Real estate news is one of the most popular subjects online, especially those stories and features which offer enduring interest to readers over time.
That seems like a simple formula but it’s amazing how much appears online which is neither reality-based nor especially logical. So, as a place to start in the quest for evergreen articles and blog items, we need information which is both factual and logical.
To validate material online we need to use links and references. This is now the accepted norm, while before we counted on print editors and fact checkers to assure that content was accurate and really worth our time. In effect, readers must also be editors, as has been pointed out by Ryan Holiday in Trust Me, I’m Lying.
Another way to validate material is to use a spellchecker. The question is not whether or not you have great spelling skills, but whether humans make mistakes and read past errors. They do, so use a spellchecker.
Next we need to write with spirit, animation, sparkle and fire. Nobody likes dull stuff, so our prose has to include adjectives, illustrations, examples and a currency to which people can relate.
Five Keys To Real Estate News
What catches people’s interest?
First, things which are usable, that answer a question right now.
Second, feature items which involve the first, the largest, the tallest, the oldest, etc.
Third, how-to pieces that help readers better understand how things work.
Fourth, there are certain topics which always interest readers: They include interest rates, VA financing, FHA mortgages, foreclosures, Fannie Mae, Freddie Mac, the Federal Reserve, buyers, sellers, trends, bargains, tips, tricks, money and wealth.
Fifth, celebrity counts. We want to know where Hollywood stars live and how much politicians paid for their houses.
Perhaps most importantly, one needs to write in plain language. A big vocabulary is great but try to translate information into words people can readily understand without a quick trip to the dictionary.
Here’s a short list of such OurBroker postings which readers seem to like.
Popular Real Estate News
A federal judge in Wisconsin has ruled that housing write-offs for ministers, priests, rabbis and other clerics are unconstitutional, a violation of the First Amendment’s establishment clause.
At issue was the question of whether clergy are entitled to a tax-free rental allowance under 26 U.S.C. § 107. This federal legislation — first passed in 1954 and amended in 2002 — allows “ministers of the gospel” to receive such a write-off. However, despite the specific language of the legislation, the IRS has broadly interpreted the term “ministers of the gospel” to include non-Christians. What it has not done is include non-believers, meaning that the leaders of the Freedom from Religion Foundation, the atheist group that brought the suit in Madison, WI, are not entitled to a housing deduction.
According to the Pew Research Center, “the number of Americans who do not identify with any religion continues to grow at a rapid pace. One-fifth of the U.S. public — and a third of adults under 30 — are religiously unaffiliated today.”
“Plaintiffs’ alleged injury,” said Federal District Judge Barbara B. Crabb, “is clear from the face of the statute and that there is no plausible argument that the individual plaintiffs could qualify for an exemption as ‘ministers of the gospel.’” Crabb then ruled that the law was unconstitutional and ordered the IRS to end the deduction.
Not only does the law discriminate against non-believers, said the judge, it also discriminates against religious faiths which do not have clergy. In addition, it allows clerics with a parsonage allowance to obtain income tax-free which can be used to pay down a mortgage — and to then write off mortgage interest and property taxes.
Church Ministers and Tax-Free Housing
How much is involved? In 2002 it was estimated that the value of deductions for clerical housing allowances, parsonages, rectories, presbyteries and vicarages amounted to $2.3 billion over five years. Because ministers are allowed to deduct fair market housing costs, including mortgage payments, utilities and furnishings, the bigger the home the bigger the deduction.
There is no doubt that the ruling will be appealed, until then the judge’s ruling is on hold.
|26 USC § 107 – Rental value of parsonages |
In the case of a minister of the gospel, gross income does not include –
(1) the rental value of a home furnished to him as part of his compensation; or
(2) the rental allowance paid to him as part of his compensation, to the extent used by him to rent or provide a home and to the extent such allowance does not exceed the fair rental value of the home, including furnishings and appurtenances such as a garage, plus the cost of utilities.
Source: Legal Information Institute, Cornel University Law School
John F. Kennedy died 50 years ago, on November 22nd. For Americans of a certain age it was an event which smothered the most positive presidency of our era.
Kennedy was the youngest president in American history, the first Catholic to win the White House, a Pacific war hero, and a man of remarkable brilliance, humor, grace and education. He had a public presence that captured perfectly the newly-emerging television era, and he was also a man with a private side which hid substantial health issues and marital infidelities.
Many will point to Kennedy’s inaugural address (“ask not what your country can do for you…”), his call for a manned mission to the moon within ten years, or the creation of the Peace Corps as the highlights of his presidency. These were tremendously significant events but there was something else which happened that impacts every human on earth to this day, Kennedy’s 1963 speech at the American University in Washington, DC which called for an end to atmospheric nuclear tests and the start of mutual disarmament.
For a number of years both the United States and what was then the Soviet Union conducted above-ground nuclear tests to assure that they had workable technologies in case it was necessary to drop an atom bomb. These tests were more than exercises in international intimidation, they kept getting larger and by 1961 the Russians tested a device which yielded at least 50 megatons.
Bigger Nuclear Bombs
As Wikipedia explains, “this is equivalent to about 1,350–1,570 times the combined power of the bombs that destroyed Hiroshima and Nagasaki, 10 times the combined power of all the conventional explosives used in World War II, or one quarter of the estimated yield of the 1883 eruption of Krakatoa, and 10% of the combined yield of all nuclear tests to date.”
As a kid I remember talk of the next bomb, the one that would inevitably be larger, maybe a 100 megaton device, a bomb so large that some believed it could actually crack the earth’s crust as well as irradiate vast areas near the test site — and with prevailing winds perhaps areas far down-range from the explosion. Think of something like Chernobyl, a nuclear plant explosion which sent nuclear debris across Europe.
Now think of something millions of times larger.
The United States and the Soviet Union had thousands of nuclear weapons and no need to test anything. Everyone knew the technology worked — and everyone knew that a nuclear war would — to paraphrase Air Force General Curtis Lemay — send the world back to the stone age, assuming anyone was alive to rub two sticks together.
Stopping open-air nuclear tests was the first step in the process not just to halt such ever-larger above-ground explosions but also to get to the greater issue, the reduction of nuclear stockpiles which were not only dangerous but were bankrupting the Soviet Union and doing no good for the US.
John F. Kennedy — We Hardly Knew You
In 1968 the United States and the Soviet Union, in a moment of sanity, agreed to the Non-Proliferation Treaty, a pact now signed by 190 nations. A series of treaties have since resulted in the reduction of about two-thirds of the national nuclear arsenals of both the US and what was then the USSR and is today Russia.
And it all began on a track field on the campus of the American University when Kennedy gave his commencement address. It was a case where, for once, common sense won out.
I was a high school student when JFK was shot in Dallas a few months after speaking at American. Later there would be the assassinations of Robert Kennedy and Dr. Martin Luther King and much later the attacks of 9/11. All of these were terrible events, traumas that changed American history in a way that later generations will never fully understand.
A new loan estimate form has been issued by the Consumer Financial Protection Bureau (CFPB).
Use of the new document will be mandatory as of August 1, 2015, however it can be expected that many lenders will start using the new form as soon as possible. Under federal rules lenders must provide a good faith estimate of closing costs or the new form to borrowers within three business days of application.
While forms generally sound like dull stuff, this one involves money and savings: borrowers will be able to use the new form to more effectively compare lender offers.
Use this link to see a sample of the new loan estimate form.
The loan estimate form, says the CFPB, “will be provided to consumers within three business days after they submit a loan application. It replaces the early Truth in Lending statement and the Good Faith Estimate, and provides a summary of the key loan terms and estimated loan and closing costs. Consumers can use this new form to compare the costs and features of different loans.”
The government agency said it spent two years “of extensive research, testing, and review to find out how to create mortgage disclosures.” The goal is to provide mortgage information to borrowers in a way that is quick and easy to understand.
Loan Estimate Form
The government says the new forms offer several advantages:
Short-term and long-term costs: By putting the important information in a clearer format than the current forms and in plain language, both the Loan Estimate and Closing Disclosure more easily explain the total costs of the loan. This includes an important breakdown of the loan amount, the principal and interest payment, and how it could change, and closing costs.
Monthly payments: The CFPB forms state in bold font what a consumer’s monthly principal and interest payments will be. If it is an adjustable-rate loan, the forms say the projected minimum and maximum payments over the life of the loan.
Comparisons of competing loan offers: The new forms use formatting that clearly breaks down the costs of the loan, such as the interest rate, mortgage insurance costs, and closing costs. As a result, would-be-homebuyers and those refinancing their existing mortgage are better able to distinguish between two different loan offers.
Shopping for closing costs: Closing costs are the costs of completing a mortgage transaction, including origination fees, appraisal fees, title insurance, taxes, settlement services, inspections, and homeowner’s insurance. Consumers can save money if they shop around for their own service providers for some of these costs. The CFPB forms plainly outline what closing services a consumer will need and which ones they can shop around for.
If you’ve been shut-off from new mortgage financing because of hard times you might want to take a look at the new FHA Back To Work mortgage program. Here, finally, is a program which can allow you to get an FHA loan in as little as 12 months after a foreclosure, short sale or deed-in-lieu of foreclosure — a much better deal than the three years HUD used to require after a foreclosure or two years after a bankruptcy.
The new FHA mortgage program is designed to help those with a history of good credit but who have lost income or employment, what the government calls an “economic event” such as a foreclosure, short sale, deed-in-lieu of foreclosure, mortgage modification, collection, judgment, or a Chapter 7 or Chapter 13 bankruptcy.
“As a result of the recent recession,” said HUD in Mortgagee Letter 13-26, “many borrowers who experienced unemployment or other severe reductions in income, were unable to make their monthly mortgage payments, and ultimately lost their homes to a pre-foreclosure sale, deed-in-lieu, or foreclosure. Some borrowers were forced to file for bankruptcy to discharge or restructure their debts.”
“Because of these recent recession-related periods of financial difficulty,” HUD continued, “borrowers’ credit has been negatively affected. FHA recognizes the hardships faced by these borrowers, and realizes that their credit histories may not fully reflect their true ability or propensity to repay a mortgage.”
FHA Back To Work Mortgages
So how does the program work?
There are three criteria:
First, there must be “credit impairments” which were the result of lost income or employment beyond your control. Think of a business which closes or cuts back on hours; a firm which downsizes, right-sizes or smart-sizes — or simply moves its workplace outside our borders.
According to HUD, an “economic event” is “any occurrence beyond the borrower’s control that results in loss of employment, loss of income, or a combination of both, which causes a reduction in the borrower’s household income of 20 percent or more for a period of at least six months.”
The start of an economic event is the month of loss of employment or income. Recovery from an economic event occurs with the re-establishment of satisfactory credit for a minimum of 12 months.
Second, borrowers must show that they have recovered from their loss of income and employment and now have satisfactory credit. This can be demonstrated, says HUD, if the borrower’s credit history is clear of late housing or installment debt payments, and major derogatory credit issues on revolving accounts.
Third, the borrower must complete required housing counseling services. This is not a big deal because the government only requires one hour of one-on-one counseling from a HUD-approved housing counseling agency. The session(s) can be completed in person or through an online course and must be completed at least 30 days before making a mortgage application — but not more than six months before submitting an application.
If you go through these steps what do you get? A shiny, new FHA mortgage to buy or refinance a home, financing that requires just 3.5 percent down.
Get your wine cellar ready. A world-wide wine shortage is expected next year and those who are not prepared may suffer the indignity of higher prices and fewer choices.
According to a new report from Morgan Stanley, “after adjusting for non wine uses, demand for wine exceeded supply by 300 million cases in 2012, the deepest shortfall in over 40 years of records. Production in 2012 also fell to its lowest levels in more than 40 years.”
Not everyone agrees. Writing for Reuters, Felix Solomon argues that “far from entering a period of global wine shortage, it looks like the 2008-2012 period of shortage is actually ending.”
As someone who neither drinks nor smokes, I’d have to say that the wine debate has little personal impact. I have no idea whether there will be a forthcoming shortage or surplus. That said, more than a few people will be put out if their favorite decanter of red, white or rose is not readily available, and that brings us to wine cellars.
A recent trip to France suggests that the French have found a solution to the projected wine shortage. The place is full of “caves,” the French expression for “basements.” But unlike US basements, places which do little more than leak, the French have evolved the wine cellar and even for teetotalers they are a thing of beauty.
First, it should be said that some French caves are really, well, caves. Some are where you would expect them, below homes, but some houses are built against limestone hills which feature either natural caves or caves which have been hollowed out of the rock. The beauty of such real estate is that if you need more space you simply dig in further. The Romans, for one, applied this approach in Amboise and the result is that 2,000 years later you can still see the Granaries of Caesar.
Part of the Granaries of Caesar at Amboise
Second, caves maintain a constant temperature year-round. That’s great for wine, cheese, ammunition….
Third, talk about preparing for tough times, one cellar we stumbled across had at least 150 barrels of wine stashed away in a long and immaculate cellar beneath a nondescript home. With 300 bottles to the barrel, this wine prepper had some 45,000 bottles on hand in case of civil unrest or nuclear war.
Wine cellars. You have to love them. Finally, a place where relatives can stay for extended visits or the kids can bunk when they return from college….
To hear folks on Capitol Hill you might think the FHA mortgage program is just a blink away from failure, a blight on the American economy and a threat to homeowners everywhere. It’s nonsense. The FHA has $48 billion in cash on hand.
So what’s the big deal?
The FHA operates a mortgage insurance program. It promises to cover lender losses if a loan goes bad. Like any insurance program it collects premiums, keeps reserves and pays out claims. With FHA insurance borrowers can get mortgages with little down instead of 20 percent up-front. Today the reserve account is under-funded and the FHA has been required to accept $1.68 billion from the US Treasury.
This is constantly described as a “bailout” but think through the logic of the situation: The FHA has $48 billion in liquid assets, it doesn’t need $1.68 billion from the Treasury, it needs nothing from the Treasury.
Money For Nothing
So why is the FHA asking for cash? Under the Federal Credit Reform Act of 1990 (FCRA) the FHA must have on hand enough cash to cover all probable losses anticipated during the next 30 years. Because of an accounting quirk created by Congress, an agency with $48 billion in the bank must ask for $1.68 billion today.
Make no mistake, the program has losses. What’s not said — what’s hermetically kept from the public by critics — is the source of those losses: FHA mortgage claims outpaced premium collections from 2000 through 2009, in other words it was the Bush Administration which drove the FHA program into the ground.
For instance, according to FHA Commissioner Carole Galante, loans made between 2005 and 2008 represent less than 15 percent of total originations over the last 30 years but are expected to contribute one-third of all losses.
Bush operatives also took two other steps to re-make FHA mortgages.
First, in 2004, they changed the FHA program from a mutual insurance program to, essentially, a for-profit plan with the government getting the profits. How? By ending insurance premium refunds to FHA borrowers and having the government keep the money.
Second, in 2008 — after the presidential election — FHA rules which had limited lender fees were eliminated. As the Bush Administration explained, it had decided to “remove the current specific limitations on the amounts mortgagees presently are allowed to charge borrowers directly for originating and closing an FHA loan.”
Alternatively — and what is also kept from the public — is that the FHA now has massive profits — more than $20 billion during the 2010-2012 period.
As loans from the Bush period are closed out FHA losses will decline and profits from the program will be undeniable. That’s the reason there is such a hurry to enact FHA “reform” now, changes that would make the FHA smaller and less competitive.
Mortgages shouldn’t be a big worry, but for a lot of Americans that hasn’t been the case during the past few weeks. The national government closed its doors from September 30th through October 16th. More than 800,000 federal workers were not paid as a result — but many, many more outside the government lost hours, income and opportunity because of the national shutdown. Even national cemeteries and the Grand Canyon were closed.
Think of the government shutdown as a warning shot. If federal workers do not have assured paychecks then who does?
It’s nice that some mortgage lenders have instantly offered forbearance to workers directly and indirectly impacted by the shutdown, but that’s not universally the case. And, it’s good, I guess, that mortgage rates have fallen since the start of the government shut-down and the near default on the national deficit.
Mortgages & Paychecks
If you live paycheck to paycheck then in time you will lose, the only question is when. You’ve got to protect your interests so here are five basic steps to take:
First, bulk up savings. It’s usually said that you should have the equivalent of six mortgage payments on hand and in cash. You need this cash not only for financial emergencies but also because things can change — what if you lose a job?
Second, you need a budget. How much do you spend each month? Where can costs be cut?
Third, re-think big costs. Do you need a new car or just a really good used car? The difference can mean thousands of dollars in savings. Take a very careful look at how CarMax sells and finances used cars before looking elsewhere.
Fourth, look at refinancing. Mortgages are now less expensive then before the federal shut-down and deficit debacle. Speak with lenders for details.
Fifth, the economy is changing. What skills do you have going forward? We now live in a world with downsizing, offshoring, outsourcing, smartsizing, rightsizing and a hundred other cutesy terms that mean we are losing jobs and income inside our borders. In fact, household income today is less than it was in 1999! Protect yourself. Look into the fields that are expanding and areas that are necessary and local such as car repair, nursing and plumbing.
It used to be that one person with a high school education could support a family. Then it took two people. Then you needed a college education. Now two people with college educations may well delay marriage, starting a family or buying a home because the national economy is so fragile.
Don’t be a victim. Save and be prepared for the tough economic times which lie ahead.
Home repair bills should be lower now that everything can be found online. After all, finding someone to do work around the house would should be easier in the age of online searches. Good luck with that. Search for any service and what you’re most likely to find are a new crop of intermediaries, go-betweens and middlemen who don’t actually know how to paint or plumb, but who surely get a fee for every “referral” they gin up.
Search engines are little help. Look up “deck repair” or “painter” or other home repair provider in your community and see what happens. The results are invariably filled not with local deck repair companies or painters, but with listing “services” that no one wants, an additional cost inserted between the consumer and the home repair professional.
Home Repair Helpers?
The idea that intermediary services provide any value is unclear. How are local trades people screened? Are they screened at all? What criteria are used? Are service providers constantly checked? Are the criteria used to rank repair services important to you? As far as I can tell intermediary services add no value whatsoever to the repair process.
I tried one listing service and asked an apperently well-regarded carpenter to come out and estimate a job. He did — and his estimate was 50 percent higher than the local guy who ultimately got the business.
There is a cost to the assorted directories and “helpful” sites that dominate the search results. They have to be paid somehow, usually by a membership subscription or a piece of the action. This is not an improvement over the Yellow Pages — you remember the fat book you got for free that listed businesses by the services they offered. With the Yellow Pages businesses paid for year-long ads, not for the charges associated with individual jobs. The Yellow Pages are still with us, online and off, and still provide a useful service.
The current system gets even worse when the directory company points you to a “local” service which is not actually local. It has an 800 number and has gathered up the names of local trades people. Now there are two intermediaries — the directory company and the mythical local service provider who likely has never seen your community.
What’s the solution? Find a local person you or your neighbors now uses — a plumber, gardner, electrician, roofer, painter or whatever — and ask the repair professional about local recommendations for contractors within five miles of your home. You’ll find local people — and you won’t have to pay higher costs because there will be no intermediary involved.
Prestige titles for real estate brokers will be a thing of past under recent enforcement actions by New York state regulators. In a decision which could travel to other states, New York says fancy titles for most real estate licensees are out. No longer will you see a salesperson or associate broker claiming such honorific titles as vice president, director, managing director, senior vice president or anything similar.
Handing out fancy titles, says Malcolm Carter, an associate broker with the Manhattan firm of Charles Rutenberg Realty, is one way that brokers “reward their independent contractors for bringing in the big bucks. Designations are thought to elevate licensed associate real estate brokers and other agents above the masses: Wouldn’t a prospective seller or buyer prefer an executive vice president to a mere mortal?”
The logic behind the state’s decision goes to the heart of real estate brokerage: In most states there is a “broker” licensed to do business with the public. Working under the broker’s authority are salespeople and associate brokers. An associate broker is someone who holds a broker’s license but works for another broker.
Real Estate Brokers & Status
Most states have laws on the books which vigorously limit the rights of salespeople and associate brokers.
In a letter to attorney Neil Garfinkel, the NY Department of State explains that the rules prohibit salespeople and associate brokers “from holding voting stock in a corporate brokerage and from being appointed as an officer in a corporate brokerage, a manager or member of a limited liability company, or a member of a partnership. As such, a licensee cannot use any title that is false or misleading, such as one that would indicate falsely that the licensee is a corporate officer with the brokerage company. The statute and implementing regulations require brokers to guide, instruct, oversee and supervise the actions of associated salespeople and associate brokers (19 NYCRR 175.21). Consistent with this principle, any title which implies that an associate broker or real estate salesperson in involved in the management, supervision and control of the brokerage company would be prohibited.”
The rules for brokers are different. They can be shareholders, corporate officers and partners. And those who are now salespeople can become “brokers” by completing required educational work and testing while associate brokers can change their status by becoming, well, brokers. As the letter to Mr. Garfinkel explains, the rules do not “limit the number of real estate brokers who may be licensed to represent a particular real estate brokerage.”
50+ Senior Designations
The effort by New York state to stamp out honorific designations should come as no surprise to anyone — nor is it likely to be limited to one state. At the federal level, the Consumer Financial Protection Bureau found that more than 50 designations had been developed by lenders to sell mortgage loans and related products to seniors. Some titles required significant study to obtain but others required no course work at all.
The same is true in real estate.
“Agents and brokers at various real estate firms were awarded corporate titles over the years for reaching sales benchmarks,” says the New York Times, “or for spending a certain number of years with the company — though at a few firms, one could become a vice president just by walking in the door.”
Oh well, at least the New York decision is good for one group…. Printers will now see a lot of new business as real estate salespeople and associate brokers come in to get new stationary and business cards.