miami, Florida
• Myrtle Beach, South Carolina
• Omaha, Nebraska
• Palm Beach, Florida
• Provo, Utah
• San Antonio, Texas

To determine the top 10, NAR says it analyzed 390 commercial real estate markets. Overall, it found a robust recovery with positive net absorption and strengthening rents across the multifamily, industrial and retail property markets, as economic production rebounded to pre-pandemic levels. The apartment and industrial sectors, specifically, have historically low vacancy rates, while retail underwent a more gradual recovery as many consumers return to brick-and-mortar shopping.

Since the second quarter of 2020, vacancy rates have declined for apartments/multifamily, industrial and retail properties. Compared to one year ago, asking rents climbed for apartments/multifamily (11%), industrial (7%) and retail (2%) properties, but declined for office properties (-0.4%).

The office sector, however, continues to struggle. Absorption rates and rents have declined, and many occupied spaces remain largely void of workers. Still, NAR says it found some positive indicators in small- and medium-sized metropolitan areas, which are seeing increases in office occupancy rates that outperform most large cities and the national average.

“Even as the economy makes a steady recovery, the one sector still lagging behind has been the office market,” says NAR Chief Economist Lawrence Yun. “Work-from-home flexibility looks to be the defining shift of the new post-pandemic economy. Despite the overall challenges, however, some local markets are bucking the trend with more office occupancy and rising rents. A combination of strong in-migration and relatively lower cost of doing business is driving these growth markets.”

NAR unveiled the top office markets today as part of its inaugural C5 Summit in New York City. C5 – which stands for “Commercial. Connect. Commerce. Capital. Community.” – brings together commercial investors and industry leaders, including commercial brokers and developers, state and local Realtor® associations, economic development corporations, government officials, REITs, and domestic and international investors.

“C5 is the nation’s top gathering of commercial real estate and economic development professionals,” says NAR President Charlie Oppler.

NAR’s latest Commercial Markets Insights report is posted on its website.

© 2021 Florida Realtors®

NAR’s Technology Board made recommendations that will go into effect if approved by a Multiple Listing Service committee and NAR’s board. Among them: Participants can’t represent that their services are free, and listing ads can’t be sorted or filtered based on the level of compensation a cooperating broker offers.

CHICAGO – In a meeting this month, the National Association of Realtors®’ (NAR) MLS Technology and Emerging Issues Advisory Board passed a series of motions designed to ensure that association-operated multiple listing services (MLS) are meeting the needs of consumers and broker subscribers. They would:

• Prohibit MLS participants and subscribers from representing that their services as an agent or representative to a buyer or seller in a real estate transaction are free or available at no cost to their clients.
• Prohibit MLS participants and subscribers from filtering or restricting MLS listings that are searchable by and displayed to consumers based on the level of compensation offered to the cooperating broker or by the name of a brokerage or agent. New restrictions would also keep MLSs from enabling this type of filtering.

The advisory board, which met Sept. 9-10 in Chicago, also recommended changes to the Internet Data Exchange (IDX) policy and the Virtual Office Website (VOW) policy to make them consistent with the prohibition on filtering and restricting MLS listings.

“The advisory board moved forward with these recommendations because we think they ensure that MLSs are up-to-date with advancements in technology and consumer preference, operate with transparency, and maintain policies that make the consumer experience better,” says Greg Zadel, CRB, CRS, and chair of the advisory board. He says the proposed policies will reinforce what already exists in NAR policies and the Code of Ethics.

A higher level of service

In a separate action, advisory board members approved a series of recommendations focused on improving the level of service MLSs provide to participants and subscribers.

The advisory board approved recommendations from the MLS Standards Work Group that would set best practices for:

• Disciplining participants who violate MLS rules
• Informing participants on the MLS website about the data feeds and technical support available to them and their vendors
• Sharing aggregated data with state associations and NAR for statistical and advocacy purposes
• Clarifying MLS officers’ and directors’ fiduciary duty
• Developing an annual MLS strategic plan with specific consideration to leadership training, partnerships, technology, participant outreach, financial independence and diversity, equity and inclusion

A sixth recommendation from the MLS Standards Work Group is that MLSs, by July 1, 2022, have a written plan with a timeline and cost estimate for coming into compliance with the Real Estate Standards Organization’s (RESO’s) Data Dictionary.

These Work Group recommendations will go through the Multiple Listing Issues and Policies Committee in November but do not require an NAR Board of Directors vote, since they would not be mandated and would not create policy, says Zadel. Rather, MLSs would be asked to consider local adoption as a means of providing a higher level of services to participants and subscribers.

The Advisory Board also considered and approved in concept recommendations that

• MLSs be required to offer participants, or their designees, a single data feed in accordance with their licensed authorized use
• MLSs be required to provide participants with a brokerage back-office feed of data as defined in the recommendation

Establishing standards for data feeds will make it easier for the brokers to incorporate MLS data into the many productivity tools and reports they use today in their business, says Zadel. “This will empower MLS participants with the information they need to better serve their clients and customers.”

Finally, the advisory board recommended changes to the IDX and VOW policies that would require participants’ IDX displays and VOWs to display the listing firm’s contact information “at least as prominently as any other contact information or lead form on the site.”

Ensuring that the listing broker attribution is clear would provide a more accurate representation to the public, Zadel says, would improve consumers’ ability to seek information on the property, and is consistent with the “True Picture” requirement of Article 12 in NAR’s Code of Ethics.

At a meeting in October, the advisory board will consider other potential policy changes, including one that would address the disclosure of compensation in public displays.

If the policy recommendations are approved by the Multiple Listing Issues and Policies Committee at its Nov. 13 meeting and by the NAR Board of Directors at its Nov. 15 meeting during the Realtors® Conference & Expo, the policies will go into effect Jan. 1, 2022, and MLSs will then have until March 1 to adopt changes locally.

Source: National Association of Realtors® (NAR)

© 2021 Florida Realtors®

If Republicans and Democrats fail to reach agreement by Sept. 30, some services – such as NFIP, IRS and more – could slowly shut down, possibly delaying transactions.

WASHINGTON – Congress often agrees to continue government funding at the last minute, but a failure to extend the debt limit has, at times, forced the federal government to cut back on services. In general, vital services remain in operation, but a need for tax records could be delayed, and the National Flood Insurance Program (NFIP) could be impacted.

Past government shutdowns – 35 days in 2018-2019 and 16 days in 2013 – shuttered many federal agencies. In some cases, the government created work-arounds. In all cases, however, the problems grew worse as time passed.

Currently, debt funding must be passed before Sept. 30, 2021. At the moment, the extension is being used as leverage for passing or not passing other issues, and it appears as if it may happen again starting on Oct. 1. As a result of previous shutdowns, some federal agencies have a type of backup plan, though full services are unlikely if lawmakers can’t reach an agreement.

If the shutdown should occur, the following might be impacted, though the extent may not be clear right away:

Flood insurance: Buyers required to have flood coverage may find it challenging to secure National Flood Insurance Program (NFIP) policies, making it difficult to close on homes in flood zones. However, many Florida buyers have other options through private coverage, plus some flood policies can be assumed by the buyer if a seller is willing to do so.

Federal Housing Administration (FHA loans): FHA falls under the Department of Housing and Urban Development (HUD), and up to 95% of HUD employees have been furloughed in the past if the government shuts down.

However, FHA lending may not completely stop. HUD’s earlier Contingency Plan calls for FHA to continue endorsing new loans in its Single Family Mortgage Loan Program, but the agency will be short on staff during a shutdown. Existing and new FHA loan applications may take longer to approve and fund.

Rural Housing Programs: Rural housing programs under the U.S. Department of Agriculture (USDA), would likely stop issuing new rural housing Direct Loans or Guaranteed Loans, such as its Single Family Housing Guaranteed Loan Program.

Internal Revenue Service: Homebuyers often need tax-return transcripts if required by their lender. In a shutdown, however, the IRS generally closes and suspends processing forms.

While FHA and VA loans don’t require IRS tax transcripts, many lenders require them for various types of loans – sometimes including FHA and VA. If a government shutdown lasts for a while, buyers should expect delays. However, lenders have, in the past, become more flexible if buyers can’t secure Form 4506T through no fault of their own.

Government Sponsored Enterprises (Fannie Mae, Freddie Mac, etc.): During previous shutdowns, Fannie Mae and Freddie Mac continued normal operations, similar to their regulator, the Federal Housing Finance Agency, since they don’t rely on appropriated funds. They may also introduce relaxed procedures that permit closings to go forward without federal verification of Social Security numbers and IRS tax transcripts. However, lenders would still have to obtain federal verification of both before the GSEs agree to purchase the loans.

© 2021 Florida Realtors®

Couples may happily disagree in life, but when they have to share a home the differences can come to the forefront. The top reason for a fight? A home’s price.

NEW YORK – Homebuying is emotional, and doing it with a significant other can be stressful. Couples don’t always see eye-to-eye.

A new survey from LendingHome, a lender to real estate investors, found that couples are most likely to disagree on these four items when purchasing a home together:

• The price: 53%
• The location: 29%
• The size or style of the home: 18%
• The condition: 29% wanted a new home; their partner wanted a fixer-upper

Men were more likely to say that they disagreed with their partner on the condition of the home, with 60% desiring a fixer-upper while their partner wanted something new.

“Choosing, buying and settling into a shared home is a significant step for any couple,” says Michael Bourque, LendingHome’s CEO. “If you and your partner are progressing toward this milestone, it’s important to take some time to consider more than just your aesthetic preferences and favorite neighborhoods. Your credit scores and histories will also play a role in your home buying journey.”

A majority of the more than 1,000 survey respondents considered homebuying a significant step. Nearly 80% of those in a relationship said purchasing a home was “very important, 91% said they worked on a homebuying budget together, and 32% said the two of them spent up to two years saving to buy a home.

Source: “Couples in Love Should Consider These Four Things When Buying a Home Together,” LendingHome (Sept. 22, 2021)

© Copyright 2021 INFORMATION INC., Bethesda, MD (301) 215-4688

U.S. Commerce: Sales of new homes last month were up 1.5%, reaching a seasonally adjusted annual rate of 740,000 – more than economists expected.

SILVER SPRING, Md. (AP) – Sales of new homes in the U.S. rose modestly in August as rising prices continue to sideline potential buyers.

Sales of new homes last month rose 1.5%, the Commerce Department reported Friday, reaching a seasonally adjusted annual rate of 740,000. That’s more than economists had expected and follows an increase in July, which was revised upward to a seasonally adjusted rate of 729,000 houses. July’s jump came after three consecutive declines in April, May and June as builders grappled with surging lumber prices and a shortage of workers.

Prices for new homes also ticked up in August. The median price for a new home rose $400 to $390,900, more than 20% higher than August of 2020 when the median price for a new home was $325,500.

Builders have been hit with rising costs and shortages of building materials and labor have rippled through the construction industry. Delays are common, prompting many builders to dial back the number of new homes they put up for sale. As building a new home gets more expensive, some of those costs are passed along to buyers.

The National Association of Realtors reported earlier this week that sales of previously occupied U.S. homes fell in August and soaring prices eased a bit from what’s been a torrid pace.

Sales of new homes rose in three of four U.S. regions, according to Commerce, with a steep decline of 31.1% in the Midwest. Sales rose 26.1% in the Northeast, 6% in the South and 1.4% in the West.

Overall, sales of new homes are 24.3% below the pace of one year ago. Sales have cooled in 2021 since January’s rate of 993,000 units, but remain at historically high levels.

© 2021 Associated Press, Matt Ott, AP business writer. All rights reserved.

A Freddie Mac study of 12M appraisals found that 13% of homes in Black neighborhoods were below contract price; in white tracts, it was 7.4%; in Latino it was 9.4%.

WASHINGTON – A new analysis from Freddie Mac alleges appraisal values are more likely to fall below the contracted sales price in Black and Latino neighborhoods than in predominantly White areas. The research is based on an evaluation of 12 million appraisals for purchase transactions on single-family homes submitted to Freddie Mac from 2015 to 2020.

Nearly 13% of properties in Black census tracts received appraisal values lower than the contract price compared to 7.4% for those in white tracts, according to the study. In areas that are predominantly Latino, the appraisal gap for properties in Latino tracts rose from 7.7% to 9.4% over the years included in the study.

However, Freddie Mac researchers also suggested that the appraisal difference might be greater than the study uncovered. Differences in comparable sale distances, variances in comparable sale prices, and possible systematic overpayment for properties by minorities can explain “only a modest amount of the observed appraisal gaps for the minority tracts.”

“An appraisal falling below the contracted sale price may allow a buyer to renegotiate with a seller, but it could also mean families might miss out on the full wealth-building benefits of homeownership or may be unable to get the financing needed to achieve the American Dream in the first place,” says Michael Bradley, senior vice president of modeling, econometrics, data science and analytics in Freddie Mac’s single-family division.

“Our research marks the beginning of a comprehensive effort to better understand the key drivers contributing to the appraisal gap.”

Bradley says Freddie Mac plans to focus on possible solutions that could include appraisal best practices, uniform standards for automated valuation models, enhanced consumer disclosures, and revised fair lending exam procedures and risk assessments.

Source: “Racial and Ethnic Valuation Gaps in Home Purchase Appraisals,” Freddie Mac (Sept. 20, 2021)

© Copyright 2021 INFORMATION INC., Bethesda, MD (301) 215-4688

The 30-year fixed-rate mortgage averaged 2.88% this week, a small increase from last week’s 2.86%. Freddie Mac credits foreign investors for keeping rates low.

MCLEAN, Va. – Freddie Mac’s weekly mortgage survey found that the 30-year fixed-rate mortgage (FRM) averaged 2.88%. up from last week’s 2.86%.

“The slowdown in economic growth around the world has caused a flight to the quality of the U.S. financial markets,” says Sam Khater, Freddie Mac’s chief economist. “This has led to a rise in foreign investor purchases of U.S. Treasuries, causing mortgage rates to remain in place, despite the increasing dispersion of inflation across different consumer goods and services.”

According to Khater, some elements of housing market are improving: “Homebuyers continue to snap up available inventory, which has improved modestly, and home price growth is moderating,” he says. “However, the next few months will be choppy as several home builders are signaling that they are going to deliver less supply amid labor and materials shortages.”

Average mortgage rates for Sept. 23, 2022

• The 30-year fixed-rate mortgage averaged 2.88% with an average 0.7 point for the week, up slightly from last week’s 2.86%. A year ago, the 30-year FRM averaged 2.90%.
• The 15-year fixed-rate mortgage averaged 2.15% with an average 0.6 point, up from last week’s 2.12%. A year ago, it averaged 2.40%.
• The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.43% with an average 0.3 point, down from last week’s 2.51%. A year ago at this time, it averaged 2.90%.

© 2021 Florida Realtors®

Citizens Property Insurance expects to exceed more than 1M policies sometime in 2022 – and private insurers will rack up more than 1B in losses by the end of this year.

TALLAHASSEE, Fla. – Citizens Property Insurance Corporation’s policy count will surpass 1 million next year as private market insurers continue to experience losses expected to reach nearly $1 billion by the end of 2021.

Speaking to Citizens Board of Governors, Citizens President, CEO and Executive Director Barry Gilway on Wednesday warned that as Citizens’ policy count grows, so does the risk of assessments on all Florida insurance consumers. A fee could added to all policies if a major storm or series of storms hits, and causes Citizens to exhaust its $6.4 billion surplus.

Created as Florida’s insurer of last resort, Citizens is taking on more than 5,000 policies a week as private companies continue to shed policies in response to losses brought on by litigation, damage from Hurricanes Irma and Michael, more expensive reinsurance and other factors.

“Citizens is considering all ideas to reduce exposure, and to continue to operate as efficiently as possible during this unprecedented growth period,” Gilway said.

During committee meetings Tuesday, Citizens officials outlined a series of options to stem growth, including marketing and technology upgrades to the Florida Market Assistance Plan, which was created by the Florida Legislature to refer potential policyholders to private market coverages.

Citizens officials are taking steps to reduce risk by increasing inspections on new business and exploring potential changes to Citizens Depopulation Choices and Property Insurance Clearinghouse programs. Such changes would require legislative consideration.

“At this point, everything is on the table as we try hard to support the development of a stronger private insurance market and stabilize the role of Citizens as the market of last resort,” said Gov. Nelson Telemaco, chairman of Citizens’ Exposure Reduction Committee.

Since October 2019, Citizens has seen its policy count jump from 420,000 to more than 700,000. At this pace, company officials expect the policy count to exceed 760,000 by the end of 2021. Initial estimates call for Citizens policy count to reach 1.1 million to 1.3 million by year-end 2022.

Citizens policy count reached a peak of nearly 1.5 million in 2011 with nearly $520 billion in exposure. If the state was hit by a 1-in-a-100-year storm during that time, all Florida insurance consumers would have been on the hook for $24 billion in assessments, which would have been tacked onto their monthly premiums for years.

Source: News Service of Florida

A syndicator combines money from multiple investors for a single project. Due diligence requires consideration of at least nine things – but trust tops the list.

NEW YORK – As we slowly emerge from the global pandemic, investors seeking high risk-adjusted returns are finally waking up to the undeniable strength of apartment or multifamily real estate investing. Many real estate sectors such as office space, hotels and retail got decimated during the past 18 months. Apartments, however, have seen demand surge.

Multifamily construction has not kept up with the growing population and the precipitous rate of household formation. Some people hit hard during the pandemic have sold their homes and moved into apartments. As the mortgage payment forbearance period ends in the fourth quarter of 2021, many more homeowners are expected to put their homes on the market. As vaccination rates across the country rise, and employers resume hiring, recent college graduates and young adults looking to start living independently are finally leaving their parents’ basements and their friends’ couches to strive out on their own.

All of these cohorts turn to apartment living.

Many commercial real estate investments happen through a syndication. A syndication is simply the pooling of resources to accomplish a common goal. If you have been on a commercial airplane, then you have been part of a syndication. Chances are you were not interested in paying for all the costs of operating that flight, so you and all the passengers put your money together or “syndicated” the flight.

Real estate syndications involve a team of active real estate professionals called syndicators, operators or deal sponsors. This team brings together passive investors who do not want to learn the details of real estate investing. Many investors enjoy their current careers or love to spend their time doing other things. They understand that real estate offers diversification, strong returns, and a less volatile risk profile from traditional stock investments. It is the job of the operator to research the market, find the deal, close the transaction, implement the business plan, and operate the asset until it is sold.

Do you trust the operator?

This is the most important question you need to ask yourself. Do you feel that the operator will do the right thing for you when faced with a really difficult decision?

Experienced professionals such as secret service agents and court judges get moral character wrong all the time. Do your research. Ask the operator to tell you about those investments that did not go as planned. It is easy to do the right thing when everything is going well or when the market is in an up cycle. Experience in down markets matters.

“Ask whether they were invested in the 2008 downturn and how they weathered that period. Ask what lessons were learned then that they apply today,” advises Kamara.

How aligned is the operator with the investor?

The most obvious means by which an operator is aligned with the investor is the fact that if they do not deliver results or act immorally, then they will cease attracting investors for subsequent deals. Look for operators that have been in business for many years. It takes a long time to build a reputation and only a few poor decisions to destroy it. Understand that just because a syndicator invests their own money in a deal does not mean that they are 100% aligned with you. It is certainly good that they invest their own cash, but this does not guarantee a positive outcome.

Who is providing the loan guarantees?

Most syndicated real estate loans use non-recourse debt. This means that even if things do not work out, passive investors are not liable and their personal assets cannot be used to fulfill the loan obligation. What you may not know is that banks still do require guarantees that the investment will be managed in a conscientious manner, without fraud, misappropriation or environmental degradation. The operator has to make these guarantees typically backed by net worth greater than the loan amount. Should there be any illegal acts the principals who provide the above guarantee are indeed personally liable. It is important to understand who provides these guarantees. You do not want that outsourced to a third party.

Who is paying the upfront costs?

Before a deal gets presented to investors, a lot of money has to change hands. Earnest money deposits, often to the tune of hundreds of thousands of dollars, have to be put in escrow. Lenders often require that their application fees and third party diligence costs be paid upfront. Significant legal fees are often paid upfront. Many fees are not recoverable should the deal not close. It is helpful to understand who pays for these costs and whether you may lose your capital should the deal not close.

What is the investment legal structure?

The majority of syndications are organized as a limited liability company (LLC) or a limited partnership. These structures enable easy distribution of profits to investors as income is not taxed at the entity level but flows through to the investors’ individual returns.

The biggest disadvantage of real estate investments is that they are illiquid. Your capital will be tied up for a long time and you cannot readily exit the investment. Your rights as a limited partner will be spelled out in the offering legal agreements. Make sure you understand the constraints of what you are allowed to do before you invest to avoid surprises and uncomfortable conversations later. Do not skim through legal documents.

What are the projected returns to you after all the fees are paid?

It is important to be clear about the percentage of the profits that you are entitled to on an annual basis, as well as when the property is refinanced or sold. What are the various fees that the operator is charging? Typical syndications often involve some or all of the following fees: Asset management fee, acquisition fee, disposition fee, construction management fee. Are the property returns being projected calculated before fees or after fees? Make sure you understand how the cash waterfall flows and when it fills your buckets.

What are the assumptions used to arrive at the projected returns?

Every multifamily investment will have two key components of the return: 1) the cash on cash return which gets paid out annually, and 2) the split of profits when the property is refinanced or sold. It is important to understand the assumptions associated with each of these components. Where the majority of the return comes from is a range that defines the personality of the deal.

Kamara emphasizes, “Any model can be manipulated with lofty assumptions. Ask for justification of the following key assumptions: cap rate at exit vs current, each year’s rent growth projections, capital expense projects during the hold period and vacancy projections. These are some of the most important metrics to pay attention to.”

Why is this deal unique and why does it make money?

Each investment opportunity has a story. Try to understand why the operator is particularly thrilled about this opportunity. What is the deal thesis and business plan? What needs to be true for the operator to be able to execute the plan? Think through the possible range of outcomes if things do not go exactly according to plan.

What is the market doing and does it support your potential investment?

In real estate, the market is very local. As a result, there are many real estate markets. It is often a mistake to equate national headlines to what is going on in the town where your operator is about to tie up millions of dollars.

“The key is to investigate further, examine the facts carefully about the big picture and your specific location, and then make your own conclusions,” Kamara says. “Also understand that markets are cyclical. They do not always go up. They do not go down forever either. The difficulty is understanding where in the market cycle you are. Nobody can predict the top or the bottom. Good operators plan for numerous market outcomes.”

Source: Cape Sierra Capital

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