Speaking of Real Estate
The improving U.S. economy and strengthening dollar provided a welcoming backdrop for the National Association of REALTORS®’ first foray to the major global real estate exposition known as MIPIM held this week in Cannes, Frances. More than 21,000 attendees from 93 countries have gathered to explore global investment opportunities at the trade show.
The eye-catching 1,200 square-foot NAR-U.S. Pavilion highlighted the association’s commitment to global commercial interests while raising awareness about top markets for foreign investment in the United States. The pavilion showcased three robust U.S. markets that are internationally-recognized for their success in attracting foreign investment: Miami, Chicago, and Birmingham, Ala. “There are quite a lot of connections to be made here at MIPIM,” said NAR Treasurer Mike McGrew, who is part of NAR’s delegation at the show.
Attendee Cynthia Shelton, a commercial practitioner with Colliers International from Orlando, Fla. and current Committee Liaison to the NAR Leadership Team was energized about the NAR’s presence at the show. “This is going to make the U.S.A. the place to be, to invest in even more than it is now,” she said, in an interview from a MIPIM broadcast on YouTube. “REALTORS® represent the boots on the ground. We’re hoping to bring more investors to the U.S. to invest in things like office buildings, residential developments, and retail. When investments happen, cities give credits, get more taxes, and allow us to develop better projects which helps our schools and employers.”
The wide range of countries at the show— from Belgium to Brazil— is generating considerable buzz. “Governments have invested large sums to attract attention from buyers, developers, and interested parties,” said Christopher Zoller, CRS, and 2015 residential president of the Miami Association of REALTORS®. “We are getting lots of inquiries here from people looking for investors or investments, developers or developments, small personal purchases or large scale opportunities. It is exciting to see the global scale of real estate excitement.”
The CCIM Institute has partnered with NAR at the event to showcase their education platform and the value of their prestigious professional designation. After being away for several years, participating in the MIPIM event “has given us the ability to seek out significant business relationships for our members,” said 2015 CCIM President Mark Macek. “As an organization with members in over 30 countries we look forward to using this opportunity to move CCIM forward.”
NAR’s presence at the show has broadened awareness of the role of REALTORS® in commercial and global real estate. Approximately 70,000 NAR members offer commercial brokerage and related services. An additional 283,000 members are involved in a combination of residential and commercial work.
Real estate professionals always talk about giving the homes they sell more personality. Of course, that usually comes in the form of inspired staging, bold paint jobs, and creative landscaping. Rarely do they mean it so literally as to give the house its own Twitter account and let it tweet to buyers.
But truth is stranger than fiction.
Bob the House — a three-bedroom, one-and-a-half-bath ranch in the Chicago suburb of Mount Prospect — has been tweeting about his journey on the market since October. You’ll find Bob to be a rather inspirational house, tweeting messages of positivity and hope on a regular basis, along with fanfare for the Chicago Cubs and humorous updates about his search for the right family. (“Six showings today! You like me, you really like me!”)
Here’s the open secret: It’s not really Bob who’s doing the tweeting. It’s his “handler,” Rich Burghgraef, an account executive with sales consulting firm Randolph Sterling, Inc. Burghgraef writes in a blog post that he created Bob, whose name comes from the street the house lives on, Robert Drive, as a way to get away from typical advertising tactics. It seems Bob was a hit, with showings of the home going from one or two a weekend to six and eight after the Twitter account debuted. It may have even been responsible (or at least contributory) to the ultimate happy ending, as Bob tweeted on March 1: “My new family moved in on Friday. Thank you all for taking an interest.”
“I learned long ago [that] people will buy from people they know, like, and trust,” Burghgraef writes in his blog post. “However, when you are talking about selling a house, nobody cares about the person selling the house. What buyers care about is whether the house can be their next home.”
Burghgraef says that he used Bob to make a personal connection with buyers, not just to throw marketing messages of “buy me!” at them. Bob would tweet about the school that taught him to tweet (so there’s a good school in the neighborhood!); his friend, the stop sign (safety first!); and his stepson, the swing set (don’t you see your family here?). The home’s Twitter account gave buyers a new way to “fall in love with him even before stepping in for a showing,” Burghgraef says.
“I work with a lot of newer salespeople, and one of the common frustrations they come to me with is how they lose confidence in the product or service they sell because the competition came in at a lower price,” he writes. “If you truly understand and are passionate about the fact that you have the best solution for your client, the only true competition is apathy.”
Who was Bob’s competition? It could have been the comp down the street selling for $5,000 less, Burghgraef says. But that was still no match for Bob.
“He just needed to find a different way to make you fall in love with him,” Burghgraef says.
An effort is under way in the Senate to renew legislation that spares underwater homeowners from having to pay income tax on mortgage debt forgiven by a lender, one of the chief supporters of the tax-relief provision told a group of politically active REALTORS® during NAR’s Federal Policy Conference in Washington.“I can’t make sense of anyone having to pay tax on income they never see,” Sen. Dean Heller (R-Nev.) said at NAR’s Federal Policy Conference.
Speaking on Feb. 5, Sen. Dean Heller (R-Nev.) said he is working with Sen. Debbie Stabenow (D-Mich.) to again extend a provision that Congress renewed for 2014, which lapsed on December 31. The Heller legislation, the Mortgage Forgiveness Tax Relief Act, would exempt forgiven mortgage debt from taxation through the end of 2016.
Heller and Stabenow are both members of the tax-writing Senate Finance Committee. Heller is also chairman of the Senate Banking, Housing and Urban Affairs Committee’s Subcommittee on Economic Policy.
Although he didn’t give a timetable for when the Senate might move forward on the measure, Heller indicated that he considers passing such a bill a priority and would like to see it happen quickly. He said that as a lawmaker from Nevada—which was particularly hard-hit by the housing downturn several years ago and has yet to fully recover—he especially aware of the severe impact falling home prices can have on home owners.
“I can’t make sense of anyone having to pay tax on income they never see,” Heller said.
Heller also said he thinks a deal on broader changes to the tax code is “within our reach,” although Hill staffers who spoke at the conference indicated that fundamental divisions over the issue between Republican lawmakers and President Obama will make achieving progress hard, particularly if the sides do not find common ground by late 2015.
One way the government could move ahead on tax reform is to reach an agreement on how to modify taxes on corporations, which Republicans on Capitol Hill and Obama agree should be a priority. The White House and Congress are further apart when it comes to the way the tax code treats individuals, because Obama has proposed raising taxes on the highest earners—a non-starter for Republicans, analysts say.
A key concern for some lawmakers, however, is that tinkering with corporate taxes without also providing relief to individuals would be unfair to small business owners such as real estate professionals, who often operate their businesses as limited liability companies (LLCs) or S corporations, meaning that income they generate passes through to their owners, who pay tax on it at their individual rate.
The days of filling out the HUD-1 settlement form and getting a Good Faith Estimate (GFE) from the lender are winding down. On August 1, those two forms are going away. The Truth in Lending Act (TILA) disclosure form is going away, too. Replacing them are two new forms: the Closing Disclosure and the Loan Estimate. You can familiarize yourself with these new forms on the website of the Consumer Financial Protection Bureau (CFPB), which has taken over administration of the Real Estate Settlement Procedures Act (RESPA) from HUD. Just go to CFPB.gov and type in the name of the forms in the search box.
There are also new rules for the closing procedure. One rule requires all forms to be ready three days prior to closing. NAR is recommending you actually get everything ready seven days prior to closing, so when you go into the three-day period, you don’t have to make any changes. Because making changes as the clock winds down comes with a cumbersome set of hurdles.
What this means is, you and the other settlement service providers, including the lender and title agent, are under the gun to get everything squared away earlier than you have to today. And the buyers and sellers have to be cooperative as well, because if last-minute changes are made, a new three-day waiting period kicks in, at least in some cases.
The good news is, you have until August 1 to get familiar with the new forms and learn about the new closing procedures, and NAR is hosting a series of webinars on the topic. To learn when the next one is, go to Realtor.org/respa.
The video above, with Ken Trepeta of NAR Government Affairs, provides a concise overview of what to expect and also shares some tips on how to decrease the likelihood of snags in this new environment.
The CFPB’s goal in making these changes is to increase transparency for consumers. Start your education process by accessing the 5-minute video.
The dollar is strengthening, so you would expect institutional real estate investors from outside the U.S. to hesitate before buying here. But that’s not happening, because the relative stability of the U.S. economy and commercial real estate markets offsets the higher buying costs. That’s one of the takeaways from Scaling New Heights, a 2015 commercial real estate outlook from NAR, Deloitte, and Real Estate Research Corporation/Situs, which the groups released February 5.
What’s more, big buyers from outside the U.S. aren’t just looking at properties in New York, L.A., Washington, and Miami; they’re looking at properties throughout the U.S., including secondary markets.
That means buyers from London or Toronto might be interested in your apartment or office property in Omaha or Indianapolis. What investors are looking for, says George Ratiu, NAR’s manager of quantitative and commercial research, is higher yield, and they can often get that more readily in secondary markets than they can in the big markets.
If you have commercial properties in even smaller, “tertiary” markets, your buyers will probably be mainly from the area or region, as they always have been, Ratiu says.
Looking ahead, expect financing to be more widely available this year than in the previous few years. That’s because all the major sources of financing are back: pension funds, commercial banks, institutional investors, even commercial mortgage backed securities (CMBS), which virtually disappeared during the recession. Today they account for about 30 percent of financing.
Despite the improved availability of money, you still have to have a performing asset to get financing at the best terms, as you would expect.
All in all, it’s a good time to be in commercial real estate, because the momentum is on the upswing.
Learn more about the findings in the video with NAR analyst George Ratiu.