Oct. 1, 2018 – In every property transaction, there’s the fairly straightforward purchase price – and then there’s all the other sometimes-confusing costs associated with buying a home.
The Legal Hotline frequently fields calls from members with confused customers wondering exactly what they’re obligated to pay for in a transaction.
Florida Realtors’ most popular contract form, the Residential Contract for Sale and Purchase (“FR/Bar”), lays out these additional costs in paragraph 9, and they can vary depending on which party chooses the closing agent.
This article attempts to clarify one question: Who pays for what? As a practical matter, I highly recommend printing out the pages of the FR/Bar that include paragraph 9 to follow along.
Paragraph 9 covers closing costs, fees and charges associated with the transaction. Specifically, paragraph 9(a) covers costs that will be paid by a seller and 9(b) lays out the costs to be paid by a buyer.
However, upon closer examination, you can see that “who pays for what” largely depends on which box is checked in paragraph 9(c) regarding title evidence and insurance. 9(c) provides three optional boxes, one of which must be checked:
- If the box by 9(c)(i) is checked, the seller chooses the closing agent and pays for the Owner’s Policy and Charges. The buyer pays for costs associated with the buyer’s lender, if applicable.
- If 9(c)(ii) is checked, the buyer chooses the closing agent and pays for the Owner’s Policy and Charges, in addition to the costs associated with buyer’s lender, if any.
- 9(c)(iii) is a regional provision for the Miami-Dade/Broward area and effectively splits the costs differently between the parties.
It’s important to note that “Owner’s Policy and Charges” is explained in paragraph 9(c) of the contract and defines those charges to be the owner’s title policy and premium, title search and closing services costs.
In deciding which option to choose, the parties may refer to paragraphs 9(a) and 9(b) to determine what, exactly, they would be responsible for paying in association with the transaction. For example, if box 9(c)(ii) is checked, the buyer can look to paragraph 9(b) to see that buyer is responsible for the Owner’s Policy and Charges and any municipal lien search fee, in addition to the other named costs that are always paid for by a buyer. However, if paragraph 9(c)(i) is checked, the seller pays for those named costs. With paragraph 9(c)(iii) in play, these costs are allocated between the parties: the seller pays for the title search and municipal lien search charges and the buyer pays for the owner’s policy premium.
As you can see, the decision to check a box in paragraph 9(c) carries a lot of weight with regards to “who pays for what,” so it’s important for Realtors to understand this section – but it’s also very important for buyers and sellers so there aren’t any surprised parties at the closing table.
If you are debating whether or not to list your house for sale this year, here is the #1 reason not to wait!
The National Association of Realtors’ (NAR) Chief Economist Lawrence Yun recently commented on the current lack of inventory:
“Inventory coming onto the market during this year’s spring buying season – as evidenced again by last month’s weak reading – was not even close to being enough to satisfy demand.
That is why home prices keep outpacing incomes and listings are going under contract in less than a month – and much faster – in many parts of the country.”
The latest Existing Home Sales Report shows that there is currently a 4.1-month supply of homes for sale. This remains lower than the 6-month supply necessary for a normal market, and 6.1% lower than last year’s inventory level.
The chart below details the year-over-year inventory shortages experienced over the last 12 months:
Anything less than a six-month supply is considered a “seller’s market.”
Meet with a local real estate professional who can show you the supply conditions in your neighborhood and assist you in gaining access to the buyers who are ready, willing, and able to buy righ
RISISince the beginning of the year, mortgage interest rates have risen over a half of a percentage point (from 3.95% to 4.52%), according to Freddie Mac. Even a small rise in interest rates can greatly impact a buyer’s monthly mortgage payment.
First American recently released the results of their quarterly Real Estate Sentiment Index (RESI), in which they surveyed title and real estate agents across the country about the impact of rising rates on first-time homebuyers.
Real estate professionals around the country have not noticed a slowdown in demand for housing among young buyers; nearly 93% of all first-time homebuyers last quarter were between the ages of 21-35, with the largest share of buyers (51%) coming from those ages 26-30.
First American’s Chief Economist Mark Fleming had this to say,
“On a national level, mortgage rates would need to hit 5.6%, 1 percentage point above the current rate, before first-time homebuyers withdraw from the market.”
So, what is slowing down sales?
According to the last Existing Home Sales Report from the National Association of Realtors, sales are now down 3.0% year-over-year and have fallen for the last three months. If rising interest rates aren’t to blame, then what is?
Fleming addressed the cause, saying that:
“The housing market is facing its greatest supply shortage in 60 years of record keeping, according to the Federal Reserve Bank of Kansas City. The ongoing housing supply shortage will make it difficult for first-time buyers to find a home to buy, even when they are financially ready.”
First-time homebuyers know the importance of owning their own homes and a spike in interest rates is not going to keep them from buying this year! Their biggest challenge is finding a home to buy!
The National Association of Realtors (NAR) keeps historical data on many aspects of homeownership. One of their data points, which has changed dramatically, is the median tenure of a family in a home, meaning how long a family stays in a home prior to moving.
As the graph below shows, over the last twenty years (1985-2008), the median tenure averaged exactly six years. However, since 2014, that average is almost ten years – an increase of almost 50%.
Why the dramatic increase?
The reasons for this change are plentiful!
The fall in home prices during the housing crisis left many homeowners in a negative equity situation (where their home was worth less than the mortgage on the property). Also, the uncertainty of the economy made some homeowners much more fiscally conservative about making a move.
With the economy coming back and wages starting to increase, many homeowners are in a much better financial situation than they were just a few short years ago.
One other reason for the increase was brought to light by NAR in their 2018 Home Buyer and Seller Generational Trends Report. According to the report,
“Sellers 37 years and younger stayed in their home for six years…”
These homeowners, who are either looking for more space to accommodate their growing families or for better school districts to do the same, are likely to move more often (compared to typical sellers who stayed in their homes for 10 years). The homeownership rate among young families, however, has still not caught up to previous generations, resulting in the jump we have seen in median tenure!
What does this mean for housing?
Many believe that a large portion of homeowners are not in a house that is best for their current family circumstance; they could be baby boomers living in an empty, four-bedroom colonial, or a millennial couple living in a one-bedroom condo planning to start a family.
These homeowners are ready to make a move, and since a lack of housing inventory is still a major challenge in the current housing market, this could be great news.
WASHINGTON – July 3, 2018 – Homebuyers with a lower credit score pay thousands of dollars more for the same home than a buyer with an excellent credit score.
A Zillow analysis conducted in May finds that nationally, a borrower with an “excellent” credit score could get a mortgage with a 4.5-percent annual percentage rate. A similar borrower with a “fair” credit score could get a 5.1-percent rate. Over the lifetime of a 30-year mortgage, this means a buyer with a fair credit score can end up spending $21,000 more than a buyer with an excellent credit score for the typical U.S. home.
That difference is magnified in expensive markets. In addition to high home prices, the penalty for a lower credit score tends to be higher in more expensive areas.
In San Jose, where the median home value is $1.3 million, a buyer with a lower credit score can end up paying $129,000 more than a buyer with an excellent credit score over the full life of the loan.
Even if a homeowner doesn’t pay out the full 30-year term on a loan, the annual costs of a fair credit score can add up. A buyer with a fair credit score could pay $700 more every year on the typical U.S. home than someone with an excellent score.
A third of all buyers said determining how much home they could afford was a challenge, making it the most frequently named financing concern during the home buying process. Beyond the list price of a home, other costs like mortgage interest, property taxes and homeowners insurance can add up, impacting the overall affordability for buyers.
“When you buy a home, your financial history determines your financial future,” said Zillow senior economist Aaron Terrazas. “Homebuyers with weaker credit end up paying substantially higher costs over the lifetime of a home loan. Of course, homeowners do have the option to refinance their loan if their credit improves, but as mortgage rates rise this may be a less attractive option.”
Homebuyers with excellent and fair credit scores in Pittsburgh see the smallest difference in mortgage rates, and as a result, also see the smallest difference in lifetime mortgage costs among the country’s 35 biggest markets. A buyer with a fair credit score would pay about $9,000 more on the median Pittsburgh home than someone with excellent credit.
Copyright © 2018, Arlington Sun Gazette, Sun Gazette Newspapers, Springfield, VA.
NEW YORK – June 29, 2018 – Home improvements can rejuvenate a stale dwelling. But remodeling and renovations could set you back thousands of dollars for each room.
A “midrange minor kitchen remodel” – including hardware, countertops, flooring and a refrigerator – is about $21,000, on average, according to Remodeling magazine’s 2018 Cost vs. Value report. But with the right approach, you can give your abode some TLC without busting your budget.
“If you’re strategic with the planning, especially if you’re willing to put in a little sweat equity, there are definite simple fixes that you can make,” says Dan DiClerico, a home expert at HomeAdvisor.
Try these ways to update your home for less.
Rearrange the furniture
Here’s a solution that won’t cost a dime: a new room layout. You can work with what you already have to make your space feel new again. Consider ideas like moving the bed to the opposite wall or swapping the location of the sofa and chair in the living room.
Grab a paint brush
Slap a fresh coat of paint on the walls for a quick makeover. Hiring a professional to tackle the entire interior can set you back close to $2,000, DiClerico says. But you’ll cut costs by taking on the project yourself.
Don’t have the time or money to paint the whole house? Choose one or two areas that you spend the most time in, such as the living room or bedroom.
“If you’re able to do it yourself, certainly under $100 is going to get you a bucket of paint and all the necessary tools to totally transform that space,” DiClerico says.
Try the same tactic with furniture. Fresh paint or a new finish can revitalize old cabinets, tables, dressers and other items.
Replace fixtures and hardware
New light fixtures, faucets or cabinet hardware can give a room a completely different look and feel. Cosmetic changes can benefit your wallet, too. You can find cabinet handles and knobs at most home improvement and hardware stores for a few dollars each. Some faucets and shower heads reduce water use, which means you could save money each month.
Limit your upgrades
You don’t have to revamp every inch of a room. DiClerico suggests that you “splurge on the things you’re interacting with on a daily basis.” So rather than shell out half a year’s salary for a complete kitchen remodel, upgrade a few select items.
“You can do a sweep of appliances – the fridge, the range, the dishwasher – for a few thousand dollars or less,” DiClerico says.
Explore other ways to scale back on costs. You might purchase a coffee table or chair in lieu of a living room set, or install new flooring in a small, heavily trafficked location instead of every room.
Redecorating can be much more affordable – and just as effective – as major upgrades. You can cozy up a space and add a pop of color with throw pillows, lamps, area rugs or plants. Dress up windows with brand new curtains. Or, pick a statement piece for the wall, like a large work of art or mirror.
“It’s about zeroing in on the focal points in that space to get the bang for the buck,” DiClerico says.
Cover your furniture
Salvage couches and armchairs that have minor wear and tear with slipcovers. While getting a piece of furniture reupholstered or buying an entirely new piece can cost hundreds to several thousand dollars, you can buy a quality cover for less than $100.
Knowing when and where to shop can help you trim expenses. For example, January white sales are prime time for discounted bedding. Presidents Day sales in February often include furniture, while November’s Black Friday deals feature appliances. Map out your purchases accordingly, if you can.
Check thrift stores, yard sales and local online marketplaces like Craigslist throughout the year for cheap or free secondhand furniture and home goods.
“Making your home more beautiful, more functional, more energy efficient shouldn’t have to put you in the poorhouse or into debt,” DiClerico says. With careful planning, you can find solutions within your budget.
Copyright © 2018 The Associated Press, Lauren Schwahn. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. This article originally appeared on the personal finance website NerdWallet.
June 28, 2018
The median listing price for homes nationwide reached an all-time record in June, realtor.com® reports. List prices soared to a median of $299,000 this month, as a shortage of homes for sale and high buyer demand continued to push asking prices higher.
“Limited options, fast-selling properties, and escalating home prices have been a persistent challenge for would-be buyers,” realtor.com® notes in its June 2018 monthly housing trend report.
On average, homes sold in 54 days in June. Inventories increased 4 percent month over month, which is a typical seasonal increase, the report notes. On an annual basis, however, inventory is 4 percent lower.
Of the 100 largest markets, the following six saw listings spend 30 days or less on the market on average:
- San Jose-Sunnyvale-Santa Clara, Calif.: 23 days on market
- Seattle-Tacoma-Bellevue, Wash.: 24 days on market
- San Francisco-Oakland-Hayward, Calif.: 25 days on market
- Omaha-Council Bluffs, Neb.: 26 days on market
- Salt Lake City, Utah: 26 days on market
- Colorado Springs, Colo.: 30 days on market
“The pace of sales in the early days of summer continues to be as fierce and unforgiving as it’s ever been, especially for entry-level buyers,” says Javier Vivas, director of economic research for realtor.com®. “On the bright side, buyers saw more new listings hit the market than they saw last June, causing inventory to drop at a slower rate. However, much of the new inventory is composed of higher-priced, newer and larger homes, forcing a very hungry pool of buyers to adjust their budgets.”
Social media usage has become a part of modern culture, so why shouldn’t the real estate world plant its collective flag there? After all, it’s a powerful marketing tool that allows agents and brokers to connect with potential clients on a platform which they’re already using.
Well, it’s not as easy as it seems. As the social media landscape has expanded to include Facebook, Twitter, Instagram, Pinterest, LinkedIn, and more, it’s also become more complex. But while this seemingly endless opportunity represents the potential for great success, there are a number of mistakes one could make that will turn social media into a hindrance to success. Mistakes on social media can mean wasted time and resources, as well as your target market unfollowing your brand.
1. Not Interacting
The beauty of social media is that it gives agents the opportunity to interact directly with their potential audience. The goal of a post is not to blast out information but to promote engagement. So, if people are commenting or asking questions and the agent is not checking their notifications, potential clients may feel put off by the experience and take their queries elsewhere.
Be at the ready to provide timely and informative responses to all post engagements. Even something as simple as “thank you so much for commenting” can go a long way toward winning the hearts and minds of social media users.
2. Inconsistent Branding
To truly maximize exposure, real estate agents should use a variety of social platforms. When appearing on multiple social sites, it’s important to keep personal branding consistent.
Something as simple as using the same profile and cover photo (appropriately sized for each specific site) can help present a unified brand. Recognizing a familiar face contributes to the process of creating a bond, and potential clients will remember an agent’s photo before they recall their name. When prospects see an agent across multiple platforms, that will give the agent’s brand a larger presence in the mind of potential clients. However, while maintaining an overall brand consistency is important, agents and brokers should strive to post different content on each site.
3. Going Off-Script
While it might be tempting to wing it, agents should not just hit the record button and go. Script all video content thoroughly and rehearse it before filming, even when posting live content on social.
Video content is a great way to showcase homes, and social media is an excellent place to put videos to gain exposure. Agents can post videos of homebuying or homeselling tips or give virtual tours. Viewers enjoy watching videos and can connect more with the content in this format. Since we all digest video content on social media, it makes sense for agents to post their videos on those platforms.
Real estate professionals have to be trusted by their clients, and excessive “umms” and pauses don’t inspire the confidence needed to bring in new business. Agents and brokers should strive to keep their message concise and professional at all times. The idea of entering into a real estate transaction can be daunting for many, but when you speak with confidence, you’re likelier to inspire that confidence in your audience as well.
4. Posting Listings Exclusively
The fastest way to lose followers is to be all business all the time. If an agent posts nothing but listings with no engagement-focused posts to inspire conversations, the audience will become bored and click away. It is vital when marketing on social media not to appear to be spam. Homebuyers and homesellers are on social media for more than just real estate needs, and as such, they follow a lot of pages.
Try posting two listings per week, filling the rest of your feed with probing questions and valuable content that addresses buyer or seller concerns. Something as simple as a photo of an ornate bedroom with the caption, “What is something all master bedrooms should have?” can help start a conversation.
McLEAN, Va. – June 28, 2018 – Mortgage rates declined over the past week and have now retreated in four of the past five weeks, according to Freddie Mac’s weekly Primary Mortgage Market Survey. The 30-year fixed-rate mortgage dropped to an average 4.55 percent compared to last week’s 4.57 percent.
Sam Khater, Freddie Mac’s chief economist, says mortgage rates have settled down and stabilized over the past two months.
“The decrease in borrowing costs are a nice slice of relief for prospective buyers looking to get into the market this summer,” Khater adds. “Some are undoubtedly feeling the affordability hit from swift price appreciation and mortgage rates that are still 67 basis points higher than this week a year ago.”
Mortgage rate stats for the week of June 25
- The 30-year fixed-rate mortgage (FRM) averaged 4.55 percent with an average 0.5 point for the week ending June 28, 2018, down from last week when it averaged 4.57 percent. A year ago at this time, the 30-year FRM averaged 3.88 percent.
- The 15-year FRM this week averaged 4.04 percent with an average 0.5 point (unchanged from last week). A year ago at this time, the 15-year FRM averaged 3.17 percent.
- The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.87 percent this week with an average 0.3 point, up from last week when it averaged 3.83 percent. A year ago at this time, the 5-year ARM averaged 3.17 percent.
“As highlighted in our June Forecast, the economy and housing market overall are on solid footing this summer, which should support continued strength in housing demand,” says Khater. “Home price growth is still high, but is expected to moderate, and while sales activity has slowed, it’s primarily because of stubbornly low supply.”
© 2018 Florida Realtors®