Orange County October Events

Advertisements

Homeownership and Well-Being: A Complicated Relationship

Homeownership has come to represent security and wealth—the American Dream, realized, for millions who place their stake through property. There is evidence, even, that homeownership lends itself to overall satisfaction.

Financially, homeownership is also associated with well-being, according to a new report by the Consumer Financial Protection Bureau (CFPB). The CFPB defines “financial well-being” as “a state of being wherein a person can fully meet current and ongoing financial obligations, can feel secure in their financial future and is able to make choices that allow them to enjoy life.”

The first factor is key. The ability to afford a home affects sense of well-being, the report shows. The CFPB assigned respondents to a survey, on a scale of zero to 100, scores of well-being. In comparing homeowners and renters, homeowners averaged a 58, while renters averaged a 49. (As a whole, respondents to the survey averaged a 54.) Generally, Americans in good enough financial straits (in the context of income and savings) are in a position to purchase a home; the capacity to own, therefore, rather than ownership itself, is a predicator of well-being.

Affordability is also impactful in that those with a lower share of their income spent on housing have higher scores of well-being. Respondents paying more than 50 percent of their income on housing averaged a 46.5, roughly 10 points below the 56.51 of respondents who shell out 30 percent or less.

Respondents with “non-retirement investments” have higher scores of well-being, as well. (A house, often, is an appreciating asset, building wealth, as other investments do, over time.) Respondents with even one non-retirement investment averaged a 62, while those without averaged a 51. (Real estate, relatedly, has ranked as the No. 1 investment in several studies.)

“Housing satisfaction” is connected similarly. Respondents “very satisfied” with the place they live averaged a 60; those less than “very satisfied” averaged a 50. One distinction, however: The ability to improve level of satisfaction (buying in a more costly but safer neighborhood, for example) hinges on having the wherewithal to do so.

Financial well-being is also linked to homeownership in unanticipated ways. According to the report, age, education and physical health are the top three influences on financial well-being. Age has implications: Americans at a certain life stage, for instance, could be of the perception that “now” is the time to own a home. If they do not meet that expectation, their sense of well-being could suffer.

A cushion for emergencies, likewise, is related. Respondents with access to at least $2,000 for the unexpected (within 30 days) averaged a score of 62—leaps ahead of the 39 for those without. On the other side of the coin: Respondents who have experienced a “financial shock,” such as a major home repair, averaged a 52, while those who have not averaged a 57.

“The strongest relationships to financial well-being appear to be related to savings and security nets,” the report states. Homeownership, for most, is both—but its relationship to well-being? It’s complicated.

Source: Consumer Financial Protection Bureau (CFPB)

For more info, please visit : RIS Media

7 Real Estate Ideas That Deserve to Die

Just because everyone believes something is true doesn’t make it so.

broken "idea" light bulb

Conventional wisdom dies hard. Popular perceptions may drive the decisions you make about your real estate career, from how you market your business to what your office should look like. But longstanding beliefs—these days amplified by social media bubbles and spin—can be flat wrong. Through research, crowdsourcing, and interviews with industry experts known for their skeptical eye, we uncovered some of the most questionable dogmas, along with reasons they should be dismissed. Reconsidering these ideas may embolden you to challenge other dubious notions you encounter as you serve clients and manage your career.

1. DIY tendencies will lead to more FSBOs.

Today’s do-it-yourself culture—driven largely by the explosion of information available on the internet—is not causing more people to try to sell their homes on their own, despite fears to the contrary. If you examine the news reports about the supposed rise in FSBO sales, the “evidence” for the trend usually comes from people running websites with names like Owners.com and FSBOhomes.com. In fact, National Association of REALTORS® Chief Economist Lawrence Yun says the reality is quite the opposite. In recent years, the national FSBO rate as a percentage of all sales has held steady at 8 percent: “Despite the prevalence of online viewing, FSBOs are at near historic lows,” Yun says.

2. New windows make a home energy-efficient.

While a boon to curb appeal, new windows are unlikely to be critically important to a home’s efficiency. The Federal Trade Commission has warned or filed charges against more than a dozen window manufacturers to ensure their marketing is truthful. Some companies were promising up to 50 percent return on investment thanks to energy savings; Laura Stukel estimates that number to be closer to 3 percent. “A window is basically a hole, and a hole is never efficient. You can have a slightly better hole, but it will never be a major factor,” says Stukel, green, an agent with LW Reedy Real Estate in Elmhurst, Ill. She tells owners who want to cut energy bills to start with insulation—likely a third of the cost of new windows—or just get a smart thermostat.

Three Irksome Ideas

Here’s what some of our social media followers said about the conventional wisdom they find most irritating.

Calling a client “my buyer” or “my seller”

From Facebook: Kevin L. Batdorf, GRI, broker-owner of Batdorf and Associates Inc. in St. Petersburg, Fla.: “No one owns a customer.”

The “see six homes, revisit three, and choose one” model of buying a home

From Facebook: Michael J. Fischer, managing broker of Homestead Real Estate Consultants LLC in Atlanta: “Too many agents still want to control every aspect of their client’s experience. These days, we’re still a critical part of the transaction, but clients also want to hunt comps, research neighborhoods, and learn about the purchase on their own. It’s up to us to understand the information that’s out there and arm our folks with enough to make a good decision. … Our customers are informed, knowledgeable, and skeptical. A good agent understands how, when, and where to add expertise.”

Seller’s agents and buyer’s agents can’t work together

From Twitter: Sinead DeRoiste (@DreamSeeLive) of Better Homes & Gardens GO Realty in Raleigh, N.C. “Yes, we represent opposite sides, but we are not in opposition. #MutualRespect”

3. Members of generational groups are all the same.

Not all millennials want microapartments. Not all baby boomers fear technology. Not all seniors want to age in place. Not all members of Generation X are stuck in homes they bought during the boom. Researchers group generations together to better understand trends, but agents and brokers serve clients best when they park stereotypes at the door. “We get it: Millennials are everywhere. Connected boomers act and think just like millennials,” says Nobu Hata, NAR’s director of member engagement.

4. There’s no need to spend money on marketing when homes are selling quickly.

During hectic times, it can be easy to overlook the reality that business won’t always be so brisk. Busy markets represent the best moment to invest in your business profile, according to Hata. “Now is the time to spend the money and build a portfolio of work. You need to have the right tools in place to be able to attract business when the market tanks,” he says.

5. Brick-and-mortar real estate offices are a burden.

Brokers surveying thousands of square feet of empty cubes may be tempted to close their physical offices as a cost-saving move. “Moving away completely from brick-and-mortar is a mistake,” says Chris Lim, president of CLIMB Real Estate in San Francisco. “What owners and brokers need to do is really understand agents’ needs.” That’s why CLIMB’s in-house designer is constantly reexamining how salespeople use the company’s varied spaces and testing out new configurations for meetings and collaboration. CLIMB’s main, 2,500-square-foot office serves as a test lab and hub for smaller offices and co-working spaces. An important aspect of the brokerage’s physical presence is ensuring the CLIMB brand is present where consumers gather. The company’s 500-square-foot “condo store” on a bustling street entices shoppers to visit new multifamily buildings all over the Bay Area using virtual and augmented reality. A custom Airstream trailer offers a unique presence at community events and open houses.

6. Traditional zoning is always the answer.

The idea of separating residential, commercial, and industrial space into separate pockets of land no longer fits with the way many people want to live, work, and play today. And some of the reasons behind this type of zoning aren’t applicable anymore (workplaces and factories are no longer the major contributors to pollution they once were, for one). Form-based codes offer one regulatory alternative where a community plan sets the development agenda and where mixed-use is the norm.

7. Successful malls must rely on big department stores.

As longtime mall anchors J.C. Penney, Sears, and Macy’s falter, shopping mall owners are looking to grocery stores, restaurants, fitness centers, and even health care clinics as chief drivers of foot traffic. Experiential entertainment—encompassing everything from improv theaters to bowling alleys to karaoke bars—are also promising tenants for retail centers because they can fill large spaces with activities conducive to in-person engagement, a difficult element to reproduce online.

For more info on this article, visit: Realtor Mag

Trump’s tax reform plan is a mixed bag for real estate

Some good news and some bad, depending on the size of your biz.

Before the parsing, pissing and politicalization of President Trump’s nine-page tax reform proposal gets hot and heavy, here are some essential features that might help or hurt real estate. You can read the entire plan here. You can find a good rundown here from Business Insider.

Warning: much of the proposal is still somewhat vague. For example, will there be a higher tax bracket for the super rich (beyond the proposal for a top rate of 35 percent)?

Here are the three brackets in the proposal:

  • A bottom individual tax rate of 12 percent. This a bump from the current rate of 10 percent but people currently in the 15 percent marginal tax bracket would go in here and so in effect see a tax cut. Plus, the standard deduction would increase to $12,000 for individuals and $24,000 for married couples. This would ease the blow for those paying 10 percent today.
  • A middle tax bracket of 25 percent. But there is no definition of what the middle is.
  • The top individual tax rate is 35 percent. The current top rate is 39.6 percent.

The plan also references a fourth, higher bracket. No percentage is attached to this proposal, but it seems to be Trump’s way of handling his campaign promise of not lowering taxes for the rich.

While the plan eliminates most itemized deductions, it purportedly plans to protect part of the mortgage interest deduction and charitable write-offs.

But the plan wipes out state and local tax deductions, which could hurt high-cost areas like New York and California, and would put an end to homeowners deducting their property taxes.

For example, a 25 percent rate is proposed for pass-through businesses, which means that instead of getting taxed as an individual for business profits, small companies will be taxed at this new rate, which should be lower for many businesses.

But the plan also calls for the elimination of some business deductions, it does not specify which ones. The plan is silent on real estate depreciation and 1031 exchanges.

Finally, overseas assets from US-owned companies would be repatriated and taxed at a one-time lower rate, expected to be 10 percent versus as high as 39.5 percent today. Apple, Microsoft and Google alone are hoarding nearly $500 billion overseas. Some of this money might find its way into the luxury housing market, new businesses and the stock market.

Earlier this year, NAR dumped on the three bracket plan and concluded it would hurt homeowners, even with the safeguards for the mortgage interest deduction.

According to an Inman report at the time, NAR and big-four accounting firm PwC concluded:

“An illustrative comprehensive tax reform option that would lower and consolidate marginal tax rates to three rates with a top rate of 33 percent, double the standard deduction, eliminate all itemized deductions other than charitable contributions and mortgage interest, eliminate personal exemptions, eliminate the Alternative Minimum Tax, and cap the tax rate on pass-through business income at 25 percent.”

All of these changes were proposed in the “Better Way” blueprint and can also be found in Trump’s tax reform proposal.

The President’s promise:

“Too many in our country are shut out of the dynamism of the US economy, which has led to the justifiable feeling that the system is rigged against hard working Americans. With significant and meaningful tax reform and relief, we will create a fairer system that levels the playing field and extends economic opportunities to American workers, small businesses, and middle-income families.”

Now, the horse trading begins.

 

For more info, visit: Inman.com

NAR: Homebuyers, Sellers Stuck in Neutral

Homebuyers and sellers are confident in the housing market, but there are few sales to show for it, according to recently released findings from a survey by the National Association of REALTORS® (NAR).

NAR’s quarterly Housing Opportunities and Market Experience (HOME) report reveals homebuyers and sellers are stuck in neutral, despite a record 80 percent of homeowners surveyed for the report believing now is a good time to sell and 62 percent of renters believing now is a good time to buy. Low inventory is behind the stall, says NAR Chief Economist Lawrence Yun.

“The housing market has been in a funk since early spring because of the ongoing scarcity of new and existing homes for sale,” Yun says. “The pace of new-home construction has not meaningfully broken out this year, and not enough homeowners at this point have followed through with their belief that now is a good time to sell. As a result, home shoppers have seen limited options, stiff competition and weakening affordability conditions. Buyer demand is robust this fall, but the disappointing reality is that sales will continue to undershoot their full potential until supply levels significantly improve.”

Buying a home is already a pipe dream for many renters—and pushed even further out of reach by rising rents, the report shows. Fifty-one percent of renters expect their rent to increase in the next year, but 42 percent would renew their lease, rather than buy a home, if their rent did go up. (Only 15 percent would buy a home.)

“Even though the typical down payment of a first-time buyer has been 6 percent for three straight years, two-thirds of respondents indicated that saving for one is difficult right now,” says Yun. “Rents and home prices have outpaced incomes in the past few years, and this is undoubtedly impacting their ability to put aside savings for a home purchase, even if they increasingly believe it’s a good time to buy. Heading into next year, higher home prices and limited inventory in the affordable price range will likely continue to hold back a share of renters who would prefer to be homeowners.”

More of those surveyed (57 percent) believe the economy is improving, however—optimism that could potentially translate into more earnings, and, by extension, more housing opportunities. The survey’s Personal Financial Outlook Index, which gauges respondents’ sentiment on their financial situation over the next six months, leapt up to 62.0 in September.

“Jobs are plentiful, wage growth is finally showing signs of life, home values are up considerably in the past five years and the stock market is at record highs,” Yun says. “The economy is not perfect, and growth overall is still sluggish, but the financial health of the typical household looks as healthy as it has since the recession.”

 

For more info, visit: RIS Media

How Earnest Money Can Get You The House You Want

Do you know what earnest money is and how it can affect your home purchase?

When you’ve found that perfect home and are ready to make an offer, there’s a surefire way to let the seller know you mean business — make sure you include an earnest money deposit.

But what is earnest money? Earnest money is a deposit you pay to show the buyer you’re serious about the transaction. “Earnest money is what shows your good-faith intent in a transaction,” says Cara Ameer, broker associate and real estate agent at Coldwell Banker Vanguard Realty in Ponte Vedra Beach, FL. “The seller sees your financial skin in the game up-front.”

Both the buyer and the seller want to make sure the deal goes through, and an earnest money deposit helps give the deal solid footing. It’s important to understand what earnest money is and how it can affect your transaction when buying a home.

  • Is earnest money a legal requirement to buy a home?

    No. But money talks — and deposits keep buyers from changing their minds.

    “A buyer will think twice about [backing out] if they’ve [got] a lot of money tied up in this [deal],” says Ameer. That kind of built-in financial security makes sellers feel more at ease when accepting an offer.

  • How much money do you need?

    Earnest money amounts vary by area and can range from 1% of the home purchase price to 5%, depending on the type of home you’re purchasing.

    “The bigger the purchase price, the bigger the binder needs to be,” says Ameer. “If you’re purchasing a $1 million house, you would need to put more — or what the seller asks for.”

    You don’t need to pay everything at once, though. If your seller wants a $50,000 deposit, you can negotiate to give $25,000 upfront and another $25,000 after successful completion of any due diligence period.

  • Why are higher deposits required on most new construction?

    Earnest money for new construction can be as high as 50% of the purchase price, but there’s a good reason why developers ask for extra cash. They often front construction costs or borrow funds from a bank, which may want proof that units are sold to qualified buyers.

    Developers don’t want buyers to walk away either. Homes customized to a particular buyer’s tastes can have higher construction costs and may not be easily remarketed if the buyer changes their mind.

  • Are deposits ever nonrefundable?

    Real estate contracts dictate timelines and responsibilities for both buyers and sellers. Buyers risk losing their deposit when they don’t comply with the contract’s terms, and sellers lose valuable marketing time.

    Contracts can fall through for many reasons, such as if a buyer can’t get financing (provided there’s a mortgage contingency), or if a buyer decides not to follow through with the purchase after an unsatisfactory inspection.

    In addition, depending on the market, a seller may negotiate that the deposit is nonrefundable after a certain number of days. Agree to this only if you can take the risk since as a buyer, you could be giving up your money if you decide to walk away from the property.

    “In some housing markets with multiple offers, you may want to [agree to a nonrefundable deposit] to make your offer more attractive, or the seller may counter with asking for a nonrefundable binder,” says Ameer. “This is where your agent’s market knowledge will come into play.”

  • How are disputes handled?

    If a deal closes within the contract’s timeline and you’re able to provide documentation, you’ll likely get your money back or, depending on the agreement, it will be applied as a credit toward the purchase price of the home.

    But every situation is different, and issues can and do arise. “As a consumer, you have to ask your agent how [disputes] are handled,” says Ameer. “It depends on the dispute resolution process.”

    When a title company or an attorney’s office holds the deposit in escrow, parties often use mediation or go to small claims court to resolve disputes, which can be pricey.

    “You have to weigh the cost of mediation and settling versus going to court, which can be very expensive,” says Ron Shuffield, president of EWM Realty/Christie’s International Real Estate in Miami, FL.

  • Who gets to keep the money?

    The broker, a real estate attorney, or a title company “holds” your earnest money deposit. But none of those parties get to keep the money.

    One of three scenarios will occur: The buyer has refunded the money because of failed contingencies; the deposit is applied to the purchase price or refunded to the buyer when the sale closes, or the seller receives the deposit because the buyer backed out of the deal for reasons not covered in the contract.

  • Is it ever fair to forfeit a deposit?

    If you back out of the agreement for reasons not covered under your contingency agreement, you may not get your deposit back. Be sure you fully understand how failed contingencies affect both you and the seller to avoid confusion and heartbreak later on.

    It may seem as if you’re throwing away money if you forfeit your deposit, but there are financial considerations on the seller’s side when you walk away. As soon as the seller accepted your offer, they may have rented or purchased a new home or put furniture in storage — and they definitely will not accepting other offers.

    “There’s a lot of dominoes that have to fall into the right places when you’re purchasing property,” says Shuffield. “If everyone doesn’t follow through with what they’re supposed to do, it creates expenses.”

     

For more info, visit: Trulia Blog

Blog at WordPress.com.

Up ↑