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How Do Homeowners Really Feel About Trying To Sell?

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The idea of moving to a new house can be exciting.  Perhaps its to a new town full of possibilities, maybe it’s a bigger house in the suburbs allowing kids to play in a big back yard and have their own bedrooms, it may even be a smaller, easier to maintain house allowing more free time to do the things people love instead of home repairs and yard work.  However, for many Americans, they must first sell their current home before moving on to their next dream home. This phase of the real estate process is the source of angst for many homeowners.

The 2019 Zillow Group Consumer Housing Trend Report revealed many aspects of the home selling process cause stress for the homeowner trying to sell their home.  In an article published by MBA Newslink, it was summarized that, “not knowing if a home will sell within the desired time frame is the largest source of stress for sellers, with 56% calling it a stressful experience. Meanwhile, 53% of sellers worry about not being able to sell their home for the price they want; and 52% were stressed about an offer falling through.”

Sellers worry that they won’t sell their current home in time to comfortably purchase their next home, while others worry that they won’t be able to keep the house in the desired condition to sell the home, and still other homeowners find the idea of leaving their home for showings and open houses a stressful situation.  Home buyers can be so overwhelmed, their stress matches or exceeds the prospect of planning a wedding or getting fired from a job. 

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Will Technology Change the Role of Real Estate Agent?

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Technology has impacted the way people find homes, research neighborhoods, and compare prices; in essence, buyers are able to get much of the initial legwork done by sitting at their computer or scrolling on their smart phone.  Nevertheless, when it comes to actually buying a home, about 90% of buyers still use a hired real estate agent to help them with the actual offer and contract negotiations according to a report released by the National Association of Realtors.

In an article published by Forbes, its noted that “… buyers and sellers can get to the “one yard line” without much help. But deals rarely get done unless an agent is acting as middleman.”  Real estate agents, without a doubt, add value with their professional expertise and negotiating experience.  However, the sticking point for many is the large piece of the sale that the agents get for their commission.  In many cases, the seller pays a total of 6%, with the buying and selling agent getting 3% each. 

The concept of direct sales, hasn’t yet taken over the real estate market and certainly hasn’t made real estate agents obsolete; in fact, realtors may skip showing homes whose sellers aren’t willing to pay the 3% commission.  Yet, technologically based real estate companies are still searching for ways to compete with the current real estate agent.

Case in point, companies such as Opendoor, you simply “type your address into Opendoor’s website, submit a few photos, and it will make you an offer within a couple of days. No open houses, negotiation, or waiting months for the buyer to come up with the money. In fact, the average closing time from the first offer is less than 20 days,”  according to the article written by Stephen McBride. Some experts believe this type of business could change the way people buy and sell houses and the agent’s role in the transaction.

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Why Would a Real Estate Broker Publish Agent Commissions?

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At the start of September 2019, real estate firm Redfin made a change to the way they communicate with their customers and potential customers.   They have made the decision to provide more information on the homes they have listed for sale, specifically detailing how much the buyer’s agent will make upon the sale of the listed home.

According to an article published by Forbes, “…nearly 40% of recent home buyers don’t understand how their real estate agent was paid,”  while 13% indicated they had “no idea” how much or how the agent was paid upon closing.  With the recent announcement of the Northwest Multiple Listing Service, allowing brokers to share details of the commission deals, Redfin decided to get out in front of the trend sure to spread to other regional areas.

Perhaps buyers have become more interested in the ways commissions are negotiated after a few law suits alleging “….collusion, inflated commissions, and price-fixing, among other things.” To head off any concerns and to satisfy buyer’s desire for transparency, some agents feel that this up-front approach helps ease the minds of their customers.  As one Redfin broker, Paul Reid of Boise, ID,  stated, “Showing consumers the commission a seller is offering a buyer’s agent is a great win for making real estate more transparent. When a buyer has a better understanding of how his agent is being paid and the costs the seller is incurring, he can make a more informed decision on what to offer.”

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Why is the Number of First Time Home Buyers Declining?

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With reports of continued low mortgage rates, many might assume the housing market would be booming with home sales.  However, it would seem that some other economic factors are affecting potential home buyers’ decisions.

The number of adults planning to purchase a home has dropped 2% since last year, and the number of first time home buyers among the groups looking to purchase a home is down 5%, from 63% in 2018 to 58% this year.  According to an article published by CNBC.com, written by Anne Cusak, a lack of affordable home coupled with worries about the economy and personal economic stability are to blame.

According to Rose Quint, the National Association of Home Builders assistant vice president for survey research, “…potential buyers are held back by the lowest levels of affordability in a decade.”  Many first time home buyers are limited in their budget; as home prices increase, they aren’t necessarily able to keep up.  Since the lower end of the real estate market has seen the fastest price increase, these home buyers are being priced out. 

Even if the home prices are within reach and the mortgage rates continue to stay low, prospective buyers are less than eager to jump in when they feel their personal finances are on shaky ground.  Cusak notes, “Buying a home is an incredibly emotional experience, and potential buyers will often pull back when they have the slightest fear of losing their jobs or losing any income.”

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Possible Cost Savings for First Time Home Buyers

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Buying a home is expensive, buying a home for the first time is overwhelming and the costs can be surprising and cause some to think twice before signing the papers.  There is good news for first time home buyers; they may be able to save some money when purchasing a home.  Specifically, some may be able to qualify 25 basis-point discount on the FHA mortgage insurance.

The Housing Financial Literacy Act of 2019 passed in the House of Representatives earlier in July.  This bill’s purpose is to encourage first time homeowners to complete a program to educate them on the home buying and home ownership experience in order to promote sustainable homeownership.  Buyers that complete this training could qualify for the discount, but the bill needs to pass the Senate’s vote and move on for presidential approval.

According to an article published by HousingWire.com, although some experts are concerned the discount could have a negative impact the FHA’s insurance fund, many agree that promoting education about home buying and ownership is vital in helping more American’s have a positive homeownership experience. 

“Whether you are managing your credit, creating a budget, saving for retirement, or purchasing a home, understanding the basic principles of planning, saving, and investing for the future is vitally important,” Rep. Joyce Beatty, D-OH, who presented the bill, said. “Studies show that pre-purchase housing counseling equips first-time homebuyers with the much-needed financial skills and tools to make informed financial decisions that ultimately benefit not only their families, but also the surrounding neighborhood and our entire economy.”

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Is Housing Market Ready to Rebound?

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Homeowners trying to or thinking about putting their home on the market may have been a little hesitant based on the trends in the real estate market over the past year.  As real estate professionals know, and homeowners may have noticed, the real estate market took a turn last summer.  An increased number of homes hit the market, but higher prices and decreased sales, the outlook for homeowners was less than ideal.

However, homeowners may be able to breathe a sigh of relief as this slump could be coming to an end.  With mortgage rates dipping below 4 percent and a slowed housing inventory, it appears prices and home sales should begin to climb again.

According to an article published on Realtor.com, written by Clare Trapasso, “…much of the fate of the housing market relies on mortgage interest rates. If they stay low, buyers have more money to spend on homes. So prices have more room to rise.”  However, homeowners should be aware, despite a high demand for homes as younger buyers begin their families and look to settle down, current buyers, Chief Economist Danielle Hale of realtor.com®  warns “seem a little more patient. They’re more willing to wait for a good property.”

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What Challenges to Buyers with Children Face?

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Buying a home can be an overwhelmingly stressful decision.  There are many factors buyers need to take into account when making a final home purchase decision.  Location, size, floor plan, down payments, and mortgage rates are a few that buyers must consider.  The buyer’s budget is another very important factor that must be considered.  It appears, however, that a specific group of buyers is more likely to go over their set budget when purchasing a home.

According to an article published by The M Report, buyers with children seem to have trouble sticking to their budget when purchasing a home.  In fact, 25.6% of buyers with children exceeded their budget when purchasing a home.  This group also had 31% that were denied a mortgage, where buyers without children only saw 11% denied mortgages.

It appears that having children in the home increases the list of demands that buyers make for their homes.  They want shorter commute times to their workplace, which can put them in more desirable and expensive locations.  The size of the home increases as the need for more space to accommodate growing families increases.  Some buyers make sacrifices on these items in order to stay within, or at least closer, to their budget. 

To make matters more stressful for this group of buyers, many decisions on home purchases can be rushed for families as they work to ensure they are settled before the school year begins. 

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Photo Credit: Franco Giovanella

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How is the New Housing Market Faring So Far in 2019?

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The 2019 real estate market is approaching the halfway point of the year and recent statistics published jointly by the Census Bureau and Department of Housing and Urban Development reveal an interesting mix of ups and downs within the new housing market.  The good news is that new house prices have increased 8.8% from last May.  However, disappointing drops in the sale of new single family homes was also reported, they fell 6.9% 

An article published by Bloomberg, reported by Reade Pikert, offers some explanation behind these conflicting statistics.  A detailed view of the home sales decline reveals that the home that are experiencing the decline in sales are almost all priced below $300,000.  Thus suggesting there is a shortage of “affordable” properties. 

Additionally, sales of existing homes took a dip in April, yet the number of sales of pre-construction properties reached the highest level since 2017.  Pickert indicates, “New-home purchases account for about 10% of the market and are calculated when contracts are signed. They are considered a timelier barometer than purchases of previously-owned homes, which are calculated when contracts close.”

Despite the mixed reviews of the new housing market’s 2019 performance thus far, it seems investors remain optimistic.  The article states, ”A gauge of U.S. homebuilding-industry stocks erased losses after the data and was up about 0.3% despite losses in the broader market, suggesting investors were focusing on the upward revisions to new home sales.”

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Is Zillow’s Co-Marketing Program Illegal?

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Many in the market for a new home look to the web when beginning their search.  Most likely, Zillow.com is one of the site visited by prospective buyers.  Not only can these house hunters view homes for sale in their desired neighborhood, recently they have also been shown advertisement for “premier” agents and brokers.  According to an article published by the Miami Herald, these real estate professionals “ …pay hundreds or thousands of dollars a month in advertising fees to the company. Premier agents need not be the highest volume or most successful agents in their area; they simply need to pay for the label.”

The program then expanded about 6 years ago, and introduced a program allowing agents to share advertising costs by partnering with lenders.  It was a win win for agents, who were able to have much of their advertising cost covered, and lenders, who could get a foot in the door with prospective home buyers.  However, it is now being reviewed to determine if this program violates the Real Estate Settlement Procedures Act which “prohibits payment of fees for business referrals among realty, mortgage and title industry providers that are not for services actually rendered”, according to journalist Kenneth R Harney. 

In fact, a judge in the U.S. district court in Seattle determined that, “the court can draw a reasonable inference that Zillow designed the co-marketing program to allow agents to provide referrals to lenders in violation of RESPA.” The class-action lawsuit filed will hear from both whistle blowers alleging violations and certainly Zillow defending its program’s legality.

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Generous Incentives Available for Home Buyers

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Before deciding to purchase a home, it would be wise to research incentive programs offered by lenders; programs can offer qualified home buyers a few thousand dollars to put toward down payments, closing costs, and other fees associated with purchasing a home.

An article published by Housing Wire details a program offered by Bank of America which, according to reporter Ben Lane, can provide as much as $10,000 to a borrower.   In fact, the article states, “Bank of America is committing $5 billion to help boost homeownership for “low- to moderate-income and multicultural homebuyers and communities” across the country, the bank announced Tuesday.” 

Their Neighborhood Solutions program can provide up to $10,000 to qualified borrowers to apply toward closing costs.   Additionally, the America’s Home Grant program is being expanded to offer lender credits up to $7500.  These are funds that the bank is not requiring be repaid by the borrower. 

In additional to credits towards purchase, buyers can look for competitive mortgage rates and low down payment requirements geared toward low and moderate income borrowers.  According to D. Steve Boland, head of consumer lending at Bank of America. “We know many of our clients want the power to own their first home, which can sometimes be challenging. One of the ways we’re helping is through our suite of affordable homeownership solutions and professional resources, which aid them in overcoming barriers and put sustainable homeownership within reach.”

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