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Mortgage Rates Keep Hovering but Down Slightly This Week

The 30-year, fixed-rate mortgage averaged 2.96% this week, down marginally from last week’s 2.99% as it remains in under-3% territory.

MCLEAN, Va. – The 30-year fixed-rate mortgage (FRM) averaged 2.96% this week, according to Freddie Mac’s weekly survey. It’s a slight drop from last week when the FRM came close to the 3% mark, averaging 2.99%.

“The economy is recovering remarkably fast, and as pandemic restrictions continue to lift, economic growth will remain strong over the coming months,” says Sam Khater, Freddie Mac’s chief economist.

“Despite the stronger economy, the housing market is experiencing a slowdown in purchase application activity due to modestly higher mortgage rates,” Khater adds. “However, it has yet to translate into a weaker home price trajectory because the shortage of inventory continues to cause pricing to remain elevated.”

For the week of June 10, 2021:

  • The 30-year fixed-rate mortgage averaged 2.96% with an average 0.7 point, down from last week’s average 2.99%. A year ago, it averaged 3.21%.
  • The 15-year fixed-rate mortgage averaged 2.23% with an average 0.6 point, down from last week’s 2.27%. A year ago, it averaged 2.62%.
  • A 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.55% with an average 0.2 point, down from last week’s 2.64%. A year ago, it averaged 3.10%.

© 2021 Florida Realtors®

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Habitat for Humanity Builds Its First U.S. 3D-Printed Home

Some experts say affordable housing’s future will come from gigantic 3-D printers, and the nation’s best-known house-building charity just built its first one in Arizona.

TEMPE, Ariz. – Habitat for Humanity Central Arizona is building the global housing nonprofit’s first 3D-printed home in the United States. Construction of the home, which began in May, combines 3D printing using a Build on Demand Printer (BOD 2) shipped from Germany-based PERI Group.

“While we have found success in building small 3D-printed homes abroad, at 1,700 square feet, this home represents Habitat’s entry into new, innovative space,” says Adrienne Goolsby, senior vice president of U.S. and Canada at Habitat for Humanity International. “It is the first of its kind in the U.S. and sets the stage for increased capacity through a solution that could be both sustainable and cost-effective.”

Goolsby says Habitat will continue to study the process and its “potential to be scaled and more widely adopted, so that we can further address the critical issue of home affordability in the U.S.”

At 1,738 square feet of livable space, the custom, single-family home will feature three bedrooms, two full bathrooms and overlook a community park. Approximately 70%-80% of the home will be 3D printed, including all the internal and external walls. The rest will be done using traditional construction methods. The home will be solar ready once construction is completed, and Habitat Central Arizona is also pursuing a LEED Platinum certification and IBHS FORTIFIED Home designation.

Long term, a 3D-printed home could help address current challenges in the housing market, such as the rising cost of labor, lumber and other construction materials. It also helps in hotter climates, such as Arizona and Florida, where summer temperatures can put Habitat’s staff and volunteers at risk.

“If we can deliver decent, affordable, more energy-efficient homes at less cost, in less time and with less waste, we think this can be a real game-changer,” says Jason Barlow, president and CEO of Habitat Central Arizona.

The home is expected to be completed in the early fall and could be occupied as soon as October 2021.

About Habitat for Humanity

Habitat for Humanity started as a grassroots movement on an interracial community farm in south Georgia. Since its founding in 1976, the Christian housing organization has grown to become a leading global nonprofit working in local communities across all 50 states in the U.S. and in more than 70 countries. Habitat homeowners help build their own homes alongside volunteers and pay an affordable mortgage.

© 2021 Florida Realtors®

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Study: High Flood-Risk Homes Sell for $50K More than Low-Risk Ones

Buyers care about a home’s flood risk more than they once did, but it doesn’t override the appeal of a beachfront or lakefront view. According to a study, high flood-risk homes sold for a record 13.6% premium in 2021’s first quarter, up from 1Q 2020’s 10.1% and 1Q 2019’s 7.2%.

SEATTLE – A study of flood-risk and home values suggests that concerns over climate change haven’t affected the value of property that’s located in a high-risk flood zone. It appears to be true even though consumers have greater access to flooding information via online listing advertising websites.

In the first quarter of 2021, the median sale price of homes with high flood risk was $402,010, compared with $353,783 for homes with low flood risk, according to a new report from Redfin. That means high-risk homes sold for a record 13.6% premium – up from a premium of 10.1% in the first quarter of 2020 and up from a premium of 7.2% in the first quarter of 2019.

Since 2013, homes with a high flood risk have sold, on average, for about 7% more than homes with low flood risk, likely because many of them are luxury waterfront properties. That premium surged during the coronavirus pandemic when many wealthy homebuyers started eyeing oceanfront or lakefront houses outside of major cities.

“Americans are buying the beach houses they always dreamed of because they have the flexibility to work from wherever they want,” says Redfin Senior Economist Sheharyar Bokhari. “While flood risk is intensifying in many parts of the country, it doesn’t seem to be a deal breaker for a lot of homebuyers. This may be because buyers aren’t aware they’re purchasing a home in a flood plain or just don’t view it as an immediate danger. Places with high flood risk are also often home to large concentrations of retirees, many of whom don’t see climate change as a threat they need to worry about in their lifetime. Florida is one example.”

Redfin and other real estate websites have started sharing property-level flood risk data online to help house hunters determine if the homes they’re interested in are located in flood plains and whether they should purchase flood insurance.

Places prone to flooding are also seeing stronger growth in home sales. Sales of high-flood-risk homes rose 18.6% year over year in the first quarter – about double the 9.6% gain in sales of low-flood-risk homes.

In Jacksonville, homebuyers often inquire about flood risk, but it virtually never causes them to back out, says local Redfin real estate agent Heather Kruayai. Jacksonville has two waterways running through it, and about 43,000 properties have a high flood risk, according to First Street Foundation’s Flood Factor.

“If you buy a home on the water in Florida, flooding is just something that comes with the territory. Most buyers understand that,” Kruayai says. “A lot of out-of-state buyers have been moving here during the pandemic and purchasing waterfront properties, but there are also locals looking for space to spread out because the city has become so congested.”

Kruayai says that flood risk isn’t even a strong negotiating factor if buyers hope to snag a lower price. “Even if you wanted to … you’d have a tough time because we’re in such a hot seller’s market.”

Low-risk flood-zone homes do have one price advantage, however. Prices have gone up for all homes regardless of flood risk, but homes in low-risk zones are more likely to finalize a price higher than the owner’s asking price.

In the first quarter of 2021, 47.2% of low-flood-risk homes sold for more than their list price, compared with 37.4% of high-flood-risk homes. That 9.8-percentage-point gap is the largest on records dating back to 2013.

Overall, properties with low flood risk typically cost less than properties with high risk because they’re less likely to be on the beach or have any kind of waterfront view, Bokhari explained. Because low-risk properties are more affordable, they also face more competition, which means buyers are more likely to bid up the prices.

© 2021 Florida Realtors®

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DeSantis Says He’ll Sign Bill Changing Property Insurance

A bill that may increase rates for some owners with state-owned Citizens Property Ins. will likely be signed into law. DeSantis says it will “stem some of the problems.”

TALLAHASSEE, Fla. – Gov. Ron DeSantis said Wednesday he will sign a property-insurance package that could lead to larger rate increases for some customers of the state-backed Citizens Property Insurance Corp. and curb some roof-damage claims and lawsuits.

But DeSantis also said more needs done to make the private insurance industry “stronger.”

“I think we got a lot of good stuff done in the legislative session, one of the things we’ll be, I know we worked on, was some property insurance reform, to try to stem some of the problems we see in that market,” DeSantis said, while appearing by video during a meeting of the Enterprise Florida Board of Directors. “We want this to be affordable for homeowners. We don’t want it to be something that is just kind of a pot for litigation. And that really (is) what was happening in Florida. I mean a huge, huge proportion of the money was going to litigation expenses.”

The heavily negotiated bill (SB 76), which passed the Legislature in April, drew criticism from some lawmakers for going too far, while others argued it didn’t go far enough.

The bill was one of five sent to DeSantis’ desk on Wednesday. He has 15 days to act on the bills.

Senate Banking and Insurance Chairman Jim Boyd, R-Bradenton, said everybody “had to give a little bit” in negotiations on the bill, which is intended to bolster an insurance market that has seen wide-ranging rate increases and policies pouring into Citizens Property Insurance, the state-run “insurer of last resort.”

“I do believe it will help the market kind of rebuild itself,” Boyd, the bill sponsor, said when the measure was approved by the Senate on April 30, the last day of the 60-day session.

The bill came against the backdrop of regulators last year signing off on dozens of rate increases topping 10%. Also, private companies have dropped tens of thousands of policies because of financial issues. Citizens saw its policy count grow to 589,041 as of April 30, up from 453,911 a year earlier.

DeSantis told Enterprise Florida board members, who met at Embry-Riddle Aeronautical University in Daytona Beach, that the goal is “manageable premiums” and a “stronger private insurance market,” where payments go “to the actual claimants rather than to the attorneys.”

He added that changes will continue to be an issue in future legislative sessions.

“It’s something that we’re working on, and we’re watching very closely,” DeSantis added. “But I think the Legislature did, by and large, a pretty good job on addressing it. But we’re probably going to have to do more going forward.”

In arguing against the bill on the Senate floor, Sen. Annette Taddeo, D-Miami, complained the measure “literally is going to raise the rates” for Citizens customers.

However, Citizens President and CEO Barry Gilway issued a statement when the bill was approved that said the measure offers “meaningful steps to address rising insurance rates caused in large part by unnecessary litigation. … Citizens is growing at an unsustainable rate, putting our customers and Floridians on the financial hook when a big storm hits the state.”

Sen. Gary Farmer, a Lighthouse Point Democrat who was one of five senators who opposed the changes, likened the insurance industry to “Chicken Little” and disputed arguments about major financial problems among insurers.

“It’s a manufactured crisis – a completely manufactured crisis,” Farmer said.

Among the changes in the bill, which will take effect July 1:

  • Allowing larger annual rate increases for customers of Citizens. Such increases currently are capped at 10%, but that limit would be gradually raised to 15%.
  • Preventing contractors from soliciting homeowners to file insurance claims, including offering incentives to homeowners. That part of the bill is intended to curb roof-damage claims. It also seeks to prevent public insurance adjusters from offering incentives to inspect for roof damage.
  • Taking steps to try to limit fees of attorneys who represent homeowners in lawsuits against insurers. That involves using a formula that would look at how much money is awarded in court judgments and how much money was offered by insurers to settle claims before the lawsuits.
  • Reducing from three years to two years the time to file claims, with an additional year for supplemental claims.

The Senate initially sought more far-reaching changes to attorney fees and roof-damage claims. In part, it proposed creating a “reimbursement schedule” that would have allowed insurers to sell policies that provide reduced payments for repairing or replacing roofs over 10 years old. For example, insurers could have reimbursed 70% of the costs for metal roofs over 10 years old and 40% of the costs for concrete-tile and clay-tile roofs.

The change would have led to shifting more costs to many homeowners when they have roof damage. However, the House balked at the idea, which was not included in the final bill.

Source: News Service of Florida

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Don’t Overestimate Buyers’ Real Estate Knowledge

A survey of young adults found misconceptions: 2 out of 3, for example, are waiting for interest rates to go down – and 90% aren’t sure what a fixed-rate mortgage is.

NEW YORK – Many young adults may be missing key information they need to move forward in the housing market. For example, two out of three young adults recently surveyed say they’re waiting for lower mortgage rates to start the homebuying process, according to a survey of 1,000 non-owner millennials (between the ages of 25 to 40) conducted by Lombardo Homes. However, economists largely predict that mortgage rates will soon start to edge upwards, moving higher than their current lows that are hovering around 3%.

With mortgage rates already near historic lows, this “may speak to a lack of education and awareness among this cohort of homebuyers,” the survey notes.

Also, many young adults are underestimate how much money they need for homeownership. Millennials underestimated how much home they can afford right now, how much interest they would pay over a 30-year mortgage, and how much home values appreciate, on average, over 10 years:

  • 1 in 4 underestimated their buying potential by $150,000 or more
  • 1 in 3 underestimated – by 93% to 100% – the amount of interest they’d pay over 30 years on a $300,000 loan
  • 1 in 4 underestimated how much a home historically increases in value over 10 years by $100,000 or more

Consumers in the survey also lacked knowledge about average home prices and property taxes in their local area, 59% did not know that the seller tends to pay all the real estate agent fees, and most did not understand many real estate terms that industry insiders take for granted. When asked if they could “confidently define this term,” the number who said “no” was:

  • Appraisal – 48%
  • Deed – 58%
  • Assessment – 62%
  • Principal – 64%
  • Escrow – 68%
  • HOA – 68%
  • Earnest money – 72%
  • Amortization – 74%
  • ARM – 77%
  • PMI – 86%
  • FRM – 90%
  • PITI – 94%

Regardless of the confusion, though, 83% of respondents are actively saving for a home right now, though rising rents may stand in their way: 71% said rent is so high it’s hard to accumulate savings for buying a home.

Other top reasons millennials say they haven’t bought a home yet are:

  • “Can’t afford a down payment” – 85%
  • “Can’t afford something nice enough to compel me to buy” – 67%
  • “Want to be flexible, not tied to one area” – 63%
  • “Not ready for the commitment” – 62%

Source: “Renting vs. Buying 101,” Lombardo Homes (May 13, 2021)

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

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Study: Emotional Support Animals Help Those Who Need Them

While renters may falsely claim a pet is an emotional support animal, evidence has emerged showing a big benefit for people actually struggling with chronic mental illness.

TOLEDO, Ohio – A team led by a social work researcher at The University of Toledo has published the first empirical evidence that emotional support animals can provide quantifiable benefits to individuals with serious mental illness who are experiencing depression, anxiety and loneliness.

The research brings credence to the many anecdotal reports of emotional support animals having positive impacts on chronic mental health issues.

“This is the first peer-reviewed, published scientific evidence that emotional support animals may benefit people’s mental health,” said Dr. Janet Hoy-Gerlach, a professor of social work and the lead investigator on the project. “My hope is that our pilot study catalyzes additional research in this area with more rigorous methodology.”

Frequently misunderstood and often maligned, emotional support animals are neither household pets nor highly trained service animals.

Emotional support animals need no formal training or certification but are recognized in writing by a health or mental healthcare professional as therapeutically needed for a person with a health or mental health condition. The person’s condition must meet the definition of a disability under the Fair Housing Act, a federal housing policy that protects against disability-related housing discrimination.

While there is a sizeable body of research on the benefits of pets that helps to inform the recommendation of emotional support animals in healthcare, there has been no previously published scientific research focusing specifically on the benefits of emotional support animals.

In the UToledo pilot study, researchers from the College of Health and Human Services followed a small group of study participants who were paired with a shelter dog or cat through the Hope and Recovery Pet Program, a community partnership of UToledo, the Toledo Humane Society and ProMedica.

Participants in the study, all of whom met low-income criteria and were identified as at risk of social isolation, were referred by their mental health providers.

Hoy-Gerlach and her collaborators regularly tested participants for changes in a trio of biomarkers related to stress and bonding, and administered surveys about participants’ depression, anxiety and loneliness prior to adoption and at the end of the 12-month study period.

At the conclusion of the study, they found a statistically significant decrease in participants’ depression, anxiety and loneliness as measured by standardized scales.

The researchers also observed a consistent pattern of higher amounts of the bonding hormone oxytocin and lower amounts of the stress hormone cortisol after participants engaged in focused interactions with their emotional support animal for 10-minute periods.

While not a statistically significant finding, the analysis hinted that participants may have benefited from their animals at a biological level.

“The biomarker findings, along with the standardized stress, anxiety and loneliness surveys and qualitative interviews together suggest insights into how emotional support animals may help reduce symptoms and loneliness associated with chronic mental illness,” Hoy-Gerlach said. “We can’t make any generalizations or big sweeping claims, but the findings are pretty straightforward for this particular group of people.”

Researchers observed the highest oxytocin increase at the 12-month mark, which could indicate participants’ bond with their dog or cat had strengthened over time.

Qualitative research corroborated this idea: In open-ended interviews, study participants talked about feeling much more emotionally attached to their respective animals at the end of the study.

The research, published in the Human-Animal Interaction Bulletin, builds on Hoy-Gerlach’s previous research into the human-animal bond and could lead the way toward new thinking about how emotional support animals can be implemented as a strategy in managing chronic mental health issues.

A trained clinical social worker who has extensive experience in counseling, crisis work and public mental health, Hoy-Gerlach’s interest in studying how animals affect mental health began after working on assessments for suicide and finding people’s pets were frequently a protective factor. She has since devoted much of her academic research to the topic. In 2017, she published the book “Human-Animal Interactions: A Social Work Guide.”

While the recently published study was small in nature, Hoy-Gerlach said it could serve as a major step toward demonstrating the value of emotional support animals for human health.

“We have seen a significant increase in social isolation because of COVID-19, particularly among those most vulnerable to its effects. While our research was initiated before the pandemic, the findings couldn’t be more applicable,” she said. “Now more than ever, we need to be thinking about leveraging every resource at our disposal.”

Such efforts can benefit both people and animals in need. The Hope and Recovery Pet Program exemplifies this, Hoy-Gerlach said, providing emotional support animals for people with mental illness while placing homeless animals into permanent, loving homes.

“The human-animal bond is an underutilized resource for both human and animal well-being,” Hoy-Gerlach said.

Hoy-Gerlach’s findings also serve to push back against the idea that emotional support animals are little more than a scheme aimed at exploiting the system to give household pets special status.

“The narrative of emotional support animal fraud has unfortunately gained traction in the media and public eye, and that obscures the very real ways in which emotional support animals can benefit people,” Hoy-Gerlach said. “For the individuals in our study who are living with chronic mental illness, being paired with an appropriate animal appears to have demonstrable positive effects on their well-being.”

Copyright © 2021 NewsRx LLC, Health Policy and Law Daily

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2 of 3 City-to-Town Movers Got a Bigger House and Lower Costs

Study: Home prices are rising rapidly, but two-thirds of city sellers who moved to a smaller metro traded up without spending more money.

SEATTLE – About two-thirds of city dwellers who bought a larger home in a different metro over the last year have the same or lower housing costs than they did before their move, according to a new Redfin survey: 78% said they have the same amount of disposable income or more than they did before, and 64% said they moved into a home that is the same size or larger than their previous property.

Perhaps more importantly, 80% said they’re happier since they moved.

Due in part to the pandemic and local lock-downs, many buyers moved to smaller metro areas that offer more affordable housing. When asked why they decided to make their specific move, more than a quarter said affordability motivated it; 22% said lower taxes also was a factor.

“For most people, relocating to a different metro area probably wasn’t a knee-jerk reaction to the pandemic,” says Taylor Marr, Redfin’s lead economist. “A lot of Americans had already been considering relocating, but they were blocked from actually making the move because they had to stay close to their office or wanted to live near friends or their child’s school.

“The pandemic and resulting work-from-home culture has removed some of those barriers, allowing many people to choose where they live based on factors like affordability, proximity to family and weather. And the loosening of social ties that come with remote work, remote schooling and a lack of in-person events made it somewhat easier for families to leave their comfort zone and try somewhere new. Those people are likely to be satisfied with their moves because the circumstances of the pandemic have allowed them to chase their dreams.”

Source: “Eight Out of 10 People Who Relocated During the Pandemic Are in a Similar or Better Financial Position Post-Move,” Redfin (May 28, 2021)

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Rising Prices Change Answer to “Should I Buy or Rent?”

Renters are traditionally told that it makes sense to buy if they’ll live in a home at least three years. But people who bought in 2017 are now sitting on a nest egg.

NEW YORK – If you own a home in the top 10 metropolitan U.S. housing markets, it may be worth a lot more than what you paid for it, even if you bought it just a few years ago. The median sales price of a home in these areas has jumped an average of 57% in the past four years, according to new data from Realtor.com.

That’s a feat that normally would have taken 10 years to achieve, Danielle Hale, chief economist for Realtor.com, tells USA TODAY. “If you are a somewhat recent owner, it might surprise you to learn that you could actually sell your home and make some money much sooner than you might have expected to,” Hale says.

Realtor.com looked at the 300 largest metropolitan areas and ranked them by how much their sale prices have climbed since 2017. The median time these listings stay on the market has dropped by 30 days, and these houses are now selling in 25 days.

Leading the pack is Boise, Idaho, where the median price surged by 72% to $385,000 from $224,000. The market with the highest median price was the Stockton-Lodi, California, area at $460,000, a 51% increase from January-February 2017 to the same period in 2021.

Affordability was a key factor in the markets that experienced price increases. The largest price increases occurred near major Western cities that are tech hubs. Besides Boise, other hot metro areas with those characteristics include Spokane, Washington, and Ogden, Utah.

“Boise is attracting a lot of people from major California markets like San Francisco and San Jose,” Hale says. “The climate is similar, the prices are much more affordable, and it has lots of outdoor activities.”

The list includes cites in Western, Midwestern and Southern states, including Arizona, California, Colorado, Florida, Indiana, North Carolina, Utah and Wisconsin.

A recent survey by Realtor.com found that 10% of homeowners plan to list their homes this year, and more than a quarter (26%) plan to do so within the next three years. One of the biggest drivers was turning a profit. In the current seller’s market, where multiple bids on houses are now the norm, 29% of would-be home sellers expect to set the list price above what they think the house is worth, the survey found.

Hale says it typically takes three to five years for a homeowner to get to a break-even point when the costs of buying make sense over renting.

The median sales price for an existing single-family home soared 18.4%, to $334,500, in March, marking a historic high, according to the National Association of Realtors. Housing inventory stood at 1.07 million units at the end of that month, down 28% from a year earlier.

Copyright 2021, USATODAY.com, USA TODAY

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When Will Buyers Again See Foreclosures Listed for Sale?

WASHINGTON – As COVID-19 infections continue to decline in the United States, Americans are slowly coming out of isolation and returning to a sense of normalcy – a return to on-site work and school, a return to indoor dining, a return to travel, a return to in-person visits with friends and loved ones, and a return to sports arenas, ballparks, and arts venues, among other types of returns.

But a return to normalcy is not a positive for all. A case in point: There are many home loan mortgagors for whom forbearance from their regularly scheduled monthly mortgage payments will soon come to end, along with an end to the moratorium on initiations and continuations of foreclosure.

Will a return to normalcy for delinquent mortgagors necessarily mean a rapid return to home foreclosures? That is the question that the Consumer Financial Protection Bureau (CFPB) is trying to answer in the negative in its proposed amendments to the default servicing regulations that are part of Regulation X under the Real Estate Settlement Procedures Act (RESPA). The comment period on the proposed amendments (the Proposal) closed on May 10, 2021, with a proposed effective date of August 31, 2021.

This laudable public policy goal, however, raises interesting questions about the CFPB’s legal authority to impose additional temporary limitations on a loan holder’s right to pursue foreclosure against delinquent mortgagors. This Legal Update synthesizes certain of the comments to the Proposal regarding an attempt to increase the time before a loan holder or servicer may initiate a foreclosure.

Background

The context is well known to those in the residential mortgage industry and related stakeholders. It has been over a year since Congress enacted the CARES Act, which, among lots of other provisions, gave mortgagors during the “covered period” the right to receive forbearance for up to a year on their regularly scheduled home mortgage payments if they attested to a financial hardship directly or indirectly caused by COVID-19.

The law also imposed a moratorium on home foreclosures and evictions during the “covered period.”

The CARES Act only applied to loans that were sold to Fannie Mae or Freddie Mac, insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs or the Department of Agriculture – labeled “federally backed mortgage loans” – but various states enacted somewhat similar provisions.

While the CARES Act failed to define the term “covered period,” the relevant federal entities, either at their own initiative or as a result of a subsequent executive order by President Biden, extended the time limits on forbearance and the foreclosure/eviction moratoria. But the time limits are rapidly approaching.

As the CFPB noted in its Proposal, “… the foreclosure moratoria that apply to most mortgages are scheduled to end in late June 2021. In addition, most borrowers with loans in forbearance programs as of the publication of this proposed rule are expected to reach the maximum term of 18 months in forbearance available for federally backed mortgage loans between September and November of this year and will likely be required to exit their forbearance program at that time.”

And that is just for federally backed mortgage loans, although the extension of forbearance from 12 months to 18 months is limited to certain borrowers. Forbearance and foreclosure relief voluntarily provided by private investors or required under applicable state law also will soon sunset or may already have ended.

Unless they have been making regularly scheduled monthly mortgage payments notwithstanding their award of forbearance, mortgagors generally are delinquent for the number of months they were in forbearance, and even more if they were delinquent before the commencement of forbearance because they had not paid the amounts due under the terms of their loan documents.

This means that a graduation from forbearance likely results in a seriously delinquent borrower who may not be eligible for home retention loss mitigation options and, as a result, risks the loss of the borrower’s home.

Existing Regulation X

The existing Regulation X prohibits a precipitous push to foreclosure. Unlike the CARES Act, the applicability of Regulation X is not limited to “federally backed mortgage loans.” It does not require a residential mortgage loan holder or servicer to offer a borrower any loss mitigation at all or any particular types or forms of loss mitigation. But it requires servicers of residential mortgage loans to follow detailed procedures to ensure that the borrower is informed by the servicer of available loss mitigation options, given the opportunity to apply and be timely considered for such options, appeal the denial of any loan modification option, and not be subject to a dual track of foreclosure while the borrower’s application for loss mitigation is being evaluated.

To afford sufficient time for a borrower to be evaluated for available alternatives to foreclosure, Regulation X presently prohibits a servicer, including a small servicer, from making the first notice or filing required under applicable law for any judicial or non-judicial foreclosure process unless:

  1. the mortgage loan is more than 120 days delinquent or
  2. the foreclosure is based on a borrower’s violation of a due-on-sale clause or
  3. the servicer is joining the foreclosure of a superior or subordinate lienholder

This is referred to as the required “pre-foreclosure review.” Of course, borrowers exiting a COVID-19 forbearance may be well over 120-days delinquent. In other words, the pre-foreclosure review period under existing regulations already would have expired.

Proposed amendment to Regulation X relating to special pre-foreclosure review

As an overlay or supplement to the existing requirement for a 120-day pre-foreclosure review, the Proposal calls for a temporary COVID-19 emergency special pre-foreclosure review period that would generally prohibit servicers from making the first notice or filing required by applicable law for any judicial or non-judicial foreclosure process until after Dec. 31, 2021.

The CFPB asked commentators to consider two potential exceptions. The first exception would permit a servicer to make the first notice or filing before Dec. 31, 2021, if the servicer has completed a loss mitigation review of the borrower and the borrower is not eligible for any non-foreclosure option. The second exception would permit a servicer to make the first notice or filing before Dec. 31, 2021, if the servicer has made certain efforts to contact the borrower and the borrower has not responded to the servicer’s outreach.

In addition, while not an explicit exemption, because the Proposal only applies to loans secured by the borrower’s principal residence, loans secured by abandoned properties may not be subject to this extension of the pre-foreclosure review period, depending on the facts and applicable state law.

Moreover, unlike the existing pre-foreclosure review period under Regulation X, “small servicers” would be exempt from the proposed special pre-foreclosure review period.

Public comments relating to the special pre-foreclosure review proposal

The relatively short duration of the extension of the pre-foreclosure review, coupled with the potential exceptions render the Proposal, are a relatively modest step to forestall foreclosures, and the public comments the CFPB received in response to the Proposal reflect that conclusion.

The comments generally break down into four categories:

  1. Is the special pre-foreclosure review period practically necessary or counterproductive?
  2. If adopted, should the special pre-foreclosure review period be based on a specific calendar date, Dec. 31, 2021, for all borrowers or instead on a specific number of days following the end of forbearance for any particular borrower?
  3. Should the exceptions be expanded and clarified?
  4. Does the CFPB have the legal authority to impose the special pre-foreclosure review period?

Is the special pre-foreclosure review period necessary or counterproductive?

Perhaps because of the potential availability of broad exceptions to the special pre-foreclosure review period, public comments focused less on the imposition of such an extended review period and more on what it should look like.

The Housing Policy Council (HPC) and the Bank Policy Institute (BPI), however, together expressed concern in their comment letter “… that the brief time when the review period will be effective suggests that the need for this regulatory change is limited and the proposal is unnecessarily complicated.” They expressed their belief that the existing protections afforded borrowers under the loss mitigation provisions of Regulation X, along with standard state foreclosure proceedings, are sufficient to achieve the CFPB’s general objective to provide every borrower with ample opportunity to avoid foreclosure when a borrower’s circumstances would permit such avoidance.

The Urban Institute (UI) in its comment letter makes a more practical point – namely, that the existing procedures for evaluating mortgagors for alternatives to foreclosure, whether by regulation or investor policies, “… require multiple rounds of communication and borrower notice and take several weeks or months.” This could take the foreclosure decision beyond Dec. 31, 2021. And for those borrowers who were delinquent pre-pandemic and already found to be ineligible for loss mitigation alternatives to foreclosure, additional time is unlikely to change the result and “[d]elaying the inevitable would serve neither the borrower nor the neighborhood in which the home is located.”

Moreover, UI highlights the fact that the current economic environment is different than the economic environment during the last housing crisis that featured a crashing real estate market with a substantial number of underwater loans. In light of the substantial home equity experienced by most borrowers resulting from strong home appreciation, “[m]ost uncurable loans, whether agency or non-agency, will be resolved via a market sale.”

The foreclosure route, as a result, will be much more limited. According to UI, “[T]his would render the proposed prohibition largely redundant-and counterproductive-as properties would be held back from the market at a time when supply is tight.”

The HPC/BPI comment letter identifies another counterproductive result of the proposed special pre-foreclosure review period. As the CFPB acknowledged in the preamble to its Proposal, the letter notes the notification of the foreclosure process “is the impetus to engage with the servicer” for some borrowers and “[d]elaying that notice may exacerbate this problem.”

If adopted, should the special pre-foreclosure review period be based on a specific calendar date or a specific number of days following the end of forbearance?

While the UI comment letter asserts that a special pre-foreclosure review period ending at the end of this calendar year does not offer protection for those whose forbearance ends after that date, it did not suggest either an extension of that deadline or the replacement with a fixed number of days.

Consumer advocates see the same problem and, not surprisingly, propose a different solution. The Center for Responsible Lending (CRL) and National Community Stabilization Trust (NCST) in their joint comment letter opine that “… a rule that pauses foreclosures until Dec. 31 would do nothing for those whose forbearance runs through or beyond that cutoff and who also face a risk of an avoidable home loss.”

They prefer a 120-day grace period at the end of a borrower’s forbearance period to a “one-size-fits-all pre-foreclosure review period.” Aside from wanting to protect borrowers who do not come out of forbearance until next year, the CRL/NCST letter expresses concern that “… servicer capacity to engage in effective loss mitigation will be strained with a large number of foreclosures filed at the beginning of 2022.”

The National Consumer Law Center (NCLC) articulates the same position as the CRL and NCST in even in more detail. It supports a 120-day grace period at the end of a borrower’s forbearance period instead of a Dec. 31, 2021, deadline. Its long list of objections to the December 31 proposal includes the “immense pressures on the entire foreclosure system if hundreds of thousands of foreclosures begin in January 2022,” the lack of protection for those whose forbearance ends after Dec. 31, 2021, and the arguable incentives to servicers to begin foreclosures before the new rule takes effect, given that the effective date will not occur for several more months.

The HPC/BPI letter takes a different tack. While it does not support a special pre-foreclosure review period in the first place, it recommends a shorter 60-day period if the CFPB elects to establish such a period.

Should the exceptions to the special pre-foreclosure period be expanded and clarified?

As noted above, the Proposal asks commenters to consider two possible exemptions to the special pre-foreclosure review period, although the Proposal does not include explicit language for the potential exceptions.

The first exception would permit a servicer to make the first foreclosure notice or filing before Dec. 31, 2021, if the servicer has completed a loss mitigation review of the borrower and the borrower is not eligible for any non-foreclosure option. The second exception would permit a servicer to make the first foreclosure notice or filing before Dec. 31, 2021, if the servicer has made certain efforts to contact the borrower and the borrower has not responded to the servicer’s outreach.

Not surprisingly, the major lender trade associations support both exceptions, albeit with clarification.

The possible exemption for completed loss mitigation reviews raises the question of when the review must have been completed. For example, the CFPB questioned whether the exemption only should be available for reviews after the effective date of the final rule. Both the Mortgage Bankers Association (MBA) and the American Bankers Association (ABA) in their respective comment letters advocate that the exemption should apply to loss mitigation evaluations completed prior to the effective date of the final rule, while the HPC comment letter provides that the exemption should include evaluations made within the six months prior to the effective date to account for the time frame (after March 1, 2021) when the various COVID-19 loss mitigation government programs currently available were put into effect.

The MBA and ABA letters also recommend that this exemption be expanded to include borrowers who have declined the proposed loss mitigation options or have failed to perform on the selected loss mitigation option.

The NCLC rejects the exemption for previously completed loss mitigation reviews, arguing that “… evidence from the Great Recession and from government note sales, as well as from current borrower experiences, demonstrates that loss mitigation reviews are often incomplete or inaccurate.” It believes that borrowers may not realize that they previously have been denied a loss mitigation option and mistakenly believe that they are safe until the end of the calendar year.

Perhaps more importantly, the NCLC comment letter agrees with the concern expressed by the CFPB in the Proposal that prior evaluations may have been completed prior to the borrower’s recovery from financial hardship and thus do not account for the borrower’s present financial circumstances.

The possible exemption based on unresponsive borrowers generated many requests for specificity regarding the scope of the “reasonable diligence” that the servicer must take before concluding a borrower is unresponsive. The HPC supports the CFPB’s recommendation to use the definition of “reasonable diligence” in the Home Affordable Modification Program (HAMP) and further recommends that the written notice requirements may be satisfied by using notices already required under Regulation X.

The CRL/NCST also support the incorporation of HAMP’s definition of “reasonable diligence,” but they proposed to condition the availability of this exemption on the adoption of another component of the CFPB’s proposal – namely, that the servicer, after exercising reasonable diligence in trying to reach the borrower, sends a “streamline payment modification offer or solicitation” to the borrower with a deadline for a response.

But the CFPB’s Proposal simply would permit a servicer to offer a “streamline payment modification” without a complete loss mitigation application. The CRL/NCST approach would convert a voluntary process available to servicers into a condition precedent to the availability of the exemption from the special pre-foreclosure review based on an unresponsive borrower. The CRL takes the same approach, claiming that an exemption based solely on the inability of the servicer to establish contact with the borrower “… would incentivize less rigorous, ineffective contact attempts.”

Two additional exemptions from the special pre-foreclosure review should be added according to some of the comment letters. First, some of the trade associations representing servicers want to exclude borrowers whose loans were delinquent prior to the onset of COVID-19. For example, the HPC/BPI letter requests that the CFPB clarify that the foreclosure review period does not apply to foreclosures that were initiated prior to the final rule’s effective date, regardless of whether state law requires refilling or restarting the foreclosure.

This is not really a new exemption, given that the requirement for a special pre-foreclosure review applies to the first notice or filing required by applicable law; by its terms, this requirement would not apply to loans where the servicer made this filing prior to the commencement of the foreclosure moratorium, but the trades want to be sure that a required refiling would not trigger the special pre-foreclosure review.

Interestingly, neither the CRL/NCST nor the NCLC letters comment on this issue. The ABA calls for an explicit exemption for borrowers who were 120-days delinquent on March 1, 2020, and, as of September 1, 2021, remain more than 120-days delinquent. Rather than seeking a new exemption or clarification of the Proposal, the MBA would include within the “unresponsive borrower” exemption borrowers who were seriously delinquent (over 120 days) prior to March 1, 2020, and who have not requested assistance or responded to servicer contact attempts made in accordance with Regulation X.

An explicit exemption for abandoned properties also is a request under some of the comment letters.

As noted above, the Proposal only applies to loans secured by the borrower’s principal residence, which based on the facts and circumstances may result in the exclusion of abandoned properties. For example, the HPC/BPI letter asks the CFPB to “explicitly and clearly exempt abandoned properties from the special pre-foreclosure review period”; the ABA and MBA letters make similar requests.

This is an issue on which consumer advocates and servicers seem to be aligned. The CRL/NCST letter highlights the concern that “[V]acant or abandoned homes that do not go through foreclosure risk blighting the community.” It wants a clear definition for abandoned properties to “… encourage servicers to foreclose on them and help avoid blight.”

Both the HPC/BPI and CRL/NCST letters ask the CFPB to consider adopting the definition of “abandonment” contained in the Uniform Home Foreclosure Procedures Act drafted by the National Conference of Commissions on Uniform State Law, unless state law otherwise defines the term.

Does the CFPB have the legal authority to impose a special pre-foreclosure review period?

When Congress enacted the CARES Act and imposed a home loan foreclosure/eviction moratorium and granted borrowers a statutory right to home loan forbearance, questions abounded whether the actions could be overturned as an unlawful “taking” under the Fifth Amendment of the US Constitution. This Amendment provides: “Nor shall private property be taken for public use, without just compensation.”

But over the years, courts have distinguished between a so called “per se taking” and a “regulatory taking,” accounting for the public interest asserted to justify the taking in the latter case. While some may want to attack the CFPB’s proposed special pre-foreclosure review as an unconstitutional taking, none of the major trades did so. The more likely question is whether the CFPB has sufficient delegation of authority from Congress to require servicers to delay the initial filing of a foreclosure.

A good example of challenging the delegation of congressional authority to undertake regulatory action arose under the nationwide eviction memorandum ordered by The Centers for Disease Control and Prevention (CDC) on Sept. 4, 2020. Concerned that eviction of tenants would exacerbate the spread of COVID-19, the CDC ordered a temporary prohibition on residential evictions. It believed that it had the authority to issue this order based on its statutory delegation of authority to “make and enforce such regulations as in his [the Secretary] judgment are necessary to prevent the introduction, transmission, or spread of communicable diseases …” On May 5, 2021, the United States District Court for the District of Columbia held that the CDC did not have the statutory authority to order the temporary residential eviction, finding that this order was invalid but staying its opinion pending appeal.

What about the CFPB? What is its statutory authority to require a delay in filing foreclosures under RESPA regardless of whether a loan is a “federally-backed mortgage loan” covered by the CARES Act?

Actually, this question about the CFPB’s statutory authority predates the Proposal and harkens back to the original issuance of the CFPB’s default servicing regulations in 2013. The answer requires a review of the provisions of the Dodd-Frank Act (the DFA) enacted by Congress on July 21, 2010.

The provisions in the voluminous DFA pertaining to residential mortgage servicing are limited. The DFA amended RESPA to clarify a servicer’s obligations with respect to “qualified written requests,” escrow accounts and force-placed insurance. It amended the Truth-in-Lending Act to clarify obligations with respect to periodic statements, crediting of payments, and payoff statements.

That’s it! Virtually none of the extensive default servicing regulations contained in Regulation X reflect specific provisions in the DFA.

There is one potentially broad delegation of authority under the DFA. Section 1463 of the DFA provides that “A servicer of a federally related mortgage loan shall not … fail to comply with any other obligation found by the Bureau of Consumer Financial Regulation, by regulation, to be appropriate to carry out the consumer protection purposes of this Act.”

This statutory provision purports to be very broad, but is limited by the consumer protection purposes of RESPA. The comment letter from the Structured Finance Association argues that the CFPB simply does not have the statutory authority to impose the special pre-foreclosure review. It notes, for example, “RESPA’s statement of congressional purpose does not speak to servicing at all. And the subjects to which Congress regulates servicers under Section 6 are limited.” It further notes that “there is nothing from the context of RESPA’s enactment to suggest that Congress delegated authority to the Bureau to prohibit foreclosures.”

Of course, under this argument, one could argue that the CFPB did not have statutory authority to require the pre-foreclosure review period in the original servicing amendments to Regulation X following the enactment of DFA, much less the additional time period occasioned by the proposed special pre-foreclosure review period. Arguably, both or neither should be valid, although perhaps there is a line in the sand that cannot be crossed before the CFPB’s authority to regulate foreclosure is deemed insufficient.

None of the other major trade associations raised this statutory delegation of authority issue in their comment letters to the Proposal. One reason may be the relatively modest scope and duration of the proposed special pre-foreclosure review, as well as their strong desire to work collaboratively with the CFPB to ease delinquent borrowers’ transition from forbearance. But this issue may gain added industry support if the comments of the consumer advocates to expand the special pre-foreclosure review find favor with the CFPB.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the “Mayer Brown Practices”). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. “Mayer Brown” and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

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You Can’t Stop Storms but You Can Minimize Damage

After a hurricane, there’s nothing worse than homeowners’ sentences that start, “I should have …” An hour preparing now can minimize bigger troubles later.

CRYSTAL RIVER, Fla. – The 2021 hurricane season is here. Preparation means more than just creating a disaster kit and reviewing your family’s disaster plan, although these are critical first steps.

There’s much more you can do to protect your home and family before a hurricane hits. You can minimize potential damage from flooding and high winds by being prepared.

Plan ahead

  • Document items and contents in your home in photos.
  • Put together your disaster kit. This includes, but is not limited to: shelf stable foods, water, flashlights, battery-powered radios, batteries, medical, accessibility and pet supplies, cash, and first-aid supplies. If you wait until the last minute, you may encounter diminished or depleted supplies, crowds, and increased traffic on our roads.
  • Buy a National Flood Insurance Policy from your insurance company. Standard homeowner’s insurance policies do not cover flood damage. See msc.fema.gov/portal to know the flood risk in your area and see floodsmart.gov for information about risk and rates.
  • Download the FEMA app at fema.gov/mobile-app. The app provides disaster resources, safety tips, maps of open shelters, and weather alerts from the National Weather Service. Go to Ready.gov for more details.

There are many ways to strengthen your home against wind and wind-driven rain. FEMA’s Wind Retrofit Guide for Residential Buildings is a good resource. Consider elevating appliances, such as water heaters, air-conditioning units and electrical equipment.

Trees with trunks larger than six inches in diameter should be far enough away from your house that they cannot fall on it. Remove branches that hang over utility wires. Professional regular pruning done can create a sturdy, well-spaced framework of tree branches with an open canopy that allows wind to flow freely through.

During a hurricane watch

  • Stay tuned to your phone alerts and TV or radio for weather updates, emergency instructions and evacuation orders. Severe weather information is also available from the National Oceanic and Atmospheric Administration at www.noaa.gov.
  • Activate your disaster plan. Check your disaster kit. Important items include food/water, flashlights, battery-powered radios, batteries, medical, accessibility and pet supplies, cash and first-aid supplies.
  • Place important papers and documents such as driver’s licenses, social security cards, passports, birth certificates, vehicle registration cards and insurance policies in a waterproof, portable container.
  • Know what you and your family will do if there is an evacuation order.

During a hurricane warning

  • Stayed tuned to phone alerts and TV or radio for weather updates.
  • Fill vehicles with gas.
  • Keep mobile devices fully charged.
  • Bring any loose items like trash cans, yard furniture – including items on your dock – barbecue grills and tools inside; store in a garage or sturdy building.
  • Disconnect electrical appliances.
  • If you evacuate, turn off gas and electricity at the main switch or valve.

For additional information on hurricanes, visit ready.gov/hurricanes; for details on floods, visit ready.gov/floods.

For more information on recovery, visit FEMA.gov, or follow @FEMARegion4 on Twitter and FEMA’s Facebook page.

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Homeowners Want to List – but They Fear What Comes Next

Many owners would love to get top dollar for their home, but they weigh that perk against the downside – buying another home – and fears outweigh their desire to list.

NEW YORK – Some homeowners are reluctant to sell amid a hot housing market because the profit they stand to make is less of a concern than the burden of finding a new home.

Selling appears easy right now – list, accept multiple bids, and sell for top dollar. But the prospect of fierce and expensive bidding wars to secure their next home is discouraging.

Thad Wong, co-founder of @properties, says that “even with low rates and the appreciation of their home, they can’t find something better than what they live in right now.”

With so many homeowners unwilling to sell, housing inventory is extremely tight; the number of existing homes on the market at the end of April was down 20.5% year over year, while the number of listed homes plunged to record lows earlier this year. The low stock underpins continuing home price appreciation, making homeownership too costly for many buyers.

The timing of dual transactions – selling one home and buying another at the same time – contributes to the problem since many families can’t afford to buy a new property without selling a current one first. And since sellers often receive multiple bids in the current market, agents say offers with contingency clauses are likely to be rejected.

The supply shortage is particularly pronounced at lower price points. The National Association of Realtors said the supply of existing homes on the market priced between $100,000 and $250,000 fell more than 30% in April from a year earlier, while the stockpile of homes listed for over $500,000 grew.

“I don’t think we can really alleviate the shortage until people feel like they can sell their home and move,” says Meredith Hansen with Keller Williams Greater Seattle.

Source: Wall Street Journal (06/04/21) Friedman, Nicole

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Paint the Town Red. Or Blue. Or Any Color You Can Find

Summer remodelers and builders face another supply-line caused problem this summer: A paint shortage. Paint firms expect a temporary 6%-40% price increase.

ST. PETERSBURG, Fla. – Fewer paint products are hitting store shelves, resulting in shortages that could hamper summer home improvement projects.

“Some of the most commonly used paints are out of stock,” says Mike Marcewicz, founder of Mike’s Painting and Home Improvements in St. Petersburg, Fla.

COVID-19 restrictions and the February winter storm in Texas – where many of the raw materials used to make most paints are found – disrupted supply chains for home products.

“In a supply chain already challenged by COVID-19, the February natural disaster in Texas further impacted the complex petrochemical network, causing significant disruptions,” a spokesperson for paint company Sherwin-Williams says. “Recovery has been significant in recent weeks and is improving – but is still far from complete. The pace at which capacity comes back online and supply becomes more robust remains uncertain.”

The paint shortages are happening as new construction and remodeling projects boom, and builders and contractors say they’re on waiting lists to receive more paint for their projects.

In the meantime, customers should expect a run-up in paint prices until the shortages subside. Paint firms say that price increases could range from 6% to 40%.

Source: “Paint Shortage Continues Months After Winter Storm Froze Supply,” Bay News-9 (May 22, 2021); “This Home Necessity Is Disappearing From Store Shelves,” BestLifeOnline.com (May 20, 2021); “The Cost of a Can of Paint Really Going Up 40%?” Murphy Bros. (2021); “Your Home Improvement Project Just Got a Lot More Expensive. From Dishwashers to Paint and Fertilizer, Here Are the Goods in Short Supply,” Business Insider (May 10, 2021)

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Condo Q&A: Can We Hold a Special Election?

Also: Property insurance costs skyrocketed. Is it OK for the board to take out a loan from the roof reserve? And is a clubhouse bathroom upgrade a “material alteration”?

NAPLES, Fla. – Question: A director on my condominium association board resigned. The remaining directors can’t agree on who should fill the vacancy. Can we hold a special election and let the owners decide? – T.B.

Answer: Yes. Most condominium documents allow the remaining directors to fill a vacancy on the board. Typically, the newly appointed director will serve out the remaining term of the preceding director who vacated the position, unless the bylaws provide otherwise.

The Florida Condominium Act states that the board may also hold a special election to fill a director vacancy. The normal election rules must be followed. This is a good alternative when there is dispute in the filling of board vacancies.

Question: My condominium association was just informed by our insurance agent that there will be a big increase in our property insurance premium this year. The board has informed the owners that there is not enough available money to pay for the increase, so they are going to take out a short-term loan from the roof reserve to pay for this expense, with a promise to pay back the loan in full by the end of the fiscal year.

We utilize straight-line reserves and not pooled reserves. Can the board take this action on their own? – M.V.

Answer: No. The Florida Condominium Act provides that funds contained in the reserves required by statute, which include the roof reserve, can only be utilized for their “earmarked” purpose. The statute further provides that these reserve funds can be utilized for an alternative purpose if approved in advance by a majority of the owners voting, in person or by proxy, at a membership meeting where a quorum is attained.

Many associations take an annual vote to allow reserves to be used for cash flow purposes, especially to deal with large insurance premiums that often come due early in the fiscal year. Many of these votes require the borrowed money to be paid back into the reserve fund by a certain date.

Specific disclosure language must be included on the proxy or ballot, which should be prepared in consultation with the association’s legal counsel.

Question: The bathrooms in the clubhouse of my condominium association are very outdated. The board plans to renovate and upgrade them, including changing the bathroom vanity tops from laminate to granite.

Is this considered a material alteration of the common elements? Does the board need to obtain unit owner approval first? – M.U.

Answer: Based on appellate court decisions going back a half century, a change to the common elements is considered a material alteration or addition, if the project will “palpably and perceptively vary or change the form, shape, elements or specifications of a building from its original plan or design or existing condition, in such a manner as to appreciably affect or influence its function, use or appearance.” The change you describe is likely a material alteration. There is an exception for “necessary maintenance,” but that exception is sparingly applied.

Section 718.112(2) of the Florida Condominium Act requires 75%-unit-owner approval for material alterations unless the declaration states otherwise. Most declarations do contain a material alteration provision. Many of these provisions authorize the board to spend up to a certain amount on an alteration before a unit owner voting approval requirement is triggered, with different condominium documents containing different voting percentages.

Attorney David G. Muller is a shareholder with the law firm of Becker & Poliakoff, P.A., Naples (www.beckerlawyers.com). The information provided herein is for informational purposes only and should not be construed as legal advice. The publication of this column does not create an attorney-client relationship between the reader and Becker & Poliakoff, P.A. or any of our attorneys. Readers should not act or refrain from acting based upon the information contained in this article without first contacting an attorney, if you have questions about any of the issues raised herein. The hiring of an attorney is a decision that should not be based solely on advertisements or this column.

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NAR: 5 Appraisal Topics Every Agent Should Know

WASHINGTON – Appraisers are an integral part of the real estate sales process, making it imperative that agents not only understand the fundamentals of the appraisal system but also follow the best practices for communicating with appraisers.

At an interactive session at the National Association of Realtors® (NAR) recent 2021 Legislative Meetings, panelists shared best tactics for working with appraisers and making the process as smooth as possible for all parties. Here are five of the most pressing points discussed.

Interacting with an appraiser at a property

Michelle Bradley, vice chair of the Appraisal Standards Board at the Appraisal Foundation, recommended that agents bring a packet of information about their listing for the appraiser. Making face-to-face contact will help build rapport – even simply introducing yourself, handing over the packet, leaving your card and letting them know you’re available if they have any questions – is helpful, she said.

While appraisers can’t discuss comparable properties, Bradley said agents can still provide MLS data sheets with brief explanations of why similar homes are relevant to your listing, such as whether they were built by the same builder, have a remodeled kitchen or involve other comparable elements. Agents can also explain why some sales are not comparable.

Look up the legal description of the property and include a copy of the most recent tax bill, which can show whether the home is in a special tax district, said Maureen Sweeney, a residential real estate appraiser and member of the Illinois Real Estate Appraisal Administration and Disciplinary Board. If the appraiser doesn’t accept the agent’s packet of information, then follow up with an email, copy the lender, and list the paperwork and data you attempted to share so that everyone has a record, she said. “This way you have done your due diligence.”

However, agents and brokers should never try to influence the appraiser, said Peter Gallo, owner and chief appraiser of HomeSight Appraisal in Charlotte, N.C. Don’t tell the appraiser your client needs a certain value, for example.

“Good appraisers want as much information as they can get,” said Claire Aufrance, an appraiser and broker from Greensboro, N.C., who sits on the North Carolina Appraisal Board and the Appraisal Institute Board of Directors. “They’ll figure out what to use. But I would be careful not to say, ‘You have to use these comps.’ “

How multiple offers factor into the appraisal process

Bradley says some real estate pros give her a spreadsheet of the multiple offers on the property. “We are in an unprecedented market with historically low interest rates and a shortage of housing supply,” she said. “It’s highly critical to give appraisers all of that data. Let them know how many offers came in. If there were 87 showings and 15 offers or more, that’s absolutely demonstrative of the demand.”

It’s also the appraiser’s job to develop an opinion on a home’s fair market value, and just because the buyer and seller have agreed on a price doesn’t mean that’s the true value of the property, said Francois Gregoire, broker, appraiser, instructor, and president of Gregoire & Gregoire Inc., a residential real estate appraisal firm based in St. Petersburg, Fla.

“The appraiser has to look at what is the subject property’s competition,” Gregoire said. “If there is no competition, and you’ve got no supply, that has an influence on the value of that property.”

Different appraisal requirements

The appraiser has a scope of work for every lender client, which differs depending on the mortgage product, said Bradley. For example, you may have heard of “drive-by appraisals.” It’s not the appraiser’s decision to do a drive-by appraisal; it’s the lender’s decision based on the loan product the buyer is getting, Bradley said.

If a buyer is using an FHA-insured mortgage, the appraiser has to fulfill both the lender’s and HUD’s requirements, Bradley said. HUD requires the house meet safety, soundness and security requirements, so there might be requested repairs related to those categories. If the buyer is getting a VA-guaranteed mortgage, that adds safety, soundness and sanitary requirements to the appraisal.

Even Fannie Mae and Freddie Mac require appraisers to report “true property condition” for conventional loans, Bradley said. “Don’t advise your seller to accept one offer over another just because you think there’s going to be a difference in repairs,” she added.

While some buyers may waive an appraisal in a multiple-offer situation, the lender will likely still require it. Waiving the appraisal means the buyer will purchase the property regardless of the outcome of the appraisal, said Lynn Madison, trainer and CEO of Lynn Madison Seminars, who currently serves on NAR’s Professional Standards and Real Property Valuation committees. “Be careful about waiving the appraisals and what that means in your marketplace pertaining specifically to your contract,” she added.

What happens when the appraisal and purchase price don’t match?

Once the appraisal is completed, the appraiser can no longer communicate with the agent; communication must be done through the lender, Madison said. Parties can request clarification or additional information or ask the appraisers to consider additional data, which would be submitted through an intermediary on the lender side.

“Pertinent data would be a property that is competitive with the subject property that sold recently and that your buyers would probably consider as an alternative to the property your buyers made an offer on,” Gregoire said. Because of lags in reporting, the appraiser might not have been aware of those comparable sales, or there may have been errors in the appraisal report that need correcting.

Racial bias in home appraisals

Every two years, all credentialed appraisers in the U.S. are required to take a day-long course from the Appraisal Foundation on the Uniform Standards of Professional Appraisal Practice. The next edition of the course will heavily focus on fair housing and illegal discrimination.

“The profession is taking this very seriously, and if there are problems, the profession wants to root out those problems,” said Gregoire. “We want allegations to be investigated, and if there is illegal behavior on the part of licensees, they should bear the appropriate punishment.”

If you or your client believe racial bias influenced an appraisal, a complaint should be filed through your state regulatory agency, Gregoire said. The Appraisal Subcommittee also has a website to help complainants determine the appropriate legal authority to receive their complaint: refermyappraisalcomplaint.asc.gov.

“The appraiser side of the business is doing exactly the same thing we’re doing on the brokerage side of the business, which is taking a good hard look at how we do everything to make sure there is no bias in what we’re doing,” said Madison.

Source: National Association of Realtors® (NAR)

© 2021 Florida Realtors®

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Think a Hacker Can’t Shut Down Your Computer? Think Again

A tech-challenged criminal can now buy software that shuts down any business’ operating system. Imagine the impact – then take concrete steps to keep your data safe.

NEW YORK – On May 6, 2021, Colonial Pipeline fell victim to a ransomware cyberattack, which took down the largest fuel pipeline in the country and led to gasoline shortages on the east coast.

Then on May 30, 2021, the largest meat producer in the world, JBS Foods, also became a victim of ransomware, closing down plant operations in the U.S. for a few days.

According to a cybersecurity consultant who responded to the cyberattack on Colonial Pipeline, hackers gained access to their systems by logging on via a Virtual Private Network (VPN) using a compromised password.

Both attacks are examples of how major systems can be taken offline if the right measures aren’t taken.

Cybersecurity expert and Assistant Professor for the School of Computing at the University of Utah, Mu Zhang, said both businesses and individual consumers need to take all the steps they can to prevent hacks like these.

“The attackers actually need to first find a vulnerability so they can get into a system,” said Zhang.

To close these openings, Zhang recommends:

  • Installing the latest security updates for your computer
  • Using antivirus software and scanning for viruses often
  • Changing your passwords often
  • Using two-factor authentication
  • Not opening emails if you don’t know who they’re from or opening attachments from an unknown email address

“It will be more useful to also to store an offline backup, which is not connected to the internet, so air-gapped,” said Zhang.

The reason why an offline backup is important too is that ransomware hackers will usually delete your online backup, so they have the only copy. This means you can only get it back if you pay the ransom.

Zhang said, “The victim should learn a lesson from this attack. Try to back up their data and store it in a safer place to prevent future attacks.”

Ransomware attacks may seem more popular right now because, every time a big company pays the ransom to get back their data, hackers are more motivated to do it again.

“The real-world incidents have shown that they can make a real profit,” said Zhang.

Ransomware hackers tend to go after big businesses rather than individuals because that’s where they’ll make the most money. This is why it’s important for employees to take steps to prevent hackers from logging into workplace systems using their information.

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When Will the Market Slow Down? Q&A with Fla. Experts

The real estate market is cyclical, but the next slowdown might take longer than you think. Most experts predict “boiling” well into 2022 or even 2023.

FORT LAUDERDALE, Fla. – After almost a year and a half of intense demand for houses, the real estate market in South Florida shows no signs easing up.

Most experts believe the market will continue to boil for at least another year, either well into 2022 or even 2023. Some believe that with the “perfect storm” of low interest rates, continued migration to Florida and the lack of homes for sale, the demand could continue even longer.

The National Association of Realtors® believes that home prices will rise by about 9% through 2021, but at a slightly slower pace heading into 2022, growing by 3% due to more houses heading onto the market, according to Nadia Evangelou, senior economist and director of forecasting at the association.

The South Florida Sun Sentinel reached out to real estate lawyers, agents, mortgage lenders, developers, builders, economists and appraisers to answer the No. 1 question on everyone’s mind: Is this the right time to buy or sell, or should I wait?

When will the South Florida market start to slow down?

Ron Pietkewicz, Bank of America area lending manager for Palm Beach & The Treasure Coast: With the out-of-state migration expected to continue to South Florida, demand will continue to challenge supply – regardless of interest rates nudging higher. While we may see some cooling off in certain areas, I do believe the South Florida market will remain heated well into 2022.

Karen Johnson, president of Broward Palm Beaches and St. Lucie Realtors: A stable inventory market is considered 5.5 months. We have 1.4 months of supply as of April 2021. Based on demand, we don’t anticipate a slowdown in the next year or 18 months based on the shortage of supply that we have. We don’t see any slowdown coming soon.

Bonnie Heatzig, executive director of luxury sales at the Douglas Elliman real estate company: It doesn’t appear that there will be a slowdown anytime soon. All of our markers have our housing market trending upwards in the foreseeable future. I think now with the successful rollout of the vaccinations and lockdown barriers easing up, buyers are making their way to South Florida with confidence.

When will prices start to decline?

Ken H Johnson, real estate economist at Florida Atlantic University: We will see a rise in the 30-year (mortgage) rate in six to 12 months, at which time we should see housing prices begin to moderate. Price appreciation should slow down, maybe decline slightly, in the coming real estate slowdown. But we should not see a decline on the order of magnitude seen after the last crash, due in great part to the local housing inventory shortage.

Eli Beracha, real estate professor at Florida International University: I don’t expect housing prices to appreciate at the same rate it has over the past year. The good thing is that this is something that is coming gradually and levels off. I do think it depends on what part of the market you are looking at: Broward is different than Miami Dade, and the condo market is different than single-family homes.

Dan Mackler, real property practice co-chair at Gunster law firm: If interest rates increase significantly, which would probably be driven by high inflation, or if the number of people relocating to Florida significantly decreases, then I would expect the housing market to cool down. Right now, with interest rates running so low, buyers can afford to buy to homes that they otherwise couldn’t before. I also don’t think that there will be a major decline in relocations to Florida. So, I would not expect prices to meaningfully decrease until the end of next year or the beginning of 2023.

Will newly built homes ease pressure on the market?

Jeff Grant, REMAX Real Estate: Prices could start to level off in the next six months or so. I think that homebuilders will have some more inventory because, right now, they are really limited to that they can do due to shortages and supplies.

Michael Wohl, principal of Coral Rock Development Group: There’s plenty of inventory in the high-end rental market, but in the for-sale market there’s no inventory, and I think that will continue until builders can catch up. Right now, there are labor and delivery issues, so it’s not easy for for-sale housing developers to keep up with the demand. The market will correct itself when it becomes no longer affordable. In South Florida, affordability is a major concern and major issue.

Jerome Hollo, executive vice president of Florida East Coast Realty: Inventory will play a significant role in pricing. Generally, compared to other markets, there is limited opportunity for new single-family product, which should cushion any drop in pricing. You are starting to see a lot more inventory growth in the condominium sector. Additional inventory should create some downward pricing. However, this may not be the case in all submarkets.

When the federal eviction moratorium ends, will the market cool down?

Joseph Hughes, real estate attorney: I think that the eviction moratorium will play a role in cooling down the market. Many landlords who could not previously evict their tenants will learn for the first time that they will be unable to collect all of the past-due rent owed to them by their tenants. This will probably motivate many of them to decide to stop renting and take advantage of the market by simply selling their properties, thereby increasing the supply.

On the flip side, rental values will likely increase significantly due to the increased demand, which will not only cause many landlords to decide to hold onto their properties, but also likely prompt many tenants to consider buying homes instead of renting elsewhere.

Dan Mackler: I am not sure that there are enough people living rent free (by not paying their rent) to make a difference. Based on conversations I have had with our multifamily clients, they have not experienced a tremendous amount of tenant defaults.

© 2021 South Florida Sun-Sentinel. Visit sun-sentinel.com. Distributed by Tribune Content Agency, LLC.

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Landlords Ask Supreme Court to End the Eviction Moratorium

One judge ruled to end the eviction moratorium, but an appeals court refused to make any changes right away. Landlords now want the U.S. Supreme Court to weigh in.

WASHINGTON – A lawyer representing landlords and housing providers asked the Supreme Court on Thursday to halt the Biden administration’s moratorium on evictions, which was put into place because of the coronavirus pandemic.

The request comes after a three-judge panel of the U.S. Court of Appeals for the D.C. Circuit on Wednesday declined to stop the moratorium while a case challenging its constitutionality is pending.

“Landlords have been losing over $13 billion every month under the moratorium, and the total effect of the CDC’s overreach may reach up to $200 billion if it remains in effect for a year,” states the landlords’ request to Chief Justice John G. Roberts Jr.

The landlords won in the district court in the District of Columbia, but the judge paused the ruling while it was appealed, leaving the Centers for Disease Control and Prevention’s (CDC) eviction moratorium intact – for now.

The appeals court affirmed that move this week, allowing the lawsuit to proceed but kept landlords from evicting non-paying tenants.

“The moratorium was tailored to the necessity that prompted it,” wrote the three-judge panel. “[The Department of Health and Human Services] carefully targeted it to the subset of evictions it determined to be necessary to curb the spread of the deadly and quickly spreading COVID-19 pandemic.”

The landlords hope the Supreme Court will reverse that move.

“The stay order cannot stand. As both the Sixth Circuit and the district court here recognized, Congress never gave the CDC the staggering amount of power it now claims,” the landlord’s court filing states. The moratorium bans landlords from evicting tenants while the order is enforced, so landlords are unable to remove a renter who can’t pay rent.

The CDC first issued the moratorium in September under former President Trump, but the government has continued to renew it, even after vaccines have been widely distributed.

Lawyers for the landlords said they fear that the government will renew the moratorium again instead of letting it lapse at the end of June as scheduled.

Lawsuits challenging the government’s eviction moratorium are piling up, as property owners, including struggling mom-and-pop operators, ask the courts why they are expected to take a financial hit while non-paying tenants are protected by the moratoriums.

Some district courts have delivered wins for the landlords, while others have ruled for the government. Recently, the 6th U.S. Circuit Court of Appeals invalidated the government’s moratorium but did not issue a nationwide injunction.

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Fla. Attorney General Issues Real Estate Scam Warning

Stressed buyers and renters desperate for a home can make rash decisions – and scammers know that. Escrow wire-fraud scams can destroy a buyer’s dreams only moments before a closing, but Fla. A.G. Moody also focuses on rental, loan-flipping and foreclosure relief scams.

TALLAHASSEE, Fla. – Florida is in the midst of a home buying frenzy, and Florida Attorney General Ashley Moody issued a warning for Floridians to remain vigilant against real estate scams. Stressed buyers or renters can be fertile territory for scammers because offers that seem “too good to be true” aren’t. Consumers should understand how to safely navigate the process.

“Buying a home is often the largest and most important purchase a person makes, so it’s important to ensure scammers don’t take advantage of the situation to turn a dream purchase into a financial nightmare,” says Moody.

Common real estate scams include escrow wire fraud, rental scams, loan-flipping scams and foreclosure relief scams.

Escrow wire fraud

In escrow wire fraud, scammers usually pose as representatives from a title or escrow company and contact a new homebuyer with instructions for escrow money transfer. If the consumer follows the scammer’s instructions and wires in the escrow money, the scammers can withdraw that money and disappear.

To avoid this trap, consumers should always check the original documents received from the lender directly rather than relying on just an email, and they should call the phone numbers listed on the original document to confirm the validity of the wiring instructions. A big red flag: Sometimes an email requests an escrow change that contradicts instructions already received. Always confirm an escrow account number with the bank or lender before wiring any money.

Rental scams

Scammers post fake rental ads on Craigslist or other sites, often using real photos and/or addresses taken from a legitimate real estate listing or rental offer. They change only the contact information.

Once a consumer expresses interest in the rental, the scammers ask for either an upfront cash payment to rent the property or put down a deposit. Consumers should be suspicious of anyone who asks for a cash deposit to see a property, and ensure the person is the real property owner before negotiating rental terms. A big red flag: Scammers will often say they’re out of town and suggest that renters drive by to look at the property. They often “scrape” information from an actual listing because the home will then have a “for rent” or “for sale” sign in the yard.

Loan-flipping scams

Loan-flipping scams occur when a predatory lender persuades a homeowner to refinance their mortgage repeatedly, often borrowing more money each time. The fraudster charges high fees with each transaction, and eventually the homeowner gets stuck with higher loan payments they can’t afford. Homeowners can avoid this scam by being wary of lender solicitations, and to deal only directly with known banks or lenders.

Foreclosure relief scams

In a foreclosure relief scam, criminals dupe homeowners in pre-foreclosure with a promise to save the owner’s home – providing the owner pays a large upfront fee. As time passes, these homeowners often find themselves in worse financial shape and living in a house that the bank has still foreclosed. Consumers should work directly with their loan servicer to modify an existing loan, request forbearance or make another arrangement.

Moving scams

In an earlier Consumer Alert, Moody warned Florida consumers about moving scams, which often involve lower-priced services that become more expensive after the fact. To avoid common moving scams, consumers should:

  • Never sign blank or incomplete documents or contracts
  • Obtain moving estimates and quotes from the company in writing and make sure estimates are binding
  • Determine whether the movers will perform the move alone or if the company will subcontract the service to another carrier

Real estate and moving scams in Florida can be reported to the Attorney General’s office by calling 1(866) 9NO-SCAM or filing a complaint online at MyFloridaLegal.com.

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Tampa Bay Realtor Hosts Cooking Show in Her Listings

Tiny Newby can advertise her listings by showing off their kitchens, and she does that by actually cooking in them with the videos posted on her Facebook channel.

TAMPA – Realtor Tina Newby has a unique branding strategy: She hosts a cooking show – and she cooks using a kitchen in of one of her listings.

Once completed, she posts the videos on her Realtor Can Cook Facebook page.

Newby says that the show is a family production. Her husband shoots and edits the videos, while her children help arrange food and ingredients, set up lights and clean the kitchen afterwards.

In the current market where properties don’t stay on the market long, Newby says it can be a balancing act right now to host shows in the houses she sells.

“The thing is the consistency,” she notes. “I can’t just say, ‘I’m too busy, I’m not going to do it,’ because everybody expects it. If I stop doing it, then people are going to assume that I’m no longer doing it, or I’m no longer a real estate agent.”

Newby also believes the cooking video can also show off the house’s advantages.

“I think for us as humans, we are drawn to the kitchen – surrounded by the countertop, by the sink, talking, getting drinks, and it’s just a natural thing for us,” she says. “I felt like if you can picture yourself cooking, spending time with your family in the kitchen, you know that this is going to be a wonderful home for you.”

Source: Tampa Bay Times (05/27/21) Mahoney, Emily L.

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For Some, Renting Is an Amenity – Not a Necessity

Lots of Americans who could buy a home choose to rent instead, notably many with incomes in the $120K-$150K range. They view the higher cost mainly as a convenience fee.

WASHINGTON – Many thousands of Americans who can afford to buy homes choose to rent instead, and they’re in the market for built-to-rent communities that offer luxury features and finishes, amenities and reputable school systems. Renting is also a way to avoid today’s highly priced single-family homes and bidding wars.

Tim Sullivan with Zonda, a real estate research firm, says the premium for a rent-built, single-family home can be 10% to 20% higher than a purchase, as such homes are new and generally part of larger, master-planned communities with amenities including pools, walking trails and playgrounds.

This factor, plus strong demand for product from multiple demographics, is why traditional home builders are increasingly making inroads into the built-to-rent market. For example, BB Living in 2019 partnered with luxury home builder Toll Brothers to develop communities of luxury homes to rent, with more than 20 under development in markets like Tampa.

“A lot of our customers are renting by choice,” says Toll Brothers’ Fred Cooper. “The average income is in the $120,000 to $150,000 range. It’s turned out to be a more affluent customer that’s very interested in renting.”

Clients aren’t limited to empty-nesters, though. Brad Hunter of West Palm Beach-based Hunter Housing Economics says rentals are also favored by “baby chasers” – grandparents who want to be close to their children and grandchildren.

Source: Wall Street Journal (06/03/21) Friedman, Robyn A.

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Report: Home Loans Backed by PMI Increased 53% in 2020

The association representing private mortgage insurers (PMI) says the average Fla. buyer has a credit score of 739, a $58K annual income and buys a median $310K home. In 2020, 55% of Fla. first-time buyers relied on PMI to make down payments of less than 20%.

WASHINGTON – As home costs go up, more buyers need private mortgage insurance (PMI) because they make less than a 20% down payment. As a result, more buyers need PMI to secure a home of their own.

According to U.S. Mortgage Insurers’ (USMI) annual report, which includes a breakdown specific to Florida, it would take a Florida firefighter 28 years to save for a 20% home down payment ($46,073 annual salary), a middle school teacher 24 years ($56,113 salary), a registered nurse 19 years ($72,204 salary) and a veterinarian 15 years ($97,150 salary).

Florida borrowers with PMI in 2020

  • Over 40% of mortgage borrowers
  • 130,800 homeowners in Florida
  • $276,232: the average loan amount of those with PMI
  • 55%: Percentage of PMI users who were first-time buyers
  • 746: Average credit score for PMI borrowers

Florida, Texas, California, Illinois and Michigan were the top five states for mortgage financing with PMI.

“Access to low down payment loans was more important than ever this past year as many homebuyers weighed other economic concerns during the pandemic,” says Lindsey Johnson, president of USMI. “Mortgage insurance levels the playing field and provides lower- and middle-income households with access to mortgage credit.” Johnson says the industry served more than 2 million borrowers last year, a “new milestone for our industry.”

Report findings

  • It would take an average 21 years for a household earning the national median income of $68,703 to save for a 20% down payment (plus closing costs), for a $299,900 single-family home, the national median sales price.
  • The wait time is seven years with a 5% down payment mortgage with PMI.
  • In 2020, PMI allowed over 2 million more owners a chance to own their own home
  • Nearly 60% of PMI purchase mortgages went to first-time homebuyers, and more than 40% had annual incomes below $75,000.
  • The average loan amount purchased or refinanced with PMI was $289,482.
  • PMI supported $600 billion in 2020 mortgage originations – about 65% for new purchases and 35% for refinanced loans.
  • By year end, about $1.3 trillion in outstanding mortgages had active PMI coverage.

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Bill on Impact Fee Limits Now on DeSantis’ Desk

The bill, if signed by DeSantis, would add new limitations to the way local governments can levy impact fees – which pay for infrastructure needs – on new developments.

TALLAHASSEE, Fla. – A bill sent Thursday to Gov. Ron DeSantis would limit local impact fees imposed on builders and developers. Local governments use impacts fees to offset costs for new infrastructure to handle growth.

DeSantis has until June 18 to act on the bill (HB 337). If signed, it would prevent local governments from increasing impact fees more than once every four years and would limit those increases to 50%. If an increase is between 25 and 50%, it would have to be spread over four years. Smaller increases would be phased in over two years.

As he debated the bill April 22, Senate sponsor Joe Gruters, R-Sarasota, pointed to the reasons a bill was needed – increases in impact fees that exceeded 150% in Orange County and 80% in Hillsborough County.

“This bill is all about predictability, to make sure that people can plan and go through a project and understand exactly what the cost is going to be,” Gruters said at the time. “When you have these types of massive increases, it hurts everybody. We hope that local governments can plan accordingly.”

The bill was approved 94-23 in the House and 28-12 in the Senate. The growth-management organization 1000 Friends of Florida has called for DeSantis to veto the bill, saying it would make it “virtually impossible for local governments to require that new development pays its own way. Existing residents will shoulder even more of the costs associated with new development through raised taxes, declining roads, parks and other public infrastructure, or both.”

The bill would allow local governments to exceed the limits, but that would require a study showing “the extraordinary circumstances requiring the additional increase.” Also, local governments would have to hold at least two workshops and approve the increases by at least a two-thirds vote.

The impact-fee measure was one of 27 bills that the Legislature sent to DeSantis on Thursday, according to his office. The bills were passed during the legislative session that ended April 30.

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Will the Office Market Bounce Back? There’s a New Twist

As the office market decides how and when employees will return, the employees themselves may pose an unexpected challenge: 39% say they’ll quit if forced back full-time.

NEW YORK – As companies prepare to start calling employees to return to work in person, a survey found that many workers say they’ll refuse to return to the office. That could have ramifications for the commercial office market.

Of 1,000 nationwide employees polled by Morning Consult, a study commissioned by Bloomberg, 39% said they would consider leaving their jobs if bosses aren’t flexible about remote work or working from home. Younger workers were least likely to want to return in person, according to the survey: 49% of millennial and Generation Z workers felt the strongest on the topic.

Tech firms leading return to the office

A survey conducted last month by realtor.com of nearly 4,000 U.S. adults showed that almost 60% of new homeowners who purchased in the last 12 months work from home, and 62% prefer to continue working remotely. Many respondents said they’d look for a new job if they had to return to the office in person full-time.

More employees want to continue with remote work at least part of the week. A JLL survey of 2,000 international workers found that 72% want to remain home more during the workweek. Only about a quarter of respondents said they wanted to work from the office full-time.

WeWork CEO Sandeep Mathrani sparked criticism online recently when he said the “least engaged” workers are the ones who want to continue to work remotely. JPMorgan Chase CEO Jamie Dimon added to that, saying that working from home doesn’t work for people “who want to hustle.”

As the rollout of vaccines has started to reach milestones around the country, many companies have considered bringing back workers earlier than they originally suggested.

Source: “39% of Workers Willing to Quit if Remote Work Not Allowed: Survey,” Commercial Observer (June 1, 2021)

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Not Doing Rental Transactions? They’re a Lead Generator

Some agents avoid rentals because they pay less than home sales., but, beyond steady income, landlords and renters can become leads when they’re ready to buy.

WASHINGTON – According to a survey from RentSpree, a software provider for tenant screening, renter management and more, more real estate pros consider rentals a way to expand their business and add an added revenue-generating opportunity.

In 2020, real estate agents with three years or more experience were three times more likely to complete a rental transaction, according to the study of 581 industry professionals; and 30% of respondents said that their brokerage completed more than 50 rental transactions last year, an increase over the prior year.

“Experienced agents have cultivated a robust clientele, among which are investment property owners that need renters,” the RentSpree study claims. “These types of clients will rely on their agents to identify and screen potential tenants.”

Newer agents, however, often view rentals as a waste of time, the survey finds. That view may be due to the ratio between time spent working a rental listing and the compensation.

“Newer agents tend to underestimate the potential that rentals can bring to their overall real estate business,” according to the study. “Primarily, lead generation and substantive client relationship building can result in future home sales.”

The California Association of Realtors® recently partnered with RentSpree so that its members can offer a digital rental process to their clients, using the platform for screening, signing a lease, and more. RentSpree said that it had a 125% increase in rental applications in the last year, and the number of site visitors has tripled.

Source: “The Future of Real Estate: Rentals + Technology,” RentSpree (2021)

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Drone Use May Be on the Rise

Aerial photography is becoming more common in real estate listings – even for interior shots – and new FAA rules may allow drone use in even more locations.

WASHINGTON – Real estate pros increasingly use drones to capture aerial photos and videos of their listings or even the interiors – and new Federal Aviation Administration (FAA) rules may allow even more use going forward.

The FAA recently eased some restrictions and expanded some drone rules by authorizing operations at night, as well as over people and moving vehicles. A new Window to the Law video – produced by the National Association of Realtors®’ (NAR) legal team – shares how this could expand drone use among real estate professionals. NAR also hosts a reference page on drone use.

Note, however: The timelines vary as to when some of the new rules take effect.

For example, FAA’s new Remote Identification Rule will not go into effect until Sept. 15, 2023, allowing drone operations over people. It requires drones to transmit identifying information about the drone and its operator that would be accessible by law enforcement agencies to identify unsafe operations. To accomplish this, many newer drones will have a built-in remote identification broadcast function.

FAA’s Operations Over People and at Night Rule, which already took effect March 16, may allow real estate pros to capture aerial twilight photos and videos of their listings. Certified drone pilots who have completed an updated initial test or an updated recurrent online training regimen will now be able to fly drones at night. To be eligible, a drone must include flashing anti-collision lights.

“These are exciting changes that generate more opportunities for drones to create impactful and creative marketing, but it’s important that you are familiar with the FAA’s rules, as well as any state or local laws that may impact your operation before your next drone operation,” says Katie Garrity, associate counsel at NAR.

Drone operators must have a pilot certification and be prepared to show it upon request. Also, FAA rules from 2016 created rules and limitations on drone operations, including weight, altitude and speed limits.

Real estate pros who hire a drone operator to capture photos or videos of their listings should ensure the company has insurance coverage and the flyer has a current and up-to-date pilot certificate.

Source: National Association of Realtors® (NAR)

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Will Solar Panels Go from a Perk to an Expectation?

More owners install solar panels as costs drop, and in Calif., they’re mandatory for new construction. One day, buyers will probably expect every listing to have them.

WASHINGTON – Homeowners show more willingness to add solar panels as installation costs drop, and many industry observers point to California that, in 2020, became the first state to require that newly built homes, with a few exceptions, must include a rooftop solar system.

“This mandate normalizes the idea of solar panels as acceptable to regular homeowners, but it will be a long time before mandates are considered by other states except for the most progressive ones,” says Elizabeth Beardsley, senior policy counsel with the U.S. Green Building Council in Washington.

Most times, homebuyers and homeowners are motivated to install solar panels for potential savings in utility costs. Homeowner Mike Rain in Fairfield, Calif., told The Washington Post that he and his wife went from paying $50 to $80 per month for electricity on their previous home to paying nothing because their new home has solar panels on the roof.

Even as prices for solar installation fall, however, it can still be expensive. The average cost to install a residential solar system is $20,000, according to the Solar Energy Industries Association. Homeowners often have the option to lease it too.

“You can calculate the payoff time for installing solar panels by looking at incentives, utility bills, and how much you may get paid for excess power that your home generates,” says Beardsley. “For example, where I live in Virginia, it would take 20 years for the installation to pay for itself; but if I lived in D.C., it would only take six years because of their incentives.”

Tax credits – whether local, state, or federal – can help offset some of the installation costs. The federal residential solar energy tax credit allows homeowners to claim 22% of the cost of installing a solar panel system in 2021.

The cost-effectiveness of solar panels depends on the local price of electricity, the price utility companies pay residents for any excess electricity generated, the solar panel installation cost, the amount of sun the panels receive, and the orientation of the panels, according to a study conducted last year by the Home Innovation Research Labs at the National Association of Home Builders.

The use of residential solar power is still growing, experts say.

“The biggest factor is the extreme decline in the cost of installing a solar panel system,” says Kevin Wilson, national vice president of strategic sourcing and sustainability for Tri Pointe Homes in Los Angeles. “At the same time, the cost of electricity is extremely high in California. Those two factors coupled to accelerate homeowner interest in solar panels. In addition, as they become more common, there’s less pushback on how it looks. That’s a nonissue now, but in the past, some homeowners only wanted them in the back of the house where they couldn’t be seen.”

Source: “Solar Panel Use Heats Up as Installation Costs Fall,” The Washington Post (May 29, 2021) [Log-in required.]

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Dear Anne: Listing Agents Please Take Care

Listing shortages lead to some disconcerting behavior. Sellers have tremendous leverage in this intense seller’s market, but the Code of Ethics applies during all types of markets. Still, a handful of listing agents take advantage, simply because they think they can get away with it.

ORLANDO, Fla. – Dear Readers: I realize inventory is in short supply, but some of the stories I’ve been hearing lately are disconcerting, and I wanted to share them with you.

First scenario: A listing agent who is also the seller told a buyer that they don’t have a chance to secure his property unless they dump their agent and work with him.

I would like to remind this listing agent about Standard of Practice 1-1, which says, “Realtors® when acting as principals in a real estate transaction remain obligated by the duties imposed by the Code of Ethics.

Granted, as the seller, the agent can waive the submission of the offer. However, if the agent is not the sole owner of the property, a hearing panel could hold the agent to the obligation to present all offers to the co-seller unless the co-seller waives his/her right in writing. I must admit I’m curious on how a hearing panel would land on that one.

However the seller/agent is bound under the precepts of Article 3 which says, Realtors shall cooperate unless it isn’t in the best interest of your client. The agent could argue that he is his own client and cooperating with the buyer’s agent isn’t in the seller’s best interest. But again, if there is a co-seller involved … hmmm?

In my book, threatening a buyer is unprofessional. The agent in this case could suffer from a fate worse than being found in violation of the Code, and that is a tarnished reputation. I realize saving money is important, but at what cost? A good business reputation is the gift that keeps on giving – and a bad reputation rarely has a happy ending.

Second scenario: A listing agent told an out-of-town agent, “If you want your buyer’s offer presented, I’m the one who will work with the buyer and you’ll get a referral fee.”

Oh, this crosses the line! Standard of Practice 1-7 says listing brokers are to submit ALL offers until closing or the execution unless the seller/landlord waives this obligation in writing. The seller hired the listing broker to sell the property, not get territorial.

Article 1 is about protecting and promoting your seller’s best interest. The question is: Whose best interest is the agent promoting and protecting?

I have written about this before, so maybe it’s time for a refresher. Per Standard of Practice 3-1, “…Unless expressly indicated in offers to cooperate [verbal, written, MLS or MLS Advantage], cooperating brokers may not assume that the offer of cooperation includes an offer of compensation.” Can’t get any plainer that that. The “so you’re not from here tactic” could get the listing agent two articles behind his name, Articles 1 and 3. If money is the issue, only requests for arbitration based on the offer of compensation made in some form: verbal, in writing, in the MLS or through MLS Advantage could make it to arbitration.

Third and final scenario: A listing agent says “If your buyer doesn’t work through me, I’m only going to pay you half the commission offered in the MLS.”

We’re back to Article 3 again, but focusing on Standard of Practice 3-2, any change in compensation offered for cooperative services must be communicated to the other Realtor prior to the time that Realtor submits the offer.

If the change is made after the offer is submitted, this could be a violation. If the change is made before the offer for purchase is submitted, it would not be. MLS rules also come into play. If the listing broker is going to offer a different commission from the rest of the participants, it must be communicated in writing in advance of the submission of the offer. It also goes on to say this modification is not the result of any agreement among all or any other participants in the service.

Listing brokers do not like it when a buyer’s agent holds the buyer’s offer hostage until the listing broker agrees to more commission than is offered, so why would a buyer’s agent want to hand over the buyer to earn nothing or a referral fee so the listing agent can pocket more money?

These scenarios fly in the face of the spirit of cooperation. Cooperation is some awesome sauce, and the best in this business swear by it. If everyone works together, everyone benefits. Enough said.

Anne Cockayne is the former Director of Local Association Services for Florida Realtors

© 2021 Florida Realtors®

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Presenting Offers: OK with License Law? Code of Ethics?

Your exhausted seller received five offers in one day. Four are over asking price, but the last one offers $50,000 less, possibly making it a waste of time for an already exhausted seller. Must you still present it? Perhaps not – but only under very specific conditions.

ORLANDO, Fla. – In today’s fast paced market, sellers receive many competitive offers on their properties. Some sellers may choose to ask for highest and best; some sellers may just accept one of the offers presented to them.

This article isn’t about that though. This article focuses on the agents involved and their actions with regards to offers and counteroffers.

Florida real estate licensees can have one of three types of agency relationships with buyers and sellers: single agent, transaction broker or no brokerage relationship. Unless a licensee has something in writing with their respective party indicating single or no brokerage relationship, Florida law presumes you are in a transaction broker relationship.

Under a transaction broker relationship – as well as single agent relationship – you have obligations with regards to offers and counteroffers. Additionally, Article 1, Standard of Practice 1-6, 1-7 and 1-8 of the Code of Ethics set forth further requirements regarding the presentation of offers and counteroffers.

Specifically, per Florida Statute 475.278, the licensee is obligated to present all offers and counteroffers in a timely manner, unless a party has previously directed the licensee otherwise in writing. This article focuses on the language of this statute.

What does this mean in plain English? Unless your buyer or seller sent you something in writing in advance, or you’ve added something into your listing or buyer brokerage agreement clarifying what kinds of offers and counteroffers they want to see, you must present them all.

We all know the market is hot right now, so I understand the pressure to act quickly, on both sides. However, Florida Realtors Legal Hotline calls have included statements from Realtors indicating that some sellers feel overwhelmed by the number of offers they’re receiving. As a result, these agents try to help by picking and choosing which offers the sellers see.

Let me be clear: If you don’t have something in writing in advance – before you received those multiple offers – stating that you’re able to do this, it’s a violation of your real estate licensing law.

Does this mean this can’t happen at all? No! But you must do it properly.

If you’re a listing agent taking a listing, you can easily have a conversation with the sellers and should be asking a variety of questions, including what kind of offers the sellers are looking for. Do they only want to see cash offers? Do they only want to see offers over a certain price point? Do they only want to see offers that can close by a certain time? If so, clarify that in writing in your listing agreement or get it in writing some other way from your sellers. Then if you get offers that don’t fall within the sellers’ criteria, you do not have to present those offers and are able to move forward, confident you are in compliance with your real estate licensing law and the Code of Ethics.

Meredith Caruso is Associate General Counsel for Florida Realtors

© 2021 Florida Realtors®

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Condos: Who Insures What? Who Pays for Damages?

The 2021 hurricane season began June 1, but water pipes can burst year-round. If an insurable event occurs in a condo, however, is it a unit owner’s job to pay or the association’s? It’s a simple question with a sometimes complicated answer.

NAPLES, Fla. – Questions often arise when there is an insurable event (such as when a water or sewer pipe bursts), who pays for the damage? The condominium association or the unit owner?

The answer will depend upon what the damaged items are. Section 718.111(11)(f), Florida Statutes, provides that: “(f) Every (Condominium Association) property insurance policy issued or renewed on or after January 1, 2009, for the purpose of protecting the condominium must provide primary coverage for:

  1. All portions of the condominium property as originally installed or replacement of like kind and quality, in accordance with the original plans and specifications.
  2. All alterations or additions made to the condominium property or association property pursuant to s. 718.113(2).
  3. The coverage must exclude all personal property within the unit or limited common elements, and floor, wall, and ceiling coverings, electrical fixtures, appliances, water heaters, water filters, built-in cabinets and countertops, and window treatments, including curtains, drapes, blinds, hardware, and similar window treatment components, or replacements of any of the foregoing which are located within the boundaries of the unit and serve only such unit. Such property and any insurance thereupon is the responsibility of the unit owner.”

So, the association’s insurance policy covers the structures of the building(s) as originally installed or replaced, plus all approved alterations or additions to the building(s). The association policy also covers the unit A/C equipment (this was a change to the statute after Hurricane Irma to insure that all the air conditioning is repaired and turned on as quick as possible after a hurricane to prevent mold growth). The unit owners’ policies, if obtained, cover their personal property and some fixtures within the unit and floor, wall and ceiling coverings. The drywall in the units and the stuff behind the drywalls is the association, wherein the paint or wall paper on the drywall is insured by the unit owner.

While the association is required to carry insurance on the structures, the statute does not require unit owners to carry a unit policy, and many unit owners decide to self-insure their unit and not carry unit insurance unless their Declaration of Condominium requires them to do so (most do not). Many owners who do not have a mortgage decide to take the risk of self-insuring their condominium unit.

Another question that often arises is who pays for the dry-out of the unit (fans etc.) from a pipe burst, as the statute is silent on this. As both the association benefits from the dry-out (less chance of mold behind the walls) as well as the unit owner (property saved from turning moldy green or black), the dry out cost should be shared proportionally between the association and the unit owner depending upon how much they benefit. If it cannot be determined a proportional share, the dry out cost is usually shared equally – 50/50.

Who pays the association deductible for an internal unit drywall repair (unit perimeter drywall is Association responsibility) can be a complicated answer and depends upon whether there was ever a deductible opt-out vote of the members or not. If that question arises, you should check with your association’s legal counsel.

For non-insurable event damage (such as mold growth from a slow water leak over an extended period of time), you will need to look at your governing documents maintenance, repair and replacement responsibilities usually contained in your Declaration of Condominium to determine whether the association or the owner must pay for the repair.

Rob Samouce is a principal attorney in the Naples law firm of Samouce & Gal, P.A. He is a Florida Bar Board Certified Specialist in Condominium and Planned Development and concentrates his practice representing condominium, cooperative and homeowners’ associations in all their legal needs including the procedural governance of their associations, covenant enforcement, assessment collections, contract negotiations and contract litigation, real estate transactions, general business law, construction defect litigation and other general civil litigation matters. This column is not based on specific legal advice to anyone and is based on principles subject to change from time to time.

© 2021 Journal Media Group

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Counting Contract Dates: The Advanced Training Course

Business days, calendar days, holidays? Deposits, inspections, repairs and automatic closing extensions? Contract timelines can still confuse members. Here are some of the top questions posed to Florida Realtors Legal Hotline.

ORLANDO, Fla. – Florida Realtors Legal Hotline has weathered extreme seller’s markets, buyer’s markets, and even distressed property markets. The types of calls we hear vary quite a bit as these seasons change. However, there is one constant, regular conversation that never changes – counting dates to calculate contractual deadlines.

We previously ran an introduction to date counting titled Days-ed and Confused: Time Provisions in FAR/BAR Contracts. That was a nice 101-level introduction and overview to the topic. This time, we’re going to dive a little deeper into a 201-level discussion of date counting, still using the Florida Realtors/Florida Bar Residential Contract for Sale and Purchase and the As Is version (rev. April 2017).

While the last article covered the basics of counting time, this gets into some of the more common spots where people fumble in figuring out deadlines.

  1. Deposit Deadline. One common mistake is parroting lines other people have said, like, “You always use business days to calculate escrow delivery,” instead of locating the source of the rule and reading it carefully. Take that phrase, for example. If you’re talking about the Florida Real Estate Commission’s (FREC) escrow handling rules at Florida Administrative Code 61J2-14, you’d be correct. Sales associates must deliver any deposits received to their broker or employer no later than the next business day following receipt. Brokers, meanwhile, must place the deposit in an escrow account no later than the third business day after the broker or associate receives the deposit.

    However, when it comes to a buyer’s deadline to make a deposit under a Florida Realtors/Florida Bar contract, calendar days are used. Section 18, Standard F provides “Calendar days shall be used in computing time periods.” There is no reference to business days in these contracts, although there can be an automatic extension if a deadline or date ends on a weekend or holiday, as Standard F continues: “Other than time for acceptance and Effective Date … any time periods provided for or dates specified in this Contract … which shall end or occur on a Saturday, Sunday, or a national legal holiday … shall extend to 5:00 p.m. (where the property is located) of the next business day.” Therefore, any buyer who has a contract with an effective date of Friday should take care to ensure the deposit is delivered to the escrow agent no later than Monday.

  2. CFPB Requirement Extension. Another phrase we’ve heard goes something like, “The buyer’s lender says they have an automatic extension of up to 10 days if they need more time to close.” However, here’s how Section 5(a) is worded: “If Paragraph 8(b) is checked and Closing funds from Buyer’s lender(s) are not available on Closing Date due to Consumer Financial Protection Bureau Closing Disclosure delivery requirements (CFPB Requirements), then Closing Date shall be extended for such period necessary to satisfy CFPB Requirements, provided such period shall not exceed 10 days.” Did you spot the key words? The delay in funds must be due to Closing Disclosure (referred to as the CD, formerly called the HUD-1) delivery requirements. This refers to a specific three business-day waiting period mandated by the CFPB, not any lender delay whatsoever. 
  3. Inspection and Repair Multiple Timelines. One final phrase we hear when people talk about the Florida Realtors/Florida Bar contract (the inspection and repair version, NOT the as-is version) is, “So, can the buyer cancel if the seller doesn’t want to make the repairs?” This question overlooks the multiple timelines in play, some of which don’t begin until one side or the other sends a written notice. When there are multiple clocks for situations like these, it may help to sketch them out. If not, the parties should keep going back to the contract to make sure everyone orients on where they are in the process.
     
    • First, the buyer has the option to deliver a written notice of items the seller must remedy within the inspection period. The default timeframe in Section 12 is 15 days after the effective date, although the parties can negotiate a different deadline by putting a number in the box.

      If the buyer delivers a written notice of general repair items, the date the seller receives that notice starts a second clock. Section 12(b)(iii) provides that the seller will have 10 days to deliver an appropriately licensed person’s estimate of what it would cost to make the repairs. There’s a second option where the seller can hire their own inspector to counter the buyer’s inspection report, although since it’s infrequently used, we’ll drop to the third common time window.

    • Once a seller delivers the written estimate of repairs, a third clock starts if the estimate exceeds the repair limit in the contract. Both the buyer and seller will have 5 days to write to the other side. The buyer can (if they want) inform the seller they’ll just ask for some of the repairs in order to keep the cost under the repair limit. Simultaneously, the seller can (if they want) inform the buyer that they’ll fix all the repairs, despite the fact that costs are over the repair limit.
       
    • If neither the buyer nor the seller sends a written message during that 5-day window, then in the final phase, either party can terminate the contract, enabling the buyer to receive a return of the deposit. As you can see, there are quite a few formal steps to get to this final cancellation phase.

Joel Maxson is Associate General Counsel for Florida Realtors

© 2021 Florida Realtors®

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