Glen Oaks Escrow

Spring Shaping Up To Be a Great Season For the Housing Market

The spring season usually starts shaping up in March and goes until June, but this year thanks to unseasonably warm weather in many parts of the United States it may have started early.

Spring is the litmus test for the overall housing demand. Current home sales in February were up 9% from last year, and the Pending Home Sale Index was up as well. And according to a late February NAR survey of 4,300 agents, Realtors’ confidence in the single-family home market is also looking strong. Economist Paul Dales of Capital Economics says this spring season should be “the best we have seen in the past four or five years.”

Of course not every market will move in unison, and spring sales will be a great indication of which ones are headed in which direction. Veros Real Estate Solutions forecasts that home prices overall will drop less than 1%, but 40% of 321 metropolitan areas will see prices rise.

Phoenix is at the top of that list, and will see a 5% price gain this year. Denver is also seeing rising prices as their supply of homes drops as well. Some non-distressed homeowners are still reluctant to put their home on the market, but not all of them. In Central Pennsylvania residents saw a 30% increase in new listings early this year, and the trend has continued into spring. Overall spring is shaping up to be a very positive season for the housing market.

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Experts See a Decline in Mortgage Delinquencies for 2012

Now that the mortgage delinquency numbers for 2011 have been finalized, economists look ahead to the rate for 2012.  Their early conclusion?  Based on current data, the national delinquency rate is expected to decline another 7% by the end of 2012, giving the economy another sigh of relief in a segment that desperately needs it.

According to TransUnion, employment numbers have increased, banks have also started letting credit flow again, albeit with more stringent approval guidelines.  Both will help more borrowers avoid delinquency altogether, helping to improve overall consumer confidence and U.S.GDP.  Since the recession began in 2008, real estate has become the poster child for disappointment, with some states seeing mortgage delinquencies of more than 20%.  An exploding foreclosure rate sent the number of vacant properties soaring; in some markets, banks own nearly as many properties as private parties do; the overall real estate and credit markets have left a stubborn legacy that will likely take years to correct.  New qualification rules and down payment requirements have locked out many buyers who, just four years ago, wouldn’t have had any problem qualifying for a mortgage.

While delinquency in the entire U.S. is expected to fall in 2012, states like California, Florida, and Nevada will likely see an uptick in the number of borrowers falling behind in 2012.  In those markets, economists estimate the delinquency rate could increase in 2012 by nearly 12% over 2011 rates, due mostly due to ongoing unemployment troubles.

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FHA Anti-Flipping Rule Waiver Extended

The FHA has extended its waiver on an anti-flipping rule, originally intended to prohibit buyers from obtaining FHA-insured financing for homes owned by sellers for less than 90 days.

The extension is excellent news for investors who have been snapping up foreclosures in order to “flip” them (most flipping occurs within 90 days).  FHA’s research concluded that by disallowing flipped properties – at least on a temporary basis – it would hamper an important part of the recovery in the real estate market.  Since the rule was first waived in February, 2010, FHA has financed $7 billion in home sales – about 42,000 properties total.

Speaking with DSNews.com recently, FHA’s acting commissioner, Carol Galante stated, “We must make every effort to promote recovery in every responsible way we can. This extension is intended to accelerate the resale of foreclosed properties in neighborhoods struggling to overcome the possible effects of abandonment and blight.”

There are limits to activity however in an effort to prevent predatory activity.  The waiver has been written with specific conditions to prevent inflated transactions and the potential for mortgage fraud.  For example, any transaction that FHA finances must be conducted at arms-length; no link between buyers and sellers may exist.  There are also documentation requirements if the sale price is 20% or more over the seller’s acquisition cost.

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Who Says Winter is Slow? How Realtors Stay Busy During the Holidays

Most would consider the winter months the slowest time in real estate.  It’s true that the time around the holidays is typically reserved for family and relaxation, with significant life changes on hold until after the new year.  But, savvy Realtors use that time to network, obtain re-certifications, and/or continue their education, allowing them to be fully prepared when the market “springs to life” in the spring – armed with new skills and a list of potential clients.

For those agents with properties on the market, the winter months may also be a good time to host open houses.  There’s typically less competition for clients during this time, and sellers may find a more serious pool of potential buyers, many of whom may be out looking due to an upcoming relocation.

Since most new listings occur in the spring, agents and sellers may also benefit from listing properties “early.”  In this way, you allow the home to stand out early.  It also increases the likelihood of an offer that sticks.

“Winter is a nice time of year to shop,” states Prudential’s Marilyn Bailey.  “There aren’t as many buyers out there, so you’re not competing with other offers as much.”

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New Regulations Real Estate Agents and Brokers Need to Know About in 2012: Part Three

This article completes the list of the fifteen new real estate laws and regulations that you need to know about, for the sake of your business and your clients’ interests. We hope that you’ve found value in this blog post series and wish you nothing but success in the final months of 2011!

Sellers Disclosing Water-Conserving Plumbing Fixtures: C.A.R. successfully sponsored a new law, effective January 1, 2012, revising the Transfer Disclosure Statement (TDS) to include a checkbox in Section A for the seller to disclose whether the property has water-conserving plumbing fixtures.  The revised TDS also clarifies at the end of Section B that, by January 1, 2017, a single-family residence built on or before January 1, 1994 must generally be equipped with water-conserving plumbing fixtures.  If, however, that single-family home is altered or improved on or after January 1, 2014, the water-conserving plumbing fixtures must be a condition of final permit approval.  Water-conserving plumbing fixtures are low-flow toilets, shower heads, and faucets under section 1101.3 of the California Civil Code.  C.A.R. intends to release a revised TDS form in November 2011 to comply with this law.  Senate Bill 837.

NHD Companies Disclosing Mining Operations: Starting January 1, 2012, a company preparing a natural hazard disclosure (NHD) statement for a prospective buyer, as required for certain transactions, must also disclose whether the property is located within one mile of a mining operation, according to map coordinate data from the Office of Mine Reclamation.  If a property is within one mile, the NHD company must give a specified notice that such mining operations may cause inconveniences.  Senate Bill 110.

No Fee Bundling for HOA Disclosures: Beginning January 1, 2012, another C.A.R.-sponsored bill requires a homeowner’s association (HOA) to, upon written request, give an estimate of the fee for providing a prospective buyer with the governing documents of the common interest development and other required HOA disclosures.  The fee must be reasonable based upon the HOA’s actual cost for procuring, preparing, reproducing, and delivering the HOA documents.  If the fee is paid, the HOA cannot withhold the required HOA disclosures for any reason.  Moreover, the HOA cannot bundle the fee for providing required HOA disclosures with any other fees, fines, or assessments.  This law will prevent an HOA’s third-party document preparation company from bundling together both mandatory and non-mandatory HOA documents, and charging a higher fee for providing all the documents.  The HOA is also prohibited from charging any additional fees for electronic delivery of HOA documents, which must be available to a requesting party if the HOA maintains the documents electronically.  Additionally, at a buyer’s request, the HOA must provide 12 months of approved minutes of the association’s board of directors meetings (excluding executive sessions).  Delivery of the required HOA documents must be accompanied by a cover sheet itemizing the documents required by law and those provided.  In November 2011, we intend to release a revised C.A.R. standard form Homeowner Association Information Request that complies with this requirement.  Assembly Bill 771.

Brokers Designating Managers: Under another law that C.A.R. sponsored, effective July 1, 2012, an employing broker may appoint a licensee as a manager to supervise the licensed activities, clerical staff, and day-to-day operations of a branch office or division.  An appointed manager who fails to properly supervise licensed activities will be subject to disciplinary action by the California Department of Real Estate (DRE).  Appointing a manager, however, does not limit the employing broker’s supervisory responsibilities.  The appointment of a manager must be in a written agreement in which the manager accepts the delegated responsibility.  The employing broker must notify the DRE when a manager has been appointed or terminated.  A licensee cannot be an appointed manager if the licensee holds a restricted license, is or has been subject to a debarment order, or is a salesperson with less than two years of full-time real estate experience within the last five years.  Senate Bill 510.

Strengthening DRE Enforcement: Effective January 1, 2012, the DRE will have greater disciplinary authority to achieve its highest priority of protecting the public.  A licensee will be required to report to the DRE within 30 days of any of the following: (1) disciplinary action taken by another licensing entity in California or another state, or by a federal governmental agency; (2) an indictment or information charging a felony against the licensee; or (3) a conviction of a felony or misdemeanor, including a plea of guilty or no contest.  Failure to comply with this reporting requirement will be cause for discipline.  The DRE’s broader disciplinary authority will also include, among other things, the ability to automatically suspend the license of anyone incarcerated after a felony conviction.  For disciplinary actions, the DRE can conclusively presume without a hearing that a licensee’s conviction of murder, rape, lewd and lascivious acts, or a violation of dangerous drugs or controlled substances laws is substantially related to the licensee’s qualifications, functions, or duties.  The DRE will also be able to enter into a pre-prosecution settlement with a licensee or applicant instead of issuing an accusation or statement of issues, but the settlement shall be considered discipline.  Additionally, the DRE can request that a disciplinary order requires the disciplined licensee to pay reasonable investigation and prosecution costs.  Failure to pay can result in non-renewal of license.  The DRE can also require that a restricted licensee pays the costs for monitoring the licensee and monetary restitution to any person who sustained damages caused by the licensee’s misconduct.  Again, failure to pay can result in non-renewal of license.  Senate Bill 706.

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New Regulations Real Estate Agents and Brokers Need to Know About in 2012: Part One

Each year new laws and regulations come about as the year comes to a close. These new regulations and updates to existing laws not only affect real estate agents and brokers, but also their clients. To help you navigate through these new laws, we will be posting them over the next several weeks.

1. DRE Issuing Citations and Fines: Starting January 1, 2012, the DRE can issue a citation and fine up to $2,500 if, upon investigation, it has cause to believe that a licensee has violated the DRE rules, or a unlicensed person has engaged in licensed activities.  The person cited can request a hearing within 30 days from receipt of the citation.  The citation and fine will be in lieu of DRE disciplinary action for the offense cited, and the citation will not be reported as discipline.  However, failure to comply with the terms of the citation or pay the fine within a reasonable time specified by the DRE shall result in disciplinary action and non-renewal of license.  The DRE may also apply to a superior court for a judgment in the amount of the fine and an order compelling compliance.  All administrative fines collected will be deposited into the Real Estate Recovery Fund, which has, under Senate Bill 706, been renamed the Consumer Recovery Account.  Additionally under this law, if the DRE delays the renewal of a license due to a pending disciplinary action, the license will not expire until the results of the disciplinary action are final or the license is voluntarily surrendered, whichever occurs first.  This law also gives the DRE the authority to make public information confirming the fact of certain investigations or proceedings regarding a licensee, and to apply for a court order to enforce a subpoena if a licensee has refused to obey.  Senate Bill 53. Read Full Text

2. Reporting Broker-Owned Escrows and Securities Qualification Exemptions: Starting July 1, 2012, a broker who conducts escrow activities for five or more transactions in a calendar year under the broker exemption from the Escrow Law, or whose escrow activities are $1 million or more in a calendar year, must file with the DRE an annual report of the number of escrows and dollar volume.  The report must be filed within 60 days after the end of a calendar year in which the threshold is met.  A failure to submit the report will be penalized at $50 per day for the first 30 days and $100 per day thereafter, up to $10,000.  A broker who fails to pay the penalty may be subject to license suspension or revocation.  All penalties collected will be deposited into the Consumer Recovery Account under the Real Estate Recovery Program.  Effective January 1, 2012, this law also requires a broker who files certain information with the DRE for an exemption from securities qualification to submit a copy of that information to any investor who gives funds to the broker in connection with a transaction involving the sale of a series of notes (or undivided interests in a note) secured by real property under section 10237 of the California Business and Professions Code.  Senate Bill 53. Read Full Text

3. DRE Suspending Largest Tax Delinquents: Commencing January 1, 2012, both the State Board of Equalization and the Franchise Tax Board must periodically make public a list of the 500 persons with the largest tax delinquencies in excess of $100,000.  The lists must include, among other things, each taxpayer’s occupational or professional license numbers.  The DRE and other state governmental licensing entities (with certain exceptions) must suspend and refuse to issue or renew an occupational or professional license for anyone on either tax delinquency list.  Assembly Bill 1424. Read Full Text

4. Agents Handling Appraisal Issues: Beginning January 1, 2012, a licensee cannot knowingly or intentionally misrepresent the value of real property.  Furthermore, a licensee who offers or provides an opinion of value of residential real property that is used as the basis for originating a mortgage loan cannot have any direct or indirect interest in the property or transaction as defined under Regulation Z (at 12 C.F.R. section 226.42(d)).  A licensee or other interested party is also prohibited from using coercion, extortion, bribery, intimidation, compensation, or instruction to improperly influence a person preparing an appraisal or valuation for a real estate transaction.  Senate Bill 6. Read Full Text

5. Increasing Small Claims to $10,000: Commencing January 1, 2012, the small claims court jurisdiction will generally increase from $7,500 to $10,000 for an action brought by a natural person.  For a claim of bodily injury from a car accident, the increase to $10,000 will not occur until 2015.  The dollar limit in small claims court for an action brought by a corporation or other entity will remain at $5,000.  Senate Bill 221. Read Full Text

*Information provided by the CALIFORNIA ASSOCIATION OF REALTORS.

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Rental Homes Becoming More Popular In Recent Months

A recent survey found that, over the last decade, the number of homes occupied by renters has gone up nearly 34%.  Good news for landlords – great news for those looking for a long-term investment (10 years or more)  and who have ever thought about becoming a landlord.

The good news doesn’t stop there.  In 2010, average rental rates jumped a whopping 12% year-over-year.  This trend doesn’t show any sign of leveling off as demand continues to rise and vacancies remain at record lows as more renters flood the market searching for rentals.

For owners of multiple properties or empty-nesters looking to downsize, the opportunity couldn’t be clearer.  Mortgage rates remain at historic lows, making this one of the best times for prospective real estate investors to enter the market – as a landlord. 

When seeking out an investment property, experts advise sticking close to home.  Investors are also cautioned to avoid properties with more than four units due to steep borrowing standards.  Look for a property where the rental income will provide a 20% cushion.  That will help cover repairs, the cost of property management, and potential vacancy between tenants.

A rental property can be an excellent addition to your long-term investment portfolio.  With a little research and attention, it can also provide owners with an additional source of income while remaining low-risk.

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