June 23, 2017

Speaking of Real Estate

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Updated: 1 hour 14 min ago

Largest Source of Mortgage Funds in U.S. Tries to Help Homebuyers Struggling With Student Debt

Mon, 06/19/2017 - 07:59

Fannie Mae has come to recognize the problem people are facing when they’d like to buy a house but they’re hemmed in by tens of thousands of dollars of student loan debt. First, in calculating loan applicant’s debt-to-income ratio, the company is no longer factoring in debt that’s being paid by someone else. That means, for home buyers whose parents are making payments on their student debt, those payments won’t count against their DTI calculation. Other debt payments are also being taken out of the calculation if someone else is making the payments. So, if loan applicants are getting their car payments taken care of by someone else, those payments are taken out of their DTI calculation, too.

Second, if borrowers are making student loan payments that are smaller than what their original repayment agreement calls for, those smaller payments are factored into DTI calculation rather than the original payment amount. That means if the borrower is paying $100 a month rather than the original $500 a month that the repayment agreement called for, only the $100 a month is factored into DTI. Why might  borrowers be paying less than the original amount? Because a number of public entities have created programs to help people who are faced with making student loan payments but aren’t making much money. They idea is, once they start making more money, they can start paying their original payment amount. Prior to this change, Fannie recognized only the original payment terms when calculating DTI.

Third, existing homeowners can get improved repayment terms on cash-out refinancing if the loan is for paying down student debt. This change is really for parents who want to help their kids retire their debt or for people who already own a home and want to get rid of their student debt.

All three of the changes are already in effect, so if you have homebuyers who tried to get a home mortgage loan a few months ago and couldn’t because their DTI was too high, there’s a real chance they can reapply and get different results. That’s something to let your customers know about.

But there is more change coming, too. At the end of July, Fannie Mae’s maximum allowable DTI will rise to 50 percent from 45 percent. Once that change takes effect, loan applicants who have really struggled to meet DTI requirements now have an even better chance of  getting a loan approved.

The changes are detailed in the latest Voice for Real Estate news video from NAR. Also covered: Efforts by NAR and the federal government to increase the national homeownership rate, which has been stuck at a 50-year low since the downturn, and the increasing interest among foreign investors in smaller commercial properties in markets outside the big metro areas.

Access and share the video.





What to Know About Selling a Home With a Reverse Mortgage

Mon, 06/05/2017 - 09:00

By Greg Geilman

Photo credit:

It’s difficult to understand how a reverse mortgage works and how selling a home with one differs from the standard procedure. The truth is that it’s very similar; the major difference is the way the lender manages the loan amount if it exceeds the home price. If you’re working with a client who has a reverse mortgage, here are four questions to help you better understand the process.

What Is a Reverse Mortgage?

It’s much like a regular mortgage, but the way in which the money is paid out is a little different. With a reverse mortgage, your client is leveraging the home equity they’ve built up, and the loan is paid out in a lump sum, line of credit, or set monthly payment.

Your client can use this money to pay medical expenses, finance home improvements, or even subsidize their monthly income. The amount your client can get from a reverse mortgage depends largely on their age and the equity they have in their home. As the bank pays out the reverse mortgage to your client, the interest on that principal grows.

How Is a Reverse Mortgage Paid Back?

Unlike a traditional mortgage, a reverse mortgage may not have a set maturity date, or the date the loan must be repaid in full. The standards are set in the loan and may define maturity as the date that:

  • The borrower dies.
  • The borrower sells the property.
  • The borrower moves out of the home.
  • The borrower fails to provide reasonable upkeep or pay property taxes.

Once your client sells their home, the lender has first right to the proceeds to recoup any outstanding balance on the reverse mortgage (unless there is also a lien on the home for unpaid property taxes). If the outstanding loan amount is less than the sale price, your client or their next-of-kin will receive the difference.

Are There Limits on Selling a Home With a Reverse Mortgage?

The maturity date of a reverse mortgage is most often when the borrower sells their home. So the sale of the home is the most common part of the reverse mortgage process. With a traditional mortgage, you expect your client’s home value to exceed the remaining balance of their mortgage at resale. But because the borrower of a reverse mortgage is typically being paid in installments, the mortgage principal increases rather than decreases. That makes it quite possible that the loan amount could eventually exceed the resale value of the borrower’s home. Therefore, when working with a seller who has a reverse mortgage, you should focus on factors that can impact their home value the most, such as renovations, property condition and maintenance, and the status of property taxes.

What If the Home Has Lost Value?

For a client whose property value has fallen below the amount they borrowed on a reverse mortgage, you may need to conduct a short sale. Fortunately, reverse mortgages are known as “nonrecourse loans,” which means the lender cannot go after your client or their heirs for the difference between the outstanding loan amount and the final sale price of the home. But short sales require the lender’s buy-in before you can list the home at a lower value. So the lender may require an appraisal to confirm the value before agreeing to the listing.

Greg Geilman, e-PRO, is managing partner of the Freedman Geilman Group at RE/MAX Estate Properties in Manhattan Beach, Calif.


Sponsor Webinar: Reaching Today’s Renters

Tue, 05/30/2017 - 16:00

Rental management softeware company AppFolio is hosting a webinar on using the latest communication channels to reach rental households to expand your marketing reach. REALTOR® Magazine is promoting the webinar because it believes there could be information in it that’s valuable to rental property specialists, but the magazine isn’t participating in the webinar and is not endorsing its contents. Below is the company’s description of its free webinar:

Amplify Your Brand in 9 Surprisingly Simple Steps

Marketing in property management evolves as quickly as renters do. They want the latest and greatest in technology, and it’s up to you to connect with them on the channels they prefer! Join Barbara & Rebecca for 9 easy ways to amplify your brand with the best in marketing today.

Benefits of the webinar:

  • Learn how to integrate current trends into your marketing strategy
  • Adopt time-tested methods for increasing engagement across all channels
  • Make brand advocates out of your team members in the community
  • Personalize your communications, and let your uniqueness shine

When: Thursday, June 15, at 2 p.m., Eastern time
Where: Your computer or phone
Presenters: Barbara Savona and Rebecca Ross of Sprout Marketing


Good Opportunity to Learn About Self-Directed IRAs

Mon, 05/22/2017 - 14:41

Bill Neville

The Entrust Group provides professional services for people who use a self-directed IRA as part of their savings plan. The company is hosting an upcoming webinar to educate you as a real estate professional about how to use the tax-advantaged accounts as part of your savings strategy. The webinar is June 14 at 11 a.m., Pacific time (2 p.m., Eastern time). Below is a description provided by the company of its webinar, which REALTOR® Magazine is promoting but not hosting:

Now, more than ever, people are investing in real estate as a way to save for retirement. For 35 years, the number of The Entrust Group’s clients investing in real estate in their self-directed IRAs has grown consistently. Each year, The Entrust Group uncovers real estate investment trends based on data from Entrust clients and respected organizations, such as the National Association of REALTORS®. Join Bill Neville, business development manager at The Entrust Group, as he discusses the company’s latest report. He’ll be talking about 1) Entrust IRA real estate investment trends, 2) national real estate trends, and 3) three reasons to invest in real estate with an IRA. Bill Neville will answer questions and make a free copy of the 2017 Real Estate Investor Market Research Report to attendees.

Program details:

Understanding Self-Directed IRAs
Free webinar for real estate professionals
When: June 14, 11 a.m., Pacific time (2 p.m., Eastern time)
Where: Your computer or phone
Presenter: Bill Neville, Business Development Manager, The Entrust Group
Register for the webinar.

REALTOR® Magazine believes real estate professionals will find value in hearing a company that specializes in self-directed IRAs explain how this type of investment works, share trends on their use, and answer your questions about them. The webinar is sponsored by The Entrust Group and REALTOR® Magazine is letting real estate professionals know about it but it did not participate in development of the webinar and does not endorse its content.

Could Alexa Be Your Client’s Agent?

Thu, 05/18/2017 - 17:55

Smart speakers might be the latest touch point connecting consumers with real estate data. Users of Amazon’s Echo can already access mortgage calculators and automated valuation tools. So it makes sense that NAR’s Multiple Listing Issues and Policies Committee would begin to investigate policies to guide the development of these new tools in accordance with the IDX display rules.

Real estate pros should lead the way in applying new technology to the industry, said Sam DeBord.

Voice-activated technology is becoming increasingly popular, not only for its hands-off ease but also as a way to make more information accessible to those who have disabilities. Although MLS policy doesn’t currently allow audio delivery of IDX property listing information, that could soon change. Miguel Berger, CEO of audio technology company Voiceter Pro, LLC, contacted the MLS Technology and Emerging Issues Advisory Board about the “skill” (a term for something akin to a smartphone app) his company created to enable consumers to search for properties using voice commands spoken to the Amazon Echo device. After initial setup, Alexa will respond verbally with the top three search results and email that information to the consumer. The company is currently pursuing similar technology integrations, namely through Google Home and Microsoft’s Cortana.

Does Amazon Echo have a future in real estate?

At the REALTORS® Legislative Meetings & Trade Expo in Washington, D.C. this week, the advisory board proposed that the committee look at how rules might be changed to disseminate IDX information to consumers through these smart speakers.
Some expressed concern about possible unintended consequences of the technology. Cathy Libby, CEO of MLS Maine Listings, questioned how the listings might be prioritized, if more than the initial three returned to a user in response to his or her query. “How are those listings determined as far as what’s being read back to the consumer?” she asked. She also worried about industry disintermediation: “Are we further eroding the use of a real estate agent?”

In the end, the majority of committee members preferred to proactively address the issue before the technology really takes off. “Do you want broker members to build the best new technology, or do you want someone who isn’t a broker building new technology?” said Sam DeBord of Coldwell Banker Danforth in Seattle, who expressed favor for the development of a new policy. “We fall behind the curve when we hold our brokers back.”

Fox News Host: Tough Road for Tax Reform

Wed, 05/17/2017 - 14:15

Congress likely will pass health insurance reform this year, but it’s less certain whether lawmakers will be able to tackle tax reform before switching their focus to re-election in 2018, “Fox News Sunday” host Chris Wallace said at the REALTORS® Legislative Meetings & Trade Expo in Washington, D.C., on Wednesday.

Chris Wallace talks tax reform at the REALTORS® Legislative Meetings & Trade Expo in Washington, D.C.

Health reform is the most pressing concern currently, and the consequences of not passing a bill would be so significant for Republicans, Wallace said, that lawmakers are likely to hammer out a compromise between the House and Senate later this year. No Republicans “want to go in [during re-election] and say they got nothing done,” Wallace said. “I’ve got to think they’ll get some of that through.”

Tax reform is another matter. It affects the entire economy and every industry that has a preferred tax benefit will be lobbying hard, he said. What’s more, lawmakers “only have a little over a year to get their agenda through Congress before campaign season starts.”

NAR is advocating for a tax-reform bill that preserves incentives for homeownership and commercial sales. A study commissioned by NAR, which was released at the conference, estimates that 70 percent of middle-income homeowners would pay more taxes under the reform concepts House Republicans and the Trump administration are exploring.

Wallace said President Trump inherited a difficult political climate in Washington to get his pro-business agenda through Congress, despite the Republican majority in both chambers.

But Trump has also contributed to the challenges, Wallace said, by alienating Democrats with his rhetoric and raising ethical and legal concerns with his response to the Russia investigations, his firing of FBI Director James Comey, and his sharing of sensitive intelligence with the Russians. These matters, Wallace said, are a “case study in how easy it is to lose focus on the economy.”

In response to a question from an audience member, Wallace said he will make it a point to use lessons of the 1986 tax reform effort to shape his news coverage of the current one. During the 1986 push, the savings & loan industry collapsed, and the federal government ended up owning millions of properties. “Using history as a guide” to the “unintended consequences” of policies is something that would add value to his reporting, Wallace said.

REALTORS® Are Greener Than You Think

Tue, 05/16/2017 - 14:45

If you’re an environmentally conscious real estate professional, you’re in good company. The house was packed at the Land Use, Property Rights, and Environment forum during the REALTORS® Legislative Meetings & Trade Expo in Washington, D.C., on Tuesday, with a ballroom full of practitioners eager to discuss pressing environmental concerns in their markets.

Photo credit: Morguefile/slain

But these weren’t fringe treehuggers of the real estate community; they were, as Amanda Stinton, director of the National Association of REALTORS®’ Sustainability Program, explained, leaders in a growing chorus of real estate pros calling for energy efficiency and environmental awareness. Stinton presented NAR’s REALTORS® and Sustainability 2017 Report—the first survey of its kind for the association—at the session. With nearly 3,000 respondents nationwide, the survey found that 71 percent believe energy efficiency promotion in listings is very or somewhat valuable, and 86 percent have taken steps to reduce waste and energy usage in their business and at home.

“REALTORS® are committed to the reduction of energy waste,” Stinton said. Still, the path to turning their ambitions into reality is rough. Only 43 percent say their MLSs support green data fields; only 24 percent say tiny homes—a trend growing in popularity among consumers who want to reduce their carbon footprint—are available in their market; and 70 percent say they have been involved in zero transactions involving a home with green features in the last 12 months. “We may have a desire to promote energy efficiency but not an effective path to do so.”

A couple of interesting questions came from attendees, notably when  Bruce Elliott, president of the Orlando Regional REALTOR® Association, asked how agents can justify a higher asking price for a green home. Stinton acknowledged that it often depends on the market and the buyer but noted that “we are starting to see feature-by-feature premiums.”

John Rosshirt, CRS, GRI, broker-associate at Stanberry & Associates in Austin, Texas, asked whether the sustainability report revealed any discrepancies between what real estate professionals and consumers considered desirable green features in homes and neighborhoods. Stinton said differences do exist: For example, when it comes to walkability, “there’s a disconnect between what practitioners think and what consumers think. Consumers scored it higher.”

Insana: Millennials Will Keep America’s Growth Engine Humming

Tue, 05/16/2017 - 12:15

Ron Insana

Half a dozen years after the economic crisis the American economy is strong and poised to see continued growth as millennials enter the workforce and form households, CNBC commentator Ron Insana told several thousand REALTORS® at the Legislative Conference & Trade Expo in Washington on Tuesday.

Economic strength is likely to survive even if the administration of Donald Trump is engulfed in crises related to investigations into his campaign’s Russia ties, conflicts of interest, or even over his carrying out his oath of office, a question that’s being raised over his recent handling of sensitive intelligence.

What such a crisis would likely do is delay congressional action on the pro-business agenda Trump brought into office, Insane said. Priorities such as tax reform and health insurance reform would unlikely get through Congress before 2018 even though Congress and the White House entered the year with hopes of getting those passed quickly.

Insana said the United States came out of the economic crisis in better shape than other advanced economies and today stands in a strong position in part because of the energy independence it achieved through fracking and increased natural gas production—what Insana calls a key step toward a Fortress America doctrine of economic independence. The country also continues to grow important high-tech industries that will transform how the economy works for millennials, the largest generational cohort in the country’s history.

“No one’s ever made a profit betting against the American economy,” he said.

Against this positive economic backdrop, millennials will increase their rate of household formation, the first step toward entering the homeownership market in large numbers. That, along with continued lag in housing inventories driven in part by shortages of constriction labor, will keep upward pressure on housing prices, exacerbating affordability problems. Already some housing sectors—most notably high-end rentals in big metropolitan areas like New York City—are showing signs of bubble conditions, he believes.

If Trump is removed from office before his four-year term and Vice President Mike Pence assumes the presidency—a distinct possibility, Insana said, because of mounting constitutional concerns in Congress—Republicans’ pro-business agenda could see new momentum. Action could be taken on tax reform, health reform, and infrastructure investment. But if the crises help Democrats take the House as well as the Senate in 2018, the new dynamic would imperil that agenda.

The conference runs through Saturday, May 20. Almost 9,000 REALTORS® and others are in Washington to attend sessions and meet with their members of Congress to talk about tax reform, flood insurance reauthorization and reform, secondary mortgage market reform, and other priority legislative issues of real estate professionals.

Insana photo: WalkingGeek (Creative Commons)

Solar Boosts Home Values But Selling Can Be a Trial

Mon, 05/15/2017 - 08:37

Homes with solar panels tend to sell for higher prices than comparable homes with conventional energy, studies show. One study, released two years ago by Lawrence Berkeley National Laboratory, found solar homes selling for a 15 percent premium. But selling these homes can require extra preparation if you’re an agent in the transaction.

The biggest issue is how the panels were financed. If the owner simply bought the panels and the accompanying inverter, there shouldn’t be any problem for buyers. But if the panels and inverter were financed or leased, some hurdles can arise and you can provide the greatest value by understanding these hurdles so you can help your clients avoid getting snagged.

If the panels were leased, then you will need to make sure the lease contract is in order and transfers properly to the buyer. That shouldn’t pose too much problem if the seller has the contract in order. But if the panels were financed using public assistance, the hurdles can be higher.

There are different forms of public assistance for solar panels but the one you need to be the most aware of is PACE, a federally funded state and local program that stands for Property Assessed Clean Energy.

The challenge with PACE is the lien that’s placed on the home. Homeowners use the assistance to finance the purchase and installation of the panels and pay the assistance back over time, typically through their property tax bill.

If the borrower defaults on the PACE loan, the lien that’s placed on the home is in a super-priority position, which means it must get paid back first, just liked a tax lien. That can pose a problem for homebuyers trying to obtain mortgage financing to buy the home. Loan programs differ, but under some programs, including some that rely on federal backing, lenders aren’t able to make loans as long as that lien is in place.

This is where you can help, because knowing what loan programs allow funding to go forward when with PACE funding attached is a time- and money-saver.

The possibility of financing hurdles in some loan programs shouldn’t obscure what’s good about homes with solar panels. First, the home’s energy bills can be lower, because each kilowatt of power the panels generate is one less that has to be paid to the utility company. Second, homeowners can get a federal credit each year on their taxes. The state might offer its own credit as well.

Currently, about 1.2 million homes have solar panels and the trend is pointing steeply up. According to data from the Solar Energy Industries Association, the cost of solar panels and their installation has dropped 70 percent over the last decade or so and the growth of solar panels has risen by a similar percentage during that same period.

Bottom line: More homes will have solar panels in the years ahead and that means the chance of you having to list or sell a solar home is increasing every year. The panels pose a challenge but they are also a big business opportunity. Homes are more valuable with them and many people want them because they like the idea of using renewable energy.

The opportunities and challenges are detailed in the latest Voice for Real Estate news video from NAR. View and share the video.

Tax Plan Could Hurt Homeowners

Tue, 05/02/2017 - 13:45

The tax plan released by the Trump Administration earlier this week puts the real estate industry at the center of the debate over how to make the country’s tax code simpler, fairer, and better at generating economic growth in the United States. For that reason, it’s important for real estate professionals to dig below the surface to see how the plan could change the tax picture for most homeowners.

The plan calls for reducing the number of tax brackets for individuals, lowering the rates on the remaining brackets, and doubling the standard deduction while eliminating all itemized deductions except those for mortgage interest and charitable contributions.

On the surface, doubling the standard deduction and retaining MID might seem to put more money into the pockets of many middle-income households without compromising the federal government’s historic commitment to home ownership. And in fact it would for some households.

But for most middle-class households who own homes, the new standard deduction won’t be high enough to offset what they would lose on the itemization side. Yes, they would retain the option of taking the deductions for mortgage interest and charitable contributions, but unless these amounts totaled more than the standard deduction, it would not make sense to claim them. Also, they would lose the deductions for real estate taxes, mortgage insurance premiums, state and local taxes, as well as others, such as the medical expense deduction. There are also changes to the treatment of personal and dependent exemptions that will change one’s tax calculation. The net effect on many or even most homeowners would be a loss. In some cases, a big loss.

Take a single female who’s earning $65,000 a year and paying $1,000 a month in rent in Colorado. She decides to make a little higher monthly payment to become a homeowner. She puts 5 percent down on a $265,000 condo, which increases her monthly housing costs to $1,193 (principal and interest). That’s a common scenario for a first-time buyer like her, because while her costs go up, she now has a home of her own and the chance to build equity over time.

But under today’s tax code, her monthly costs actually go down, according to an NAR analysis, because when she claims all of the itemized deductions available to her as a home owner, she ends up with a net tax benefit of over $3,300, or roughly $275 a month, compared to what she would get by taking the standard deduction. When that $275 a month is factored into her monthly housing costs, she’s paying significantly less than she was as a renter.

Under the Administration’s tax plan, that advantage goes away almost entirely because she can only deduct her mortgage interest and charitable contributions Without the option to deduct real estate taxes, state and local taxes, and mortgage insurance premiums, her net tax advantage over taking the standard deduction falls to a little more than $150. Although that’s still a net gain, it’s just a shadow of her current benefits and not nearly enough to bring her monthly housing costs down to what she was paying when renting.

Clearly, the tax picture will differ depending on your situation. For households in higher-tax states, the benefit of itemizing is higher. And for second-home owners, the net tax benefit of itemizing can be substantial. On balance, though, according to different scenarios NAR has run, homeowners are going to come out the losers under the Administration’s tax plan.

Tax experts estimate that 95 percent of homeowners today would find it makes more sense to take the standard deduction rather than itemize under the Administration’s plan. That should be an alarming statistic to real estate professionals, because it means millions of homeowners would be paying more in taxes than they pay today. The tax plan does not preserve homeownership by preserving MID; it devastates homeownership, and it does it in three ways:

1. Removes or largely reduces the tax incentive of owning a home instead of renting one for most people.

2. Discriminatorily raises taxes on homeowners more than on renters.

3. Causes a drop in the value of homes by more than 10 percent.

Separate from the  changes the tax plan would make to household’s homeownership calculation are other changes that could affect real estate professionals. These include the proposal to reduce the corporate tax rate from 35 percent to 15 percent and to extend that rate reduction to small businesses and pass-through entities.

NAR Senior Tax Policy Representative Evan Liddiard walks through different scenarios on how the tax plan affects households in a recorded webinar. It’s a good way to dig below the surface to see how the proposed changes could affect real estate. Before taking a stand one way or the other on the tax plan, you’re encouraged to get a sense of how it could affect home owners by watching the presentation.

Watch the recorded webinar.

Access the slides used in the webinar.

Also, Liddiard and NAR Deputy Chief Lobbyist Jamie Gregory walk through NAR’s concerns in a video with Jon Boughtin of NAR Media:

3 Ways to Promote Your Town

Tue, 05/02/2017 - 06:41

Point State Park in downtown Pittsburgh.
Credit: Meg White/REALTOR® Magazine

The real estate professionals who’ve established themselves as community advocates and local economic experts are often the more successful ones in any given market. But how did they get there?

One organization that can point the way is the National Main Street Center, an independent subsidiary of the National Trust for Historic Preservation. The group, which has been working for more than three decades to bolster historic downtowns and neighborhood commercial districts, is convening its annual Mainstreet Now conference this week in Pittsburgh. REALTOR® Magazine is on hand to glean hints that can help real estate pros improve their business and marketing efforts.

Here are three examples from Mainstreet Now speakers of how volunteers, staffers, and business owners have highlighted what makes their town special.

  1. Write the story of your town. Publications large and small regularly seek free, quality content from locals. But that doesn’t mean you should limit yourself to pitching a real estate column. Mike Jackson, an architect in Springfield, Ill., recommended that attendees think about ways to promote their community through a regular column in the local newspaper or its website. He suggested write-ups that celebrate local businesses’ “birthdays,” or posts that compare historic photos of what the town center looked like in the past with modern ones. “That’s a great regular feature to do,” he says. “It’s very clever, and it’s not that hard to do.”
  2. Show local businesses the money. Dionne Baux, director of urban programs at the National Main Street Center, notes that small-business owners are often eligible for special grants, fast-track permitting, and favorable lending terms under local, state, and federal programs. The problem is they often aren’t aware of what’s available. “Incentive programs can be buried,” she says. “How are you communicating these incentive programs to small-business owners who do not have time to research this?” Such a strategy works best for real estate pros in the commercial sector, but small-business owners buy homes, too!
  3. Get involved in your area’s big event. Many cities and towns have at least one event—an art walk, a car show, a special shopping event, or an ethnic or historic celebration—that brings the public to Main Street. Make sure your business is represented there. Kathy LaPlante, senior program officer for the National Main Street Center, notes that it’s not just restaurants and retail establishments that can benefit from these events. “Any kind of business can be involved in an art walk,” she says, noting all a brokerage would have to do is give space to an artist (though offering free tchotchkes with your logo on them can’t hurt, she adds). Even if you’re not directly involved, she says, “Open your door. Have a popcorn machine.” You never know when your interactions on Main Street will lead to a new client.