HomeStack, APInation to power up tech stacks

by Richelle Hammiel | Aug 23, 2024 | Industry, News Feed

8 key ways our team is preparing for Aug. 17

by Richelle Hammiel | Aug 6, 2024 | Industry, News Feed

Inman Connect Las Vegas is LIVE this week! Get all your real estate questions answered and network with thousands of industry leaders. Join us virtually from anywhere in the world — the future of real estate is unfolding now.

With the deadline for implementation of new rules set down by the National Association of Realtors’ settlement rapidly approaching, the practice of residential real estate sales as we have known it will be changing.

Although we can hope that the long-term result will be the same — after all, our goal has always been to help sellers sell and buyers buy — it is going to be a lot more complicated and will require a ton more paperwork and effort to achieve the same result.

Consequently, as a team, we are actively gearing up for the significant changes that will become the new reality in a few short weeks. Here are eight key things we are focusing on to prepare.

Ahead of Aug. 17, we are:

1. Finetuning our value proposition

Because we will now be required to have all our buyers sign a buyer-broker agreement that includes agent compensation, and because we had better be prepared to demonstrate our value, we have dramatically upgraded our value proposition and accompanying documentation. We are training our team members to be fully conversant with our new dialogue and collateral.

2. Upgrading our buyer consultations

We have improved our buyer consultation process. To begin, we are making comprehensive buyer consultations mandatory for all our prospective clients. By instituting a detailed process and then extensively training our team members on the use of our new tools, we are striving to fully educate our buyers, all the while reducing the chances of misinterpretation or error.

3. Going through extensive training in the new forms

This has not been easy, especially in California, where the forms seem to be changing weekly. California Association of Realtors (CAR) released a boatload full of new forms and then, mere days later, pulled them back due to accusations from the Consumer Federation of America and the threat of Department of Justice (DOJ) intervention.

Many of the forms were rewritten and then, the very day they were re-released, the DOJ announced it was formally investigating C.A.R. We are holding our breaths, hoping this will not require even more changes to our forms before Aug. 17.

Additionally, the window is tightening, as some of the MLSs in our region are launching the new rules early to ensure full compliance before the deadline. 

For example, though our team has always used a proprietary buyer agreement form, now we will be required, along with all other members of C.A.R., to use the agreement provided by the association. This is a very complicated form with many potentially different outcomes, so we are doubling down on the training for this specific form to ensure everyone on the team knows all of the options inside out. 

As many of the other basic forms (listing agreements) have significantly changed, effective training is critical. Training is coming from a number of sources, including team sessions, our brokerage, legal counsel, our state Association of Realtors and our local MLS. 

4. Expanding our script practices

As the team leader, I am not willing to have anyone on our team “winging it.” Therefore, faced with such monumental changes in not only our rules but also the forms we use and the business practices we will need to employ going forward, we have upped the ante for script practices that specifically deal with the upcoming changes. We begin each day with a team “Power Up” that includes script practice. 

5. Providing training to ensure our team members avoid steering

Due to the possibility of unintentional steering in the new realities, we are doing a deep dive to fully understand what steering is and is not, both on the buying side and the listing side. The fear has been that buyer’s agents will start steering clients away from homes that do not offer compensation.

While the hope is that the new practices, including buyer-broker agreements, will remove this possibility, human nature being what it is, there’s still the possibility that some agents, afraid they may lose clients if they require their buyers to pay their compensation, will seek ways to minimize this risk. 

There are also potential problems on the listing side.

Historically, we’ve explained commissions by saying, “Here is the entire commission we charge, and out of this, we will be giving the buyer’s agent ‘x percentage.’”

If there were ever any pushback on what was being offered to the buyer’s agent, some agents would say, “You want to make sure to provide a full commission to the buyer’s agent to incentivize them to show your property.” Unfortunately, that is steering the sellers, and it’s a violation of the Realtor Code of Ethics.

Instead, conversations with sellers should center around doing what they need to do to ensure there will be competent professional representation on the other side of the table. 

6. Locking down some new communication protocols

To prevent the possibility of being accused of steering buyers away from listings that provide income that is not commensurate with the agreed-upon amounts in our buyer-broker agreements, we are instituting rigid communication protocols to ensure we are in full compliance with the law. This means we will need to have detailed communication logs for each buyer to ensure we can verify how each potential property was handled. 

7. Launching a method of communicating levels of cooperative commissions

Because we can no longer list cooperative compensation on the MLS, we are working with our brokerage to establish an effective way of communicating with buyer agents. Because no universal methodology exists as of yet, we recommend that every team collaborate with their brokerage to establish a method that works in their market.

In addition to this, we are making the assumption that any buyer’s agent — in cooperation and agreement with the buyer (based on the buyer-broker agreements they have with their clients) can ask for any pre-determined level of compensation when they write an offer on any listing, regardless of what a seller may state they are or are not offering. 

8. Doubling down on open houses

Currently, the new laws allow for an agent representing the seller to hold an open house on the seller’s behalf. Under this arrangement, no open house agent would be considered to be representing a buyer who is merely visiting the open house. C.A.R. has introduced a form for buyers to sign when attending an open house that specifically states that the agent providing the open house is not entering into an agency agreement with the visitor. 

Because a buyer-broker agreement will not be required for a buyer to visit an open house, we are assuming that some buyers, unwilling to commit to a dedicated agent’s buyer-broker agreement, will utilize open houses to shortlist potential homes. We believe that this will mean an increase in visitors who have not signed agreements with any specific agent.

Consequently, we are enhancing our open house training so our agents can utilize these opportunities to build their businesses should a visiting buyer ask the attending agent for a representative relationship. In the event that happens, C.A.R. has issued another version of a limited buyer-broker agreement that can be filled out and signed on the spot. 

As we begin to morph into the new reality, I am sure there will be many unanticipated issues along the way. To help pave the way and make the journey as smooth as possible, we recommend you and your team take a serious look at each of the issues above and respond accordingly. 

What’s changed since NAR struck its deal: Client Pipeline Tracker

by Richelle Hammiel | Aug 5, 2024 | Industry, News Feed

This report is available exclusively to subscribers of Inman Intel, the data and research arm of Inman offering deep insights and market intelligence on the business of residential real estate and proptech. Subscribe today.

The real estate industry sits on the precipice of significant changes to MLS practices and client contracts that are set to go into effect later this month.

And for the most part, agents haven’t budged much on the skepticism that they felt in the immediate aftermath of the NAR settlement announcement in mid-March.

General agent negativity toward their potential revenue prospects remained unchanged in late July, and has not meaningfully improved since the NAR deal was announced in mid-March, according to Intel’s Client Pipeline Tracker.

Client Pipeline Tracker level in July: -7

• Previous level: -7 in June
• Recent peak: +7 in January

Chart by Daniel Houston

The Tracker is an updating measure of agent sentiment toward the pool of potential real estate buyers and sellers, powered by the Inman Intel Index monthly survey of real estate professionals.

But while general agent sentiment has remained fairly negative, there are some signs that agents may be less convinced today that the new rules will hurt them with buyers than they were in late March.

This month, Intel goes deeper under the hood, breaking down the main components driving agent sentiment.

Read the takeaways in the report below.

More buyers, little reassurance

Intel’s Client Pipeline Tracker is a compilation of how agents feel about their buyer and seller pipelines — both over the past year and in the near future.

Intel described the full methodology in this post, but here’s a quick refresher on how to read the results.

• A rating of 0 represents a neutral period in which client pipelines are neither improving nor worsening.
• A positive score reflects a market in which client pipelines have been improving, or are widely expected to improve in the next 12 months. The higher the rating, the more confident agents are in that conditions are moving in a positive direction.
• A negative score suggests client pipeline conditions are worsening, or are widely expected to get worse in the year to come.

An extremely positive combined score falls somewhere around +20. This type of score would signify that much of the industry is in agreement with the fact that pipelines are improving and will continue to improve.

An extremely negative combined score, on the other hand, falls closer to -20. That’s a bit lower than where the industry stood in September, the first time Intel surveyed agents about their pipelines.

For the four individual components that go into the score, results as high as +50 or as low -50 are sometimes observed.

Here are the component scores for July, and how each one changed from the previous month.

CPT component scores

June → July

1. Present buyer pipelines: -35 → -32
2. Future buyer pipelines: +2 → +2
3. Present seller pipelines: -17 → -17
4. Future seller pipelines: +4 → +1

These month-to-month changes reflect the first agent-reported uptick in buyer pipeline activity in six months, potentially an early sign that declining mortgage rates are finally bringing hesitant buyers back to the table.

• The average rate for a 30-year mortgage fell to 6.40 percent on Friday, its lowest point since the spring of 2023, according to Mortgage News Daily.
• This is part of a continued decline from where rates stood in April at 7.44 percent.

Perhaps noteworthy, however, is how agents report that they need to see more before they fully trust that this shift will change their outlook for their future business.

While most agents still believe their buyer pipelines will hold steady or improve in the year to come, a weak summer in terms of existing-home sales may weigh more heavily for some than the very recent uptick in buyer leads.

Also worth noting: The improving mortgage rate environment for buyers — and the hope of upcoming rate cuts by the Fed, potentially as early as September — have yet to give agents meaningful reassurance that they’ll have more listing clients to work with a year from now.

More details on that front below.

What’s actually changed since NAR’s settlement news

The news in mid-March that NAR had reached a settlement that would bring substantial changes to the MLS and buyer and seller contracts had an immediate negative effect on agent sentiment.

Particularly hard-hit? Agents’ outlook for their future buyer pipelines.

• In February, only 15 percent of agent respondents to the Intel Index said they expected their buyer pipelines to grow lighter over the next 12 months.
• By late March, immediately after the settlement news broke, that share had spiked to 28 percent.

Since then, agents have become less bearish on their future buyer pipeline prospects — signaling that maybe some of their worst fears about the settlement impact might not pan out after all.

• In late July, 23 percent of agent respondents expected their buyer pipelines to weaken over the next year.

There have been two other significant shifts in the underlying attitudes about client pipelines.

• Despite the recent reported uptick in potential homebuyer clients, the number of buyers had been steadily slipping. The share of agents reporting lighter buyer pipelines year-over-year in July was 54 percent — up from 45 percent who reported the same in March.
• Declining mortgage rates and looming interest rate cuts have yet to reassure sellers that their listing client pools will improve in the future. The share of agents who expect their listing pipelines to improve next year fell to 29 percent in July, down from 38 percent in March.

In other words, many agents may be less worried about the practical implications of the settlement on their businesses today, but more responsive to weak sales and an extended period of rate-locked sellers.

And even with the positive news with regard to mortgage rates and buyer pipelines in recent weeks, they’ll need more assurances before changing their minds on the market outlook.

Methodology notes: This month’s Inman Intel Index survey was conducted July 22-Aug. 4, 2024, and had received more than 550 responses as of Friday. The numbers used for this article are preliminary and subject to revision. The entire Inman reader community was invited to participate, and a rotating, randomized selection of community members was prompted to participate by email. Users responded to a series of questions related to their self-identified corner of the real estate industry — including real estate agents, brokerage leaders, lenders and proptech entrepreneurs. Results reflect the opinions of the engaged Inman community, which may not always match those of the broader real estate industry. This survey is conducted monthly.

Email Daniel Houston

Cost of insurance, property tax top triggers of mortgage delinquencies

by Richelle Hammiel | Jul 23, 2024 | Industry, News Feed

At Inman Connect Las Vegas, July 30-Aug. 1, 2024, the noise and misinformation will be banished, all your big questions will be answered, and new business opportunities will be revealed. Join us.

Some of homeownership’s largest hidden costs, including property taxes and homeowners insurance, are the biggest factors contributing to a growing number of mortgage delinquencies, a survey from Auction.com shows.

Hidden costs, like property taxes and homeowners insurance, were given a 37 percent risk factor for triggering mortgage delinquency by leaders in default servicing, according to the survey, making it the highest-ranked risk factor.

Consumer debt delinquencies were also ranked high at 32 percent, followed by rising unemployment at 15 percent, commercial mortgage defaults at 10 percent and falling home prices at 6 percent.

Auction.com’s survey was conducted in April. Respondents included banks, nonbanks, mortgage asset owners and investors, government agencies and government-sponsored enterprises.

Insurance costs have surged in many parts of the country in recent years, even as major insurance companies have pulled out of what are seen as high-risk states, like California and Florida.

Homeowners’ insurance costs nationally rose 33.8 percent from 2018 through 2023, according to S&P Global Market Intelligence. In Texas, rates jumped 60 percent during that period, while rates rose more than 50 percent across Colorado, Arizona and Utah.

Climate change and the risk associated with it has been a major factor contributing to rising costs, Benjamin Collier, an associate professor of risk management and insurance at Temple University, told Realtor.com.

“A major reason is climate risk, and that insurers have had broad losses from severe climate events over the past few years from hurricanes and severe storms,” Collier said. “If you look at places where insurers have been paying out more claims than taking in premiums over the last couple years, it’s half the states.”

Inflation in construction costs has also added to rising insurance premiums, Collier noted. But, more near-term, higher insurance rates are more likely to affect mortgage delinquencies in regions that have seen an uptick in climate-related events in recent years, he said.

“My expectation is that these challenges would be greatest in higher-risk areas, because those higher-risk areas are where we’re seeing insurance prices climb the fastest,” Collier told Realtor.com. “I also think that this problem might be greater for lower-income households in those areas, who are often living and working much closer to the edge of their available budget.”

On top of rising home insurance costs, many homeowners are also dealing with rising property taxes as a result of surging home values. Last year, the average tax on single-family homes in the U.S. rose 4.1 percent to $4,062, after a 3 percent increase the year before, a report from Attom Data Solutions shows.

The hidden costs of owning and maintaining a single-family home in the U.S. now average more than $18,000 per year, according to Bankrate. That figure translates to about $1,500 per month on top of a mortgage payment, up 26 percent from four years ago.

That’s a lot of additional costs for homeowners, especially for established homeowners who have been accustomed to lower costs during their tenure.

Foreclosure rates remain relatively low

Foreclosure activity has remained relatively low in the U.S., according to Attom, with 177,431 U.S. properties receiving foreclosure filings (including default notices, scheduled auctions or bank repossessions) during the first half of 2024. During the 2008 housing recession, about 15 times as many borrowers faced foreclosure. That figure from the first half of 2024 is also 4.4 percent less than what it was during the first half of 2023.

“Given the low default environment we’re in, this finding serves as an early warning of what could trigger more defaults in the future, especially if we continue to see more natural disaster events that, in turn, put more upward pressure on home insurance rates,” Daren Blomquist, a vice president of market economics at Auction.com, told Realtor.com.

“It’s important to note that even though rising hidden homeownership costs represented the highest risk factor of rising defaults, the majority of our mortgage servicing survey respondents believe that foreclosure volume will rise only modestly for the rest of the year (less than 5 percent),” Blomquist continued. “So these rising hidden homeownership costs represent the highest risk in a low-risk environment.”

If foreclosure rates do start to rise, they may begin in areas where those hidden costs are increasing the most quickly, Auction.com’s survey suggested.

For instance, foreclosure starts surpassed pre-pandemic levels in May in areas of the Gulf Coast, Texas and inland California, according to Blomquist — all areas that have seen storm and wildfire damage in recent years.

Foreclosure starts hit 135 percent of pre-pandemic levels in Houston, Texas; 93 percent of pre-pandemic levels in Riverside-San Bernadino, California; 100 percent of pre-pandemic levels in Tampa-St. Petersburg, Florida; 114 percent of pre-pandemic levels in Orlando, Florida; and 104 percent of pre-pandemic levels in San Antonio, Texas.

Those markets are located in states that are among the top 10 for insurance premium increases between 2018 and 2023, according to Attom’s data.

“Although it’s too early to fully connect the dots, we do see more rapidly rising foreclosure starts in many of the major markets where insurance costs have been rising,” Blomquist said.

“Absent of broader economic or housing market shocks, we would expect the default trend to follow the uneven regional pattern,” he added. “Markets with higher and faster-rising hidden homeownership costs would likely see a bigger increase in defaults. We are already seeing some signs this could be playing out when we look at recent foreclosure start data.”

Email Lillian Dickerson