by Richelle Hammiel | Aug 6, 2024 | Industry, News Feed
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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.
by Zillow | Aug 6, 2024 | Industry, News Feed
Find out how Orlando-based Premier Sotheby’s International Realty agent and Miss Florida USA, Peyton Lewis, focuses on self-awareness, growth and goals to meet challenges head on.
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Since the age of 14, Premier Sotheby’s International Realty’s Peyton Lewis has competed in pageants with a platform that centers on inspiring women to be financially literate, pursue their dreams and break barriers. At 26 years old, Lewis was just crowned Miss Florida USA.
Find out how this Orlando, Florida — born and raised — agent focuses on self-improvement and goal setting to meet challenges head-on.
Name: Peyton Lewis
Title: Global Real Estate Advisor
Experience: 3+ Years
Location: Orlando, Florida
Brokerage full name: Premier Sotheby’s International Realty
Background:
- Age: 26 years old
- Hometown: Born and raised in Orlando, Florida
- Education: Graduated from the University of Central Florida (UCF) with a major in Business
- Profession: Full-time real estate agent specializing in selling luxury real estate
Pageant experience:
- Started competing in pageants at age 14
- Won the title of Miss Osceola County at 18
- Crowned Miss Florida USA 2024
Q&A with Peyton Lewis
What are 3 things you’d like readers to know about you?
I am Miss Florida USA 2024. My goal is to empower women to become successful entrepreneurs and leaders in their communities, and I plan on using my platform as a real estate agent to educate people about affordable housing.
What’s 1 big lesson you’ve learned in real estate?
One big lesson I’ve learned in real estate is the importance of persistence and continuous learning. I realized this when I first started out and faced numerous challenges.
From difficult market conditions to learning the intricacies of luxury real estate, I understood that success doesn’t come overnight. It requires dedication, adaptability and a commitment to self-improvement. By attending industry seminars, seeking mentorship, and constantly updating my knowledge, I was able to overcome obstacles and achieve my goals.
What would you tell new agents before starting in the business?
Focus on building genuine relationships, and always prioritize your clients’ needs. Real estate is not just about transactions; it’s about people and their dreams.
Listen more than you talk, and strive to understand your clients’ aspirations and concerns. This approach not only builds trust but also leads to long-term success and referrals. Additionally, never stop learning. The market is constantly evolving, and staying informed will give you a competitive edge.
What do too few agents know that would make their lives easier?
Too few agents understand the power of effective time management. Organizing your day, prioritizing tasks, and setting clear goals can significantly reduce stress and increase productivity.
Implementing a daily routine that includes time for prospecting, follow-ups, and personal development can help agents stay focused and efficient. Utilizing tools and technologies for automation and organization can also free up valuable time, allowing agents to focus on what truly matters — building relationships and closing deals.
What book, movie, TV show, podcast, or other media has taught you the most?
by Florence Scovel Shinn has been incredibly influential for me. The book emphasizes the power of positive thinking, affirmations and the law of attraction.
It taught me that our thoughts and words shape our reality, and by maintaining a positive mindset, we can overcome challenges and attract success. This philosophy has not only helped me in my real estate career but also in my personal life, fostering a sense of optimism and resilience.
What is the one thing everyone should be doing to make their life/business better?
Everyone should focus on personal growth and self-awareness. Understanding your strengths, weaknesses, and motivations can significantly impact your professional and personal life.
Take time for self-reflection, set clear goals, and continually seek opportunities for improvement. Investing in yourself, whether through education, mentorship, or wellness practices, creates a solid foundation for success. When you prioritize your development, you become more confident, capable and ready to tackle any challenge that comes your way.
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by Craig C. Rowe | Aug 6, 2024 | Industry, News Feed
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Student housing represents one of the most unique investment opportunities in multifamily housing, and we landed there by happy accident.
In the early 2000s, we sold a property in Illinois and pursued a new purchase but couldn’t find the right fit. Then we discovered a 70-unit property near the University of Illinois. I spent my undergrad years as an Illini, knew the neighborhoods and felt comfortable entering the market.
Thus began our tour of the student housing niche. At one point, our firm operated properties in seven states and was the largest off-campus landlord at several universities. In 2006, I wrote the book Profit by Investing in Student Housing, a step-by-step guide to entering the market.
Student housing, like the students themselves, has changed significantly since then. Yet it remains a growth business for investors who understand its unique opportunities and challenges. Student housing isn’t for every investor. To approach the market properly, investors should carefully think through the possibilities and pitfalls. Here are a few things to consider.
The upside of student housing
As I wrote in my book, if done strategically, student housing provides high rates of return and low risk. Student housing properties — on properly selected campuses — are highly likely to appreciate. Even though colleges and marketplaces change, that still applies today.
According to Coldwell Banker Commercial, student housing will be a $14 billion market by 2027, and beds lease quickly. RealPage found that students at 175 tracked universities had leased 84.5 percent of the beds for the 2024 fall semester by June.
Although that lagged slightly behind pre-leasing rates of the past two years, it still represented both a healthy industry trend and student housing’s investor appeal.
Operators usually pre-lease properties full, or close to it, before the academic year begins, giving them a strong annual rent base.
Rent growth, though it “softened” to 4.4 percent in June, according to RealPage, continues to churn forward. Essentially, demand still exceeds bed supply, particularly at larger universities in less urban areas, and will for the foreseeable future.
That’s the oversimplified core of student housing. Properties achieve high occupancy when enrollment is high, and alternatives to on-campus housing are short.
Off-campus properties lease quickly, generate premium rental rates, and often are located in regions where labor and material costs are lower.
Some operators can fill 100 percent of student beds three months before the academic year starts, removing the pressure of running a property with staggered leases. Largely, you know exactly what you’re getting with student housing: consistent occupancy and rent growth.
The downside of student housing
In student housing, it’s not uncommon to receive a complaint from a new tenant that their power is off, only to learn that the tenant had not called their provider to begin service. Students are primarily first-time renters, don’t understand the details of renting, and need extra attention throughout the process.
That process begins with a stress-inducing August, when most students move into their apartments. These are hectic weeks for operators, who have to clean, paint, repair and prepare units for simultaneous arrival. Imagine a hotel bracing for a large convention.
Onboarding an entire building in a week is intense, often to the point of exhaustion. Operators must plan carefully, be ready for contingencies, and expect chaos.
The opposite of chaos, however, is an under-rented building. This is a pre-lease business, as students begin looking for August apartments in January. A building with unleased units in August is unlikely to find renters in October, leaving money on the table.
Further, students are, let’s say, particular renters. They can require higher security deposits and cause more damage. They also mean more annual upkeep. We replaced carpets and repainted every unit before every school year.
This requires careful budgeting and diligent maintenance.
These are just the short-term concerns. Long-term, investors must monitor population trends, ever-escalating tuition costs, and alternatives to four-year degrees. College enrollment is declining, particularly among men according to Pew Research. The Chronicle of Higher Education writes that universities are preparing for an “enrollment cliff” that could alter their futures significantly.
How to get started in student housing
Still interested in student housing as an investment? Here are some suggestions to get started:
Choose the right location
Student housing can follow an even more location-based approach than traditional multifamily housing. Investors should consider larger schools in less urban environments, where fewer multifamily properties are available.
Look for markets with universities of at least 15,000 on-campus students and those with high application numbers and consistently growing freshman classes.
Regionally, according to RealPage, the desert and mountain states of Arizona, Utah and Idaho have reported high occupancy (99 percent) and rent growth (13 percent).
Also, survey the quantity and quality of on-campus housing options when considering off-campus investments.
In-market factors matter as well. Traditionally, properties within a mile of campus are more popular than those farther away. Still, out-of-town properties can be appealing, especially to graduate students.
In fact, RealPage noted that properties more than a mile from campus reported stronger rent growth in June than those closer to campus.
Understand your renter pool
Again, students are not traditional renters. They need more assistance. Consider video tutorials about the move-in process, property features, and lease terms. Make expectations clear, and communicate not only with the students but also with the parents, who likely will guarantee the lease.
Be very online
Many students, especially out-of-state and international applicants, will choose an apartment solely through virtual tours. They also want to report issues and, most importantly, pay rent online. Operators should build a robust online portal and app to manage student communications.
Despite the challenges that all multifamily markets face, student housing remains a solid investment. The fundamentals and demographics are strong, and financing options can be favorable. Cautions always exist, particularly in individual markets, but student housing endures through most economic conditions and continues to be a resilient investment.
Michael H. Zaransky is the founder and managing principal of MZ Capital Partners in Northbrook, Illinois. Founded in 2005, the company deals in multifamily properties.
by Jotham Sederstrom | Aug 5, 2024 | Industry, News Feed
Shares in Offerpad hit a new all-time low in after-hours trading Monday after the iBuyer reported that it continues to trim its losses but expects further declines in revenue and homes sold in the third quarter.
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Shares in iBuyer Offerpad slipped to a new all-time low in after-hours trading Monday after the company reported that it continues to trim its losses but expects further declines in revenue and homes sold.
Offerpad’s $13.8 million second-quarter net loss was a 21 percent improvement from the first quarter, when the company was $17.5 million in the red, and a 38 percent reduction from its $22.3 million net loss in Q1 2023.
But revenue during the spring homebuying season was also down 12 percent from Q1, to $251.1 million, as home sales declined by 12 percent, to 742.
Offerpad said it expects Q3 revenue to continue to decline, to between $185 million and $225 million, and that home sales will drop to between 550 and 650.
Offerpad executives have been working to pivot from a sellers to a buyers market by shrinking the company’s “buy box” — narrowing the scope of the homes that it evaluates for purchase, and adjusting the input variables in its underwriting model to be more conservative.
“Our disciplined and patient approach within our buy box has proven successful in this evolving market,” Offerpad CEO Brian Bair said on a call with investment analysts. “Our short-term strategy focuses on proactively adapting to changing real estate conditions by purchasing fewer properties and concentrating on higher margin opportunities. This approach positions us well for the anticipated shift to a buyer’s market.”
The strategy is showing up in gross margins, which at 8.7 percent were up 80 basis points from Q2, with gross profit per home sold up 10 percent to $29,500.
In a separate announcement, Offerpad announced the launch of a new online portal for agents and teams, Powered By Offerpad, aimed at growing the company’s Agent Partner Program. About one-third of all Q2 real estate acquisitions came through the Agent Partner Program, Offerpad said.
Offerpad also touted the performance of its renovation service, with new customers including Fannie Mae and Freddie Mac helping boost closed renovation projects 306 percent from a year ago and generating $4.9 million in revenue.
The Chandler, Arizona-based company ended the quarter with $56.9 million in cash and cash equivalents, down 51 percent from a year ago and 17 percent from Q1.
Shares in Offerpad, which over the last 12 months have traded for as much as $13.36 and as little as $3.79, were changing hands for as little as $3.64 in after-hours trading Monday. If Offerpad shares don’t bounce back when markets open Tuesday, they’ll be at a new all-time low after adjusting for last year’s reverse split.
Offerpad went public in 2021 with a valuation of $2.7 billion through a merger with the Spencer Rascoff-led special purpose acquisitions company (SPAC) Supernova Partners Acquisition Company, Inc.
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by Ryan Barone | Aug 5, 2024 | Industry, News Feed
Despite safety ranking high on the list of homebuyer concerns, many house hunters say they’re willing to consider purchasing in a high-risk area in exchange for affordable housing, according to a new report.
Despite ranking high on the list of homebuyer concerns, many house hunters say they’re willing to trade safety and consider properties in high-risk areas in exchange for more affordable housing, according to a new report.
The report, released today by Redfin, found that nearly 17. 3 percent of potential homebuyers are willing to potentially sacrifice their safety if that means finding a home within their budget.
The survey compared the willingness of different age groups to relocate to neighborhoods that are less safe due to affordability. Gen Z participants who were willing to live somewhere less safe if the price was right clocked in at 23.7 percent, compared to millennials with 18.1 percent and 17.5 percent of Gen Xers.
Baby boomers appeared least willing to move to a less-safe neighborhood at 5.5 percent.
The Redfin-commissioned survey, conducted in February by Qualtrics, gathered responses from nearly 3,000 homeowners and renters about essential must-haves that would convince them to purchase a new home. Survey results indicated that participants were willing to trade off features such as the number of bedrooms and proximity to places of employment if that guaranteed affordability.
“Younger generations have come of age during a housing supply crunch, where prices are at all-time highs. Couple that with them earning less — relative to older generations — and you can see why they are willing to make more serious sacrifices to find a home they can afford,” Redfin Senior Economist Elijah de la Campa said. “When the typical household earns less than is needed to buy or rent a typical home, house hunters can’t afford not to make sacrifices.”
Despite the trade-off, safety and crime were notably among the primary causes of moving for 16.4 percent of survey participants. Gen Xers were the most sensitive to safety concerns at 20.8 percent, followed by baby boomers at 17.6 percent, millennials at 15.3 percent and Gen Zers at 12.8 percent.
When addressing safety concerns in high-risk areas, it’s crucial to consider environments prone to natural or climate disasters such as fire, flood or poor air quality. In Redfin’s survey, 28 percent of participants indicated their willingness to live in one of these environments if they were affordable.
A separate report from Redfin on Monday looked at data collected nationwide and included trends related to homebuyers moving to and from high-risk, disaster-prone environments.
High-fire-risk areas showed a total of 97,535 people moving in and 34,170 moving out. Of those moving in, 36.1 percent were moving to fire-prone Texas, up from 28.7 percent in 2022. Texas showed a net inflow of 30,156.
California’s high-fire-risk areas showed an opposite trend, with 17,357 people moving out — a net outflow of 6,937 in 2023, as opposed to 2022 when high-fire-risk counties saw a slight net inflow, up 763.
High-flood-risk counties showed 16,144 more people move in than out, fueled by a significant influx of new arrivals to Florida. However, Miami-Dade County experienced a net outflow of 47,597 people in 2023, more than almost any other county in the nation.
Florida and California are in an ongoing housing insurance crisis where homeowner premiums have skyrocketed, and some have lost coverage completely.
“Ballooning insurance costs and intensifying natural disasters are driving thousands of Americans out of risky areas, but those people are quickly being replaced by other people for whom climate change isn’t the top concern,” Redfin Senior Economist Elijah de la Campa said.
“For a lot of Americans, things like cost of living and proximity to family take precedence over catastrophe risk, which can feel less immediate and more abstract. But the cost-benefit calculus seems to be shifting in places like California and Florida, where skyrocketing home insurance costs and an uptick in high-profile disasters have had a tangible impact on residents and made national news,” de la Campa said.
Allstate, California’s sixth largest insurer, is looking to raise insurance costs by 34 percent, impacting over 350,000 people and exceeding the 30 percent hike sought by State Farm last month. The company ceased writing new homeowners policies in the state in 2022.
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by Amanda York | Aug 5, 2024 | Industry, News Feed
Concerns about fraud mean lenders who want to sell multifamily loans to the mortgage giants may be required as soon as this summer to do more due diligence on borrowers and their properties.
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Concerns about fraud could lead to stricter rules for commercial property lenders who provide funding for apartment buildings that are backstopped by mortgage giants Fannie Mae and Freddie Mac, The Wall Street Journal reports.
The rules — which would require lenders who want to sell multifamily loans to the mortgage giants to do more due diligence on borrowers and their properties — could be introduced by Fannie and Freddie’s federal regulator as soon as this summer, the Journal reported Monday, citing anonymous sources “familiar with the preliminary plans.”
Fannie Mae, Freddie Mac and their federal regulator, the Federal Housing Finance Agency (FHFA), declined to comment to Inman.
While Fannie and Freddie’s multifamily loan portfolios are dwarfed by their single-family holdings, together they owned or guaranteed $927 billion in multifamily loans as of June 30, representing about 40 percent of the market, the Journal estimated.
Multifamily business: Small but growing
Freddie Mac’s multifamily mortgage portfolio is growing faster than its single-family guarantee business. Source: Freddie Mac.
Multifamily mortgages make up only about 13 percent of Freddie Mac’s $3.5 trillion mortgage portfolio, for example — but grew by 5 percent during the second quarter of 2024, to $447 billion. Fannie Mae’s multifamily portfolio totaled $480 billion as of June 30.
Much of the risk associated with Fannie and Freddie’s multifamily loan portfolios has been transferred to private insurers, and so far the loans are performing well.
The serious delinquency rate on Fannie Mae’s multifamily portfolio was flat at 0.44 percent in Q1 and Q2 2024. Even after setting aside $248 million as a hedge against future losses, Fannie Mae’s multifamily business generated $629 million in Q2 net income, the company said in its latest earnings report.
But rising interest rates have exposed a growing number of fraudulent commercial mortgage schemes based on doctored financial reports and valuations, the Journal reported. Federal prosecutors have been working with the FHFA’s Office of Inspector General to uncover the extent of the problem.
The rules being drafted may require lenders that do business with Fannie and Freddie to verify financial information provided by borrowers, and conduct more thorough evaluations of the financial performance and valuations of properties that serve as collateral, the Journal reported.
Although they’ve been in government conservatorship for nearly two decades, Fannie and Freddie are profitable and continue to build their net worths.
Fannie Mae and Freddie Mac build net worth
Fannie Mae posted a $4.5 billion Q2 profit and grew its net worth to $86.5 billion, providing $95 billion in liquidity to finance 213,000 home purchases, 45,000 home refinancings and 72,000 units of multifamily rental housing.
Freddie Mac generated a $2.8 billion Q2 profit and grew its net worth to $53.2 billion, funding 212,000 home purchases, 45,000 refinancings and 92,000 rental units.
After growing their single-family mortgage portfolios during the pandemic when mortgage rates were near historic lows, the mortgage giants have since seen much of their refinancing and purchase mortgage business evaporate.
Boom and bust in purchase lending
Fannie Mae, which backed $451 billion in purchase mortgages in 2021, saw purchase mortgage volume decline to $273 billion in 2023 and $128 billion in the first six months of 2024.
Freddie Mac, which lagged Fannie Mae’s 2021 purchase mortgage business by $21 billion in 2021, has closed the gap in recent years, backing $265 billion in purchase loans last year and $127 billion in H1 2024.
Single-family mortgage portfolios flatten
The decline in new business means Fannie and Freddie’s single-family mortgage portfolios are no longer growing. All told, Fannie Mae guaranteed payments on $3.6 trillion in mortgages as of June 30, while Freddie Mac’s single-family mortgage portfolio totaled $3.06 trillion.
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